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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2025

☐ 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)

Registrant’s telephone number, including area code: (315) 445-2282

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the common stock, $1.00 par value per share, held by non-affiliates of the registrant computed by reference to the closing price as of the close of business on June 30, 2025 (the last business day of the registrant’s most recently completed second fiscal quarter): $2,983,297,493.

The number of shares of the common stock, $1.00 par value per share, outstanding as of the close of business on January 31, 2026: 52,723,931

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the Definitive Proxy Statement for the Annual Meeting of the Shareholders to be held on May 20, 2026 (the “Proxy Statement”) are incorporated by reference in Part III of this Annual Report on Form 10-K.

Table of Contents

TABLE OF CONTENTS

PART I		Page
Item 1	Business	3
Item 1A	Risk Factors	18
Item 1B	Unresolved Staff Comments	30
Item 1C	Cybersecurity	30
Item 2	Properties	33
Item 3	Legal Proceedings	34
Item 4	Mine Safety Disclosures	34

PART II
Item 5	Market for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities	34
Item 6	[Reserved]	37
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	75
Item 8	Financial Statements and Supplementary Data:	77
	Consolidated Statements of Condition	78
	Consolidated Statements of Income	79
	Consolidated Statements of Comprehensive Income	80
	Consolidated Statements of Changes in Shareholders’ Equity	81
	Consolidated Statements of Cash Flows	82
	Notes to Consolidated Financial Statements	83
	Report on Internal Control over Financial Reporting	149
	Report of Independent Registered Public Accounting Firm	150
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	152
Item 9A	Controls and Procedures	152
Item 9B	Other Information	152
Item 9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	152

PART III
Item 10	Directors, Executive Officers and Corporate Governance	153
Item 11	Executive Compensation	153
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	153
Item 13	Certain Relationships and Related Transactions, and Director Independence	153
Item 14	Principal Accounting Fees and Services	153

PART IV
Item 15	Exhibits and Financial Statement Schedules	154
Item 16	Form 10-K Summary	157
	Signatures	158

Table of Contents

Part I

This Annual Report on Form 10-K contains certain forward-looking statements with respect to the financial condition, results of operations and business of Community Financial System, Inc. These forward-looking statements by their nature address matters that involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements are set forth herein under the caption “Forward-Looking Statements.”

Item 1. Business

Community Financial System, Inc. (the “Company”) was incorporated on April 15, 1983, under the Delaware General Corporation Law. Its principal office is located at 333 Butternut Drive, Syracuse, New York 13214. The Company’s business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services to retail, commercial, institutional and governmental customers. The Company is a registered financial holding company which wholly-owns two significant subsidiaries: Community Bank, N.A. (the “Bank” or “CBNA”), and Benefit Plans Administrative Services, Inc. (“BPAS”). As of December 31, 2025, BPAS owns five subsidiaries: Benefit Plans Administrative Services, LLC (“BPA”), a provider of defined contribution plan administration services; Northeast Retirement Services, LLC (“NRS”), a provider of institutional transfer agency, master recordkeeping services, fund administration, trust, and retirement plan services; BPAS Actuarial & Pension Services, LLC (“BPAS-APS”), a provider of actuarial and benefit consulting services; BPAS Trust Company of Puerto Rico, a provider of trust and benefit plan administration services; and Hand Benefits & Trust Company (“HB&T”), a provider of collective investment fund administration and institutional trust services. NRS owns one subsidiary, Global Trust Company, Inc. (“GTC”), a non-depository trust company which provides fiduciary services for collective investment trusts and other products. HB&T owns one subsidiary, Hand Securities, Inc. (“HSI”), an introducing broker-dealer.

As of December 31, 2025, the Bank operates 192 full-service branches and 8 drive-thru only locations throughout 42 counties of Upstate New York, 9 counties of Northeastern Pennsylvania, 12 counties of Vermont, 1 county of Western Massachusetts and 1 county of Southern New Hampshire, offering a range of commercial and retail banking services. The Bank owns the following operating subsidiaries: CBNA Preferred Funding Corporation (“PFC”), CBNA Treasury Management Corporation (“TMC”), Nottingham Investment Services, Inc. (“NISI”), Nottingham Advisors, Inc. (“Nottingham Advisors”), OneGroup NY, Inc. (“OneGroup”), Nottingham Wealth Partners, Inc. (“Wealth Partners”) and Oneida Preferred Funding II LLC (“OPFC II”). OneGroup is a full-service insurance agency offering personal and commercial lines of insurance and other risk management products and services. PFC and OPFC II primarily act as investors in residential and commercial real estate activities. TMC provides cash management, investment, and treasury services to the Bank. NISI and Wealth Partners provide broker-dealer and investment advisory services. Nottingham Advisors provides asset management services to individuals, corporations, corporate pension and profit sharing plans, and foundations.

The Company maintains a website at https://communityfinancialsystem.com. Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, are available on the Company’s website free of charge as soon as reasonably practicable after such reports or amendments are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The information posted on the website is not incorporated into or a part of this filing. Copies of all documents filed with the SEC can also be obtained by visiting the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, by calling the SEC at 1-800-SEC-0330 or by accessing the SEC’s website at https://www.sec.gov.

Current Year Acquisitions

7 Branches from Santander Bank, N.A. in the Lehigh Valley Market

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 $31.9 million of loans and $543.7 million of deposits. Total cash 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 $32.0 million.

Table of Contents

Financial Services Companies

During 2025, the Company, through its subsidiaries OneGroup, BPA, BPAS-APS and NISI, completed the acquisitions of certain assets of financial services companies. The assets were acquired from companies that provide insurance, employee benefit and wealth management services. Total aggregate consideration for these acquisitions was $11.2 million, including $4.5 million in cash and $6.7 million in contingent consideration arrangements. The Company recognized $8.4 million of customer list intangible assets and $2.9 million of goodwill in conjunction with these acquisitions.

Segment Information

The Company has identified four reportable operating business segments: Banking and Corporate, Employee Benefit Services, Insurance Services and Wealth Management Services. Information about the Company’s reportable business segments is included in Note U of the “Notes to Consolidated Financial Statements” filed herewith in Part II.

Business Segments

Banking

The Bank is a community bank committed to the philosophy of serving the financial needs of customers in local communities. The Bank’s branches are located in towns and cities within its geographic market areas of Upstate New York, Northeastern Pennsylvania, Vermont, Western Massachusetts and Southern New Hampshire. The Bank is nearing completion of its process of expanding its branch presence in more densely populated markets within its geographic footprint including the Albany, Buffalo, Rochester and Syracuse regions of New York, the Lehigh Valley region of Pennsylvania, Southern New Hampshire and Springfield, Massachusetts. The Company believes that the local character of its business, knowledge of the customers and their needs, and its comprehensive retail and business products, together with responsive decision-making at the branch and regional levels and its digital banking service offerings, enable the Bank to compete effectively in its geographic market. The Bank is a member of the Federal Reserve System, the Federal Home Loan Bank of New York and the Federal Home Loan Bank of Boston (as a non-member bank) (collectively, referred to as “FHLB”), and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable limits.

Employee Benefit Services

Through BPAS and its subsidiaries, the Company operates a national practice that provides employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services to a diverse array of clients spanning the United States and the Commonwealth of Puerto Rico.

Insurance Services

Through OneGroup, the Company offers personal and commercial lines of insurance and other risk management products and services. In addition, OneGroup offers employee benefit related services. OneGroup represents many leading and specialty insurance companies.

Wealth Management Services

Through the Bank’s Nottingham Trust division, NISI, Nottingham Advisors, and Wealth Partners, the Company provides wealth management, retirement planning, higher educational planning, fiduciary, risk management, trust services and personal financial planning services. The Company offers a range of investment products including stocks, bonds, exchange-traded funds, mutual funds, insurance and advisory products.

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Competition

The banking and financial services industry is highly competitive in the New York, Pennsylvania, Vermont, Massachusetts and New Hampshire markets. The Company competes actively for loans, deposits, and financial services relationships with other national and state banks, thrift institutions, credit unions, retail brokerage firms, mortgage bankers, finance companies, including financial technology companies, insurance agencies, and other regulated and unregulated providers of financial services. In order to compete with other financial service providers, the Company stresses the community nature of its operations and the development of profitable customer relationships across all lines of business.

The Company’s employee benefits, trust and plan administration business competes on a national scale and provides geographic diversification for the Company. Certain lines of business are marketed primarily through unaffiliated financial advisors, while others are marketed directly to plan sponsors and fund companies. In order to compete with large national firms, the Company stresses its consultative approach to complex engagements.

The Company utilizes the Community Connect program, which is a joint initiative between the four operating business segments to facilitate cross-selling opportunities and connections with commercial clients between the functional areas of the business. The program intends to provide customers with interconnected solutions and enhance customer retention.

Human Capital Resources

The Company’s employees are asked to embody the core values of integrity, excellence, teamwork and humility. These values are foundational to sustaining the strength of the Company’s culture. As of December 31, 2025, the Company had 3,001 total employees, which included 2,853 full-time employees and 148 part-time and temporary employees. Of the Company’s 3,001 employees, 2,157 are in the Banking and Corporate segment (2,028 full-time employees and 129 part-time and temporary employees), 479 employees are in the Employee Benefit Services segment (471 full-time employees and 8 part-time and temporary employees), 256 are in the Insurance Services segment (246 full-time employees and 10 part-time and temporary employees), and 109 employees are in the Wealth Management Services segment (108 full-time employees and 1 part-time temporary employee). The Company’s employee base is concentrated in New York, Pennsylvania and New England where the Bank maintains its retail bank branch presence, with approximately 2,136 employees in New York, 312 in Pennsylvania and 323 in Vermont, Massachusetts and New Hampshire. Approximately 230 of the Company’s employee base is located outside of its retail banking footprint.

The Company considers its relationship with its employees to be strong. None of the Company’s employees are represented by a labor union or are represented by a collective bargaining agreement.

Oversight

The Board of Directors (the “Board”) has ultimate responsibility for the strategy of the Company. The Board’s Compensation Committee is responsible for the oversight of executive compensation, company culture, diversity, and employee engagement. The Company proactively identifies potential human capital related risks, such as succession planning, labor market shortage, increased labor costs, and employee retention strategies to mitigate those risks. Strong human capital management is viewed as integral to the Company’s business strategy.

Compensation and Benefits

The success and growth of the Company’s business is largely dependent on its ability to attract, develop, and retain a population of skilled and high-performing employees with varied backgrounds and skill sets at all levels of the organization. Accordingly, the Company’s compensation philosophy includes elements that reinforce the Company’s core values, reward employees for their achievements and maximize continued performance with long-term retention. The Company employs benchmarking measures to ensure employees are paid fairly based on their job and performance. The Company conducts workforce planning sessions periodically across all business areas to ensure competitive market pay for employees and actions to support commitment to the professional development of employees.

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Growth and Development

The Company continues to broaden the scope of its talent development initiatives across its widening and geographically diverse footprint in order to sustain a value-driven and growth-oriented environment where employees can perform at their peak and the next generation of leaders are prepared. The Company offers a wide range of learning and development programs, both internally and externally, that support a broad scope of the Company’s talent development initiatives making continuous learning a part of each employee’s relationship with the Company in a growth-oriented environment. The Company maintains a strong performance culture through its performance management program. The program supports setting clear expectations for all employees via annual goal setting and encourages ongoing and frequent feedback. These dialogues are intended to achieve higher performance, engagement and commitment, improving outcomes and productivity. The Company has invested in an on-line skills development platform that will expand and enhance the ability to build critical skills for today and in the future.

Culture and Attracting a Talented Workforce

The Company is committed to fostering an inclusive environment where there is a sense of purpose, belonging, and ownership, guided by the Company’s core values and dedication to serving customers. The Company empowers its workforce to achieve their full potential by supporting the development of job-related skills and personal growth within a culture that prioritizes employees’ wellbeing and fosters inclusivity. In this environment, employees feel safe to share ideas, receive support, and take thoughtful risks without the fear of judgment or retaliation.

The goal of the Company’s recruitment efforts is to provide fair opportunities to all candidates and to build a strong and positive reputation both internally and externally. To support this objective, leaders across the business and the Company’s human resource professionals share increased responsibility in recruitment and selection processes, supported by a committed Talent Acquisition team that focuses exclusively on recruitment and talent attraction to deliver a consistent, strategic and candidate-centered experience. The Company’s long-standing presence and proven track record offer candidates the stability of a well-established organization, while its forward-looking strategy continues to drive expansion into diverse geographic locations and new markets. This balanced approach provides opportunities for career growth, innovation, and meaningful impact, complemented by a comprehensive benefits package that supports employee well-being, financial security, and work-life balance. To further support effective hiring decisions, the Company initiated the use of assessments within the recruitment process. These assessments are intended to promote objectivity, alignment with role requirements, and a positive candidate experience. The Company remains committed to continuing to grow, refine, and develop these assessment practices as part of its ongoing investment in talent acquisition excellence.

Engagement

The Company is committed to creating a top-tier workplace filled with highly satisfied and engaged employees. The Company believes that open and honest communication among employees, managers and executive leadership fosters an open and collaborative work environment where everyone can participate, develop, and thrive. The Company continues to conduct a survey annually to maintain a feedback loop with employees. In 2023, the Company selected Engagement Champions whose role is to support leaders and managers in the ongoing engagement efforts and initiatives. In 2024, the CEO instituted a Company-wide employee townhall to enhance communication and transparency relative to the Company’s strategy and priorities. The townhalls include a Q&A segment where the CEO answers questions on a variety of topics. The town halls are conducted twice a year and continue to serve as a key component of transparent communication with all employees.

Health and Safety

The health and safety of the Company’s employees is of utmost importance. The Company is committed to providing tools and resources to support employees’ overall health and wellbeing. This includes offering a variety of health and welfare benefits as well as a holistic wellbeing program.

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Supervision and Regulation

General

The banking industry is highly regulated with numerous statutory and regulatory requirements that are designed primarily for the protection of depositors and the financial system. Set forth below is a description of the material laws and regulations applicable to the Company and the Bank. This summary is not complete and the reader should refer to these laws and regulations for more detailed information. The Company’s and its subsidiaries’ failure to comply with applicable laws and regulations could result in a range of sanctions and administrative actions imposed upon the Company and/or its subsidiaries, including restrictions on merger and acquisition activity, the imposition of civil money penalties, formal agreements and cease and desist orders. New laws and regulations, more complex regulations, and changes in regulators’ interpretations and application of existing laws and regulations cannot be predicted and may have a material adverse effect on the Company’s businesses and results.

The Company and its subsidiaries are subject to the laws and regulations of the federal government and, where applicable, the states and jurisdictions in which they conduct business. The Company, as a financial holding company, is subject to extensive regulation and supervision by the Board of Governors of the Federal Reserve System (“FRB” or “Federal Reserve”) as its primary federal regulator. The Bank is a federally chartered national bank and is subject to extensive regulation and supervision by the Office of the Comptroller of the Currency (“OCC”) as its primary federal regulator, and as to certain matters, the FRB, the Consumer Financial Protection Bureau (“CFPB”), and the FDIC. The Company expects the current federal government administration will continue to implement a regulatory reform agenda that impacts the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies.

The Company is also subject to the jurisdiction of the SEC and is subject to disclosure and regulatory requirements under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. The Company’s common stock is listed on the New York Stock Exchange (“NYSE”) and it is subject to NYSE’s rules for listed companies. Affiliated entities, including BPAS, BPA, NRS, GTC, HB&T, HSI, BPAS Trust Company of Puerto Rico, Nottingham Advisors, NISI, OneGroup, and Wealth Partners are subject to the jurisdiction of certain state and federal regulators and self-regulatory organizations including, but not limited to, the SEC, the Texas Department of Banking, the State of Maine Bureau of Financial Institutions, the Financial Industry Regulatory Authority (“FINRA”), Puerto Rico Office of the Commissioner of Financial Institutions, the U.S. Department of Labor, and state securities and insurance regulators.

Federal Bank Holding Company Regulation

As the Company is classified as a financial holding company, the Company can affiliate with securities firms and insurance companies and engage in other activities that are “financial in nature” or “incidental” or “complementary” to activities that are financial in nature, as long as it continues to meet the eligibility requirements for financial holding companies (including requirements that the financial holding company and its depository institution subsidiary maintain their status as “well capitalized” and “well managed”).

Generally, FRB approval is not required for the Company to acquire a company (other than a bank holding company, bank or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature, as determined by the FRB. Prior notice to the FRB may be required, however, if the company to be acquired has total consolidated assets of $10 billion or more. Prior FRB approval is required before the Company may acquire the beneficial ownership or control of more than 5% of the voting shares or substantially all of the assets of a bank holding company, bank or savings association.

As the Company is a financial holding company, if the Bank were to not maintain a Satisfactory or better rating under the Community Reinvestment Act of 1977, as amended (“CRA”), the Company would be prohibited, until the rating is raised to Satisfactory or better, from engaging in new activities or acquiring companies other than bank holding companies, banks or savings associations, except that the Company could engage in new activities, or acquire companies engaged in activities, that are considered “closely related to banking” under the Bank Holding Company Act of 1956, (the “BHC Act”). The Bank’s most recent CRA rating was “Satisfactory”. In addition, if the FRB determines that the Company or the Bank is not well capitalized or well managed, the Company would be required to enter into an agreement with the FRB to comply with all applicable capital and management requirements and may contain additional limitations or conditions. Until corrected, the Company could be prohibited from engaging in any new activity or acquiring companies engaged in activities that are not closely related to banking, absent prior FRB approval.

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Federal Reserve System Regulation

As the Company is a financial holding company, it is subject to regulatory capital requirements. The Bank is under similar capital requirements administered by the OCC as discussed below. FRB policy has historically required a financial holding company to act as a source of financial and managerial strength to its subsidiary banks. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) codifies this historical policy as a statutory requirement. To the extent the Bank is in need of regulatory capital, the Company would be expected to provide additional capital, including borrowings from the FRB for such purpose. Both the Company and the Bank are subject to extensive supervision and regulation, which focus on, among other things, the protection of depositors’ funds.

The FRB also regulates the national supply of bank credit in order to influence general economic conditions. These policies have a significant influence on overall growth and distribution of loans, investments and deposits, and affect the interest rates charged on loans or paid for deposits.

Fluctuations in interest rates, which may result from government fiscal policies and the monetary policies of the FRB, have a strong impact on the income derived from loans and securities, and interest paid on deposits and borrowings. While the Company and the Bank strive to model various interest rate changes and adjust its strategies for such changes, the level of earnings can be materially affected by economic circumstances beyond its control.

The Office of the Comptroller of the Currency Regulation (“OCC”)

The Bank is supervised by the OCC. OCC supervision consists of multiple examinations of the Bank’s activities over the course of its annual supervisory cycle. The various laws and regulations administered by the OCC affect the Company’s practices such as payment of dividends, incurring debt, and acquisition of financial institutions and other companies. It also affects the Bank’s business practices, such as payment of interest on deposits, the charging of interest on loans, types of business conducted and the location of its offices. The OCC generally prohibits a depository institution from making any capital distributions, including the payment of a dividend, or paying any management fee to its parent holding company if the depository institution would become undercapitalized due to the payment. Undercapitalized institutions are subject to growth limitations and are required to submit a capital restoration plan to the OCC. The OCC may take enforcement actions for a variety of supervisory concerns, including violations of laws, rules or regulations and unsafe and unsound practices. As a result, the OCC could also establish individual minimum capital ratios (“IMCR”) for the Bank that are higher than the regulatory minimums. This would impair the Bank’s ability to pay dividends to the Company. The Bank is well capitalized under regulatory standards administered by the OCC. For additional information on the Company’s capital requirements see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Shareholders’ Equity and Regulatory Capital” and Note P to the Financial Statements.

During 2025, the OCC announced a number of initiatives intended to tailor regulatory and supervisory expectations for community banks, including the release of a notice of proposed rulemaking to expand the definition of community banks to include institutions with less than $30 billion in total assets. These initiatives are focused on reducing the regulatory burden on smaller, lower risk national banks and include refinements to examination processes, supervisory practices, and certain data collection requirements. The OCC has indicated that these changes are designed to improve examination efficiency, enhance supervisory clarity, and focus regulatory attention on areas of heightened or material risk. While these initiatives may reduce certain compliance and operational burdens, the Company remains subject to comprehensive prudential regulation and supervisory oversight, and changes in regulatory priorities or expectations could continue to affect the Company’s operations, compliance costs, and strategic planning. Additionally, some of the administration’s policy initiatives could have unforeseen negative consequences directly on the bank’s operations or the credit markets that it lends. If deposit alternatives, such as stablecoin, were to gain significant market share among retail and commercial depositors, it could have a significant negative impact on the Bank’s liquidity and funding costs.

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Federal Home Loan Bank (“FHLB”)

The Bank is a member of the FHLB, which provides a central credit facility primarily for member institutions for home mortgage and neighborhood lending. The Bank is subject to certain rules and requirements as a member institution of the FHLB, including the purchase of shares of FHLB activity-based stock in the amount of 4.5% of the dollar amount of outstanding advances and FHLB capital stock in an amount equal to the greater of $1,000 or the sum of 0.15% of the mortgage-related assets held by the Bank based upon the previous year-end financial information. The Bank was in compliance with the rules and requirements of the FHLB at December 31, 2025.

Deposit Insurance

Deposits of the Bank are insured up to the applicable limits by the Deposit Insurance Fund (“DIF”) and are subject to deposit insurance assessments to maintain the DIF. The Dodd-Frank Act permanently increased the maximum amount of deposit insurance to $250,000 per deposit category, per depositor, per institution. A depository institution’s DIF assessment is calculated by multiplying its assessment rate by the assessment base, which is defined as the average consolidated total assets less the average tangible equity of the depository institution. The Bank’s deposit insurance assessment is based on a large institution classification. For large insured depository institutions, generally defined as those with at least $10 billion in total assets, the FDIC uses capital and supervisory ratings (“CAMELS”) and financial measures from two scorecards to calculate assessment rates. Each scorecard has two components - a performance score and loss severity score, which are combined and converted to an initial assessment rate. The FDIC has the ability to adjust a large or highly complex insured depository institution’s total score by a maximum of 15 points, up or down, based upon significant risk factors that are not captured by the scorecard. Under the assessment rate schedule effective for 2025, the initial base assessment rate for large and highly complex insured depository institutions ranges from five to 32 basis points, and the total base assessment rate, after applying the unsecured debt and brokered deposit adjustments, ranges from two and one-half to 42 basis points. The Bank’s FDIC insurance for 2025 was based on assessment rates ranging between six and seven basis points compared to assessment rates ranging between five and seven basis points for 2024 and five and six basis points for 2023.

Under the Federal Deposit Insurance Act (“FDIA”), if the FDIC finds that an institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC, the FDIC may determine that such violation or unsafe or unsound practice or condition require the termination of deposit insurance.

The FDIA requires federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions that relate to, among other things: (i) internal controls, information systems and audit systems; (ii) loan documentation; (iii) credit underwriting; (iv) interest rate exposure; (v) asset growth and quality; and (vi) compensation and benefits. Federal banking agencies have adopted regulations and Interagency Guidelines Prescribing Standards for Safety and Soundness to implement these requirements, which regulators use to identify and address problems at insured depository institutions before capital becomes impaired. If a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the bank may be required to submit an acceptable plan to achieve compliance and agree to specific deadlines for the submission to and review by the regulator of reports confirming progress in implementing the safety and soundness compliance plan. Failure to implement such a plan may result in an enforcement action against the bank.

Enforcement actions against the Company, the Bank and their respective officers and directors may include the issuance of a written directive, the issuance of a cease-and-desist order that can be judicially enforced, the imposition of civil money penalties, the issuance of directives to increase capital, the issuance of formal and informal agreements, the issuance of removal and prohibition orders against officers or other institution-affiliated parties, the imposition of restrictions and sanctions under prompt corrective action regulations, the termination of deposit insurance (in the case of the Bank) and the appointment of a conservator or receiver for the Bank. Civil money penalties can be over $2 million for each day a violation continues.

Various proposals are under active consideration by policymakers that could affect the scope of deposit insurance coverage. For example, bipartisan legislation has been introduced in the U.S. Senate that would significantly raise the deposit insurance limit for certain noninterest-bearing transaction accounts, subject to legislative approval and funding determinations. In addition, Congress and the FDIC have conducted oversight hearings and agency analyses exploring broader deposit insurance reform alternatives, including adjusting coverage limits and targeted insurance frameworks for specific account types. The ultimate outcome, timing, and scope of any changes remain uncertain and could materially affect deposit flows, competitive dynamics, and regulatory costs.

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Transactions with Affiliates and Insiders

The Bank is subject to Section 23A of the Federal Reserve Act, as amended (the "FRA") which places limits on, among other covered transactions, the amount of loans or extensions of credit to affiliates that may be made by the Bank. Extensions of credit to affiliates must be adequately collateralized by specified amounts and types of collateral. Section 23A also limits the amount of loans or advances made by the Bank to third-party borrowers that are collateralized by securities or obligations of the Bank's affiliates. The Bank is also subject to Section 23B of the FRA, which, among other things, prohibits an institution from engaging in transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliates.

The Company is subject to restrictions on extensions of credit to insiders (namely executive officers, directors, and 10% stockholders) and their related interests. These restrictions are contained in the FRA and Federal Reserve Regulation O and apply to all insured depository institutions as well as their subsidiaries and holding companies. These restrictions include limits on loans to any individual insider and such insider's related interests and certain conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests, which cannot exceed the institution's total unimpaired capital and surplus, unless the FDIC determines that a lesser amount is appropriate. Insiders are subject to enforcement actions for knowingly accepting loans in violation of applicable restrictions.

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

On July 21, 2010, the Dodd-Frank Act was signed into law, which resulted in significant changes to the banking industry. The Dodd-Frank Act contains numerous provisions that affect all banks and bank holding companies and impacts how the Company and the Bank handle their operations. The Dodd-Frank Act requires various federal agencies, including those that regulate the Company and the Bank, to promulgate rules and regulations and to conduct various studies and reports for Congress. The federal agencies have either completed or are in the process of completing these rules and regulations and have been given significant discretion in drafting such rules and regulations. Several of the provisions of the Dodd-Frank Act have the consequence of increasing the Bank’s expenses, decreasing its revenues, and changing the activities in which it chooses to engage. The specific impact of the Dodd-Frank Act on the Company’s current activities or new financial activities the Company may consider in the future, the Company’s financial performance, and the markets in which the Company operates depends on the manner in which the relevant agencies continue to develop and implement the required rules and regulations and the reaction of market participants to these regulatory developments.

Pursuant to FRB regulations mandated by the Dodd-Frank Act, interchange fees on debit card transactions are limited to a maximum of $0.21 per transaction plus 5 basis points of the transaction amount. A debit card issuer may recover an additional one cent per transaction for fraud prevention purposes if the issuer complies with certain fraud-related requirements prescribed by the FRB. The FRB also adopted requirements in the final rule that issuers include two unaffiliated networks for routing debit transactions that are applicable to the Company and the Bank. On October 25, 2023, the FRB proposed to lower the maximum interchange fee that a large debit card issuer can receive for a debit card transaction. The proposal would also establish a regular process for updating the maximum amount every other year going forward. The Company continues to monitor the development of these proposed rule revisions.

The Dodd-Frank Act established the CFPB and empowered it to exercise broad rulemaking, supervision, and enforcement authority for a wide range of consumer protection laws. Because the Bank’s total consolidated assets exceed $10 billion, the Bank is subject to the direct supervision of the CFPB. If the CFPB were to implement rules that negatively impacted the Bank’s products or services, it could have a material negative impact on its operations.

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The CFPB has broad powers to supervise and enforce consumer protection laws, including laws that apply to banks in order to prohibit unfair, deceptive or abusive acts or practices (“UDAAP”). The Dodd-Frank Act also clarified the federal preemption rules that are applicable to national banks and gives state attorney generals for the states certain powers to enforce federal consumer protection laws. A violation of the consumer protection and privacy laws, and in particular UDAAP, could have serious legal, financial, and reputational consequences.

The CFPB, FRB, and OCC are also authorized to collect fines and provide consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data and promote the availability of financial services to underserved consumers and communities. The CFPB is authorized to pursue administrative proceedings or litigation for violations of federal consumer financial laws. In these proceedings, the CFPB can obtain cease and desist orders (which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative relief) and monetary penalties.

The final rules issued by the FRB, SEC, OCC, FDIC, and Commodity Futures Trading Commission implementing Section 619 of the Dodd-Frank Act (commonly known as the Volcker Rule) prohibit insured depository institutions and companies affiliated with insured depository institutions from (1) engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account and (2) sponsoring certain covered funds, subject to certain limited exceptions. The final rules of the Volcker Rule are not material to the Company’s investing and trading activities.

The Dodd-Frank Act requires U.S. financial regulators, including the FRB and the SEC, to adopt rules on incentive-based payment arrangements at specified regulated entities having at least $1 billion in total assets. In 2016, the federal banking regulators, the SEC, the Federal Housing Finance Agency and the National Credit Union Administration proposed revised rules on incentive-based compensation practices, which have not yet been finalized. If these or other regulations are adopted in a form similar to what has been proposed, they will impose limitations on the manner in which the Company may structure compensation for its employees, which could adversely affect the Company’s ability to hire, retain and motivate key employees.

The ongoing effects of the Dodd-Frank Act, as well as the recent and possible future changes to the regulatory framework as a result of the Economic Growth Act and future proposals make it difficult to assess the overall financial impact of the Dodd-Frank Act and related regulatory developments on the Company and the banking industry. As a result, the Company cannot predict the ultimate impact of the Dodd-Frank Act on the Company or the Bank, including the extent to which it could increase costs or limit the Company’s ability to pursue business opportunities in an efficient manner, or otherwise adversely affect its business, financial condition and results of operations. Nor can the Company predict the impact or substance of other future legislation or regulation. However, it is expected that future legislation or regulation at a minimum will increase the Company’s and the Bank’s operating and compliance costs. As rules and regulations continue to be implemented or issued, the Company may need to dedicate additional resources to ensure compliance, which may increase its costs of operations and adversely impact the Company’s earnings.

Capital Requirements

The Company and the Bank are required to comply with applicable capital adequacy standards established by the federal banking agencies (the “Capital Rules”) which are based on the Basel Committee on Banking Supervision’s (the “Basel Committee”) 2010 final capital framework for strengthening international capital standards, referred to as “Basel III”.

The Capital Rules, among other things, impose a capital measure called “Common Equity Tier 1,” (“CET1”) to which most deductions/adjustments to regulatory capital measures are to be made. In addition, the Capital Rules specify that Tier 1 capital consists of CET1 and “Additional Tier 1 capital” instruments meeting certain specified requirements.

Under the Capital Rules, the minimum capital ratios are as follows:

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4.5% CET1 to total risk-weighted assets;

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6.0% Tier 1 capital (CET1 plus Additional Tier 1 capital) to total risk-weighted assets;

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8.0% Total capital (Tier 1 Capital plus Tier 2 capital) to total risk-weighted assets;

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4.0% Tier 1 capital to total adjusted quarterly average assets (known as “leverage ratio”)

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The Capital Rules require the Company and the Bank to maintain a “capital conservation buffer” composed entirely of CET1. Banking organizations are required to maintain a minimum capital conservation buffer of 2.5% (CET1 to total risk-weighted assets), in addition to the minimum risk-based capital ratios. Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer, a banking organization is required to maintain the following: (i) CET1 to total risk-weighted assets of at least 7%, (ii) Tier 1 capital to total risk-weighted assets of at least 8.5%, and (iii) Total capital (Tier 1 capital plus Tier 2 capital) to total risk-weighted assets of at least 10.5%. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions that do not maintain a capital conservation buffer of 2.5% or more will face constraints on dividends, common share repurchases and incentive compensation based on the amount of the shortfall.

The Capital Rules provide for a number of deductions from and adjustments to CET1. These include, for example, the requirement that mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1. Under the Capital Rules, the effects of certain accumulated other comprehensive income or loss items are not excluded for the purposes of determining regulatory capital; however, banks not using the advanced approach, including the Company and the Bank, were permitted to, and in the case of the Company and the Bank did, make a one-time permanent election to continue to exclude these items.

With respect to the Bank, the Capital Rules also revised the prompt corrective action (“PCA”) regulations established pursuant to Section 38 of the Federal Deposit Insurance Act, establishing the CET1 ratio at 6.5% for well-capitalized status and the Tier 1 capital ratio at 8.0% for well-capitalized status. The Capital Rules do not change the total risk-based PCA capital requirement for any capital category.

The Capital Rules prescribe a standardized approach for risk weighted-assets that expands the risk-weight categories from the four Basel I-derived categories (0%, 20%, 50% and 100%) to a larger and more risk-sensitive number of categories, depending on the nature of the asset. The risk-weight categories generally range from 0% for U.S. government and agency securities, to 1,250% for certain securitized exposures, and result in higher risk weights for a variety of asset categories. The standardized approach requires financial institutions to transition assets that are 90 days or more past due or on nonaccrual from their original risk weight to 150 percent. Additionally, loans designated as high volatility commercial real estate (“HVCRE”) are assigned a risk-weighting of 150 percent.

Requirements to maintain higher levels of capital or to maintain higher levels of liquid assets could adversely impact the Company’s net income and return on equity. The current requirements and the Company’s actual capital levels are detailed in Note P of “Notes to Consolidated Financial Statements” filed in Part II, Item 8, “Financial Statements and Supplementary Data.”

Consumer Protection Laws

In connection with its banking activities, the Bank is subject to a number of federal and state laws designed to protect consumers and promote lending to various sectors of the economy. These laws include but are not limited to the Equal Credit Opportunity Act, the Gramm-Leach-Bliley Act (“GLB Act”), the Fair Credit Reporting Act (“FCRA”), the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), the Electronic Funds Transfer Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Dodd-Frank Act, the Real Estate Settlement Procedures Act, the Secure and Fair Enforcement for Mortgage Licensing Act (“SAFE”), the Servicemembers Civil Relief Act (“SCRA”), the Military Lending Act (“MLA”), and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans and providing other services. The Company is subject to regulation by the CFPB, which is responsible for promoting fairness and transparency for mortgages, credit cards, deposit accounts and other consumer financial products and services and for interpreting and enforcing the federal consumer financial laws that govern the provision of such products and services. The CFPB is also authorized to prevent any institution under its authority from engaging in an unfair, deceptive, or abusive act or practice in connection with consumer financial products and services.

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The GLB Act requires all financial institutions to adopt privacy policies, restrict the sharing of nonpublic customer data with nonaffiliated parties and establish procedures and practices to protect customer data from unauthorized access. The GLB Act also requires certain disclosures to consumers about information collection, sharing, and security practices and their right to “opt out” of the institution’s disclosure of their personal financial information to non-affiliated third-parties (with certain exceptions). In addition, the FCRA, as amended by the FACT Act, includes provisions affecting the Company, the Bank, and their affiliates, including provisions concerning obtaining consumer reports, furnishing information to consumer reporting agencies, maintaining a program to prevent identity theft, sharing of certain information among affiliated companies, and other provisions. The FACT Act requires persons subject to FCRA to notify their customers if they report negative information about them to a credit bureau or if they are granted credit on terms less favorable than those generally available. The FRB and the Federal Trade Commission have extensive rulemaking authority under the FACT Act, and the Company and the Bank are subject to the rules that have been created under the FACT Act, including rules regarding limitations on affiliate marketing and implementation of programs to identify, detect and mitigate certain identity theft red flags. The SCRA protects persons called to active military service and their dependents from undue hardship resulting from their military service, and the MLA extends specific protections if an accountholder, at the time of account opening, is a covered active duty member of the military or certain family members thereof. The SCRA applies to all debts incurred prior to the commencement of active duty and limits the amount of interest, including service and renewal charges and any other fees or charges (other than bona fide insurance) that are related to the obligation or liability. The MLA applies to certain consumer loans and extends specific protections if an accountholder, at the time of account opening, is a covered active duty member of the military or certain family members thereof. The Company and the Bank are also subject to data security standards and data breach notice requirements issued by various states, the OCC and other regulatory agencies. The Bank has created policies and procedures to comply with these consumer protection requirements.

The CFPB has implemented the ability-to-repay and qualified mortgage (QM) provisions of the Truth in Lending Act (the “QM Rule”) and has taken steps to modify the QM Rule. The ability-to-repay provision requires creditors to make reasonable, good faith determinations that borrowers are able to repay their mortgages before extending credit based on a number of factors and consideration of financial information about the borrower derived from reasonably reliable third-party documents. Under the Dodd-Frank Act and the QM Rule, loans meeting the definition of “qualified mortgage” are entitled to a presumption that the lender satisfied the ability-to-repay requirements. The presumption is a conclusive presumption/safe harbor for loans meeting the QM requirements, and a rebuttable presumption for higher-priced loans meeting the QM requirements. The Bank has created policies and procedures to comply with these consumer protection requirements and continues to monitor developments relative to future changes to the QM Rule.

Among other provisions, the federal banking rule under the Electronic Fund Transfer Act prohibits financial institutions from charging consumers fees for paying overdrafts on automated teller machines and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions. The rule does not govern overdraft fees on the payment of checks and certain other forms of bill payments.

In recent periods, the CFPB has finalized and proposed rules related to consumer financial data access, fee practices and other aspects of consumer banking. Certain of these rules are subject to legal challenge or further regulatory action and their ultimate scope, timing and applicability remain uncertain.

In May 2024, the SEC finalized amendments to require broker-dealers, investment companies and investment advisers registered with the SEC to adopt written policies and procedures for incident response programs to address unauthorized access to or use of customer information. The amendments also require covered entities to notify, within 30 days, individuals affected by an incident involving sensitive customer information and provide them with details about the incident and other information intended to help affected individuals respond appropriately. Compliance with these amendments began on December 3, 2025.

The Bank Secrecy Act

The Bank Secrecy Act (“BSA”) requires all financial institutions, including banks and securities broker-dealers, to, among other things, establish a risk-based system of internal controls reasonably designed to prevent money laundering and the financing of terrorism. The BSA includes a variety of recordkeeping and reporting requirements (such as currency transaction and suspicious activity reporting), as well as due diligence/know-your-customer documentation requirements. The Company has established a BSA/anti-money laundering program and taken other appropriate measures in order to comply with BSA requirements.

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Anti-Money Laundering Act of 2020

The Anti-Money Laundering Act of 2020 (“AMLA”) amends the BSA and was enacted in January 2021. The AMLA was intended to reform and modernize U.S. bank secrecy and anti-money laundering laws. The Company has and will continue to review and monitor its anti-money laundering program to ensure it complies with the provisions of the AMLA.

In July 2024, the federal banking agencies, including the Federal Reserve and OCC, proposed amendments to update the requirements for supervised institutions to establish, implement and maintain effective, risk-based and reasonably designed AML and countering the financing of terrorism ("CFT") programs. The proposed amendments would require supervised institutions to identify, evaluate and document the regulated institution's money laundering, terrorist financing and other illicit finance activity risks, as well as consider, as appropriate, the U.S. Department of the Treasury's Financial Crimes Enforcement Network's ("FinCEN") published national AML/CFT priorities.

In August 2024, the Financial Crimes Enforcement Network (“FinCEN”), which drafts regulations implementing anti-money laundering legislation, adopted a rule extending anti-money laundering obligations, including maintenance of an anti-money laundering program and filing certain reports with FinCEN, to registered investment advisers, like certain of the Company’s subsidiaries. On December 31, 2025, FinCEN issued a final rule to extend the effective date of this rule from January 1, 2026 until January 1, 2028 to provide additional time for FinCEN to review and tailor the rule.

USA Patriot Act

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”) imposes obligations on U.S. financial institutions, including banks and broker-dealer subsidiaries, to implement policies, procedures and controls which are reasonably designed to detect and report instances of money laundering and the financing of terrorism. In addition, provisions of the USA Patriot Act require the federal financial institution regulatory agencies to consider the effectiveness of a financial institution’s anti-money laundering activities when reviewing bank mergers and bank holding company acquisitions. The USA Patriot Act also encourages information-sharing among financial institutions, regulators, and law enforcement authorities by providing an exemption from the privacy provisions of the GLB Act for financial institutions that comply with the provision of the Act. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing, or to comply with all of the relevant laws or regulations, could have serious legal, financial and reputational consequences for the institution. The Company has approved policies and procedures that are designed to comply with the USA Patriot Act and its regulations.

Office of Foreign Assets Control Regulation

The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others administrated by the Treasury’s Office of Foreign Assets Control (“OFAC”). The OFAC administered sanctions can take many different forms; however, they generally contain one or more of the following elements: (i) restrictions on trade with or investment in a sanctioned country, entity or individual, including prohibitions against direct or indirect imports and exports and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments, or providing investment related advice or assistance; and (ii) a blocking of assets in which the government or specially designated nationals have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (e.g., property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. Failure to comply with these sanctions could have serious legal, financial, and reputational consequences. The Company has approved policies and procedures that are designed to comply with OFAC and its regulations.

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Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) implemented a broad range of corporate governance, accounting and reporting reforms for companies that have securities registered under the Securities Exchange Act of 1934, as amended. In particular, the Sarbanes-Oxley Act established, among other things: (i) requirements for audit and other key Board of Directors committees involving independence, expertise levels, and specified responsibilities; (ii) responsibilities regarding the oversight of financial statements by the Chief Executive Officer and Chief Financial Officer of the reporting company; (iii) an independent accounting oversight board for the accounting industry; (iv) standards for auditors and the regulation of audits, including independence provisions which restrict non-audit services that accountants may provide to their audit clients; (v) increased disclosure and reporting obligations for the reporting company and its directors and executive officers including accelerated reporting of company stock transactions; (vi) a prohibition of personal loans to directors and officers, except certain loans made by insured financial institutions on non-preferential terms and in compliance with other bank regulator requirements; and (vii) a range of new and increased civil and criminal penalties for fraud and other violations of the securities laws. The Company has approved policies and procedures that are designed to comply with the Sarbanes-Oxley Act and its regulations.

Community Reinvestment Act of 1977

Under the CRA, the Bank is required to help meet the credit needs of its communities, including low- and moderate-income neighborhoods. Although the Bank must follow the requirements of CRA, it does not limit the Bank’s discretion to develop products and services that are suitable for a particular community or establish lending requirements or programs. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibits discrimination in lending practices. The Bank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on its activities and the activities of the Company. The Bank’s failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions against it by its regulators as well as other federal regulatory agencies and the Department of Justice. The Bank’s most recent CRA rating was “Satisfactory”.

On October 24, 2023, the FRB, FDIC and OCC jointly issued a final rule intended to strengthen and modernize regulations implementing the CRA to encourage banks to expand access to credit, investment, and banking services in low- and moderate-income communities, adapt to changes in the banking industry, including internet and mobile banking, provide greater clarity and consistency in the application of the CRA regulations and tailor CRA evaluations and data collection to bank size and type. The implementation of this rule was subsequently stayed and on July 16, 2025 the FRB, FDIC and OCC jointly issued a proposal to rescind the aforementioned rule and replace it with the prior CRA regulations, with certain technical amendments. Accordingly, the CRA continues to be administered under the regulatory framework in effect prior to the issuance of the October 2023 final rule.

Cyber Security

The federal bank regulators have adopted rules providing for new notification requirements for banking organizations and their service providers for significant cybersecurity incidents. Specifically, the new rules require a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours after, the banking organization determines that a "computer-security incident" rising to the level of a "notification incident" has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization's operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization's customers for four or more hours.

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Guidance for Third-Party Relationships

On June 9, 2023, the Federal Reserve, OCC, and FDIC issued final interagency guidance on risk management of third-party relationships. The interagency guidance is based, in part, on the regulators’ previously existing third-party risk management guidance from 2013 and seeks to, among other things, promote consistency in third-party risk management and provide sound risk management guidance for third-party relationships commensurate with a bank's risk profile and complexity as well as the criticality of the activity. The final interagency guidance replaces each agency's existing guidance on this topic and is directed to all banking organizations supervised by the Federal Reserve, OCC, and FDIC. Additionally, third-party relationship risk management and banking-as-a-service arrangements (including with respect to deposit products and services) have continued to be topics of focus for federal bank regulators in 2025 and further rulemaking activity or guidance may be forthcoming.

Guiding and Establishing National Innovation for U.S. Stablecoins Act

On July 18, 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”) became U.S. law. The statute provides a federal regulatory framework for the issuance of stablecoins. If stablecoins become widely adopted by retail and/or commercial bank depositors as a substitute for bank accounts, financial institutions, such as CBNA, would experience a substantial negative impact on their liquidity, ability to originate loans and related interest income. It is highly uncertain what the impact of this law will be on CBNA’s future financial condition.

Future Legislation and Regulation

Laws, regulations and policies are continually under review by Congress and state legislatures and federal and state regulatory agencies. In addition to the specific legislation and regulations described above, future legislation and regulations or changes to existing statutes, regulations or regulatory policies applicable to the Company and its subsidiaries may affect the business, financial condition and results of operations in adverse and unpredictable ways and increase reporting requirements and compliance costs. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted.

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Information about Our Executive Officers

The executive officers of the Company and the Bank who are elected by the Board of Directors are as follows:

Name	Age	Position
Dimitar A. Karaivanov	44	Director, President and Chief Executive Officer. Mr. Karaivanov assumed his current position on January 1, 2024. He previously served as Executive Vice President and Chief Operating Officer from October 2022 to December 2023 and Executive Vice President of Financial Services and Corporate Development from June 2021 to September 2022. Prior to joining the Company, he was the Managing Director of Lazard Middle Market’s Financial Institutions Group from June 2018 through June 2021. Prior to Lazard, he was the Managing Director of RBC Capital Markets’ Financial Institutions Group from April 2011 through June 2018.
Marya Burgio Wlos	48	Executive Vice President and Chief Financial Officer. Ms. Burgio Wlos joined the Company on March 31, 2025. Prior to joining the Company, Ms. Wlos served as Managing Director and COO of the Investment Bank at M&T Bank from January 2021 through March 2025. Ms. Wlos served as Head of Management Accounting, Finance at M&T Bank from September 2018 through January 2021 and as Head of Trading Relationship Management, UBS Asset Management at UBS AG from November 2013 through August 2018. Prior to that time, Ms. Wlos served in various finance roles at Citadel LLC from April 2008 through September 2012 and at Bank of America from January 2007 to April 2008.
Maureen Gillan-Myer	58	Executive Vice President and Chief Administration and Human Resources Officer. Ms. Gillan-Myer assumed her current position on October 1, 2024. She joined the Company as Executive Vice President and Chief Human Resources Officer on October 1, 2021. Prior to joining the Company, she served as the Chief Human Resources Officer of HSBC US from February 2016 through September 2021 and as its Senior Vice President - Talent Acquisition from May 2009 through February 2016.
Michael N. Abdo	48	Executive Vice President and General Counsel. Mr. Abdo assumed his current position in July 2022. He served as Associate General Counsel from 2013 to 2020 and as Senior Vice President and Senior Associate General Counsel from January 2020 to July 2022. Prior to joining the Company in 2013, he was an associate with Cadwalader Wickersham & Taft.
Matthew K. Durkee	63	Senior Vice President, Chief Banking Officer and President of Commercial Banking. Mr. Durkee assumed his current position on January 1, 2026. He served as President, Commercial Banking from January 2024 through December 2025 and the President of the New England Region from January 2022 through December 2023. Prior to joining the Bank, he served as Executive Vice President and New England President for NBT Bank, N.A. from 2009 to 2020.

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Item 1A. Risk Factors

There are risks inherent in the Company’s business. The material risks and uncertainties that management believes affect the Company are described below. Adverse experience with these could have a material impact on the Company’s financial condition and results of operations. The Risk Committee of the Board of Directors (the “Board”) oversees the Company’s efforts to manage risks through actions such as reviewing the Bank’s credit risk, liquidity and interest rate risk, monitoring the quality and risk profile of the Bank’s loan portfolio and credit administration, evaluating the Company’s securities portfolio to ensure that the Company’s objectives related to diversification, asset quality, liquidity, profitability and pledging are met, overseeing the Company’s enterprise risk management functions and overseeing the Company’s information security and cybersecurity functions.

Risks Related to the Company’s Business

Interest Rate Risk

Changes in interest rates affect the Company’s profitability, assets and liabilities.

The Company’s income and cash flow depends to a great extent on the difference between the interest earned on loans and investment securities, and the interest paid on deposits and borrowings. Interest rates are highly sensitive to many factors that are beyond the Company’s control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the FRB. Changes in interest rates, including those driven by changes in monetary policy, could influence not only the interest the Company receives on loans and securities and the amount of interest it pays on deposits and borrowings, but such changes could also affect (1) its ability to originate loans and obtain deposits, which could reduce the amount of fee income generated, (2) the fair value of its financial assets and liabilities, and (3) the average duration of the Company’s various categories of earning assets. Earnings could be adversely affected if the interest rates received on loans and investments fall more quickly than the interest rates paid on deposits and other borrowings. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and investments, the Company’s net interest income could also be adversely affected, which in turn could negatively affect the Company’s earnings. Increases in interest rates would likely cause an increase in the unrealized loss position on certain investments, a decrease in tangible equity, and could negatively affect the Company’s earnings if the need to liquidate these investments arose. Although management believes it has implemented asset and liability management strategies to reduce the potential effects of changes in interest rates on the results of operations, any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on the financial condition and results of operations.

Liquidity Risk

The Company must maintain adequate sources of funding and liquidity to meet regulatory expectations, support its operations and fund outstanding liabilities.

The Company’s liquidity and ability to fund and run its business could be materially adversely affected by a variety of conditions and factors, including financial and credit market disruptions and volatility, a lack of market or customer confidence in financial markets in general, or deposit competition based on interest rates, which may result in a loss of customer deposits or outflows of cash or collateral and/or adversely affect the Company’s ability to access capital markets on favorable terms. Other conditions and factors that could materially adversely affect the Company’s liquidity and funding include a lack of market or customer confidence in, or negative news about, the Company or the financial services industry generally which also may result in a loss of deposits and/or negatively affect the Company’s ability to access the capital markets; the loss of customer deposits due to reductions in customer savings rates, increased spending due to inflation, or other factors including shifting to alternative investments such as stablecoins; counterparty availability; interest rate fluctuations; general economic conditions; and the legal, regulatory, accounting and tax environments governing the Company’s funding transactions. 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 that disrupts orderly short-term funding operations or from a significant tightening of monetary policy that limits the national money supply. Many of the foregoing conditions and factors may be caused by events over which the Company has little or no control. There can be no assurance that significant disruption and volatility in the financial markets will not occur in the future. Further, the Company’s customers may be adversely impacted by such conditions, which could have a negative impact on the Company’s business, financial condition and results of operations.

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The Company depends on dividends from the Bank and BPAS for cash revenues to support common dividend payments and other uses, but those dividends are subject to restrictions.

The ability of the Company to satisfy its obligations and pay cash dividends to its shareholders is primarily dependent on the earnings of and dividends from the Bank and BPAS. However, payment of dividends by the Bank is limited by dividend restrictions and capital requirements imposed by bank regulations. If the Bank is unable to pay dividends to the Company, the Company might not be able to service its debt, pay its obligations or pay dividends on its common stock.

Credit and Lending Risk

The allowance for credit losses may be insufficient.

The Company’s business depends on the creditworthiness of its customers. The Company reviews the allowance for credit losses quarterly for adequacy considering historical credit loss experience, current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels, risk ratings as well as changes in macroeconomic conditions. The Company’s allowance for credit losses may fluctuate significantly from period to period due to changes in economic conditions, changes in the composition of the Company’s loan portfolios, changes in historical loss rates and changes in other credit factors, including the level of delinquent loans. If the Company’s assumptions prove to be incorrect, the Company’s allowance for credit losses may not be sufficient to cover losses inherent in the Company’s loan portfolio, resulting in additions to the allowance. Material additions to the allowance would materially decrease its net income. It is possible that over time the allowance for credit losses will be inadequate to cover credit losses in the portfolio because of unanticipated adverse changes in the economy, market conditions or events adversely affecting specific customers, industries or markets. Furthermore, bank regulators have the authority to require the Company to make provisions for credit losses or otherwise recognize loan charge-offs following their periodic review of the Company’s loan portfolio, underwriting procedures, and allowance for losses on such loans. Any increase in the allowance for credit losses or in loan charge-offs as required by such regulatory authorities could have a material adverse effect on the Company’s financial condition and results of operations.

Mortgage banking income may experience significant volatility.

Mortgage banking income is highly influenced by the level and direction of mortgage interest rates, real estate and refinancing activity and elections made by the Company to sell or retain mortgage production. In lower interest rate environments, the demand for mortgage loans and refinancing activity will tend to increase. Increases in mortgage loan sales would have the effect of increasing fee income but could adversely impact the estimated fair value of the Company’s mortgage servicing rights as the rate of loan prepayments increase. In higher interest rate environments, the demand for mortgage loans and refinancing activity will generally be lower. Decreases in mortgage loan sales would have the effect of decreasing fee income opportunities.

Conditions in the commercial real estate market could adversely affect the Company’s business.

The deterioration of the commercial real estate market across the nation may negatively affect the economies where the Company operates and may result in customers engaged in the commercial real estate having greater difficulties fulfilling their financial responsibilities to the Company. The macroeconomic environment driving these conditions include elevated interest rates, increases in property expenses, such as casualty insurance, decreases in rents, and increases in vacancy rates, particularly for office real estate. This could lead to a material adverse effect on the Company’s financial condition and results of operations through resulting increases in the Company’s allowance for credit losses, provision for credit losses and net charge-offs.

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Legal, Regulatory, and Compliance Risk

The Company is or may become involved in lawsuits, legal proceedings, information-gathering requests, investigations, and proceedings by governmental agencies or other parties that may lead to adverse consequences.

As a participant in the financial services industry, many aspects of the Company’s business involve substantial risk of legal liability. The Company and its subsidiaries have been named or threatened to be named as defendants in various lawsuits arising from its or its subsidiaries’ business activities (and in some cases from the activities of acquired companies). In addition, the Company is, or may become, the subject of governmental and self-regulatory agency information-gathering requests, reviews, investigations and proceedings and other forms of regulatory inquiry by, including but not limited to, bank regulatory agencies, the SEC, FINRA, the CFPB, the U.S. Department of Justice, the U.S. Department of Labor, state attorneys general, state insurance regulators and law enforcement authorities. The results of such proceedings could lead to delays in or prohibition to acquire other companies, significant penalties, including monetary penalties, dividend and/or asset growth restrictions, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way in which the Company conducts its business, or reputational harm.

Although the Company establishes accruals for legal proceedings when information related to the loss contingencies represented by those matters indicates both that a loss is probable and that the amount of loss can be reasonably estimated, the Company does not have accruals for all legal or regulatory proceedings where it faces a risk of loss. In addition, due to the inherent subjectivity of the assessments and unpredictability of the outcome of legal proceedings, amounts accrued may not represent the ultimate loss to the Company from the legal proceedings in question. Thus, the Company’s ultimate losses may be higher than the amounts accrued for legal loss contingencies, which could adversely affect the Company’s financial condition and results of operations.

The Company operates in a highly regulated environment and may be adversely affected by changes in laws and regulations or the interpretation and examination of existing laws and regulations.

The Company and its subsidiaries are subject to extensive state and federal regulation, supervision and legislation that govern nearly every aspect of its operations. The Company, as a financial holding company, is subject to regulation by the FRB and its banking subsidiary is subject to regulation by the OCC as well as the FDIC, CFPB, and other federal and state agencies. These regulations affect deposit and lending practices, capital levels and structure, investment practices, dividend policy, and growth. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of a bank, the risk ratings or classifications of loans and investments by a bank, and the adequacy of a bank’s allowance for credit losses. In addition, the non-bank subsidiaries are engaged in providing services including, but not limited to, retirement plan administration, fiduciary services to collective investment funds, investment management and insurance brokerage services, which industries are also heavily regulated at both a state and federal level, including by state banking and insurance agencies, the U.S. Department of Labor and the SEC. Such regulators govern the activities in which the Company and its subsidiaries may engage. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation, interpretation or application, could have a material impact on the Company and its operations. Changes to the regulatory laws governing these businesses, or changes in regulatory policy or a regulator's interpretation of a law or regulation, could affect the Company’s ability to deliver or expand its services and adversely impact its operating and financial condition.

The Dodd-Frank Act, as amended by the Economic Growth Act, instituted major changes to the banking and financial institutions regulatory regimes in the financial services sector. The ongoing effects of the Dodd-Frank Act, as well as continued rule-making and possible future changes to the regulatory requirements, may substantially impact the Company’s and the Bank’s operations. The implications of the Dodd-Frank Act depend to a large extent on the implementation of the legislation by the FRB, the CFPB, and other agencies as well as how market practices and structures change in response to the requirements of such rule making. Changes in regulations could subject the Company, among other things, to additional costs for compliance, reduced revenues and limit the types of financial services and products it can offer and/or increase the ability of non-banks to offer competing financial services and products.

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Regulatory agencies may introduce new regulatory initiatives or pursue more aggressive enforcement policies with respect to a range of regulatory compliance matters. Regulators continue to focus on consumer protection, including product design and pricing constructs, account management and security, credit bureau reporting, disclosure rules, marketing and debt collection practices. New initiatives by applicable regulatory agencies may significantly limit the types and the terms of the products the Company may offer and the fees it may charge for its services which may have a material impact on the Company’s fee income. Any new requirements or increased enforcement of existing requirements could materially and adversely impact the Company’s revenue growth and profitability, including, as a result of increased scrutiny of pricing, underwriting and account management practices; the imposition of fines and customer remediation; higher compliance costs; reputational harm; restrictions on the Company’s ability to offer certain products or services, appropriately price for the value of products or work with certain business partners; and changes to business practices generally. The Company may also be required to add additional compliance personnel or incur other significant compliance-related expenses. The Company’s business, results of operations or competitive position may be adversely affected as a result.

The Company is also directly subject to the requirements of entities that set and interpret the accounting standards such as the Financial Accounting Standards Board, and indirectly subject to the actions and interpretations of the Public Company Accounting Oversight Board, which establishes auditing and related professional practice standards for registered public accounting firms and inspects registered firms to assess their compliance with certain laws, rules, and professional standards in public company audits. These regulations, along with the currently existing tax, accounting, securities, insurance, and monetary laws, regulations, rules, standards, policies and interpretations, control the methods by which financial institutions and their holding companies conduct business, engage in strategic and tax planning, implement strategic initiatives, and govern financial reporting.

While the Company has developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that compliance policies and procedures will be effective. The Company’s failure to comply (or to ensure that agents and third-party service providers comply) with laws, regulations or policies could result in civil or criminal sanctions, restrictions to its business model, and money penalties by state and federal agencies, and/or reputation damage, which could have a material adverse effect on the Company’s business, financial condition and results of operations. See “Supervision and Regulation” for more information about the regulations to which the Company is subject.

Federal banking agencies periodically conduct examinations of the Company’s business, including compliance with laws and regulations; the failure to comply with any supervisory actions to which the Company becomes subject to as a result of such examinations could adversely affect the Company.

Federal bank regulatory authorities periodically conduct comprehensive examinations of the Company’s business, including compliance with laws and regulations. If, as a result of an examination, such banking agencies were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, asset sensitivity, risk management or other aspects of any of the Company’s operations had become unsatisfactory, or that the Company was in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. If the Company becomes subject to such regulatory actions, the Company’s business, financial condition, earnings and reputation could be adversely affected.

The Company is subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and the failure to comply with these laws could lead to a wide variety of sanctions.

The Community Reinvestment Act ("CRA") requires the OCC to assess the Company’s performance in meeting the credit needs of the communities the Company serves, including low- and moderate-income neighborhoods. If the OCC determines that the Company needs to improve the Company’s performance or are in substantial non-compliance with CRA requirements, various adverse regulatory consequences may ensue. In addition, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. In addition, the Bank is subject to other federal and state laws designed to protect consumers, including the Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003, the Gramm-Leach Bliley Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans and providing other services.

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A successful regulatory challenge to an institution’s performance under the CRA, fair lending laws or regulations, or consumer lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company faces a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The federal Bank Secrecy Act, PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. Federal and state bank regulators also focus on compliance with the Bank Secrecy Act and anti-money laundering regulations.

If the Company’s policies, procedures and systems are deemed to be deficient or the policies, procedures and systems of the financial institutions that the Company acquires in the future are deficient, the Company would be subject to liability, including fines and regulatory actions such as restrictions on the Company’s ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of the Company’s business plan, including acquisition plans, which would negatively impact the Company’s business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences.

Basel III capital rules generally require insured depository institutions and their holding companies to hold more capital, which could limit the Company’s ability to pay dividends, engage in share repurchases and pay discretionary bonuses.

The FRB, the FDIC, and the OCC adopted final rules for the Basel III capital framework which address the regulatory risk-based capital rules applicable to the Company. The capital conservation buffer requirement is 2.5% on top of the common Tier 1, Tier 1 and total capital requirements, resulting in a required common Tier 1 equity ratio of 7%, a Tier 1 ratio of 8.5%, and a total capital ratio of 10.5%. Failure to satisfy any of these three capital requirements will result in limits on paying dividends, engaging in share repurchases, and paying discretionary bonuses. In addition, these limitations establish a maximum percentage of eligible retained income that could be utilized for such actions and potentially limit the Company’s ability to pay dividends, engage in share repurchases, and pay discretionary bonuses.

Regulation in the areas of privacy, data protection, data management, resiliency, data transfer, third-party oversight, account access, artificial intelligence and machine learning and information security and cybersecurity could increase the Company’s costs and affect or limit business opportunities and how the Company collects and/or uses personal information.

Legislators and regulators are increasingly adopting or revising privacy, data protection, data management, resiliency, data transfer, third-party oversight, account access, artificial intelligence (“AI”) and machine learning and information security and cybersecurity laws, including data localization, authentication and notification laws. As such laws are interpreted and applied (in some cases, with significant differences or conflicting requirements across jurisdictions), compliance and technology costs will continue to increase, particularly in the context of ensuring that adequate privacy, data protection, data management, incident management, resiliency, third-party management, data transfer, security controls, account access mechanisms and controls related to artificial intelligence and machine learning are in place. Additionally, new laws and regulations related to automated decision making, artificial intelligence and machine learning as well as the application of existing laws and regulations to these technologies may restrict or impose burdensome and costly requirements on the Company’s ability to use them or impact other aspects of the Company’s business.

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Compliance with current or future laws in the aforementioned areas could significantly impact business operations, including collection, use, sharing, retention and safeguarding of consumer and/or employee information and could restrict the Company’s ability to provide certain products and services or work with certain service providers, which could materially and adversely affect profitability. Failure to comply with such laws or to maintain sufficient governance and control structures could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, ongoing regulatory monitoring, customer attrition, decreases in the use of the Company’s products and services, and damage to the Company’s reputation and brand.

Changes in stakeholder expectations related to corporate responsibility matters could negatively affect the Company’s operating results.

There are changes in public awareness and concern by various stakeholders on a variety of corporate responsibility matters. These changes may include more compliance requirements or changes in expectations by stakeholders. The Company may face increased costs to address these matters, which could have an adverse impact on the Company’s business and financial condition. In particular, certain U.S. state governments continue to be focused on climate change issues, including proposed disclosure requirements that could result in additional compliance costs, which could have an adverse impact on the Company’s business and financial condition. There are additional risks related to diverging and conflicting stakeholder views on corporate responsibility. If the Company is unable to adequately address corporate responsibility matters that are of importance to stakeholders, it could negatively impact the Company’s reputation and the Company’s business results.

Operational Risk

The Company continually encounters technological change and the failure to understand and adapt to these changes could have a negative impact on the business.

The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. The Company’s future success depends, in part, upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the Company’s operations. The Company or its third-party vendors may incorporate artificial intelligence technology into certain business processes, services, or products. The use of artificial intelligence presents several risks, including an uncertain and evolving legal and regulatory environment in the U.S. and internationally and the complexity and rapid pace of change in these artificial intelligence models presents additional risks in understanding the accuracy and relevance of their outputs. Many of the Company’s competitors have substantially greater resources to invest in technological improvements, including artificial intelligence. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers and the costs of this technology may negatively impact the Company’s results of operations. Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse impact on the Company’s financial condition and results of operations.

The Company is exposed to fraud in many aspects of the services and products that it provides.

The Company offers a wide variety of products and services many of which could be vulnerable to fraud. The sophistication and skills of bad actors are increasing in scope and capabilities. Although the Company has various processes and controls in place to mitigate fraud, the risk cannot be eliminated and certain exposures are outside the Company’s control. For example, when account credentials and other access tools are not adequately protected by its customers, risks and potential costs may increase. Fraud or fraudulent attempts may also increase as (a) volumes of services and products expand, (b) those who are committing fraud adapt their methods to circumvent existing controls, become more sophisticated and more determined, and (c) services and product offerings expand. The foregoing and other factors may cause the Company’s operational losses to increase as a result.

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The Company is subject to a variety of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, which may adversely affect the Company’s business and results of operations.

The Company is exposed to many types of operational risks, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees, operational errors, or a digital or cybersecurity event or breach. Negative public opinion can result from actual or alleged conduct in any number of activities, including lending practices, sales practices, customer treatment, corporate governance and acquisitions and from actions taken by government regulators and community organizations in response to those activities. Negative public opinion can adversely affect the Company’s ability to attract and keep customers and can expose the Company to litigation and regulatory action. Actual or alleged conduct by the Company can result in negative public opinion about its business and financial loss.

If personal, nonpublic, confidential, or proprietary information of customers in the Company’s possession were to be mishandled or misused, the Company could suffer significant regulatory consequences, reputational damage, and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of its systems, employees, or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties.

Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. The Company’s necessary dependence upon automated systems to record and process transactions and the large transaction volumes may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. Further, the significant value of money managed and administered may result in larger exposures. The Company also may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability. The Company is further exposed to the risk that external third-party service providers, including those hosting “cloud” computing service, may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees or other third parties) and to the risk that business continuity and data security systems prove to be inadequate. The occurrence of any of these risks could result in a diminished ability to operate the Company’s business, potential liability to clients, reputational damage, and regulatory intervention, which could adversely affect the Company’s business, financial condition, and results of operations, perhaps materially.

The Company’s information systems may experience an interruption or security breach and expose the Company to additional operational, compliance, cybersecurity and legal risks.

The Company relies heavily on existing and emerging communications and information systems to conduct its business. Like other financial services businesses, the Company and its third-party service providers have been the victim of sophisticated and targeted cyberattacks intended to obtain unauthorized access to assets or confidential information, destroy data, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, ransomware, phishing attacks, cyber-attacks, or breaches due to errors or malfeasance by employees, contractors and others who have access to or obtain unauthorized access to the Company’s systems and networks. Although the Company and its service providers regularly defend against, respond to and mitigate the risks of cyberattacks, cybersecurity incidents among financial services businesses and industry generally are on the rise. The Company is not aware of any material losses it has incurred relating to cyberattacks or other information security breaches.

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The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and may be difficult to anticipate or to detect for long periods of time. Cyberattacks can originate from a variety of sources, including foreign governments and third-parties affiliated with them, organized crime or terrorist organizations, and malicious individuals both outside and inside a targeted company, including through use of relatively new AI tools or methods that can be used to create deepfakes for impersonation or to enable attack campaigns more quickly and effectively. The constantly changing nature of the threats means that the Company may not be able to prevent all data security breaches or misuse of data. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company’s online banking system, its general ledger, and its deposit and loan servicing and origination systems or other systems. Furthermore, if personal, confidential or proprietary information of customers or clients in the Company’s or third-party service providers’ possession were to be mishandled or misused, the Company could suffer significant regulatory consequences, reputational damage and financial loss. Such mishandling or misuse could include circumstances where, for example, such information was erroneously provided to parties who are not permitted to have the information, either by fault of the Company’s systems, employees, or counterparties, or where such information was intercepted or otherwise inappropriately taken by third parties. The Company has policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of its information systems; however, any such failure, interruption or security breach could adversely affect the Company’s business and results of operations through loss of assets or by requiring it to expend significant resources to correct the defect, as well as exposing the Company to customer dissatisfaction and civil litigation, regulatory fines or penalties or losses not covered by insurance.

Evolving data security and privacy requirements could increase the Company’s costs and expose it to additional operational, compliance, and legal risks.

The Company’s business requires the secure processing and storage of sensitive information relating to its customers, employees, business partners, and others. However, like any financial institution operating in today’s digital business environment, the Company is subject to threats to the security of its networks and data, as described above. These threats continue to increase as the frequency, intensity and sophistication of attempted attacks and intrusions increase around the world. In response to these threats there has been heightened legislative and regulatory focus on data privacy and cybersecurity in the U.S. and internationally. As a result, the Company must comply with an evolving set of legal requirements in this area, including substantive cybersecurity standards as well as requirements for notifying regulators and affected individuals in the event of a data security incident, in particular the SEC cybersecurity disclosure requirements that may require the Company to expend additional costs in the event of a material cybersecurity breach. This regulatory environment is increasingly challenging and may present material obligations and risks to the Company’s business, including significantly expanded compliance burdens, costs and enforcement risks.

The Company relies on third-party service providers, which could expose the Company to additional cybersecurity risks.

Third-party service providers provide key components of the Company’s business infrastructure, including certain data processing, cloud computing, and information services. On behalf of the Company, third parties may transmit confidential, propriety information. Although the Company requires third-party providers to maintain certain levels of information security which are verified through review of documentation collected as part of due diligence and ongoing monitoring of third-party providers, such providers may remain vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious attacks that could ultimately compromise sensitive information or result in funds being transferred. While the Company may contractually limit liability in connection with attacks against third-party providers, the Company remains exposed to the risk of loss associated with such third-party service providers. In addition, a number of the Company’s third-party service providers are large national entities with dominant market presence in their respective fields. Their services could prove difficult to replace in a timely manner if a failure or other service interruption were to occur. Failures of certain third-party service providers to provide contracted services could adversely affect the Company’s ability to deliver products and services to customers and cause the Company to incur significant expense.

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The Company’s ability to attract and retain qualified employees is critical to the success of its business, and failure to do so may have a materially adverse effect on the Company’s performance.

The Company’s employees are its most important resource, and in many areas of the financial services industry, competition for qualified personnel is intense and certain of the Company’s competitors have directly targeted its employees, including competitors who are outside of the Company’s geographic footprint offering work from home opportunities. The imposition on the Company or its employees of certain existing and proposed restrictions or taxes on executive compensation may adversely affect the Company’s ability to attract and retain qualified senior management and employees. The Company’s business could be adversely impacted by increases in labor costs, including wages and benefits, triggered by regulatory actions regarding wages; increased health care and workers’ compensation insurance costs; increased costs of other benefits necessary to attract and retain high quality employees with the right skill sets; and increased wages, benefits and costs related to inflationary and other pressure on wages now being experienced. If the Company provides inadequate succession planning or is unable to continue to retain and attract qualified employees, the Company’s performance, including its competitive position, could have a materially adverse effect.

External and Market-Related Risk

Regional economic factors may have an adverse impact on the Company’s business.

The Company’s main markets are currently located in the states of New York, Pennsylvania, Vermont, Massachusetts, and New Hampshire. Most of the Company’s customers are individuals and small and medium-sized businesses which are dependent upon the regional economy. Accordingly, the local economic conditions in these areas have a significant impact on the demand for the Company’s products and services as well as the ability of the Company’s customers to repay loans, the value of the collateral securing loans and the stability of the Company’s deposit funding sources. An economic downturn in these markets could negatively impact the Company.

The financial services industry is highly competitive and creates competitive pressures that could adversely affect the Company’s revenue and profitability.

The financial services industry in which the Company operates is highly competitive. The Company competes not only with commercial and other banks and thrifts, but also with insurance companies, mutual funds, hedge funds, securities brokerage firms and other companies offering financial services in the U.S., globally and over the Internet. The Company competes on the basis of several factors, including capital, access to capital, revenue generation, quality customer service, products, services, transaction execution, innovation, reputation and price. Each of the Company’s segments have competitors that have substantially greater access to capital and scale. Over time, certain sectors of the financial services industry have become more concentrated, as institutions involved in a broad range of financial services have been acquired by or merged into other firms. These developments have resulted in additional competitors gaining greater capital and other resources, such as a broader range of products and services and geographic diversity. The Company may experience pricing pressures and experience deposit outflows as a result of these factors and as some of its competitors seek to increase market share by reducing prices or paying higher rates of interest on deposits. Finally, technological change is influencing how individuals and firms conduct their financial affairs and changing the delivery channels for financial services, with the result that the Company may have to contend with a broader range of competitors including many that are not located within the geographic footprint of the Bank’s branch network.

The Company may be adversely affected by the soundness of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty, or other relationships. The Company has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry. Many of these transactions expose the Company to credit risk in the event a counterparty or client fails to perform its contractual obligations. In addition, credit risk may be exacerbated when the Company’s collateral is not under its control, cannot recover funds by liquidating the collateral, or is liquidated at prices not sufficient to recover the full amount of the credit or derivative exposure due to the Company. Any such losses could have a material adverse effect on the Company’s financial condition and results of operations.

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Conditions in the insurance market could adversely affect the Company’s earnings.

Revenue from insurance fees and commissions could be negatively affected by fluctuating premiums in the insurance markets or other factors beyond the Company’s control. Other factors that affect insurance revenue are the profitability and growth of the Company’s clients, the renewal rate of the current insurance policies, continued development of new product and services as well as access to new markets. The Company’s insurance revenues and profitability may also be adversely affected by new laws and regulatory developments impacting the healthcare and insurance markets as well as the financial stability of insurance carriers.

Changes in the equity markets could materially affect the level of assets under management and the demand for other fee-based services and could adversely affect the Company’s earnings.

Economic downturns could affect the volume of income from and demand for fee-based services. Revenue from the wealth management and employee benefit trust businesses depends in large part on the level of assets under management and administration. Market volatility and the potential to lead customers to liquidate investments, as well as lower asset values, can reduce the level of assets under management and administration and thereby decrease the Company’s investment management and employee benefit trust revenues.

Financial services companies depend on the accuracy and completeness of information about customers and counterparties.

In deciding whether to extend credit or enter into other transactions, the Company may rely on information furnished by or on behalf of customers and counterparties, including financial statements, credit reports and other financial information. The Company also relies on representations of those customers and their agents, counterparties or other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate or misleading financial statements, credit reports or other information could have a material adverse impact on business and, in turn, the Company’s financial condition and results of operations.

The Company may be required to record impairment charges related to goodwill, other intangible assets and the investment portfolio.

The Company may be required to record impairment charges in respect to goodwill, other intangible assets and the investment portfolio. Numerous factors, including lack of liquidity for resale of certain investment securities, absence of reliable pricing information for investment securities, the economic condition of state and local governments, adverse changes in the business climate, adverse actions by regulators, unanticipated changes in the competitive environment or a decision to change the operations or dispose of an operating unit could have a negative effect on the investment portfolio, goodwill or other intangible assets in future periods.

The Company’s financial statements are based, in part, on assumptions and estimates, which, if incorrect or conditions change, could cause unexpected losses in the future.

Pursuant to accounting principles generally accepted in the United States, the Company is required to use certain assumptions and estimates in preparing its financial statements, including the allowance for credit losses, pension, post-retirement and other employee benefit plans, goodwill and other intangible assets, reserves related to litigation and other items. Certain of the Company’s financial instruments, including available-for-sale securities and certain loans, among other items, require a determination of their fair value in order to prepare the Company’s financial statements. Where quoted market prices are not available, the Company may make fair value determinations based on internally developed models or other means which ultimately rely to some degree on management’s judgment. Some of these and other assets and liabilities may have no direct observable price levels, making their valuation particularly subjective, as they are based on significant estimation and judgment. In addition, sudden illiquidity in markets or declines in prices of certain loans and securities may make it more difficult to value certain balance sheet items, which may lead to the possibility that such valuations will be subject to further change or adjustment. If assumptions or estimates underlying the Company’s financial statements are incorrect, it may experience material losses. Further detail on the nature and sensitivity of these management assumptions is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, under Critical Accounting Policies and Estimates.

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The Company’s business and results of operations may be adversely affected by the U.S. and global financial markets, fiscal, monetary, and regulatory policies, and economic conditions generally.

General political, economic, and social conditions in the U.S. and in countries abroad affect markets in the U.S. and ultimately the Company’s business. In particular, U.S. markets may be affected by the current government administration and the domestic political environment, including but not limited to government agency staff reductions and related operating issues, uncertainty related to policy changes that directly or indirectly impact consumer spending and business investment, the level and volatility of interest rates, availability and market conditions of financing, economic growth, historically high levels of inflation, supply chain disruptions, consumer spending, employment levels, labor shortages, wage escalation or stagnation, changes in home prices, commercial property values, the growth of global trade and commerce, the availability and cost of capital and credit, and investor sentiment and confidence. Additionally, U.S. energy and commodity markets may be adversely affected by the current or anticipated impact of climate change, extreme weather events or natural disasters, the emergence or continuation of widespread health emergencies or pandemics, cyberattacks or campaigns, military conflict, terrorism or other geopolitical events. The scarcity or unavailability of affordable casualty insurance on consumers’ homes and autos, as well as businesses’ property, plant, and equipment, would impair asset prices and have a negative impact on economic activity and growth. Also, any sudden or prolonged market downturn in the U.S., as a result of the above factors or otherwise, could result in a decline in net interest income and noninterest income and adversely affect the Company’s results of operations and financial condition, including capital and liquidity levels.

Actions taken by the FRB, including changes in its target funds rate, balance sheet management, and lending facilities are beyond the Company’s control and difficult to predict. These actions can affect interest rates and the value of financial instruments and other assets and liabilities and can impact the Company’s borrowers. Sudden changes in monetary policy, for example in response to high inflation, could lead to financial market volatility, increases in market interest rates, and a flattening or inversion of the yield curve. For example, higher inflation, or volatility and uncertainty related to inflation, could reduce demand for the Company’s products, adversely affect the creditworthiness of the Company’s borrowers, or result in lower values for the Company’s investment securities and other interest-earning assets.

Actions taken by the U.S. Federal government, including material changes in fiscal and foreign trade policy, could also reduce demand for the Company’s products, adversely affect the creditworthiness of the Company’s borrowers, or result in lower values for the Company’s investment securities and other interest-earning assets. Examples of such policy changes are reduced or delayed U.S. Federal government spending, new or higher U.S. imposed tariffs on imports and retaliatory tariffs imposed by foreign governments on U.S. exports.

Changes to existing U.S. laws and regulatory policies and evolving priorities, including those related to financial regulation, consumer compliance, taxation, fiscal policy, trade policy such as tariffs, climate change, and healthcare, may adversely impact U.S. or global economic activity and the Company’s customers and its earnings and operations. For example, a slowdown in consumer demand due to increased inflation could limit the ability of firms to pass on fast-rising costs for labor, tariffs, transportation and other inputs, weighing on earnings and potentially leading to an equity market downturn. Significant fiscal policy changes and/or initiatives may also raise the federal debt, affect businesses and household after-tax incomes and increase uncertainty surrounding the formulation and direction of U.S. monetary policy and volatility of interest rates.

Any of these developments could adversely affect the Company’s consumer and commercial businesses, its customers, its securities portfolios, including the risk of lower re-investment rates within those portfolios, its level of loan net charge-offs and provision for credit losses, the carrying value of its deferred tax assets, its capital levels, its liquidity and its results of operations.

The Company’s consumer businesses can be negatively affected by adverse economic conditions and governmental policies.

The Company’s consumer businesses are particularly affected by U.S. economic conditions, including changes in personal and household incomes, unemployment or underemployment, the level of or change in interest rates, increased housing and automobile prices, the level of inflation and its effect on prices for goods and services, consumer and small business confidence levels, and changes in consumer spending or in the level of consumer debt. Heightened levels of unemployment or underemployment that result in reduced personal and household income could negatively affect consumer credit performance to the extent that consumers are less able to service their debts. In addition, unemployment or underemployment, sustained low economic growth, the level of or change in interest rates, tariffs, inflationary pressures or recessionary conditions could reduce deposit balances and diminish customer demand for the products and services offered by the Company’s businesses.

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In addition, governmental proposals to permit student loan obligations to be discharged in bankruptcy proceedings could, if enacted into law, encourage certain of the Company’s customers to declare personal bankruptcy and thereby trigger defaults and charge-offs of consumer loans extended to those customers.

Pandemics, epidemics, disease outbreaks and other public health crises have disrupted the Company’s business and operations in the past, and future outbreaks could materially adversely impact the Company’s business, financial condition, liquidity and results of operations.

Pandemics, epidemics or disease outbreaks in the U.S. or globally, have disrupted, and may in the future disrupt, the Company’s business, which could materially affect results of operations, financial condition, liquidity and future expectations. The COVID-19 pandemic adversely affected businesses, economies and financial markets worldwide, placed constraints on the operations of businesses, decreased consumer mobility and activity, and caused significant economic volatility in the United States and international capital markets. Any new pandemic or other public health crisis could have a material impact on the Company’s business, financial condition and results of operations going forward.

Certain negative developments affecting the banking industry have eroded customer confidence in the banking system and may have adverse impacts on the Company’s business.

The high-profile collapse of certain U.S. banks has generated significant market volatility among publicly traded bank holding companies and, in particular, community and regional banks. These market developments have negatively impacted customer confidence in the safety and soundness of community and regional banks. As a result, customers may choose to move or maintain deposits with larger financial institutions or outside of the banking industry, which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations. While the federal regulators have made statements ensuring that depositors of these failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in community and regional banks and the banking system more broadly or that any future bank failures will receive the same treatment.

Adverse regulatory findings or new regulatory requirements arising from the recent bank failures could increase the Company’s expenses, reduce the Company’s revenues and affect the Company’s operations.

The Company anticipates increased regulatory scrutiny, within the course of routine examinations and new regulations designed to address certain negative developments in the banking industry, all of which may increase the Company’s costs of doing business and reduce its profitability.

Risk Related to Acquisition and De Novo Expansion Activity

Acquisition and de novo expansion activity could adversely affect the Company’s financial condition and result of operations.

The business strategy of the Company includes growth through acquisition and the opening of de novo branches to expand its business footprint. Recently completed and future acquisitions and de novo branches will be accompanied by the risks commonly encountered in acquisitions and expansion into near geographic areas. These risks include among other things: limitations on potential acquisition targets based upon regulatory restrictions, obtaining timely regulatory approval, the purchase or lease of real estate that promotes the Bank’s de novo branch strategy, attracting and hiring appropriate talent, the difficulty of integrating operations and personnel, the difficulty associated with attracting new clients, the potential disruption of the Company’s ongoing business, the inability of the Company’s management to maximize its financial and strategic position, the inability to maintain uniform standards, controls, procedures and policies, the potential that errors, omissions or circumstances existing prior to or at the time of the closing result in losses after the close, and the impairment of relationships with employees and customers as a result of changes in ownership and management. Further, the asset quality or other financial characteristics of a company may deteriorate after the acquisition agreement is signed or after the acquisition closes.

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A portion of the Company’s loan portfolio was acquired primarily through whole-bank acquisitions and was not underwritten by the Company at origination.

At December 31, 2025, 7% of the loan portfolio was acquired and was not underwritten by the Company at origination, and therefore is not necessarily reflective of the Company’s historical credit risk experience. The Company performed extensive credit due diligence prior to each acquisition and marked the loans to fair value upon acquisition, with such fair valuation considering expected credit losses that existed at the time of acquisition. However, there is a risk that credit losses could be larger than currently anticipated, thus adversely affecting earnings.

General Risks

Trading activity in the Company’s common stock could result in material price fluctuations.

The market price of the Company’s common stock may fluctuate significantly in response to a number of other factors including, but not limited to:

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Changes in securities analysts’ expectations of financial performance;

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Volatility of stock market prices and volumes;

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Incorrect information or speculation;

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Changes in industry valuations;

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Variations in operating results from general expectations;

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Actions taken against the Company by various regulatory agencies;

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Changes in authoritative accounting guidance by the Financial Accounting Standards Board or other regulatory agencies;

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Changes in general domestic economic conditions such as inflation rates, tax rates, unemployment rates, oil prices, labor and healthcare cost trend rates, recessions, and changing government policies, laws and regulations; and

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Severe weather, natural disasters, acts of war or terrorism and other external events.

Item 1B. Unresolved Staff Comments

None

Item 1C. Cybersecurity

As a heavily regulated financial services company, the Company has developed comprehensive cybersecurity processes that are designed to protect the security of confidential information. Two of the more significant risks to the Company, both in terms of financial and reputational harm, are a data security breach and/or ransomware attack which cause a material financial loss to the Company and/or materially harms its operational integrity or reputation with its customers as a safe and trustworthy institution. In order to mitigate this risk and comply with the regulatory standards required by the Company’s and the Bank’s regulators, the Company has developed a cybersecurity program and framework which is administered by a team of experienced professionals and supported by external technology and consulting services. Set forth below is an overview of the Company’s risks associated with cybersecurity, its cybersecurity process, the role of management and the Board, and whether any risks from cybersecurity threats have materially affected or are reasonably likely to materially affect the Company.

Risks Associated with Cybersecurity

The Company is a frequent target of unauthorized attempts to access financial records, destroy data, degrade services, or sabotage systems. The sophistication and diversity of these threats is increasing. Against a backdrop of geopolitical tensions, the increasing use of AI by threat actors, and the growing involvement of organized cyber criminal groups, including state-sponsored groups, the Company expects greater frequency and sophistication of attacks in the future (malware, ransomware, phishing, supply chain compromise, and insider-assisted intrusions). Organized criminal actors include financially motivated ransomware gangs, criminal networks that monetize stolen data, and transnational fraud rings. These groups often operate at scale, use professionalized tools and affiliate ecosystems, and in some instances collaborate with nation state actors or exploit third-party vendors to gain access.

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The exploitation of third-party vendors and contractors increases the risk that a vendor compromise, outage, or failure to meet contractual security obligations could lead to unauthorized access or operational disruption. In addition, the Company’s increasing use of analytics, machine-learning and generative AI introduces additional data and model risks, including threats to data privacy and integrity, biased or incorrect model outputs, exploitation of third-party models or vendors, and automation-enabled escalation of attacks.

To date, these risks have not resulted in a material cybersecurity incident, but a successful compromise, whether internal or originating with a third-party vendor, could result in financial losses, remediation costs, regulatory penalties, customer attrition, and reputational harm.

For more information on risks to the Company from cybersecurity threats, see “Risk Factors – Operational Risks”.

Cybersecurity Process and Management’s Role

Management is responsible for designing and implementing policies, processes and physical and virtual safeguards to measure, monitor, and control cybersecurity risk. The primary executives responsible for the oversight of risk and cybersecurity are the Company’s Chief Risk Officer, who has over 38 years of experience in the banking industry, including 25 years as a national bank examiner for the Office of the Comptroller of the Currency, and the Company’s Chief Information Security Officer (“CISO”), who has an educational and experiential background in information technology and information security for public companies (bachelor’s degree in computer science and service as the Company’s CISO for the past 11 years, with 10 prior years of information technology and information security experience). The CISO leads the members of the Information Security Department, some of whom maintain a variety of certifications including Certified Information Systems Security Professional (CISSP), Certified Information Security Manager (CISM), and Security+ (Plus) Certification (SEC+). Both of these executives, along with the other professionals in the Information Security and Information Technology Departments, have the appropriate knowledge and expertise to effectively assess and manage the Company’s cybersecurity risk and establish a system of internal controls in an effort to safeguard the Company’s network and comply with regulatory requirements.

The Company’s cybersecurity framework includes an assessment of the Company’s hardware, software, and data platforms across its lines of business; the risks associated with the Company’s business; areas inside and outside of the Company that expose it to cybersecurity threats. As part of this framework, the Company employs policies, systems and safeguards to manage cybersecurity risks. The Company’s CISO is responsible for identifying systems and security measures that reflect the appropriate safeguards designed to protect the Company’s infrastructure and information and has implemented the majority of current cybersecurity controls in place with an emphasis on the confidentiality, integrity and availability (CIA) triad and a defense in depth methodology. The CISO uses a variety of threat intelligence resources, including law enforcement and industry groups such as the Financial Services Information Sharing and Analysis Center (FS-ISAC), to help stay informed about current and emerging risks to the Company.

CFSI maintains enterprise-wide AI and Data Governance frameworks designed to promote the accuracy, privacy, security, and responsible use of data and AI across our operations. Executive oversight is provided by the Management Risk Committee and IT Steering Committee, with operational accountability assigned to business and system data stewards and data asset owners. The CISO jointly oversees data and AI governance, supports validation and control requirements, and enforces security, privacy, and incident-response protocols. The Company has deployed machine learning and generative AI capabilities to enhance monitoring, automated classification of events and data, and threat-detection and prioritization. These tools support faster triage, playbook-driven remediation and realistic simulation for control validation. AI solutions are subject to formal approval, validation, and periodic re-validation proportional to their inherent risk; higher-risk applications retain a human-in-the-loop approach. Controls include encryption, role-based access, audit logging, vendor due diligence, and employee training. These programs are periodically reviewed to reflect evolving regulatory requirements and technological advances.

The CISO is also responsible for supervising and monitoring certain outside professionals or third-party service providers that assist in enhancing the Company’s current cybersecurity safeguards. The Company has invested meaningful resources to address cybersecurity threats and partners with leading technology companies to implement solutions to address the fast-evolving threat landscape. These solutions and services help with the prevention, detection, mitigation and remediation of cybersecurity threats and incidents.

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The Company’s Internal Audit Department further assists the Company to ensure that the proper safeguards are in place to protect the Company’s information by conducting internal audits on certain aspects of the information security program. Internal Audit engages professionals that specialize in information security to review and provide an annual examination and report on the sufficiency of the Company’s cybersecurity process and information security program. The Company’s independent public accounting firm also performs audit procedures regarding the information security program. In addition, the Company’s and the Bank’s regulators review and assess the Company’s information security program on an annual basis.

The Company also maintains certain management committees that further assist in the prevention, detection, and mitigation of cybersecurity risks. Specifically, the CISO works closely with the Company’s IT Steering Committee which, among other things, reviews the effectiveness of key controls and provides guidance around future initiatives that strengthen the Company’s overall security posture. The IT Steering Committee is comprised of key executives such as the President and Chief Executive Officer and Chief Financial Officer, as well as senior employees that specialize in technology and information security, including the Company’s CISO, Chief Technology Officer, and Chief Risk Officer, and representatives from the Board. This committee also monitors current events regarding cybersecurity threats to the Company and more broadly to the financial services industry to help the Company make informed decisions around any necessary internal control enhancements or adjustments.

In addition to the IT Steering Committee, the IT Subcommittee assists the CISO to prevent, detect, mitigate, and remediate cybersecurity threats and incidents. The IT Subcommittee typically meets quarterly and consists of members of the information technology and information security teams, the Director of Internal Audit, and senior management members of various business units. This committee is responsible for reviewing information technology and information security projects and the threat landscape.

Given the importance of maintaining the security of the Company’s systems and information, cybersecurity risks are also reviewed and addressed when assessing new products and services and any third-party service providers that may be engaged to provide systems and services to the Company. As an essential element of the Company’s cybersecurity program, the Company maintains a third-party risk management program that performs initial and ongoing due diligence, evaluates SOC reports and contract safeguards, and monitors incidents at vendors that could impact Company or customer data. As part of this oversight, the Company’s Risk Management, Legal and/or Information Security Departments review higher risk and material contracts with third-party service providers. Ongoing diligence is also conducted to confirm that vendors are meeting contractual and data security obligations.

The CISO is also responsible for monitoring data security incidents at third parties who have access to the Company’s information which may impact the Company or its customers if it was compromised. When the Company becomes aware of such events, the CISO engages with the impacted third-party service providers to understand the incident, assess the risk that the Company’s information was exposed, and determine methods by which the Company can mitigate any damage and fulfill applicable notification obligations. The Incident Response Core Team, which includes representatives from IT, Risk, and Legal, coordinates the Company’s response to such incidents in accordance with existing policies and supports notification, remediation, and any required regulatory reporting.

In an effort to remain vigilant against cybersecurity attacks, the Company further provides annual and ongoing training to all of its employees so that they have an understanding and appreciation of the cybersecurity environment and risks and the Company’s policies to combat such risks. Such training includes annual mandatory training sessions on cybersecurity for all employees, periodic informational notices regarding emerging threats, and periodic testing to ensure employees are reporting suspicious activities and are diligent in their efforts to avoid phishing attacks and cybersecurity breaches. The CISO also conducts and participates in annual table top exercises with management, and periodically with Directors, in order to be prepared in the event of a material cybersecurity event.

The Company’s customers are also sources of cybersecurity risk, particularly when their activities and systems are beyond the Company’s own security and control systems. The Company engages in periodic outreach with its clients, customers and other external parties concerning cybersecurity risks including opportunities to improve cybersecurity and avoid scams.

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The Company’s cybersecurity process and its ability to assess, manage, and remediate cybersecurity risks further centers around good communication among management. Management stays informed on cybersecurity risks through quarterly reports provided by the CRO and CISO to the Company’s Management Risk Committee, comprised of executives and senior leadership, as well as open communication with the Risk Management team, including through various reports and weekly reporting by the Chief Risk Officer to the Senior Management Committee about cybersecurity matters, as necessary. In the event there is a material cybersecurity incident, the Company’s policies and procedures set forth an action plan, which includes notification of the appropriate personnel and management within the Company as well as regulators and impacted customers, as applicable. For certain cybersecurity incidents, including, but not limited to, incidents that are deemed material pursuant to SEC cybersecurity disclosure rules or that significantly impact vital services provided by the Company, notification is also provided to the Chair of the Board Risk Committee and/or the Chair of the Board. Less severe incidents will be reported by management at the next Board or Risk Committee meeting.

Board of Directors’ Role in Cybersecurity

An integral part of Company’s risk management oversight, which includes information security, is the role of the Board. This is reinforced by the independence and reporting structure of the Chief Risk Officer, who oversees the CISO and reports to the Board Risk Committee and administratively to the President and Chief Executive Officer.

In addition, cybersecurity risk is a fundamental risk of the Company which is overseen by the Risk Committee of the Board, including Directors with experience in risk management, internal audit, cybersecurity and/or the operations of financial service companies. In particular, the Chair of the Board, Eric E. Stickels, has experience with the risks associated with operating a financial institution based upon his prior service as the President of Oneida Financial Corp. In addition, the Chair of the Risk Committee, Director Kerrie D. MacPherson, has received the Cyber-Risk Oversight Certification issued by the National Association of Corporate Directors (“NACD”), and utilize their business experience and cyber-risk expertise to assist the Risk Committee in its evaluation of management’s cybersecurity systems. Directors Knauss and Singh also serve as Board representatives on the Company’s IT Steering Committee and provide valuable oversight and insight to the committee based on their knowledge and business experience across the digital, technology and/or artificial intelligence sectors.

The Risk Committee meets five times a year during which management provides updates to the committee regarding the material risks facing the Company. As part of this reporting, the Chief Risk Officer and the Risk Management Department have created a risk management program that identifies and evaluates the risks associated with various aspects of the Company’s business and report their assessments to the Risk Committee for review or approval. Within the risk management process, cybersecurity risks are specifically reviewed and addressed, including risks related to current or proposed products and services to be offered by the Company, as well as the efforts taken or to be taken to mitigate such risks.

In addition, on at least a quarterly basis, the CISO presents an Information Security report to the Risk Committee, which includes the Company’s cybersecurity alert level, controls rating, current and emerging cybersecurity risks, threats and trends, mitigation efforts and projects and audit and regulatory updates.

On an annual basis, the Board’s Audit Committee also receives reports from outside consultants who perform various IT related audits, and the Company’s independent registered public accounting firm regarding the effectiveness of the Company’s cybersecurity program in connection with its review of the Company’s financial statements.

Item 2. Properties

The Company’s primary headquarters are located at 333 Butternut Drive, Syracuse, New York, which is leased. The Company has 261 properties, of which 140 are owned and 121 are under lease arrangements, excluding 4 properties that are in process of being opened for business in connection with the Bank’s de novo branch expansions, all of which are under lease arrangements. The majority of the Company’s properties are used by the Banking and Corporate segment which operates 192 full-service bank branches, 8 drive-thru only bank facilities and 18 facilities for back office banking and corporate operations. The Employee Benefit Services segment uses 17 properties including 16 customer service facilities and 1 facility for back office operations, all of which are leased. The Insurance Services segment uses 23 customer service facilities, 20 of which are leased. Certain properties are shared for operations of multiple segments, including most of the properties in use by the Wealth Management Services segment. Certain properties also contain tenant leases or subleases. None of the properties were subject to any material encumbrances. The Company believes that its facilities are suitable and adequate for the Company’s current operations.

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Additional information regarding the Company’s properties is set forth in Note E and Note O to the consolidated financial statements included under Part II, Item 8.

Item 3. 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 N to the consolidated financial statements included under Part II, Item 8.

Item 4. Mine Safety Disclosures

Not Applicable

Part II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company’s common stock has been trading on the New York Stock Exchange under the symbol “CBU” since December 31, 1997. Prior to that, the common stock traded over-the-counter on the NASDAQ National Market under the symbol “CBSI” beginning on September 16, 1986. There were 52,723,931 shares of common stock outstanding on January 31, 2026, held by approximately 3,136 registered shareholders of record.

The Company has historically paid regular quarterly cash dividends on its common stock and declared a cash dividend of $0.47 per share for the first quarter of 2026. The Board presently intends to continue the payment of regular quarterly cash dividends on the common stock. However, because the substantial majority of the funds available for the payment of dividends by the Company are derived from the subsidiary Bank, future dividends will depend largely upon the earnings of the Bank, its financial condition, its need for funds and applicable governmental policies and regulations.

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The following graph compares cumulative total shareholders returns on the Company’s common stock over the last five fiscal years to the S&P 600 Commercial Banks Index, the NASDAQ Bank Index, the S&P 500 Index, and the KBW Regional Banking Index. Total return values were calculated as of December 31 of each indicated year assuming a $100 investment on December 31, 2020 and reinvestment of dividends.

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Equity Compensation Plan Information

The following table provides information as of December 31, 2025 with respect to shares of common stock that may be issued under the Company’s existing equity compensation plans.


				Number of Securities
	Number of			Remaining Available
	Securities to be			for Future Issuance
	Issued upon	Weighted-average		Under Equity
	Exercise of	Exercise Price		Compensation Plans
	Outstanding	of Outstanding		(excluding securities
	Options, Warrants	Options, Warrants		reflected in the first
Plan Category	and Rights ⁽¹⁾	and Rights ⁽²⁾		column)
Equity compensation plans approved by security holders:
2004 Long-term Incentive Plan	20,001	$	23.04	0
2014 Long-term Incentive Plan	967,793		59.96	0
2022 Long-term Incentive Plan	1,043,313		38.51	850,227
Equity compensation plans not approved by security holders	0		0	0
Total	2,031,107	$	48.58	850,227

⁽¹⁾ The number of securities includes 272,813 shares of unvested restricted stock, including performance award restricted stock, comprised of 4,342 shares associated with the 2014 Long-term Incentive Plan and 268,471 shares associated with the 2022 Long-term Incentive Plan.

⁽²⁾ Excluding the impact of unvested restricted stock, including performance award restricted stock, the total weighted-average exercise price is $56.12, the weighted-average exercise price associated with the 2014 Long-term Incentive Plan is $60.23 and the weighted-average exercise price associated with the 2022 Long-term Incentive Plan is $51.86.

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Stock Repurchase Program

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. At its December 2024 meeting, the Board approved a 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. There were 206,054 shares of treasury stock purchases made under this authorization in 2025.

The following table presents stock purchases made during the fourth quarter of 2025:

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
October 1-31, 2025	998	$	56.87	0	2,421,946
November 1-30, 2025	0		0.00	0	2,421,946
December 1-31, 2025	239		60.70	0	2,421,946
Total ⁽¹⁾	1,237	$	57.61	0

⁽¹⁾ Included in the common shares repurchased were 781 shares acquired by the Company in connection with the administration of a deferred compensation plan and 456 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 6. [Reserved]

Item 7. 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 the Company for the past two years, although in some circumstances a period longer than two years is covered in order to comply with SEC disclosure requirements or to more fully explain long-term 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 77 through 148. All references in the discussion to 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, all earnings per share (“EPS”) figures disclosed in the MD&A refer to diluted EPS. The term “this year” and equivalent terms refer to results in calendar year 2025, “last year” and equivalent terms refer to calendar year 2024, and all references to income statement results correspond to full-year activity unless otherwise noted. For a discussion of 2024 results as compared with 2023 results, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report on Form 10-K for the year ended December 31, 2024.

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 provided under the caption “Forward-Looking Statements” beginning on page 70.

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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 the 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 significant accounting policies used by management is disclosed in Note A, “Summary of Significant Accounting Policies,” starting on page 83.

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 2025, the Company updated the ACL model to add 2024 loss history results into the historical data used for calculating the quantitative and qualitative factors as part of the annual model update procedures; adjusted the weighting of the three economic scenarios, increasing the weight for the downside scenario from 30% to 40% and decreasing the weight of the upside scenario from 30% to 20%, to capture additional economic uncertainty; and increased reserves for business lending to capture additional risk in the portfolio due to the increase in larger individual exposures in the business lending portfolio. The change in weighting of the economic scenarios increased the ACL by $0.7 million as compared to the prior weighting in use at December 31, 2024. The additional business lending qualitative factor increased the ACL by $9.3 million as compared to the prior factor in use at December 31, 2024.

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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 gross domestic product (“GDP”) growth forecasts used in the ACL model at December 31, 2025 were 5.5% and 1.3%, respectively, compared to 4.8% and 1.8% at December 31, 2024, respectively. The hypothetical downside forecast includes assumptions of a weakening economy represented by a cumulative decline in real GDP of 2.6%, enhanced geopolitical tensions, elevated inflation, a peak unemployment rate of 8.4% 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 year ended December 31, 2025 by approximately $3.8 million, and decrease net income by $2.8 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. Further details regarding the methodologies applied to estimate the various components of the ACL are provided in Note A, “Summary of Significant Accounting Policies,” starting on page 83.

Pension, Post-Retirement and Other Employee Benefit Plans

The Company provides a qualified defined benefit pension to eligible employees and retirees, other post-retirement health and life insurance benefits to certain retirees, an unfunded supplemental pension plan for certain key executives and an unfunded stock balance plan for certain of its nonemployee directors. The benefit obligations for the pension and post-retirement benefits plans require significant management judgment. The assumptions used in calculating the benefit obligation include the discount rate, expected return on plan assets, rate of compensation increase and interest crediting rates. The discount rate was determined based upon the yield on high-quality fixed income investments expected to be available during the period to maturity of the pension benefits. The expected long-term rate of return was estimated by taking into consideration asset allocation, long-term capital market assumptions, reviewing historical returns on the type of assets held and current economic factors. Mortality tables are also utilized in calculating the benefit obligation, the selection of which is based on management judgment. The Company analyzed the sensitivity of the discount rate and the expected long-term rate of return on plan assets on the pension benefit obligation and net periodic pension cost. At December 31, 2025, a decrease in the discount rate of 100 basis points would increase the pension benefit obligation by $11.3 million, while an increase in the discount rate of 100 basis points would decrease the pension benefit obligation by $9.5 million. For the year ended December 31, 2025, a decrease in the discount rate of 100 basis points would reduce the net periodic pension income by $0.7 million, while an increase in the discount rate of 100 basis points would decrease the net periodic pension income by $0.2 million. A decrease in the expected long-term rate of return on plan assets of 100 basis points would reduce the net periodic pension income by $2.7 million, while an increase of 100 basis points would increase net periodic pension income by $2.7 million. Further detail on the assumptions used and a comparison between 2025 and 2024 assumptions is included in Note K, “Pension and Other Benefit Plans”, starting on page 119.

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Goodwill and Other Intangible Assets

The initial carrying value of goodwill is impacted by the initial carrying value of intangible assets including core deposit intangibles, customer relationship intangibles and acquired loans that are recorded at their fair value as of the date of acquisition. Management judgment and estimates are involved in determining the initial and ongoing carrying value of goodwill and other intangible assets. Initial and ongoing carrying values require the assessment of fair value based on discounted cash flow modeling techniques and inputs such as discount rates, required equity market premiums, peer stock price volatility metrics and company-specific risk indicators. Core deposit intangibles and customer relationship intangibles are amortized on either an accelerated or straight-line basis over periods ranging from seven to 20 years, based on management judgment.

The Company evaluates goodwill for impairment on an annual basis and performs a quarterly analysis to determine if any triggering events have occurred that would require an interim evaluation. In accordance with FASB ASC 350, the Company evaluates whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, and performs either a qualitative or quantitative assessment, depending on circumstances and management judgment. The qualitative assessment requires significant management judgment, and if the qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is greater than its carrying value, no quantitative analysis is necessary. The inputs for the qualitative analysis that require management judgment include macroeconomic conditions, industry and market conditions, financial performance of the reporting unit and other relevant events that affect the fair value of a reporting unit.

During 2025, the Company performed quantitative goodwill analyses for all of the Company’s operating segments. The inputs for the quantitative analyses that require management judgment include determination of the discount rate, forecasted financial performance of the business entity, macroeconomic and industry conditions, and other relevant events that affect the fair value of the reporting unit. Based on the Company’s annual impairment analysis of goodwill as of October 1, 2025, it was determined that the fair value of each reporting unit was in excess of its respective carrying value, therefore goodwill was not impaired. The Company also performs sensitivity analyses around assumptions for the discount rates in order to assess the reasonableness of the assumptions utilized. The fair value-weighted average discount rate used for the October 1, 2025 quantitative assessment was 10.4%, compared to 11.1% for the October 1, 2023 assessment. As of October 1, 2025, a 100 basis point increase in the discount rates used in each operating segment model would reduce estimated entity level fair value by approximately $361.2 million and would not result in impairment of goodwill, as each reporting unit’s fair value would still exceed its carrying value.

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, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities 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, restructuring expenses, gain on debt extinguishment, loss on sales of investment securities, unrealized gain (loss) on equity securities 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 20.

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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.

The Company reported net income of $210.5 million for the year ended December 31, 2025 that was $28.0 million, or 15.3%, above the prior year, while earnings per share of $3.97 for the year was $0.53, or 15.4%, above the prior year. The increases in net income and earnings per share were primarily driven by increases in net interest income and noninterest revenues and a decrease in the provision for credit losses, partially offset by increases in noninterest expenses and income taxes. Income taxes increased in 2025 driven by increases in pre-tax income and certain state income tax rates.

Net interest income increased to $506.6 million in 2025, a $57.4 million, or 12.8%, increase from the prior year, marking the nineteenth consecutive year of net interest income growth. The increase in 2025 was primarily due to increases in the yield on average interest-earning assets and average loan balances, along with lower funding costs. The provision for credit losses of $21.4 million in 2025 decreased $1.4 million, or 6.2%, from 2024 as the Company's asset quality metrics improved in 2025 compared to the slight degradation experienced in 2024 that increased the prior year's provision for credit losses. Noninterest revenues increased to $311.5 million in 2025, a $14.3 million, or 4.8%, increase from 2024, with record results in all four operating segments: banking and corporate, employee benefit services, insurance services, and wealth management services.

Noninterest expenses were $521.3 million in 2025, an increase of $34.4 million, or 7.1%, from the prior year. Noninterest expenses were impacted by certain notable items including $3.7 million of acquisition expenses associated with the acquisition of seven branch locations from Santander Bank, N.A. (“Santander”) and $1.5 million of restructuring expenses associated with severance payments as part of a workforce optimization plan due to planned branch consolidations and other operational initiatives. Excluding these items, the increase in noninterest expenses from 2024 was driven primarily by increases in salaries and employee benefits, data processing and communications, occupancy and equipment, legal and professional fees, and other expenses. These increases were due in part to operating expenses associated with acquisitions completed between the periods including the 7 branch locations from Santander, the opening of 15 de novo branches during the year and the Company’s investment in customer-facing and back-office technologies.

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Net interest margin for full year 2025 of 3.29% and fully tax-equivalent net interest margin, a non-GAAP measure, of 3.31% increased 25 basis points and 24 basis points, respectively, from full year 2024. The yield on average interest earning assets increased 18 basis points compared to the prior year, primarily driven by higher loan yields. The Company’s total cost of funds decreased 7 basis points from the prior year as the rate paid on interest-bearing deposits and borrowings both decreased.

The Company’s average and ending interest-earning assets both increased year-over-year reflective of strong organic loan growth. Average and ending deposits also increased primarily driven by organic growth in non-governmental deposit balances and the $543.7 million of deposits assumed in the Santander branch acquisition. Average and ending borrowings in 2025 decreased from 2024 reflective of growth in deposit balances outpacing loan growth, including the funding provided from the Santander branch acquisition.

Asset quality remained solid throughout 2025. The full year net charge-off ratio increased slightly from 10 basis points of average loans in 2024 to 12 basis points of average loans in 2025 due to the net charge-off associated with one non-owner occupied commercial real estate (“CRE”) loan relationship. This resolution combined with the substantial repayment of one multifamily CRE nonperforming loan relationship drove decreases in the nonperforming and delinquent loans ratios between the end of 2024 and the end of 2025.

Operating net income, a non-GAAP measure, of $225.1 million, increased $31.2 million, or 16.1%, compared to the prior year, while operating earnings per share, a non-GAAP measure, of $4.24 increased $0.59, or 16.2%, from last year. Operating pre-tax, pre-provision net revenue (“PPNR”), a non-GAAP measure, of $315.3 million, increased $41.7 million, or 15.3%, compared to 2024, while operating PPNR per share, a non-GAAP measure, of $5.94, increased $0.79, or 15.3%, compared to the prior year, demonstrating improvement in the Company’s core operating performance between the periods.

Net Income and Profitability

Net income for 2025 was $210.5 million, an increase of $28.0 million, or 15.3%, from 2024. Earnings per share for 2025 was $3.97, an increase of $0.53, or 15.4%, from 2024’s results. These increases were achieved despite the impacts from certain notable non-operating items, including $3.7 million of acquisition expenses associated with the acquisition of seven branch locations from Santander and $1.5 million of restructuring expenses associated with severance payments as part of a workforce optimization plan due to planned branch consolidations and other operational initiatives. Operating net income, a non-GAAP measure, of $225.1 million, increased $31.2 million, or 16.1%, compared to the prior year, while operating earnings per share, a non-GAAP measure, of $4.24 increased $0.59, or 16.2%, from last year. Operating PPNR, a non-GAAP measure, of $315.3 million, increased $41.7 million, or 15.3%, compared to 2024, while operating PPNR per share, a non-GAAP measure, of $5.94, increased $0.79, or 15.3%, compared to the prior year demonstrating improvement in the Company’s non-credit and non-income tax-related operating performance between the periods. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.

Table 1: Condensed Income Statements



	Years Ended December 31,
(000's omitted, except per share data)	2025		2024		2023
Net interest income	$	506,550	$	449,117	$	437,285
Provision for credit losses		21,350		22,773		11,203
Noninterest revenues		311,457		297,186		214,834
Noninterest expenses		521,263		486,825		472,685
Income before income taxes		275,394		236,705		168,231
Income taxes		64,939		54,224		36,307
Net income	$	210,455	$	182,481	$	131,924

Diluted weighted average common shares outstanding		53,041		53,098		53,908
Diluted earnings per share	$	3.97	$	3.44	$	2.45

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The Company operates four businesses: Banking, Employee Benefit Services, Insurance Services and Wealth Management Services. These businesses are aggregated into the following four reportable segments: Banking and Corporate, Employee Benefit Services, Insurance Services and Wealth Management Services. The Banking and Corporate segment 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 holds and manages the Company’s investment and borrowing portfolios and includes certain banking support and corporate overhead-related expenses. Employee Benefit Services, consisting of BPAS and its subsidiaries, provides the following on a national basis: employee benefit trust, collective investment fund, retirement plan and health savings account administration, fund administration, transfer agency, actuarial, and health and welfare consulting services. BPAS services more than 10,000 benefit plans with approximately 960,000 plan participants and supports $132.1 billion in employee benefit trust assets as of December 31, 2025. In addition, BPAS employs 479 professionals serving clients in every U.S. state plus the Commonwealth of Puerto Rico, and occupies 17 offices located in New York, Pennsylvania, Massachusetts, New Jersey, Texas, Minnesota, South Dakota, Washington, Florida, and Puerto Rico. 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. The Insurance Services segment includes 256 employees and 23 customer service facilities in New York, Pennsylvania, Massachusetts, South Carolina, and Florida. Wealth Management Services include trust services provided by Nottingham Trust, a division of CBNA, broker-dealer and investment advisory services provided by Nottingham Investment Services, Inc. (“NISI”) and Nottingham Wealth Partners, Inc. as well as asset management provided by Nottingham Advisors, Inc. (“Nottingham”). The Wealth Management Services segment includes 109 employees and assets under management or administration of $14.0 billion at the end of 2025. For additional financial information on the Company’s segments, refer to Note U – Segment Information in the Notes to Consolidated Financial Statements.

The primary factors explaining full year 2025 financial performance are discussed in the remaining sections of this document and are summarized by segment as follows:

BANKING AND CORPORATE

●

Banking and corporate net interest income increased $57.4 million, or 12.9% for 2025. This was the result of an 18 basis point increase in the average yield on interest-earning assets, a $635.1 million increase in average interest-earning assets, and a 10 basis point decrease in the average rate on interest-bearing liabilities, partially offset by a $546.6 million increase in average interest-bearing liabilities. Average loans increased $524.7 million, driven primarily by organic growth in all loan categories. The yield on loans increased 21 basis points from the prior year, driven by an increase in the proportion of higher rate loans originated over recent periods. Also contributing to the growth in interest income was an increase in the average yield on investments including cash equivalents of 4 basis points, combined with a $76.8 million increase in the average book value of investments, including cash equivalents, driven primarily by the maturities, calls, and pre-payments of certain lower-yielding available-for-sale investment securities and the purchase of certain higher-yielding government agency mortgage-backed securities during the year. The decrease in interest expense of $1.7 million was driven by a 7 basis point decrease in the cost of funds and a decrease in higher cost average borrowings of $80.9 million, partially offset by an increase in comparatively lower cost average interest-bearing deposit balances of $627.5 million.

●

The provision for credit losses of $21.4 million decreased $1.4 million from the prior year’s provision of $22.8 million, reflective of stable credit quality metrics. Net charge-offs of $13.1 million were $3.0 million higher than 2024, primarily driven by the charge-off of one non-owner occupied CRE loan relationship that was previously individually assessed. This resulted in an annual net charge-off ratio (net charge-offs / total average loans) of 0.12%, which was 2 basis points higher than both the prior year and the 10-year historical average of 0.10%. Year-end nonperforming loans as a percentage of total loans and nonperforming assets as a percentage of loans and other real estate owned decreased 18 and 14 basis points, respectively, as compared to December 31, 2024 levels, primarily attributable to a decrease in nonperforming business lending loan balances. Additional information on trends and policy related to asset quality is provided in the asset quality section on pages 61 through 64.

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●

Banking and corporate noninterest revenues of $83.6 million for 2025 increased by $5.5 million from 2024’s level. The increase was reflective of an increase in customer interest rate swap fee revenues, increases in deposit service fees, an increase in revenues from CRE financing and structuring fees, an increase in bank-owned life insurance income as well as the impact of a $1.6 million income distribution received from a limited partnership investment.

●

Banking and corporate noninterest expenses, excluding amortization of intangible assets, acquisition-related expenses, litigation accrual and restructuring expenses, increased $25.9 million, or 8.0%, in 2025, driven by a $12.1 million, or 6.6%, increase in salaries and employee benefits and a $7.4 million, or 14.4%, increase in data processing and communications along with increases in occupancy and equipment, legal and professional fees and other expenses, partially offset by a decrease in business development and marketing expenses.

EMPLOYEE BENEFIT SERVICES

●

Employee benefit services total revenues for 2025 of $142.4 million increased $5.0 million, or 3.6%, from the prior year level, driven by revenue growth in the recordkeeping and third-party administration services business line due in most part to revenue growth from acquisitions and higher average market values of assets under administration.

●

Employee benefit services noninterest expenses for 2025 totaled $86.5 million. This represented an increase from 2024 of $4.9 million, or 6.0%, and was attributable to a $1.4 million, or 2.1%, increase in salaries and employee benefits due to staff additions resulting from acquisition activity and a $1.6 million, or 30.9%, increase in legal and professional fees due to legal expenses associated with the development of new collective investment funds, along with increases in data processing and communications, business development and marketing and other expenses.

INSURANCE SERVICES

●	Insurance services total revenue for 2025 of $54.4 million increased $4.0 million, or 7.8%, from the prior year level. The increase in insurance services revenue was due to revenue growth from acquisitions and an increase in contingent commissions between the periods.

●	Insurance services noninterest expenses of $43.9 million increased $0.8 million, or 1.9%, from 2024, primarily due to a $0.7 million, or 2.0%, increase in salaries and employee benefits.

WEALTH MANAGEMENT SERVICES

●	Wealth management services total revenue for 2025 of $39.4 million increased $0.8 million, or 2.0%, from 2024, reflective of more favorable investment market conditions.

●	Wealth management services noninterest expenses of $27.4 million decreased $0.8 million, or 2.8%, from 2024, primarily due to a $0.8 million, or 3.3%, decrease in salaries and employee benefits.

Selected Profitability and Other Measures

Return on average assets, return on average equity, dividend payout, and average equity to average asset ratios for the years indicated are as follows:

Table 2: Selected Ratios


	2025		2024		2023
Return on average assets	1.26	%	1.14	%	0.87	%
Return on average equity	11.29	%	10.76	%	8.27	%
Dividend payout ratio	46.6	%	52.6	%	72.4	%
Average equity to average assets	11.14	%	10.60	%	10.47	%

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As displayed in Table 2, the 2025 return on average assets ratio increased 12 basis points, while the return on average equity ratio increased 53 basis points as compared to 2024. The increase in the return on average assets was the result of an increase in net income primarily driven by net interest income growth, partially offset by an increase in average assets driven by organic loan and deposit growth, securities purchases, and deposit funding from the Santander acquisition. The return on average equity ratio increased in 2025 as net income increased at a higher rate than average equity. The increase in average equity was driven by an increase in retained earnings and a decrease in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio.

The operating return on average assets, a non-GAAP measure, increased 13 basis points to 1.34% in 2025, as compared to 1.21% in 2024. The operating return on average equity, a non-GAAP measure, increased 64 basis points to 12.07% in 2025, from 11.43% in 2024. See Table 20 beginning on page 72 for Reconciliation of GAAP to Non-GAAP Measures.

The dividend payout ratio for 2025 of 46.6% decreased from 52.6% in 2024 driven by a 15.3% increase in net income outpacing the 2.2% increase in dividends declared. The increase in dividends declared in 2025 was a result of a 2.2% increase in the dividends declared per share, while common shares outstanding were consistent as issuances associated with employee stock plans were offset by share repurchases during the year.

The average equity to average assets ratio increased 54 basis points in 2025 due to a 10.0% increase in average equity, partially offset by a 4.7% increase in average assets. The increase in average equity was driven by increases in retained earnings and decreases in the average accumulated other comprehensive loss related to the Company’s investment securities portfolio, while the increase in average assets was primarily due to strong organic loan growth.

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 $506.5 million in 2025, an increase of $57.4 million, or 12.8%, from the prior year. As disclosed in Table 3, fully tax-equivalent net interest income, a non-GAAP measure, totaled $510.1 million in 2025, an increase of $57.2 million, or 12.6%, from the prior year. The increase is a result of an 18 basis point increase in the yield on average interest-earning assets, a $638.9 million, or 4.3%, increase in average interest-earning asset balances and a 10 basis point decrease in the rate paid on average interest-bearing liabilities, partially offset by a $546.6 million, or 5.2%, increase in average interest-bearing liability balances. As reflected in Table 4, the favorable impacts of the increase in average interest-earnings asset balances ($28.6 million), the increase in the yield on average interest-earning assets ($26.9 million) and the decrease in the rate paid on average interest-bearing liabilities ($11.5 million) were partially offset by the unfavorable impact of the increase in average interest-bearing liability balances ($9.8 million).

The 2025 net interest margin increased 25 basis points to 3.29% from 3.04% reported in 2024, while the fully tax-equivalent net interest margin, a non-GAAP measure, increased 24 basis points to 3.31% from the 3.07% reported in the prior year. These increases were the result of an 18 basis point increase in the yield on interest-earning assets and a 10 basis point decrease in the rate paid on average interest-bearing liabilities. The increases in the yield on interest-earnings assets and decrease in the rate on interest-bearing liabilities were primarily due to an increase in the proportion of higher rate loans originated over recent periods, the maturity of lower rate investment securities and purchase of higher rate investment securities, and a decrease in market rates on borrowings and deposits. The 5.64% yield on average loans in 2025 increased 21 basis points as compared to 5.43% in 2024, driven by the change in proportion of loan rates as discussed above. The yield on investments, including cash equivalents, of 2.13% in 2025 was 5 basis points higher than 2024 primarily due to higher yields on investment purchases during the year and maturities, pre-payments, and calls on certain lower yielding available-for-sale securities, partially offset by the impact of lower market rates on the yield earned on cash equivalents. The cost of interest-bearing liabilities was 1.74% during 2025 as compared to 1.84% for 2024. The decreased cost reflects the 4 basis point decrease in the rate paid on average deposits and the 15 basis point lower average rate paid on borrowings due primarily to changes in market interest rates as well as lower levels of overnight borrowings in 2025.

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Total interest income increased by $55.7 million, or 8.7%, while as shown in Table 3 on page 47, total FTE-basis interest income, a non-GAAP measure, increased by $55.6 million, or 8.6%, in 2025 compared to the prior year. Average loans increased $524.7 million, or 5.2%, in 2025. This increase was driven primarily by organic growth in all of the Company’s five main portfolios - business lending, consumer mortgage, consumer indirect, home equity and consumer direct. Included in this increase was $31.9 million of loans acquired from Santander in the fourth quarter of 2025 as part of a branch acquisition. Loan interest income and fees increased $50.9 million, or 9.3%, while FTE-basis loan interest income and fees, a non-GAAP measure, increased $51.0 million, or 9.3%, in 2025 as compared to 2024. These increases were attributable to the aforementioned higher average loan balances and the impact of a 21 basis point higher loan yield, as the yield on new volume continued to outpace the yield on loan paydowns and maturities. Investment and interest-earning cash interest income in 2025 was $4.6 million, or 4.5%, higher than the prior year as a result of a 5 basis point increase in the average investment yield including cash equivalents, a $76.8 million increase in the average book basis balance of investments and a $37.5 million increase in average cash equivalent balances.

Total interest expense decreased by $1.7 million to $192.7 million in 2025 from $194.4 million in 2024. As shown in Table 4 on page 48, lower interest rates on interest-bearing liabilities resulted in a decrease in interest expense of $11.5 million, while higher average interest-bearing liability balances resulted in a $9.8 million increase in interest expense. Interest expense as a percentage of average interest-earning assets for 2025 decreased 7 basis points to 1.25% from 1.32% in the prior year. The rate on interest-bearing deposits of 1.58% was 8 basis points lower than 2024, primarily due to a decrease in certain product rates in response to changes in market interest rates during the year. The rate on borrowings decreased 15 basis points to 3.65% in 2025, primarily due to the aforementioned decrease in market interest rates. Total average funding balances (deposits and borrowings) in 2025 increased $563.4 million, or 4.0%. Average deposits increased $644.3 million, driven by increases in all deposit product types from organic growth and the Santander acquisition. Average non-time deposit balances increased $555.5 million, or 5.0%, and accounted for 84.7% of total average deposits in 2025 compared to 84.6% in 2024. Average time deposit balances increased $88.8 million year-over-year and represented 15.3% of total average deposits for 2025 compared to 15.4% in 2024. Average external borrowings decreased $80.9 million, or 8.8%, in 2025 as compared to 2024, primarily due to a decrease in average Federal Reserve short-term borrowings of $54.1 million, average securities sold under agreement to repurchase (“customer repurchase agreements”) of $46.7 million and average overnight borrowings of $20.9 million, partially offset by an increase in term FHLB borrowings of $40.8 million. The decrease in average customer repurchase agreements in 2025 was primarily driven by lower governmental balances due in part to certain customers transferring funds to the Company’s reciprocal deposit product offerings. The increase in average FHLB term borrowings was due to the timing of when the Company secured funding in 2024, as the Company secured a total of $250.0 million of FHLB term borrowings in the second and third quarters of 2024.

The following table sets forth information related to average interest-earning assets and average interest-bearing liabilities and their associated yields and rates for the periods indicated. Interest income and yields are on a FTE basis using a marginal income tax rate of 25.3% for 2025, 25.0% for 2024 and 24.4% for 2023. 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 accretion of acquired loan purchase discounts and premiums. Average loan balances include acquired loan purchase discounts and premiums, nonaccrual loans and loans held for sale.

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Table 3: Average Balance Sheet


	Year Ended December 31, 2025						Year Ended December 31, 2024						Year Ended December 31, 2023
					Avg.						Avg.						Avg.
	Average				Yield/Rate		Average				Yield/Rate		Average				Yield/Rate
(000's omitted except yields and rates)	Balance		Interest		Paid		Balance		Interest		Paid		Balance		Interest		Paid
Interest-earning assets:
Cash equivalents	$	140,145	$	5,734	4.09	%	$	102,690	$	5,290	5.15	%	$	55,881	$	2,775	4.97	%
Taxable investment securities ⁽¹⁾		4,251,192		85,800	2.02	%		4,136,337		80,444	1.94	%		4,294,210		79,593	1.85	%
Nontaxable investment securities ⁽¹⁾		415,598		13,754	3.31	%		453,676		14,993	3.30	%		514,802		17,395	3.38	%
Loans (net of unearned discount) ⁽²⁾		10,586,889		597,520	5.64	%		10,062,177		546,522	5.43	%		9,213,168		445,867	4.84	%
Total interest-earning assets		15,393,824		702,808	4.57	%		14,754,880		647,249	4.39	%		14,078,061		545,630	3.88	%
Noninterest-earning assets		1,349,537						1,235,817						1,164,823
Total assets	$	16,743,361					$	15,990,697					$	15,242,884

Interest-bearing liabilities:
Interest checking, savings, and money market deposits	$	8,139,324		89,845	1.10	%	$	7,600,646		82,999	1.09	%	$	7,771,827		52,629	0.68	%
Time deposits		2,126,117		72,355	3.40	%		2,037,315		76,521	3.76	%		1,280,751		32,708	2.55	%
Customer repurchase agreements		224,686		3,061	1.36	%		271,359		4,584	1.69	%		305,213		3,094	1.01	%
Overnight borrowings		65,844		2,987	4.54	%		86,770		4,851	5.59	%		184,581		9,349	5.06	%
FHLB and other borrowings		545,910		24,477	4.48	%		505,130		22,813	4.52	%		140,816		6,285	4.46	%
Federal Reserve short-term borrowings		0		0	0.00	%		54,098		2,643	4.88	%		0		0	0.00	%
Subordinated notes payable		0		0	0.00	%		0		0	0.00	%		765		38	4.96	%
Total interest-bearing liabilities		11,101,881		192,725	1.74	%		10,555,318		194,411	1.84	%		9,683,953		104,103	1.08	%
Noninterest-bearing liabilities:
Noninterest checking deposits		3,597,086						3,580,297						3,848,261
Other liabilities		179,619						159,288						114,946
Shareholders' equity		1,864,775						1,695,794						1,595,724
Total liabilities and shareholders' equity	$	16,743,361					$	15,990,697					$	15,242,884

Net interest earnings (FTE) (non-GAAP)			$	510,083					$	452,838					$	441,527

Net interest spread					2.80	%					2.52	%					2.77	%
Net interest spread (FTE) (non-GAAP)					2.83	%					2.55	%					2.80	%
Net interest margin					3.29	%					3.04	%					3.11	%
Net interest margin (FTE) (non-GAAP)					3.31	%					3.07	%					3.14	%

Fully tax-equivalent adjustment (non-GAAP) ⁽³⁾			$	3,533					$	3,721					$	4,242

(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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As discussed above and disclosed in Table 4 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 4: Rate/Volume



	2025 Compared to 2024						2024 Compared to 2023
	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	$	1,675	$	(1,231)	$	444	$	2,408	$	107	$	2,515
Taxable investment securities		2,270		3,086		5,356		(2,988)		3,839		851
Nontaxable investment securities		(1,260)		21		(1,239)		(2,027)		(375)		(2,402)
Loans (net of unearned discount)		29,136		21,862		50,998		43,247		57,408		100,655
Total interest-earning assets ⁽²⁾		28,616		26,943		55,559		27,156		74,463		101,619

Interest paid on:
Interest checking, savings and money market deposits		5,937		909		6,846		(1,184)		31,554		30,370
Time deposits		3,236		(7,402)		(4,166)		24,382		19,431		43,813
Customer repurchase agreements		(716)		(807)		(1,523)		(376)		1,866		1,490
Overnight borrowings		(1,046)		(818)		(1,864)		(5,385)		887		(4,498)
FHLB and other borrowings		1,830		(166)		1,664		16,452		76		16,528
Federal Reserve short-term borrowings		(2,643)		0		(2,643)		2,643		0		2,643
Subordinated notes payable		0		0		0		(38)		0		(38)
Total interest-bearing liabilities ⁽²⁾		9,792		(11,478)		(1,686)		10,117		80,191		90,308

Net interest earnings (FTE) (non-GAAP) ⁽²⁾	$	20,159	$	37,086	$	57,245	$	20,913	$	(9,602)	$	11,311

(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.

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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, 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 division 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), 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, gains or losses on debt extinguishment, realized and unrealized gains or losses on investment securities and income or losses on equity method investments.

Table 5: Noninterest Revenues


	Years Ended December 31,
(000’s omitted)	2025			2024			2023
Employee benefit services	$	135,974		$	130,981		$	117,961
Insurance services		54,410			50,249			47,094
Wealth management services		37,065			36,668			31,941
Deposit service charges and fees		32,367			31,566			28,921
Debit interchange and ATM fees		27,004			26,717			25,768
Mortgage banking		3,535			4,421			595
Other banking revenues		21,012			15,840			14,688
Loss on sales of investment securities		0			(487)			(52,329)
Gain on debt extinguishment		0			0			242
Unrealized gain (loss) on equity securities		375			1,231			(47)
Loss from equity method investments		(285)			0			0
Total noninterest revenues	$	311,457		$	297,186		$	214,834

Noninterest revenues/total revenues		38.1	%		39.8	%		32.9	%
Operating noninterest revenues/operating revenues (FTE basis) (non-GAAP) ⁽¹⁾		37.9	%		39.6	%		37.7	%

(1)

Operating noninterest revenues, a non-GAAP measure, excludes loss on sales of investment securities, gain on debt extinguishment and unrealized 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 loss on sales of investment securities, gain on debt extinguishment, and unrealized gain (loss) on equity securities. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.

As displayed in Table 5, total noninterest revenues of $311.5 million in 2025 increased $14.3 million, or 4.8%, as compared to 2024. Total operating noninterest revenues, a non-GAAP measure, increased $14.6 million, or 4.9%, to $311.1 million in 2025 as compared to 2024. The increase was comprised of increases in all four of the Company’s business units.

Noninterest revenues as a percentage of total revenues (defined as net interest income plus noninterest revenues) was 38.1% in 2025, a decrease from 39.8% in 2024. Operating noninterest revenues as a percentage of operating revenues (FTE basis), a non-GAAP measure, were 37.9% in 2025, a decrease from 39.6% in the prior year. The decrease was due to the 12.6% increase in fully tax-equivalent net interest income, a non-GAAP measure, outpacing the 4.9% increase in operating noninterest revenues, a non-GAAP measure.

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Banking noninterest revenues, comprised of deposit service charges and fees, debit interchange and ATM fees, mortgage banking and other banking revenues, totaled $83.9 million in 2025, an increase of $5.4 million, or 6.8%, from the prior year. The increase was driven by increases in other banking revenues ($5.2 million), deposit service charges and fees ($0.8 million), and debit interchange and ATM fees ($0.3 million), partially offset by a decrease in mortgage banking revenues ($0.9 million). The increase in other banking revenues was associated with higher customer interest rate swap fee revenues, other commercial banking-related fees, including an increase in CRE financing and structuring fees generated by Axiom Realty Group (“Axiom”), income from bank-owned life insurance and a $1.6 million income distribution received from a limited partnership investment.

As disclosed in Table 5, noninterest revenue from non-banking financial services (noninterest revenues from employee benefit services, insurance services, and wealth management services) increased $9.6 million, or 4.4%, in 2025 to $227.4 million. Financial services revenues represented 73% of total noninterest revenues in both 2025 and 2024. Financial services revenues accounted for 73% of total operating noninterest revenues, a non-GAAP measure, in 2025 compared to 74% in 2024.

Employee benefit services generated revenue of $136.0 million in 2025 that reflected growth of $5.0 million, or 3.8%, primarily related to 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. Ending employee benefit trust assets were $132.1 billion at December 31, 2025.

Insurance services revenues increased $4.2 million, or 8.3%, in 2025 primarily due to revenue growth from acquisitions and an increase in contingent commissions.

Wealth management services revenues increased $0.4 million, or 1.1%, in 2025 due to favorable investment market conditions. Assets under management and administration within the wealth management businesses increased $0.8 billion to $14.0 billion at December 31, 2025 as compared to one year earlier. Assets under management and administration within the wealth management businesses increased $1.4 billion to $13.2 billion at December 31, 2024 as compared to one year earlier. Assets under management and administration included approximately $3.6 billion and $3.3 billion of intercompany assets under management and administration at the end of 2025 and 2024, respectively, associated with affiliated employee benefit trust accounts.

Noninterest Expenses

As shown in Table 6, noninterest expenses of $521.3 million in 2025 were $34.4 million, or 7.1%, higher than 2024, reflective of increases in salaries and employee benefits, data processing and communications expenses, occupancy and equipment expenses, acquisition expenses, other expenses, legal and professional fees and restructuring expenses. These increases were partially offset by decreases in business development and marketing expenses, amortization of intangible assets, acquisition-related contingent consideration adjustments, and litigation expenses.

Noninterest expenses as a percent of average assets for 2025 was 3.11%, an increase of 7 basis points from 3.04% in 2024. Operating noninterest expenses (non-GAAP) as a percent of average assets, a non-GAAP measure, for 2025 was 3.00%, which was 5 basis points higher than 2024. The increases in these ratios for 2025 were due to a 7.1% increase in noninterest expenses and a 6.4% increase in operating noninterest expenses, a non-GAAP measure, while average assets increased by 4.7%, primarily due to organic loan growth.

The efficiency ratio expresses the level of noninterest expenses as a percentage of total revenues (net interest income plus total noninterest revenues). The Company also utilizes the operating efficiency ratio, a non-GAAP measure, which is a performance measurement tool widely used by banks and is defined by the Company as operating noninterest expenses, a non-GAAP measure, divided by fully-tax equivalent operating revenues, a non-GAAP measure. Lower ratios correlate to better operating efficiency.

The 2025 efficiency ratio of 63.7% improved 1.5 percentage points from the 2024 efficiency ratio as noninterest expenses increased 7.1% while total revenues increased 9.6%.

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The 2025 operating efficiency ratio, a non-GAAP measure, of 61.2% improved 1.8 percentage points from the 2024 non-GAAP operating efficiency ratio of 63.0% as the 6.4% increase in operating noninterest expenses, a non-GAAP measure, grew at a slower pace than the 9.6% increase in fully tax-equivalent operating revenues, a non-GAAP measure, comprised of a 12.6% increase in fully tax-equivalent net interest income, a non-GAAP measure, and a 4.9% increase in operating noninterest revenues, a non-GAAP measure. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.

Table 6: Noninterest Expenses


	Years Ended December 31,
(000's omitted)		2025			2024			2023
Salaries and employee benefits		$	313,915		$	300,779		$	281,803
Data processing and communications			70,161			61,843			57,585
Occupancy and equipment			48,249			43,658			42,550
Business development and marketing			15,135			16,059			15,731
Legal and professional fees			17,898			15,323			15,921
Amortization of intangible assets			13,846			14,259			14,511
Litigation accrual			(50)			138			5,800
Acquisition expenses			3,663			213			63
Acquisition-related contingent consideration adjustments			0			244			3,280
Restructuring expenses			1,499			0			1,163
Other			36,947			34,309			34,278
Total noninterest expenses		$	521,263		$	486,825		$	472,685

Noninterest expenses/average assets			3.11	%		3.04	%		3.10	%
Operating noninterest expenses⁽¹⁾ /average assets (non-GAAP)			3.00	%		2.95	%		2.95	%
Efficiency ratio			63.7	%		65.2	%		72.5	%
Operating efficiency ratio (non-GAAP)⁽²⁾			61.2	%		63.0	%		63.2	%

⁽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 20 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 loss on sales of investment securities, gain on debt extinguishment and unrealized gain (loss) on equity securities. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures.

Salaries and employee benefits increased $13.1 million, or 4.4%, in 2025, primarily due to select staff additions, including from acquisitions and de novo branch expansions and higher performance-based incentives, partially offset by lower employee medical costs that reflected rebates received. The Company also recorded $1.5 million in costs related to severance payments for a workforce optimization plan due to planned branch consolidations and other consumer banking operational initiatives. Total full-time equivalent staff at the end of 2025 was 2,805 compared to 2,698 at December 31, 2024 and 2,669 at the end of 2023.

Total non-personnel noninterest expenses, excluding amortization of intangible assets, acquisition-related expenses, restructuring expenses and litigation accrual, increased $17.2 million, or 10.0%, in 2025, reflective of increases in data processing and communications expenses, other expenses, legal and professional fees, and occupancy and equipment expenses, partially offset by a decrease in business development and marketing expenses. The increase in data processing and communications expenses is reflective of the Company’s continued investment in key technologies, including artificial intelligence applications, customer payment fraud and cybersecurity risk management software, credit administration software and other workflow efficiency initiatives, as well as a $1.4 million consulting expense in connection with a contract renegotiation with the Company’s banking core system provider, which is expected to result in proportionally lower future processing costs for that system infrastructure. Occupancy and equipment expenses increased due to higher property maintenance costs as well as incremental expenses associated with acquisitions and the Bank’s de novo branches opened between the periods. The increase in other expenses includes $1.7 million lower gains on the sale of properties related to the branch consolidations completed in 2025. Legal and professional fees increased due to legal expenses associated with the development of new collective investment funds.

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On November 16, 2023, the FDIC issued a final rule to implement a special assessment to recover the loss to the DIF associated with protecting uninsured depositors following the closures of certain banks in the first quarter of 2023. As of December 31, 2025, the special assessment is anticipated to be collected over eight quarterly assessment periods that began in 2024 at an annual rate of approximately 13.4 basis points of uninsured deposits that exceeded $5 billion as of December 31, 2022. As the estimated loss to the DIF will be periodically adjusted the FDIC could cease collection early, if the FDIC has collected enough to recover actual or estimated losses, extend the special assessment collection period one or more quarters beyond the initial collection period, if actual or estimated losses exceed the amounts collected, and impose a final shortfall special assessment on a one-time basis after certain receiverships terminate, if actual losses exceed the amounts collected. The Company recorded a $0.2 million and $1.5 million expense accrual associated with this special assessment in 2024 and 2023, respectively. The Company recorded a $0.2 million reduction to the accrual associated with this special assessment in 2025. Excluding the expense accruals associated with the special assessment, FDIC insurance expense in 2025 totaled $9.8 million, compared to $8.9 million in 2024 and $8.0 million in 2023.

Acquisition-related expenses for 2025 totaled $3.7 million, primarily comprised of costs related to the integration of the Santander branch acquisition completed in the fourth quarter of 2025.

Income Taxes

The Company estimates its income tax expense based on the amount it expects to owe the respective taxing authorities, plus the impact of deferred tax items. Taxes are discussed in more detail in Note J of the Consolidated Financial Statements beginning on page 116. Accrued taxes represent the net estimated amount due or to be received from taxing authorities. In estimating accrued taxes, management assesses the relative merits and risks of the appropriate tax treatment of transactions, taking into account statutory, judicial, and regulatory guidance in the context of the Company’s tax position. If the final resolution of taxes payable differs from its estimates due to regulatory determination or legislative or judicial actions, adjustments to tax expense may be required.

The effective income tax rate for 2025 was 23.6%, compared to 22.9% in 2024 and 21.6% in 2023. The increase in the effective income tax rate for 2025 compared to the effective tax rate for 2024 is primarily attributable to a decrease in solar energy income tax credits in the current year as well as an increase in certain state income taxes. The Company recorded income tax expense associated with the amortization of income tax credit investments of $7.3 million in 2025, compared to $9.7 million in 2024 and $1.3 million in 2023. Excluding the impact of tax benefits related to stock-based compensation activity and amortization of income tax credit investments, the effective tax rate for full year 2025 was 21.3%, up from 19.0% for full year 2024, driven by a decrease in solar energy income tax credits as well as an increase in certain state income taxes.

Shareholders’ Equity and Regulatory Capital

Shareholders’ equity ended 2025 at $2.00 billion, up $243.2 million, or 13.8%, from the end of 2024. This increase reflects net income of $210.5 million, a decrease in accumulated other comprehensive loss of $129.1 million, stock-based compensation of $10.9 million, the issuance of shares through employee stock plans of $2.1 million, partially offset by common stock dividends declared of $98.2 million and common stock repurchased of $11.2 million. The change in accumulated other comprehensive loss was primarily driven by a $118.0 million decrease in other comprehensive loss related to the Company’s available-for-sale investment portfolio, as well as a positive $11.1 million adjustment in the overfunded status of the Company’s employee retirement plans. The change in the other comprehensive loss related to the Company’s available-for-sale investment portfolio includes a net increase in the after-tax market value adjustment on the available-for-sale investment portfolio due to general downward movements in medium to long-term interest rates, as well as the volume and rates associated with the securities maturities that occurred during the past 12 months. Common shares outstanding were consistent as issuances associated with employee stock plans were offset by share repurchases during the year.

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.

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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 December 31, 2025, 2024 and 2023. Therefore, to satisfy both the minimum risk-based capital ratios and the capital conservation buffer as of December 31, 2025, 2024 and 2023, 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 December 31, 2025, 2024 and 2023, the Company and Bank meet all applicable capital adequacy requirements to be considered “well capitalized”. As of December 31, 2025, 2024 and 2023, the regulatory capital ratios for the Company and Bank are presented in Table 7 below.

Table 7: Regulatory Ratios


	December 31, 2025				December 31, 2024				December 31, 2023
	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	9.21	%	7.85	%	9.19	%	7.69	%	9.34	%	7.70	%
Common equity Tier 1 capital ratio	14.04	%	12.02	%	14.23	%	11.96	%	14.75	%	12.11	%
Tier 1 risk-based capital ratio	14.04	%	12.02	%	14.23	%	11.96	%	14.76	%	12.11	%
Total risk-based capital ratio	14.85	%	12.84	%	15.01	%	12.74	%	15.46	%	12.82	%

The Company’s tier 1 leverage ratio, a primary measure for which regulators have established a 5% minimum for an institution to be considered “well-capitalized,” increased 2 basis points from the prior year to end the year at 9.21%. The increase in the tier 1 leverage ratio as compared to 2024 was the result of an increase in shareholders’ equity, excluding intangibles and other comprehensive income or loss items of 5.0%, as the impact of net earnings retention outweighed share repurchases during the year, while average assets, excluding intangibles and the market value adjustment on available-for-sale investment securities, increased 4.7%, primarily due to the Santander branch acquisition and organic loan growth. For additional financial information on the Company’s regulatory capital, refer to Note P – Regulatory Matters in the Notes to Consolidated Financial Statements. The shareholders’ equity-to-assets ratio was 11.59% at the end of 2025 compared to 10.76% at the end of 2024. The increase was due to shareholders’ equity increasing 13.8%, as the impact of net earnings retention and a decrease in accumulated other comprehensive loss due to a reduction in unrealized loss in the Company’s investment portfolio outweighed share repurchases during the year, while assets increasing by 5.6% driven primarily by organic loan growth and the Santander branch acquisition. The tangible equity-to-assets ratio, a non-GAAP and regulatory reporting measure, was 6.75% at the end of 2025 versus 5.83% one year earlier. See Table 20 for Reconciliation of GAAP to Non-GAAP Measures. The increase was due to tangible common shareholders’ equity increasing by 22.2% in 2025 primarily due to a $129.1 million decrease in accumulated other comprehensive loss and a $112.3 million increase in retained earnings, while tangible assets increased 5.6% from the prior year, reflective of organic loan growth and the Santander branch acquisition. The Company manages organic and acquired growth in a manner that enables it to continue to maintain and grow its capital base over time and maintain its ability to take advantage of future strategic growth opportunities.

Cash dividends declared on common stock in 2025 of $98.1 million represented an increase of 2.2% over the prior year. This growth was a result of a $0.04 increase in dividends per share to $1.86 for the year, reflective of $0.01 increases in the quarterly dividend in the third quarters of both 2025 and 2024, with common shares outstanding remaining consistent. Dividends per share for 2025 of $1.86 represents a 2.2% increase from $1.82 in 2024, a result of quarterly dividends per share increasing from $0.45 to $0.46 in the third quarter of 2024 and from $0.46 to $0.47 in the third quarter of 2025. The 2025 increase in quarterly dividends marked the 33rd consecutive year of dividend increases for the Company. The dividend payout ratio for 2025 was 46.6% compared to 52.6% in 2024, and 72.4% in 2023. The dividend payout ratio decreased during 2025 as dividends declared increased 2.2% while net income increased 15.3% from 2024, primarily driven by an increase in net interest income.

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The Company’s ability to pay dividends to its shareholders is subject to laws and regulations imposing restrictions on the amount of dividends that may be declared and paid. Dividend payments by the Company are dependent on a number of factors, including the earnings and financial condition of the Company and the Bank and the ability of the Company to receive dividends from the Bank, and are subject to the limitations referred to in Note P: Regulatory Matters.

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 FRB and credit lines from correspondent banks. Other funding alternatives may also be appropriate from time to time, including wholesale and retail repurchase agreements, large certificates of deposit, and the brokered CD market. The primary sources of funds are deposits, which totaled $14.39 billion at December 31, 2025. The primary sources of non-deposit funds are customer repurchase agreements and FHLB and FRB term borrowings and overnight advances. At December 31, 2025, there were $231.2 million of customer repurchase agreements, $450.4 million of FHLB term borrowings outstanding, and no overnight borrowings.

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 8 below details the available sources of liquidity at December 31, 2025. In addition, there was $75.0 million available in unsecured lines of credit with correspondent banks at December 31, 2025. The Company’s sources of immediately available liquidity of $6.82 billion as of December 31, 2025 represent approximately 249% 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 $2.74 billion.

Table 8: Sources of Liquidity


(000's omitted)	2025			2024
Unrestricted cash and cash equivalents	$	286,995		$	191,894
FHLB borrowing capacity		1,576,124			1,185,087
FRB borrowing capacity		2,776,607			2,670,278
Net unpledged investment securities		2,177,896			1,726,680
Total sources of liquidity	$	6,817,622		$	5,773,939

Net estimated uninsured deposits	$	2,739,971		$	2,347,825

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

To measure intermediate risk over the next twelve months, the Company reviews a sources and uses projection. As of December 31, 2025, there is sufficient liquidity available during 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 December 31, 2025 indicate the Company has sufficient sources of liquidity for the next year in all simulated stressed scenarios.

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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 Company’s 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 factors such as increased restrictions on borrowing or downturns 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 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” beginning on page 18.

Goodwill and Intangible Assets

The changes in intangible assets by reportable segment for the year ended December 31, 2025 are summarized as follows:

Table 9: Intangible Assets


	Balance at								Balance at
(000’s omitted)	December 31, 2024		Additions		Amortization		Impairment		December 31, 2025
Banking and Corporate Segment
Goodwill	$	732,598	$	31,960	$	0	$	0	$	764,558
Core deposit intangibles		5,148		11,900		2,294		0		14,754
Other intangibles		724		0		202		0		522
Total Banking and Corporate Segment		738,470		43,860		2,496		0		779,834
Employee Benefit Services Segment
Goodwill		89,293		1,753		0		0		91,046
Other intangibles		23,314		3,669		7,078		0		19,905
Total Employee Benefit Services Segment		112,607		5,422		7,078		0		110,951
Insurance Services Segment
Goodwill		27,896		812		0		0		28,708
Other intangibles		17,888		3,872		3,770		0		17,990
Total Insurance Services Segment		45,784		4,684		3,770		0		46,698
Wealth Management Services Segment
Goodwill		3,438		225		0		0		3,663
Other intangibles		1,172		900		502		0		1,570
Total Wealth Management Services Segment		4,610		1,125		502		0		5,233

Total	$	901,471	$	55,091	$	13,846	$	0	$	942,716

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Intangible assets at the end of 2025 totaled $942.7 million, an increase of $41.2 million from the prior year due to the addition of $34.8 million of goodwill, $11.9 million of core deposit intangibles and $8.4 million of other intangibles arising from acquisition activity, partially offset by $13.8 million of amortization during the year. The additional goodwill, core deposit intangibles and other intangibles recorded in 2025 resulted from the acquisition of Santander branches and wealth management clients as well as OneGroup, BPA and BPAS acquisitions during 2025. Goodwill represents the excess cost of an acquisition over the fair value of the net assets acquired. Goodwill at December 31, 2025 totaled $888.0 million, comprised of $764.6 million related to banking acquisitions and $123.4 million arising from the acquisition of non-banking financial services businesses. Goodwill is subject to periodic impairment analysis to determine whether the carrying value of the identified businesses exceeds their fair value, which would necessitate a write-down of goodwill. The Company completed its quantitative goodwill impairment analyses as of October 1, 2025 and determined that there was no impairment for any of the Company’s four business segments.

Core deposit intangibles represent the value of acquired non-time deposits in excess of funding that could have been obtained in the capital markets. Core deposit intangibles are amortized on an accelerated basis over eight years. The recognition of customer relationship intangibles was determined based on a methodology that calculates the present value of the projected future net income derived from the acquired customer base. These customer relationship intangibles are being amortized on an accelerated basis over periods ranging from eight to fifteen years.

Loans

Gross loans outstanding of $10.95 billion as of December 31, 2025 increased $517.4 million, or 5.0%, compared to December 31, 2024, driven by increases in all loan categories primarily due to net organic growth. The loan-to-deposit ratio was 76.1% as of December 31, 2025 compared to 77.6% at December 31, 2024. The decrease in the loan-to-deposit ratio was driven by an increase in ending deposits of $945.4 million, or 7.0%, comprised of organic growth and $543.7 million of deposits acquired from Santander, greater than the aforementioned organic loan growth.

Included in the 2025 increase in loans is $31.6 million of loans acquired from Santander, including $4.8 million of consumer mortgage loans, $2.0 million of business lending loans, $16.4 million of home equity loans and $8.4 million of consumer direct installment loans.

The compounded annual growth rate (“CAGR”) for the Company’s total loan portfolio between 2022 and 2025 was 7.5%. The greatest overall expansion occurred in business lending at a 9.1% CAGR, followed by home equity, which grew at a 7.1% CAGR, consumer indirect at a 6.5% CAGR, consumer mortgage at a 6.3% CAGR, and consumer direct at a 5.0% CAGR. The Company’s loan growth over past three years was primarily organic.

The weighting of the components of the Company’s loan portfolio enables it to be highly diversified. Approximately 57% of loans outstanding at the end of 2025 were made to consumers borrowing on an installment, line of credit or residential mortgage loan basis while 43% of loans outstanding at the end of 2025 were associated with business lending.

Mortgages on commercial property combined with general-purpose business lending to commercial, industrial, non-profit, and governmental customers and vehicle dealer floor plan financing is characterized as the Company’s business lending activity. The total business lending portfolio increased $228.7 million, or 5.1%, in 2025 primarily due to net organic growth. During 2025, multifamily loans increased $193.5 million, or 26.7%, business non-real estate loans, including commercial and industrial lending, increased $132.8 million, or 11.6% and owner-occupied CRE increased $7.0 million, or 0.8%, while non-owner occupied CRE decreased $104.6 million, or 5.9%. The Company’s exposure to these portfolios is diverse both geographically and by industry type, and remains relatively low at 15% of total assets, 24% of total loans and 188% of total bank-level regulatory capital. Total business lending was comprised of 73.1% CRE and 26.9% business non-real estate lending at December 31, 2025. The Company’s largest non-owner occupied CRE lending concentration by property type is multifamily at 26.5% of total CRE lending, followed by office and lodging at 10.8% and 9.6%, respectively. The Company’s largest owner-occupied CRE lending concentration by industry is retail trade at 8.0% of total CRE lending, followed by real estate rental and leasing at 2.6%, and arts, entertainment, and recreation at 2.4%. These collateral and industry statistics combined with no metropolitan statistical area (“MSA”) accounting for more than 14% of the CRE portfolio and a very low level of commercial real estate lending being conducted in major metropolitan areas, demonstrate the diversity of the Company’s business lending portfolio, as there are no significant industry or geographic concentrations. See Table 10 below for concentrations of CRE lending by borrower type and Table 11 below for concentrations of CRE by property location.

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The business loan balance increases are reflective of continued high demand for multi-family housing, 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 S beginning on page 140 of this Form 10-K.

The following table presents the concentration by borrower type of the Company’s CRE loan balances as of December 31, 2025 and 2024:

Table 10: Concentrations of CRE Lending by Borrower Type


	December 31, 2025				December 31, 2024
	Amortized		Percentage of		Amortized		Percentage of
(000’s omitted, except percentages)	Cost		Total		Cost		Total
Multifamily and non-owner occupied CRE by property type:
Multifamily	$	917,586	26.5	%	$	724,114	21.5	%
Office		374,194	10.8	%		368,387	11.0	%
Lodging		332,943	9.6	%		336,221	10.0	%
Commercial Construction		297,038	8.6	%		395,482	11.7	%
Retail		268,329	7.8	%		256,351	7.6	%
Warehouse/Industrial		160,769	4.6	%		149,722	4.5	%
Other Lessors of CRE		173,451	5.1	%		200,215	6.0	%
Nursing/Assisted Living		52,373	1.5	%		56,159	1.7	%
Residential Construction		3,849	0.1	%		4,278	0.1	%
All Other		7,505	0.2	%		8,284	0.2	%
Total multifamily and non-owner occupied CRE		2,588,037	74.8	%		2,499,213	74.3	%

Owner-occupied CRE by industry:
Retail Trade		277,213	8.0	%		293,208	8.7	%
Real Estate Rental and Leasing		91,600	2.6	%		81,802	2.4	%
Arts, Entertainment and Recreation		83,453	2.4	%		87,709	2.6	%
Health Care and Social Assistance		78,529	2.3	%		85,151	2.5	%
Other Services		77,657	2.2	%		81,688	2.4	%
Manufacturing		70,735	2.0	%		49,558	1.5	%
Agriculture and Forestry		51,081	1.5	%		51,602	1.5	%
Accommodation and Food Services		41,398	1.2	%		39,385	1.2	%
Wholesale Trade		22,854	0.7	%		25,312	0.8	%
Construction		18,974	0.5	%		16,791	0.5	%
Transportation and Warehousing		10,583	0.3	%		11,547	0.3	%
Professional, Scientific and Technical Services		9,876	0.3	%		7,603	0.2	%
Educational Services		5,241	0.2	%		4,618	0.1	%
All Other		32,607	1.0	%		28,809	1.0	%
Total owner occupied CRE		871,801	25.2	%		864,783	25.7	%

Total CRE	$	3,459,838	100.0	%	$	3,363,996	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 December 31, 2025 and 2024:

Table 11: Concentrations of CRE by Property Location


December 31, 2025	Multifamily CRE				Owner occupied CRE				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

COMMUNITY FINANCIAL SYSTEM, INC. 10-K