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 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 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 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 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. in one factor may offset in other factors, both qualitative and quantitative. The third-party downside economic forecast used in the hypothetical scenario described does not predict a economic , but rather a moderate environment. The Company’s geographic distribution of loans being primarily outside of major metropolitan areas, combined with low statistical correlation between its historical 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 obligation by $11.3 million, while an increase in the discount rate of 100 basis points would decrease the pension 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 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, expenses, on debt extinguishment, on sales of investment securities, unrealized () 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 in the provision for credit associated with Current Expected Credit (“CECL”) allowance methods, helps investors and analysts measure underlying core performance and comparability to other organizations that have not engaged in acquisition or 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 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)
Net interest income
Provision for credit losses
Noninterest revenues
Noninterest expenses
Income before income taxes
Income taxes
Net income
Diluted weighted average common shares outstanding
Diluted earnings per share
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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
Return on average assets
Return on average equity
Dividend payout ratio
Average equity to average assets
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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
Taxable investment securities (1)
Nontaxable investment securities (1)
Loans (net of unearned discount) (2)
Total interest-earning assets
Noninterest-earning assets
Total assets
Interest-bearing liabilities:
Interest checking, savings, and money market deposits
Time deposits
Customer repurchase agreements
Overnight borrowings
FHLB and other borrowings
Federal Reserve short-term borrowings
Subordinated notes payable
Total interest-bearing liabilities
Noninterest-bearing liabilities:
Noninterest checking deposits
Other liabilities
Shareholders' equity
Total liabilities and shareholders' equity
Net interest earnings (FTE) (non-GAAP)
Net interest spread
Net interest spread (FTE) (non-GAAP)
Net interest margin
Net interest margin (FTE) (non-GAAP)
Fully tax-equivalent adjustment (non-GAAP) (3)
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.
Includes nonaccrual loans. The impact of interest and fees not recognized on nonaccrual loans was immaterial.
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
Taxable investment securities
Nontaxable investment securities
Loans (net of unearned discount)
Total interest-earning assets (2)
Interest paid on:
Interest checking, savings and money market deposits
Time deposits
Customer repurchase agreements
Overnight borrowings
FHLB and other borrowings
Federal Reserve short-term borrowings
Subordinated notes payable
Total interest-bearing liabilities (2)
Net interest earnings (FTE) (non-GAAP) (2)
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.
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)
Employee benefit services
Insurance services
Wealth management services
Deposit service charges and fees
Debit interchange and ATM fees
Mortgage banking
Other banking revenues
Loss on sales of investment securities
Gain on debt extinguishment
Unrealized gain (loss) on equity securities
Loss from equity method investments
Total noninterest revenues
Noninterest revenues/total revenues
Operating noninterest revenues/operating revenues (FTE basis) (non-GAAP) (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)
Salaries and employee benefits
Data processing and communications
Occupancy and equipment
Business development and marketing
Legal and professional fees
Amortization of intangible assets
Litigation accrual
Acquisition expenses
Acquisition-related contingent consideration adjustments
Restructuring expenses
Other
Total noninterest expenses
Noninterest expenses/average assets
Operating noninterest expenses (1) /average assets (non-GAAP)
Efficiency ratio
Operating efficiency ratio (non-GAAP) (2)
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.
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
Common equity Tier 1 capital ratio
Tier 1 risk-based capital ratio
Total risk-based capital ratio
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 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 it to continue to maintain and grow its capital base over time and maintain its ability to take of future strategic growth .
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)
Unrestricted cash and cash equivalents
FHLB borrowing capacity
FRB borrowing capacity
Net unpledged investment securities
Total sources of liquidity
Net estimated uninsured deposits
Total sources of liquidity/net estimated uninsured deposits
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 in the credit market. The Company has established three risk levels for these liquidity triggers that inform the response based on the of the circumstances. Responses vary from an assessment of possible funding with no impact on normal business operations to immediate action required due to funding . For more information regarding the risk factor associated with the possibility of a funding , 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
Core deposit intangibles
Other intangibles
Total Banking and Corporate Segment
Employee Benefit Services Segment
Goodwill
Other intangibles
Total Employee Benefit Services Segment
Insurance Services Segment
Goodwill
Other intangibles
Total Insurance Services Segment
Wealth Management Services Segment
Goodwill
Other intangibles
Total Wealth Management Services Segment
Total
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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
Office
Lodging
Commercial Construction
Retail
Warehouse/Industrial
Other Lessors of CRE
Nursing/Assisted Living
Residential Construction
All Other
Total multifamily and non-owner occupied CRE
Owner-occupied CRE by industry:
Retail Trade
Real Estate Rental and Leasing
Arts, Entertainment and Recreation
Health Care and Social Assistance
Other Services
Manufacturing
Agriculture and Forestry
Accommodation and Food Services
Wholesale Trade
Construction
Transportation and Warehousing
Professional, Scientific and Technical Services
Educational Services
All Other
Total owner occupied CRE
Total CRE
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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
Burlington-South Burlington, VT
Rochester, NY
Buffalo-Cheektowaga, NY
Syracuse, NY
Scranton Wilkes-Barre, PA
Utica-Rome, NY
Glens Falls, NY
All Other MSA - NY (1)(2)
All Other MSA - PA (1)(2)
All Other MSA (1)
Non-MSAs:
All Other Non-MSA
Total
December 31, 2024
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
Burlington-South Burlington, VT
Rochester, NY
Buffalo-Cheektowaga, NY
Syracuse, NY
Scranton Wilkes-Barre, PA
Utica-Rome, NY
Ithaca, NY
All Other MSA - NY (1)(2)
All Other MSA - PA (1)(2)
All Other MSA (1)
Non-MSAs:
All Other Non-MSA
Total
The MSAs within these captions are individually less than 2% of total CRE exposure.
The MSAs within these captions include certain counties in adjacent states with a high degree of economic and social integration to the respective city based in New York or Pennsylvania.
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The consumer mortgage portfolio is comprised of fixed (95%) and adjustable rate (5%) residential lending. Consumer mortgages increased $127.4 million, or 3.7%, between the end of 2024 and the end of 2025, driven primarily by organic growth, and includes the impact of $79.1 million of secondary market sales during 2025. Over the past year, the Company produced net organic growth in the consumer mortgage segment due to the Company’s competitive product offerings, recruitment of additional mortgage loan originators and proactive business development efforts, while also benefitting from the comparatively stable housing market conditions in the Company’s primary markets relative to the national environment. Home equity loans increased $56.3 million, or 11.8%, between the end of 2024 and the end of 2025, in part a result of competitive pricing and lower levels of payoffs and paydowns related to consumer mortgage refinancing in a relatively high interest rate environment, as well as $16.4 million of home equity loans acquired from Santander.
Consumer installment loans, both those originated directly in the branches and online (referred to as “consumer direct”) and indirectly in automobile, marine, and recreational vehicle dealerships (referred to as “consumer indirect”), increased $105.0 million, or 5.4%, from one year ago, including a $91.7 million, or 5.2%, increase in consumer indirect loans and $13.3 million, or 6.9%, increase in consumer direct loans, including the impact of the $8.4 million direct loans acquired from Santander. The Company is focused on maintaining a profitable in-market and contiguous market indirect portfolio by providing competitive market offerings to its customers and pursuing the expansion of its dealer network. These loans have historically provided attractive returns, and the Company strives to grow these key portfolios despite the strong competition from the financing subsidiaries of vehicle manufacturers and other financial intermediaries.
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As shown in Table 12, 17.0% of the Company’s loan portfolio matures in one year or less, 40.8% matures between one to five years, 33.0% matures between five and 15 years, and 9.2% matures after 15 years. Of the loans maturing after one year, 74.1% are fixed interest rates and 25.9% are floating or adjustable rates. The following table shows the maturities and type of interest rates for loans as of December 31, 2025:
Table 12: Maturity Distribution of Loans (1)
Maturing in
Maturing After
Maturing After
One Year or
One but Within
Five but Within
Maturing After
(000’s omitted)
Less
Five Years
Fifteen Years
Fifteen Years
Total
CRE - multifamily
CRE - owner occupied
CRE - non-owner occupied
Commercial & industrial and other business loans
Consumer mortgage
Consumer indirect
Consumer direct
Home equity
Total
Fixed interest rates:
CRE - multifamily
CRE - owner occupied
CRE - non-owner occupied
Commercial & industrial and other business loans
Consumer mortgage
Consumer indirect
Consumer direct
Home equity
Floating or adjustable interest rates:
CRE - multifamily
CRE - owner occupied
CRE - non-owner occupied
Commercial & industrial and other business loans
Consumer mortgage
Consumer direct
Home equity
Total
(1) Scheduled repayments are reported in the maturity category in which the payment is due.
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Asset Quality
The Company places a loan on nonaccrual status when the loan becomes 90 days past due, or sooner if management concludes collection of principal and interest is doubtful, except when, in the opinion of management, it is well-collateralized and in the process of collection. Nonperforming loans, defined as nonaccruing loans and accruing loans 90 days or more past due, ended 2025 at $56.5 million. This represents a decrease of $16.9 million from $73.4 million of nonperforming loans at the end of 2024. The ratio of nonperforming loans to total loans at December 31, 2025, of 0.52% decreased 18 basis points from the prior year’s level. The ratio of nonperforming assets (which includes other real estate owned, or “OREO,” in addition to nonperforming loans) to total loans plus OREO decreased to 0.59% at year-end 2025, down 14 basis points from one year earlier. At December 31, 2025, OREO consisted of 42 residential properties with a total value of $2.9 million and multiple properties associated with one commercial lending relationship with an aggregate value of $5.4 million. This compares to 44 residential properties with a total value of $2.8 million at December 31, 2024. The decreases in nonperforming loans, the ratio of loans to total loans and the ratio of assets to total loans plus OREO were primarily attributable to a decrease in nonaccrual business lending loan balances, particularly due to loans from a non-owner occupied CRE lending relationship being charged off during the year and the substantial repayment of multifamily loans from one CRE customer.
Approximately 35% of nonperforming loan balances at December 31, 2025 are related to the business lending portfolio, which is comprised of business loans broadly diversified by geography, collateral category and industry. Of the nonperforming loans in the business lending portfolio, other business non-real estate loans represents 63% of the balances, owner-occupied commercial real estate represents 34% of the balances, multifamily represents 2% of the balances, non-owner occupied commercial real estate represents 1% of the balances.
Approximately 57% of the nonperforming loan balances at December 31, 2025 are related to the consumer mortgage portfolio. Collateral values of residential properties within most of the Company’s market areas have generally remained stable or increased over the past several years. Inflation rates have trended lower and become more stable, and the unemployment rate is relatively stable. This has contributed to the credit performance in the consumer mortgage loan portfolio remaining favorable. The remaining 8% of nonperforming loan balances relate to consumer installment and home equity loans, with home equity nonperforming loan levels being driven by the same factors identified for consumer mortgages. Nonperforming loan levels in the consumer installment category are typically lower than the other portfolios because they are generally charged off before they reach non-performing status, and consequently the amount of non-performing consumer installment loans at the end of 2025 and 2024 were nominal. The allowance for credit losses to loans ratio, a general measure of coverage adequacy, was 156% at the end of 2025 compared to 108% at year-end 2024 and 122% at December 31, 2023. The increase in this ratio from one year ago was primarily driven by the decrease in business loans previously mentioned.
Total delinquencies, defined as loans 30 days or more past due or in nonaccrual status, ended 2025 at 1.10% of total loans outstanding, compared to 1.24% at the end of 2024. This was primarily driven by a decrease in delinquencies in the business lending portfolio, while the remaining portfolios increased. As of year-end 2025, delinquency ratios for business lending, consumer installment loans, consumer mortgages, and home equity loans were 0.54%, 1.34%, 1.67%, and 1.30%, respectively. Within the business lending loan portfolio, the delinquency ratios at December 31, 2025 for multifamily was 0.14%, owner-occupied commercial real estate was 0.89%, non-owner occupied commercial real estate was 0.03%, and other commercial and industrial loans was 1.25%. Year-end 2024 delinquency rates for business lending, consumer installment loans, consumer mortgages, and home equity loans were 0.98%, 1.30%, 1.56%, and 1.08%, respectively. Within the business lending loan portfolio, the delinquency ratios at December 31, 2024 for multifamily was 1.73%, owner-occupied commercial real estate was 0.97%, non-owner occupied commercial real estate was 0.69%, and other commercial and industrial loans was 0.99%. Delinquency levels, particularly in the 30 to 89 days category, tend to be somewhat volatile due to their seasonal characteristics and measurement at a point in time, and therefore management believes that it is useful to evaluate this ratio over a longer time period. The average quarter-end ratio for total loans in 2025 was 1.10%, as compared to an average of 1.05% in 2024, and 0.88% in 2023.
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The Company’s senior management, special asset officers and business lending management review all delinquent and nonaccrual loans and OREO regularly in order to identify deteriorating situations, monitor known problem credits and discuss any needed changes to collection efforts, if warranted. Based on this analysis, a relationship may be assigned a special assets officer or other senior lending officer to meet with the borrowers, assess the collateral, and recommend an action plan. This plan could include foreclosure, restructuring loans, issuing demand letters or other actions. The Company’s larger criticized credits (greater than $2.0 million exposure) are also reviewed on a quarterly basis by senior management, senior credit administration management, special assets officers and business lending management to monitor their status and discuss relationship management plans. Business lending management reviews the criticized business loan portfolio on a monthly basis.
The Company will occasionally modify loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay, interest rate reduction, or a combination thereof. During 2025, the Company modified 9 loans with total outstanding balances of $6.3 million that were considered to be modified loans to borrowers experiencing financial difficulty.
Allowance for credit losses and loan net charge-off ratios for the past two years are as follows:
Table 13: Loan Ratios
Years Ended December 31,
Allowance for credit losses/total loans
Allowance for credit losses/nonperforming loans
Nonaccrual loans/total loans
Allowance for credit losses/nonaccrual loans
Net charge-offs to average loans outstanding:
Business lending
Consumer mortgage
Consumer indirect
Consumer direct
Home equity
Total loans
Total net charge-offs in 2025 were $13.1 million, $3.0 million more than the prior year due to an increase in net charge-offs in business lending loans, primarily related to the one non-owner occupied CRE loan relationship previously mentioned, partially offset by decreases in consumer mortgage, consumer installment, and home equity net charge-offs.
Due to the significant increases in average loan balances over time as a result of acquisitions and organic growth, management believes that net charge-offs as a percent of average loans (“net charge-off ratio”) offers the most meaningful representation of charge-off trends. The total net charge-off ratio of 0.12% for 2025 was 2 basis points higher than the ratio from 2024 and 6 basis points higher than the ratio from 2023. Gross charge-offs as a percentage of average loans were 0.22% in 2025, as compared to 0.18% in 2024, and 0.14% in 2023, as management continues to focus on maintaining conservative underwriting standards and the increase was largely isolated to a small number of business customers. Recoveries were $10.3 million in 2025, representing 50% of average gross charge-offs for the latest two years, compared to 51% in 2024 and 61% in 2023, reflective of the continued effectiveness of the Company’s repossession and disposition capabilities.
Business loan net charge-offs increased in 2025, totaling $6.2 million, for a net charge-off ratio of 0.14% of average business loans outstanding, compared to net charge-offs of $2.7 million, or 0.06% of average business loans outstanding, for 2024, driven primarily by the charge-off of one non-owner occupied CRE loan relationship previously mentioned. Consumer installment loan net charge-offs decreased to $6.7 million this year from $6.9 million in 2024, with a net charge-off ratio of 0.34% in 2025 and 0.36% in 2024. Consumer mortgage net charge-offs decreased to $0.1 million in 2025 compared to $0.3 million in 2024 with a net charge-off ratio of 0.00% and 0.01% in 2025 and 2024, respectively. Home equity had net charge-offs of $0.2 million, or 0.03%, in 2025, consistent with the levels in 2024.
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Management continually evaluates the credit quality of the Company’s loan portfolio and conducts a formal review of the adequacy of the allowance for credit losses on a quarterly basis. The primary components of the review process that are used to determine proper allowance levels are collectively evaluated and individually assessed loan loss allocations. Measurement of individually assessed loan loss allocations is typically based on expected future cash flows, collateral values and other factors that may impact the borrower’s ability to repay. The Company establishes individually assessed reserves for nonaccrual business lending loans with balances greater than $0.5 million that do not share the same risk characteristics with a pool of loans. Consumer mortgages, consumer installment, and home equity loans are considered smaller balance homogeneous loans and are evaluated collectively. The Company considers qualifying loans to require an individual assessment when, based on current information and events, it is probable that the Company will be unable to collect all principal and interest according to the contractual terms of the loan agreement or the loan is delinquent 90 days or more. The Company has reviewed individually assessed loans and recorded a reserve for one loan. It was determined that the discounted collateral value exceeded the loan balance on all other individually assessed loans.
Management estimates the allowance for credit losses balance using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected future credit losses. Adjustments are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, size and credit quality of acquired loans, delinquency levels, risk ratings or term of loans as well as actual and forecasted US macroeconomic trends, including unemployment rates, growth of gross domestic product and median household income net of inflation and changes in property values such as home prices, commercial real estate prices (including office-specific property prices), automobile prices, office-specific property vacancy rates, and other relevant factors in comparison to longer-term performance. Multiple economic scenarios are utilized to encompass a range of economic outcomes and include baseline, upside, and downside forecasts, which are weighted in the calculation. The segments of the Company’s loan portfolio are disaggregated into classes that allow management to monitor risk and performance. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist, including collateral type, credit ratings/scores, size, duration, interest rate structure, origination vintage, and payment structure. In addition to these risk characteristics, the Company considers the portion of acquired loans to the overall segment balance, the change in the volume and terms of originations, differences between the incurred in the period used for quantitative modeling and a longer timeframe that includes the of 2008 and 2009 (the “ ”), as well as recent , charge-off and risk rating trends compared to historical time periods. The Company measures the allowance for credit using either the cumulative rate method, the line method, or the vintage rate method, dependent on the loan portfolios’ characteristics. The allowance for credit level computed from the collectively evaluated and individually assessed loan allocation methods are combined with unallocated allowances, if any, to derive the required allowance for credit to be reflected on the consolidated statements of condition. The provision for credit is calculated by subtracting the previous period allowance for credit , net of the interim period net charge-offs, from the current required allowance level. This provision is then recorded in the income statement for that period. Members of senior management and the Board’s Audit Committee review the adequacy of the allowance for credit quarterly.
Acquired loans are reviewed at their acquisition date to determine whether they have experienced a more-than-insignificant credit deterioration since origination. Loans that meet that definition according to the Company’s policy are referred to as purchased credit deteriorated (“PCD”) loans. PCD loans are initially recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded in the provision for credit losses.
Acquired loans that are not deemed PCD at acquisition are considered purchased seasoned loans if they are acquired in a business combination. Purchased seasoned loans are accounted for in the same manner as PCD loans in that the loan is recorded using the gross-up method where the sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. Subsequent to the purchase date, the methods utilized to estimate the required allowance for credit losses for these loans are the same as originated loans and subsequent changes to the allowance for credit losses are recorded as provision for, or reversal of, credit losses.
As of December 31, 2025, the net purchase discount related to the $774.7 million of remaining non-PCD acquired loan balances was approximately $14.0 million, or 1.8% of that portfolio.
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The allowance for credit losses increased to $87.9 million at the end of 2025 from $79.1 million as of year-end 2024. During 2025, the Company experienced loan growth and added an additional qualitative factor reserve for business lending related due to the increase in larger individual exposures in the business lending portfolio.. The Company recorded a provision for credit losses of $21.4 million during 2025, which was $1.4 million lower than the prior year. While certain national trends persist related to commercial real estate, in particular the office and multifamily sectors, the Company determined that its exposure is primarily located in geographical areas that show stable or increasing demand and have vacancy rates below the national average. The Company has also performed internal reviews of its commercial real estate portfolio, which includes a review of the type of collateral, the status of the loan, office commercial real estate-specific balances, percent of total capital, levels of delinquencies, charge-offs, nonperforming loans and classified and criticized loans, and weighted average risk ratings. Based on these reviews, management determined that the commercial real estate loan portfolio’s credit performance was in line with expectations. Refer to Note D: Loans and Allowance for Credit in the notes to the consolidated financial statements for a discussion of management’s methodology used to estimate the allowance for credit .
The ratio of the allowance for credit losses to total loans of 0.80% for year-end 2025 was 4 basis points higher than the level at the end of 2024, due to the factors noted previously. Management considers the year-end 2025 and 2024 allowance for credit losses to be adequate. The provision for credit losses as a percentage of average loans was 0.20% in 2025 as compared to 0.23% in 2024 and 0.12% in 2023. The provision for credit losses was 162% of net charge-offs in 2025 versus 225% in 2024 and 193% in 2023.
The following table sets forth the allocation of the allowance for credit losses by loan category as of the end of the years indicated, as well as the proportional share of each category’s loan balance to total loans. This allocation is based on management’s assessment, at a given point in time, of the risk characteristics of each of the component parts of the total loan portfolio and is subject to change when the risk factors of each component part change. The allocation is not indicative of the specific amount of future net charge-offs that are projected for each of the loan categories, nor should it be taken as an indicator of future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb losses in any category.
Table 14: Allowance for Credit Losses by Loan Type
December 31, 2025
December 31, 2024
(000’s omitted except for ratios)
Allowance for Credit Losses
Percent of Total Loan Balances
Allowance for Credit Losses
Percent of Total Loan Balances
Business lending
Consumer mortgage
Consumer indirect
Consumer direct
Home equity
Unallocated
Total
As demonstrated in Table 14, the consumer direct, consumer indirect and the business lending portfolios carry higher credit risk than the consumer mortgage and home equity portfolios, and therefore the Company allocates a higher proportional allowance to these portfolios. The unallocated allowance is maintained for potential losses not captured in the specific allowance categories due to model imprecision. The unallocated allowance of $1.0 million at year-end 2025 was consistent with 2024.
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Funding Sources
The Company utilizes a variety of funding sources to support the interest-earning asset base as well as to achieve targeted growth objectives. Overall funding is comprised of four primary sources that possess a variety of maturity, stability and price characteristics: deposits of individuals, partnerships and corporations (non-governmental deposits); governmental deposits that are collateralized for amounts not covered by FDIC insurance (governmental deposits); reciprocal deposits (deposits exchanged with a network of participating banks to provide additional FDIC insurance coverage for the customer); and external borrowings. The average daily amount of deposits and the average rate paid on each of the following deposit categories are summarized below for the years indicated:
Table 15: Average Deposits
Average
Average
Average
Average
Average
Average
(000’s omitted, except rates)
Balance
Rate Paid
Balance
Rate Paid
Balance
Rate Paid
Noninterest checking deposits
Interest checking deposits
Savings deposits
Money market deposits
Time deposits
Total deposits
Non-governmental deposits
Governmental deposits
Reciprocal deposits
Total deposits
As displayed in Table 15, average total deposits in 2025 increased $644.3 million, or 4.9%, from the prior year, comprised of a $555.5 million, or 4.9%, increase in non-time deposits and an $88.8 million, or 4.4%, increase in time deposits. The increase in average deposits was due to organic growth and the acquisition of $543.7 million of deposits from the Santander branch acquisition in the fourth quarter of 2025.
Non-governmental, non-time deposits are frequently considered to be an attractive source of funding because they are generally stable, do not need to be collateralized, carry a relatively low interest rate, generate fee income and provide a strong customer base for which a variety of loan, deposit and other financial service-related products can be cross-sold. The Company’s funding composition continues to benefit from a high level of non-governmental deposits, with an average balance of $11.70 billion, which increased $357.1 million, or 3.1%, from 2024, and equaled 84% of total average deposits, 2 percentage points lower than 2024 due mostly to strong growth in governmental and reciprocal deposits (mostly held by governmental customers). The Company continues to focus on expanding its deposit relationship base through its competitive product offerings, high-quality customer service, and market expansion initiatives.
Full-year average governmental deposits increased $175.1 million, or 9.4%, during 2025 to $2.04 billion, reflective of competitive offerings and expansion of the Company’s governmental deposit relationship base due in part to additional business development efforts. Governmental deposit balances tend to be more volatile than non-governmental deposits because they are heavily impacted by the seasonality of tax collection and fiscal spending patterns, as well as the longer-term financial position of the local government entities. The Company is required to collateralize certain local governmental deposits in excess of FDIC coverage with marketable securities from its investment portfolio. Due to this stipulation, as well as the competitive bidding nature of governmental time deposits, management considers this funding source to share some of the same attributes as borrowings. However, the Company has many long-standing relationships with governmental entities throughout its markets and the deposits held by these customers have provided a relatively attractive and stable funding source over an extended period of time.
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Average reciprocal deposits increased $112.1 million in 2025 compared to 2024, due to competitive product offerings, an expansion of the Company’s deposit relationship base and certain governmental customers moving from customer repurchase agreements, a non-deposit product, to reciprocal deposit products in 2025.
The mix of average deposits is consistent as compared to the prior year, with non-time deposits (noninterest checking, interest checking, savings and money markets) representing approximately 85% of the Company’s average deposit funding base in 2025 and 2024, while time deposits represent approximately 15% of total average deposits in both years. The cost of interest-bearing deposits of 1.58% in 2025 was 8 basis points lower than the 1.66% cost of interest-bearing deposits in 2024 as a result of the decreases in the average rates paid on interest checking, money market, and time deposits due to market conditions. The total cost of deposit funding, which includes noninterest checking balances, was 1.17% in 2025, a 4 basis point decrease from the prior year.
The remaining maturities of time deposits in amounts of $250,000 or more (the FDIC insurance limit) outstanding as of December 31 are as follows:
Table 16: Maturity of Time Deposits in Excess of Insurance Limit of $250,000
(000’s omitted)
Less than three months
Three months to six months
Six months to one year
Over one year
Total
The Company’s deposit base is well diversified across customer segments, comprised of approximately 60% consumer, 28% business and 12% governmental balances at December 31, 2025, and broadly dispersed among its customer base as illustrated by an average deposit balance per account of under $20,000. At the end of 2025, 64% of the Company’s total deposits were in no and generally low rate checking and savings accounts. The total estimated amount of deposits that exceeded the $250,000 insured limit provided by the FDIC, net of collateralized and intercompany deposits, was approximately $2.74 billion at December 31, 2025. This amount is determined by adjusting the amounts reported in the Bank Call Report by subtracting intercompany deposits, which are not external customers and are therefore eliminated in consolidation and governmental deposits which are collateralized by certain pledged investment securities. The Bank Call Report estimated uninsured deposit balances at December 31, 2025 are reported gross at $4.54 billion, which includes intercompany account balances of $299.4 million, and collateralized deposits of $1.50 billion. Estimated insured deposits, net of collateralized and intercompany deposits, represent greater than 80% of ending total deposits at December 31, 2025. These estimates are based on the determination of known deposit account balances of each depositor and the insurance guidelines provided by the FDIC. The Company did not hold any brokered deposits during 2025.
Borrowing sources for the Company include the FHLB, Federal Reserve, other correspondent banks, as well as access to the brokered CD and repurchase markets through established relationships with business and governmental customers and primary market security dealers.
As shown in Table 17, year-end 2025 borrowings totaled $689.9 million, a decrease of $309.0 million from the $998.9 million outstanding at the end of 2024, due to a decrease in overnight borrowings, continued principal paydown of term FHLB borrowings, and a decrease in repurchase agreements. Borrowings averaged $836.4 million, or 5.7% of total funding liabilities for 2025, as compared to $917.4 million, or 6.5% of total funding liabilities for 2024. At the end of 2025, the Company had $231.2 million, or 34%, of contractual borrowing obligations that had remaining terms of one year or less, which was lower than the $391.8 million, or 40%, at the end of 2024, due to a decrease in overnight borrowings, repurchase agreements and the paydown and maturity of fixed rate FHLB term borrowings.
The percentage of funding from deposits in 2025 was higher than the level in 2024, due to the increase in deposit balances from organic growth and the Santander acquisition. The percentage of average funding derived from deposits was 94.3% in 2025 as compared to 93.5% in 2024 and 95.3% in 2023. During 2025, average deposits increased 4.9%, while average borrowings decreased 8.8%.
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The following table summarizes the outstanding balance of the Company’s borrowings as of December 31:
Table 17: Borrowings
(000’s omitted)
Overnight borrowings
Securities sold under agreement to repurchase, short term
Federal Home Loan Bank borrowings
Finance lease liabilities
Balance at end of period
Financial Instruments with Off-Balance Sheet Risk
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments consist primarily of commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to customers, generally having fixed expiration dates or other termination clauses that may require payment of a fee. These commitments consist principally of unused commercial and consumer credit lines. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of an underlying contract with a third party. The credit risks associated with commitments to extend credit and standby letters of credit are essentially the same as that involved with extending loans to customers and are subject to the Company’s standard credit policies. Collateral may be required based on management’s assessment of the customer’s creditworthiness. The fair value of the standby letters of credit is considered immaterial for disclosure purposes. See Note N beginning on page 129 for further information on off-balance sheet exposures.
Investments
The objective of the Company’s investment portfolio is to hold low-risk, high-quality earning assets that provide reasonable returns and provide another effective tool to actively manage its earning asset/funding liability position in order to maximize future net interest income opportunities. This must be accomplished within the following constraints: (a) implementing certain interest rate risk management strategies which achieve a relatively stable level of net interest income; (b) providing both the regulatory and operational liquidity necessary to conduct day-to-day business activities; (c) considering investment risk-weights as determined by the regulatory risk-based capital guidelines; and (d) generating a favorable return without undue compromise of the other requirements.
The carrying value of the Company’s investment portfolio ended 2025 at $4.41 billion, an increase of $188.3 million, or 4.5%, from the end of 2024. The book value (excluding unrealized gains and losses) of the portfolio increased $55.0 million, or 1.2%, from December 31, 2024. The investment portfolio (excluding held-to-maturity investment securities) had a net unrealized loss of $271.2 million as of December 31, 2025, a decrease of $133.4 million from the $404.6 million unrealized loss at the end of 2024. This decrease is principally driven by the 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. During 2025, the Company purchased $108.3 million of government agency mortgage-backed securities with an average yield of 5.37%, which the Company classified as held-to-maturity. Additionally, there was $38.1 million of net accretion on investment securities in 2025. These additions were offset by $79.5 million of investment maturities, calls, and principal payments during 2025. The effective duration of the securities portfolio was 5.3 years at the end of 2025, as compared to 6.2 years at year end 2024.
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The investment portfolio has limited credit risk due to the composition continuing to be heavily weighted towards U.S. Treasury debentures, U.S. Agency mortgage-backed pass-throughs (MBS), and municipal bonds. The U.S. Treasury debentures and U.S. Agency mortgage-backed pass-throughs are all rated Aa1 by Moody’s, AA+ by Standard and Poor’s, and AA+ by Fitch. The majority of the municipal bonds are rated A or higher. The portfolio does not include any private label MBS or collateralized mortgage obligations (CMOs).
The following table sets forth the carrying value for the Company's investment securities portfolio as of December 31:
Table 18: Investment Securities
(000's omitted)
Available-for-Sale Portfolio:
U.S. Treasury and agency securities
Obligations of state and political subdivisions
Government agency mortgage-backed securities
Government agency collateralized mortgage obligations
Corporate debt securities
Total available-for-sale portfolio
Held-to-Maturity Portfolio:
U.S. Treasury and agency securities
Government agency mortgage-backed securities
Total held-to-maturity portfolio
Equity and Other Securities:
Equity securities without readily determinable fair value
Federal Home Loan Bank common stock
Federal Reserve Bank common stock
Other equity securities without readily determinable fair value
Total equity securities without readily determinable fair value
Equity securities with readily determinable fair value
Total equity and other securities
Total investment securities
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The following table sets forth as of December 31, 2025 the weighted-average yield of investment debt securities by maturity date and investment type:
Table 19: Weighted-Average Yield of Investment Debt Securities (1)
(000's omitted, except yields)
Maturing Within One Year or Less
Maturing After One Year But Within Five Years
Maturing After Five Years But Within Ten Years
Maturing After Ten Years
Total Amortized Cost/Book Value
Available-for-Sale Portfolio:
U.S. Treasury and agency securities
Obligations of state and political subdivisions (2)
Government agency mortgage-backed securities
Corporate debt securities
Government agency collateralized mortgage obligations
Held-to-Maturity Portfolio:
U.S. Treasury and agency securities
Government agency mortgage-backed securities
Weighted-average yields are an arithmetic computation of income (not fully tax-equivalent adjusted) divided by book balance; they may differ from the yield to maturity, which considers the time value of money.
Excluding the impact of $15.8 million in book value of qualified school construction bonds in the Company's portfolio which earn income primarily through income tax credits, the weighted - average yield of obligations of state and political subdivisions maturing within one year or less is 2.30% and after one year but within five years is 2.83%.
Impact of Inflation and Changing Prices
The Company’s financial statements have been prepared in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike most commercial companies, a very high percentage of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the effect of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. Notwithstanding this, inflation can directly affect the value of loan collateral, real estate, and automobiles in particular. Inflation can also impact the Company’s noninterest expense levels, and by extension the net income it generates and the earnings it retains as capital.
New Accounting Pronouncements
See “New Accounting Pronouncements” Section of Note A of the notes to the consolidated financial statements on page 97 for recently issued accounting pronouncements applicable to the Company that have not yet been adopted.
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Forward-Looking Statements
This report contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995), which involve significant risks and uncertainties. Forward-looking statements often use words such as “anticipate,” “could,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “forecast,” “believe,” or other words of similar meaning. These statements are based on the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from the results discussed in the forward-looking statements. Moreover, the Company’s plans, objectives and intentions are subject to change based on various factors (some of which are beyond the Company’s control). Factors that could cause actual results to differ from those discussed in the forward-looking statements include: (1) adverse developments in the banking industry related to bank failures and the potential impact of such developments on customer confidence and regulatory responses to these developments; (2) current and future economic and market conditions, including the effects of changes in housing or vehicle prices, higher unemployment rates, disruptions in the commercial real estate market, labor shortages, supply chain , to obtain raw materials and supplies, U.S. fiscal debt, budget and tax matters, geopolitical matters and , the effects of announced or future tariff increases, changes in global trade policies, and any changes in global economic growth; (3) the effect of, and changes in, monetary and fiscal policies and laws, including future changes in Federal and state statutory income tax rates and interest rate and other policy actions of the Board of Governors of the Federal Reserve System; (4) the effect of changes in the level of checking or savings account deposits on the Company’s funding costs and net interest margin including the possibility of a sudden withdrawal of the Company’s deposits due to rapid spread of information or disinformation regarding the Company’s well-being; (5) future provisions for credit on loans and debt securities; (6) changes in assets; (7) the effect of a fall in stock market or bond prices on the Company’s fee income businesses, including its employee services, wealth management, and insurance businesses; (8) risks related to credit quality; (9) inflation, interest rate, liquidity, market and monetary fluctuations; (10) the of the U.S. economy in general and the of the local economies where the Company conducts its business; (11) the timely development of new products and services and customer perception of the overall value thereof (including features, pricing and quality) compared to competing products and services; (12) changes in consumer spending, borrowing and savings habits; (13) technological changes and implementation and financial risks associated with transitioning to new technology-based systems involving large multi-year contracts; (14) the ability of the Company to maintain the security, including cybersecurity, of its financial, accounting, technology, data processing and other operating systems, facilities and data, including customer data; (15) effectiveness of the Company’s risk management processes and procedures, reliance on models which may be or , the Company’s ability to manage its credit or interest rate risk, the sufficiency of its allowance for credit and the accuracy of the assumptions or estimates used in preparing the Company’s financial statements and disclosures; (16) of third parties to provide various services that are important to the Company’s operations; (17) any acquisitions or mergers that might be considered or consummated by the Company and the costs and factors associated therewith, including differences in the actual financial results of the acquisition or merger compared to expectations and the realization of anticipated cost savings and revenue ; (18) the ability to maintain and increase market share and control expenses; (19) the nature, timing and effect of changes in banking regulations or other regulatory or legislative requirements affecting the respective businesses of the Company and its subsidiaries, including changes in laws and regulations concerning taxes, accounting, banking, service fees, risk management, securities, capital requirements and other aspects of the financial services industry; (20) changes in the Company’s organization, compensation and plans and in the availability of, and compensation levels for, employees in its geographic markets; (21) the outcome of pending or future and government proceedings; (22) the effect of opening new branches to expand the Company’s geographic footprint, including the cost associated with opening and operating the branches and the uncertainty surrounding their including the ability to meet expectations for future deposit and loan levels and commensurate revenues; (23) the effects of natural could create economic and financial ; (24) the effects from changes in governmental which the Company and its customers to a variety of political, economic, and regulatory risks, including the risk of changes in laws (including labor, trade, tax and other laws) and the potential for in governmental agencies, services provided by the government, funding of government sponsored projects, and changes in the domestic political environment; (25) the effect of total or partial governmental ; (26) material differences in the actual financial results of investment activities compared with the Company's initial expectations, including the growth of the Insurtech market; (27) other risk factors outlined in the Company’s filings with the SEC from time to time; and (28) the of the Company at managing the risks of the foregoing.
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The foregoing list of important factors is not all-inclusive. For more information about factors that could cause actual results to differ materially from the Company’s expectations, refer to “Item 1A Risk Factors” above. Any forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement, whether written or oral, to reflect events or circumstances after the date on which such statement is made. If the Company does update or correct one or more forward-looking statements, investors and others should not conclude that the Company will make additional updates or corrections with respect thereto or with respect to other forward-looking statements.
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Reconciliation of GAAP to Non-GAAP Measures
Table 20: GAAP to Non-GAAP Reconciliations
(000’s omitted)
Operating pre-tax, pre-provision net revenue (non-GAAP)
Net income (GAAP)
Income taxes
Income before income taxes
Provision for credit losses
Pre-tax, pre-provision net revenue (non-GAAP)
Acquisition expenses
Acquisition-related contingent consideration adjustments
Litigation accrual
Restructuring expenses
Loss on sales of investment securities
Gain on debt extinguishment
Unrealized (gain) loss on equity securities
Amortization of intangible assets
Operating pre-tax, pre-provision net revenue (non-GAAP)
Operating pre-tax, pre-provision net revenue per share (non-GAAP)
Diluted earnings per share (GAAP)
Income taxes
Income before income taxes
Provision for credit losses
Pre-tax, pre-provision net revenue per share (non-GAAP)
Acquisition expenses
Acquisition-related contingent consideration adjustments
Litigation accrual
Restructuring expenses
Loss on sales of investment securities
Gain on debt extinguishment
Unrealized (gain) loss on equity securities
Amortization of intangible assets
Operating pre-tax, pre-provision net revenue per share (non-GAAP)
Operating net income (non-GAAP)
Net income (GAAP)
Acquisition expenses
Tax effect of acquisition expenses
Subtotal (non-GAAP)
Acquisition-related contingent consideration adjustments
Tax effect of acquisition-related contingent consideration adjustments
Subtotal (non-GAAP)
Litigation accrual
Tax effect of litigation accrual
Subtotal (non-GAAP)
Restructuring expenses
Tax effect of restructuring expenses
Subtotal (non-GAAP)
Loss on sales of investment securities
Tax effect of loss on sales of investment securities
Subtotal (non-GAAP)
Gain on debt extinguishment
Tax effect of gain on debt extinguishment
Subtotal (non-GAAP)
Unrealized (gain) loss on equity securities
Tax effect of unrealized (gain) loss on equity securities
Subtotal (non-GAAP)
Amortization of intangible assets
Tax effect of amortization of intangible assets
Operating net income (non-GAAP)
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(000's omitted)
Operating diluted earnings per share (non-GAAP)
Diluted earnings per share (GAAP)
Acquisition expenses
Tax effect of acquisition expenses
Subtotal (non-GAAP)
Acquisition-related contingent consideration adjustments
Tax effect of acquisition-related contingent consideration adjustments
Subtotal (non-GAAP)
Litigation accrual
Tax effect of litigation accrual
Subtotal (non-GAAP)
Restructuring expenses
Tax effect of restructuring expenses
Subtotal (non-GAAP)
Loss on sales of investment securities
Tax effect of loss on sales of investment securities
Subtotal (non-GAAP)
Gain on debt extinguishment
Tax effect of gain on debt extinguishment
Subtotal (non-GAAP)
Unrealized (gain) loss on equity securities
Tax effect of unrealized (gain) loss on equity securities
Subtotal (non-GAAP)
Amortization of intangible assets
Tax effect of amortization of intangible assets
Operating diluted earnings per share (non-GAAP)
Return on assets
Net income (GAAP)
Average total assets
Return on assets (GAAP)
Operating return on assets (non-GAAP)
Operating net income (non-GAAP)
Average total assets
Operating return on assets (non-GAAP)
Return on equity
Net income (GAAP)
Average total equity
Return on equity (GAAP)
Operating return on equity (non-GAAP)
Operating net income (non-GAAP)
Average total equity
Operating return on equity (non-GAAP)
Net interest margin
Net interest income
Total average interest-earning assets
Net interest margin
Net interest margin (FTE) (non-GAAP)
Net interest income
Fully tax-equivalent adjustment (non-GAAP)
Fully tax-equivalent net interest income (non-GAAP)
Total average interest-earning assets
Net interest margin (FTE) (non-GAAP)
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(000’s omitted)
Operating noninterest revenues (non-GAAP)
Noninterest revenues (GAAP)
Loss on sales of investment securities
Gain on debt extinguishment
Unrealized (gain) loss on equity securities
Total operating noninterest revenues (non-GAAP)
Operating noninterest expenses (non-GAAP)
Noninterest expenses (GAAP)
Acquisition expenses
Acquisition-related contingent consideration adjustments
Litigation accrual
Restructuring expenses
Amortization of intangible assets
Total operating noninterest expenses (non-GAAP)
Operating revenues (non-GAAP)
Net interest income (GAAP)
Noninterest revenues (GAAP)
Total revenues (GAAP)
Loss on sales of investment securities
Gain on debt extinguishment
Unrealized (gain) loss on equity securities
Total operating revenues (non-GAAP)
Noninterest revenues/total revenues
Total noninterest revenues (GAAP) – numerator
Total revenues (GAAP) – denominator
Noninterest revenues/total revenues (GAAP)
Operating noninterest revenues/operating revenues (FTE) (non-GAAP)
Total operating noninterest revenues (non-GAAP) – numerator
Total operating revenues (non-GAAP)
Fully tax-equivalent adjustment (non-GAAP)
Total operating revenues (FTE) (non-GAAP) – denominator
Operating noninterest revenues/operating revenues (FTE) (non-GAAP)
Efficiency ratio (GAAP)
Total noninterest expenses (GAAP) – numerator
Total revenues (GAAP) – denominator
Efficiency ratio (GAAP)
Operating efficiency ratio (non-GAAP)
Total operating noninterest expenses (non-GAAP) – numerator
Total operating revenues (FTE) (non-GAAP) – denominator
Operating efficiency ratio (non-GAAP)
Return on tangible equity (non-GAAP)
Net income (GAAP)
Average shareholders’ equity
Average goodwill and intangible assets, net
Average deferred taxes on goodwill and intangible assets, net
Average tangible common equity (non-GAAP)
Return on tangible equity (non-GAAP)
Operating return on tangible equity (non-GAAP)
Operating net income (non-GAAP)
Average tangible common equity (non-GAAP)
Operating return on tangible equity (non-GAAP)
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(000’s omitted)
Total tangible assets (non-GAAP)
Total assets (GAAP)
Goodwill and intangible assets, net
Deferred taxes on goodwill and intangible assets, net
Total tangible assets (non-GAAP)
Total tangible common equity (non-GAAP)
Shareholders’ equity (GAAP)
Goodwill and intangible assets, net
Deferred taxes on goodwill and intangible assets, net
Total tangible common equity (non-GAAP)
Shareholders’ equity-to-assets ratio at quarter end
Total shareholders' equity (GAAP) - numerator
Total assets (GAAP) - denominator
Shareholders’ equity-to-assets ratio at quarter (GAAP)
Tangible equity-to-tangible assets ratio at quarter end (non-GAAP)
Total tangible common equity (non-GAAP) - numerator
Total tangible assets (non-GAAP) - denominator
Tangible equity-to-tangible assets ratio at quarter end (non-GAAP)
Book value (GAAP)
Total shareholders’ equity (GAAP) – numerator
Period end common shares outstanding – denominator
Book value (GAAP)
Tangible book value (non-GAAP)
Total tangible common equity (non-GAAP) – numerator
Period end common shares outstanding – denominator
Tangible book value (non-GAAP)
