What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-13 compared with 2025-03-14 · 337 added, 224 removed, 790 unchanged (42% of the section changed)

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For a discussion of those risks and uncertainties and the factors that could cause the Corporation’s actual results to differ materially from those risks and uncertainties, see Forward-looking Statements below.

The Corporation has been a financial holding company since 2000, and the Bank was established in 1833, CFS in 2001, and Chemung Risk Management, Inc.

(CRM) in 2016.

The Corporation has been a financial holding company since 2000, the Bank was established in 1833 and CFS was established in 2001.

Through the Bank and CFS, the Corporation provides a wide range of financial services, including demand, savings and time deposits, commercial, residential, and consumer loans, interest rate swaps, letters of credit, wealth management services, employee benefit plans, insurance products, mutual funds and brokerage services.

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The Bank’s operating expenses are interest expense paid on deposits and borrowings, salaries and employee benefit plans, and general operating expenses.

CRM, a wholly-owned subsidiary of the Corporation, was formed and began operations on May 31, 2016 as a Nevada-based captive insurance company.

Effective December 6, 2023, the State of Nevada, Department of Business and Industry, and the Division of Insurance, acknowledged the dissolution of Chemung Risk Management, Inc.

Forward-looking Statements

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These statements can sometimes be identified by the Corporation's use of forward-looking words such as "may," "will," "anticipate," "estimate," "expect," or "intend." The Corporation cannot guarantee that its expectations in such forward-looking statements will turn out to be correct.

The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, tariffs, cybersecurity risks, changes in FDIC assessments, bank failures, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, and changes in general business and economic trends.

The Corporation's actual results could be materially different from expectations because of various factors, including changes in economic conditions or interest rates, credit risk, inflation, tariffs, cybersecurity risks, changes in FDIC assessments, public health issues, geopolitical conflicts, bank failures, difficulties in managing the Corporation’s growth, competition, changes in law or the regulatory environment, and changes in general business and economic trends.

Information concerning these and other factors can be found in the Corporation’s periodic filings with the SEC, including the discussion under the heading “Item 1A.

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Except as otherwise required by law, the Corporation undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events, or otherwise.

Summary of Strategic Actions

During the year ended December 31, 2025, the Corporation completed certain strategic transactions which had a material impact on the Corporation's results of operations and the Corporation's financial condition as of December 31, 2025.

These included components of management's balance sheet repositioning efforts and the completion of the sale of a previous branch property as part of management's ongoing evaluation of its physical distribution network.

The following section provides a summary of these transactions.

Issuance of Subordinated Debt

On June 10, 2025, the Corporation issued $45.0 million of ten-year 7.75% fixed-to-floating rate subordinated notes, due June 2035 (the "Notes").

The Notes bear interest at a fixed rate of 7.75% per year, payable semi-annually, for the first five years.

Beginning on June 15, 2030 and until the maturity date, the Notes will adjust to a floating rate equal to the then current three- month term SOFR plus 415 basis points, payable quarterly.

The Notes constitute unsecured and subordinated obligations of the Corporation and rank junior in right of payment to any senior indebtedness and obligations to general and secured creditors.

Proceeds, net of debt issuance costs of $1.0 million, were $44.0 million.

Subject to limited exceptions, the Corporation cannot redeem the Notes before the fifth anniversary of the issuance date.

The Corporation intends to use the net proceeds from the issuance and sale of the Notes for general corporate purposes and to support regulatory capital ratios for growth initiatives.

The Notes qualify as Tier 2 regulatory capital at the holding company, when applicable, subject to an annual phase-out of 20% of the Notes face amount each year during the last five years of the Note's maturity.

From the proceeds of the Notes, the Corporation provided the Bank with a $37.0 million capital contribution, effectively downstreaming the regulatory capital impact of the Notes to the Bank as common equity Tier 1 capital, which is not subject to regulatory phase-out.

The Corporation believes the issuance of subordinated debt strengthens its overall regulatory capital position and improves commercial real estate concentration ratios, allowing for flexibility in pursuing loan growth in its key expansion markets.

Sale of Available for Sale Securities

Subsequent to the Corporation's issuance of subordinated debt in June 2025, the Corporation sold available for sale securities with a book value of $244.8 million, or approximately 40% of its then total available for sale securities portfolio.

These sales resulted in a realized pre-tax loss of $17.5 million, or approximately 7% of the total book value of securities sold, resulting in proceeds of $227.3 million.

Securities sold as part of these sales included the Corporation's entire U.S.

Treasury and SBA-pooled loan securities portfolios, as well as portions of its mortgage-backed securities and municipal bonds portfolios.

A portion of proceeds from the sales were utilized to pay off $155.0 million in wholesale funding liabilities, including $100.0 million in brokered deposits and $55.0 million in FHLBNY term advances, in July 2025.

All wholesale funding liabilities were paid off at maturity and the Corporation did not incur any prepayment penalties as a result of these payoffs.

Sale of Previous Branch Property

In April 2025, the Corporation completed the sale of its previous branch property at 806 Buffalo Street, Ithaca, New York.

As previously disclosed, all operations of the branch, formerly known as the "Ithaca Station" branch were consolidated into the nearby branch at 304 Elmira Road, Ithaca, New York in the fourth quarter of 2024.

The property had previously been classified as held for sale at its cost of $0.7 million, with proceeds from the sale totaling $1.3 million, resulting in the recognition of a $0.6 million gain during the year ended December 31, 2025.

Tax Implications - Deferred Tax Asset

The resulting net loss of $17.5 million from the sale of available for sale securities occurred at the Bank, as well as the Corporation’s REIT entity.

Under IRC Sec.

582(c)(1), in the case of banks, the sale or exchange of a bond, debenture, note or certificate or other evidence of indebtedness shall not be considered a sale or exchange of a capital asset.

Therefore, the loss from the sale of securities at the Bank is considered ordinary in nature.

However, the REIT is not considered a “bank” under IRC Sec.

582(c) and therefore a sale of securities at the REIT is considered capital in nature.

The capital loss amounted to $11.5 million (gross) and represents a $2.7 million deferred tax asset as of December 31, 2025 subject to a five-year carryforward limitation.

Pursuant to ASC 740-10-30-5(e), deferred tax assets must be reduced by a valuation allowance if it is more likely than not that all of the deferred tax assets will not be realized.

The valuation allowance would serve to reduce the deferred tax assets to an amount that would be more likely than not to be realized.

The more likely than not threshold is a likelihood of more than 50 percent.

The Corporation’s current tax planning strategies include the planned sale of appreciated investment securities and loans from the REIT entity.

These transactions are intended to generate future capital gains sufficient to utilize the capital loss carryforward prior to its expiration.

Management has demonstrated both the ability and intent to execute these strategies in a timely and economically feasible manner.

After detailed review, including various scenarios of changes in market interest rates, while the Corporation’s management has demonstrated the ability and intent to implement these prudent and reasonable actions, management determined that it is more likely than not that a portion of the deferred assets, including the capital loss carryforward, will not be realized.

Further, management will continue to monitor all available positive and negative evidence on at least a quarterly basis, consistent with ASC 740, and will promptly adjust the valuation allowance assessment if facts and circumstances change materially.

Non-GAAP Presentation

The Corporation has identified both the sale of available for sale securities and the sale of the former Ithaca Station branch property as nonrecurring transactions and has made reference to non-GAAP figures within this MD&A where appropriate and useful to the reader of these financial statements.

Please refer to the GAAP to Non-GAAP reconciliations, pages 68-70, for further information.

Critical Accounting Estimates

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Management considers the allowance for credit losses to be a critical accounting estimate, given the uncertainty in estimating lifetime credit losses attributable to its portfolios of assets exhibiting credit risk, particularly in its loan portfolio, and the material effect that such judgments may have on the Corporation's results of operations.

Determining the amount requires significant judgement on the part of management, is multi-faceted, and can be imprecise.

Determining the amount requires significant judgment on the part of management, is multi-faceted, and can be imprecise.

The level of the allowance for credit losses on loans is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past events, current conditions, and expectations of the future based on reasonable and supportable forecasts.

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In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation's allowance for credit losses.

Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgement, a range of estimates for the estimate of the allowance for credit losses may be supportable.

Because the Corporation's methodology for maintaining its allowance for credit losses is based on historical experience and trends, current economic information, forecasted data, and management's judgment, a range of estimates for the estimate of the allowance for credit losses may be supportable.

Deteriorating conditions may lead to further required increases to the allowance;

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A significant portion of the allowance for credit losses is allocated to the commercial portfolio, both commercial real estate and commercial and industrial loans.

As of December 31, 2024 and December 31, 2023, the allowance for credit losses allocated to the total commercial portfolio was $15.7 million and $17.1 million respectively, or 73.6% and 75.9%.

As of December 31, 2025 and 2024, the allowance for credit losses allocated to the total commercial portfolio was $18.9 million and $15.7 million, respectively, or 78.0% and 73.6% of the total allowance for credit losses on loans.

For comparison, total commercial loans represented 76.4% and 73.2% of total loan balances, respectively, as of December 31, 2025 and 2024.

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Changes in the FOMC's median forecasted year over year U.S.

civilian unemployment rate and year over year change in U.S GDP could have a material impact on the model's estimation of the allowance.

Currently, all pools, with the exception of the consumer loans pool, as defined in Note 1 to the Consolidated Financial Statements, utilize the FOMC's projections for unemployment as a loss driver, while the consumer pool utilizes the FOMC's projections for GDP growth.

civilian unemployment rate and year over year change in U.S.

GDP could have a material impact on the model's estimation of the allowance.

Currently, a majority of loan pools, as defined in Note 1 to the Consolidated Financial Statements, utilize the FOMC's projections for unemployment as a loss driver, while the commercial and industrial, consumer, and other loans pools utilizes the FOMC's projections for GDP growth.

FOMC projections are sourced from a quarterly Summary of Projections, which accompanies select FOMC meetings.

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civilian unemployment, and a decrease of 50 bps in the FOMC's projected rate of U.S.

GDP growth, would increase the model's total calculated allowance by $1.3 million, or 6.2%, to $22.7 million, assuming qualitative adjustments are kept at current levels.

While management has concluded that its current evaluation is reasonable under the circumstances, and that sensitivity analysis is based on a series of hypothetical scenarios not intended to represent management’s assumptions or judgement of factors as of December 31, 2024, it has also concluded that differing assumptions could materially impact allowance calculations, either positively or adversely.

Management’s methodology and policy in determining the allowance for credit losses can be found in Note 1 to the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

The activity in the allowance for credit losses can be found in supporting tables in Note 4 to the Consolidated Financial Statements included Part IV, Item 15 of this Annual Report on Form 10-K.

GDP growth, would increase the model's total calculated allowance by $1.0 million, or 4.0%, to $25.2 million, assuming qualitative adjustments were kept at current levels.

While management has concluded that its current evaluation is reasonable under the circumstances, and that sensitivity analysis is based on a series of hypothetical scenarios not intended to represent management’s assumptions or judgment of factors as of December 31, 2025, it has also concluded that differing assumptions could materially impact allowance calculations, either positively or adversely.

Management’s methodology and policy in estimating the allowance for credit losses can be found in Note 1 to the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

The activity in the allowance for credit losses can be found in supporting tables in Note 4 to the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Consolidated Financial Highlights (in thousands, except per share data)

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Non-interest income 7,945 23,230

Non-interest expenses 67,250 64,243

Non-interest expense 70,729 67,250

Income before income tax expense 19,936 30,085

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Cost of interest-bearing liabilities 2.50 % 2.87 %

Cost of funds 1.86 % 2.15 %

Interest rate spread 2.47 % 1.87 %

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(a) See the GAAP to Non-GAAP reconciliations on pages 68-70.

(d) Includes non-accrual loans only.

(b) Non-interest expense divided by total of net interest income plus (e) Includes non-performing loans plus other real estate owned and

non-interest income.

repossessions

(b) Non-interest expense divided by total of net interest income plus (d) Includes nonaccrual loans only.

non-interest income.

(e) Includes non-performing loans plus OREO and repossessions.

Consolidated Results of Operations

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Non-interest income 7,945 23,230 (15,285) (65.8) %

Non-interest expenses 67,250 64,243 3,007 4.7 %

Non-interest expense 70,729 67,250 3,479 5.2 %

Pre-provision income 24,373 30,039 (5,666) (18.9) %

Provision for credit losses (46) 3,262 (3,308) (101.4) %

Provision (credit) for credit losses 4,437 (46) 4,483 N/M

Income tax expense 4,832 6,414 (1,582) (24.7) %

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Basic and diluted earnings per share $ 3.14 $ 4.96 $ (1.82) (36.7) %

The following table presents selected financial information for the years indicated, adjusted for nonrecurring items, and the dollar and percent change (in thousands, except per share and ratio data) (refer to the GAAP to Non-GAAP reconciliations, pages 68-70, for further information):

Years Ended December 31, Percentage Change

2025 2024 Change

Net interest income $ 87,157 $ 74,059 $ 13,098 17.7 %

Non-interest income (1)

24,814 23,230 1,584 6.8 %

Non-interest expense 70,729 67,250 3,479 5.2 %

Pre-provision income 41,242 30,039 11,203 37.3 %

Provision (credit) for credit losses 4,437 (46) 4,483 N/M

Income tax expense (2)

8,927 6,414 2,513 39.2 %

Net income $ 27,878 $ 23,671 $ 4,207 17.8 %

Basic and diluted earnings per share $ 5.80 $ 4.96 $ 0.84 16.9 %

(1) Adjusted for $17.5 million loss on sale of securities available for sale and $0.6 million gain on sale of previous branch property during second quarter, 2025.

(2) Adjusted for tax impact of loss on sale of securities available for sale and gain on sale of previous branch property during second quarter, 2025.

Selected financial ratios 2025 2024

Return on average assets 0.86 % 0.94 %

Return on average equity 11.53 % 14.11 %

Return on average assets (unadjusted) 0.55 % 0.86 %

Return on average assets (adjusted) (a)

1.02 % 0.86 %

Return on average equity (unadjusted) 6.40 % 11.53 %

Return on average equity (adjusted) (a)

11.81 % 11.53 %

Net interest margin, fully taxable equivalent 3.26 % 2.76 %

Efficiency ratio (unadjusted) 74.37 % 69.12 %

Efficiency ratio (adjusted) (a) 63.00 % 68.89 %

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Return on average equity for the year ended December 31, 2025 was 6.40%, compared with 11.53% for the prior year.

The decrease in net income for the year ended December 31, 2024, compared to the prior year, was due to an increase in non-interest expense, decreases in non-interest income and net interest income, offset by decreases in the provision for credit losses and income tax expense.

The decrease in net income for the year ended December 31, 2025, compared to the prior year, was due to a decrease in non-interest income, and increases in non-interest expense and provision for credit losses, partially offset by an increase in net interest income and a decrease in income tax expense.

During the second quarter of 2025, the Corporation sold a portion of its available for sale securities portfolio, and recognized a $17.5 million loss on the sale.

In addition, the Corporation recognized a gain of $0.6 million upon completing the sale of a previously held for sale branch property.

Excluding these nonrecurring items, net income (as adjusted) for the year ended December 31, 2025 was $27.9 million, or $5.80 per share.

Non-GAAP net income as presented in the MD&A has been adjusted for these two items.

Refer to the GAAP to Non-GAAP reconciliations, on pages 68-70, for further information.

Adjusted r eturn on average equity for the year ended December 31, 2025 was 11.81% , compared to 11.53% for the prior year.

Net Interest Income

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Net interest income, which is the difference between the interest income earned on interest-earning assets such as loans and securities, and the interest expense recognized on interest-bearing liabilities such as deposits and borrowings, is the largest contributor to the Corporation’s earnings.

Net interest income for the year ended December 31, 2024 totaled $74.1 million, a decrease of $0.4 million, or 0.5%, compared with $74.5 million for the prior year.

Fully taxable equivalent net interest margin was 2.76% for the year ended December 31, 2024 compared with 2.85% for the prior year.

The decrease in net interest income was primarily due to increases of $14.1 million in interest expense on deposits and $0.8 million in interest expense on borrowed funds, and a decrease of $1.3 million in interest and dividend income on taxable securities, offset by increases of $14.9 million in interest income on loans including fees, and $0.9 million in interest income on interest-earning deposits.

The increase in interest expense on deposits was due primarily to a 68 basis points increase in the average rate paid on interest-bearing deposits, which included brokered deposits, and deposit campaigns primarily related to time deposits.

The increase in interest expense on borrowed funds was due primarily to a $16.2 million increase in average balances of borrowed funds, compared to the prior year, partially offset by a 14 basis points decrease in the average interest paid on total borrowings, compared to the prior year.

Average balances of borrowed funds in the current year consisted of FHLBNY overnight and term advances and a Federal Reserve Bank Term Funding Program Advance (BTFP), while borrowed funds in the prior year consisted primarily of FHLBNY overnight advances.

The decrease in interest and dividend income on taxable securities was primarily due to a decrease of $58.0 million in average balances of taxable securities, primarily due to paydowns on mortgage-backed and SBA pooled loan securities.

The average yield on taxable securities was comparable between 2023 and 2024.

The increase in interest income on loans, including fees was due primarily to an increase of $117.5 million in average total loan balances and an increase of 44 basis points increase in the average yield on loans.

The increase in average balances was concentrated in the commercial loan portfolio, which increased $136.8 million compared to the prior year.

Average balances of consumer loans and residential mortgage loans decreased $11.0 million and $8.3 million respectively, compared to the prior year.

The average yield on commercial loans increased 37 basis points, while the average yields on consumer loans and residential mortgage loans increased 69 and 30 basis points respectively, compared to the prior year.

The increase in interest income on interest-earning deposits was mainly due to an increase of $18.8 million in average balances of interest-earning deposits, due to an increase in deposits at the FRBNY.

Average interest-earning assets increased $76.9 million while average interest-bearing liabilities increased $108.1 million during 2024, compared to the prior year.

The average yield on interest-earning assets increased 41 basis points to 4.74%, while the average cost of interest-bearing liabilities increased 67 basis points to 2.87% during 2024, compared to the prior year, both primarily due to the lagging effects of interest rate increases during 2022 and 2023.

Net interest income for the year ended December 31, 2025 totaled $87.2 million, an increase of $13.1 million, or 17.7%, compared with $74.1 million for the prior year.

Fully taxable equivalent net interest margin was 3.26% for the year ended December 31, 2025 compared to 2.76% for the prior year.

The increase in net interest income was driven by a decrease of $8.3 million in interest expense on deposits and increases of $8.2 million in interest income on loans and $1.6 million in interest income on interest-earning deposits, partially offset by a decrease of $4.2 million in interest and dividend income on taxable securities.

Interest expense on deposits decreased largely due to a decrease of 42 basis points in the average cost of total interest-bearing deposits, which included brokered deposits, and a decrease of $30.6 million in average balances of total interest-bearing deposits, each compared to the prior year.

The decrease in average balances of total interest-bearing deposits was inclusive of a decrease of $38.0 million in average balances of brokered deposits, due to proceeds from the Corporation’s sales of available for sale securities in the second quarter of 2025 being used to pay off wholesale funding liabilities, including brokered deposits.

The average cost of customer time deposits decreased 73 basis points and average balances of customer time deposits decreased $25.2 million, each compared to the prior year.

Both the decrease in average cost and average balances were primarily due to changes in promotional CD campaign offerings in the current year, compared to the prior year.

Proceeds from the Corporation’s sales of available for sale securities in 2025 also reduced reliance on customer time deposits to fund loan growth.

Interest income on loans, including fees, increased mainly due to an increase of $129.3 million in average balances of total loans and an increase of five basis points in the average yield on total loans, each compared to the prior year.

The increase in average balances of total loans was largely driven by an increase of $159.3 million in average balances of commercial loans, partially offset by a decrease of $33.9 million in average balances of consumer loans, each compared to the prior year.

The increase in average balances of commercial loans was largely concentrated in commercial real estate, particularly in the Corporation’s Capital Bank and Canal Bank divisions in Albany and Buffalo, respectively.

The decrease in average balances of consumer loans was primarily due to lower origination activity and normal portfolio turnover of indirect auto loans, as the Corporation prioritized funding other types of lending during 2025.

The increase in the average yield on total loans was mainly due to increases of 35 basis points and 15 basis points in the average yields on residential mortgages and consumer loans, respectively, partially offset by a decrease of six basis points in the average yield on total commercial loans, each compared to the prior year.

The increase in the average yield on residential mortgages was primarily due to an increase in origination volume during 2025, most of which was originated at yields above the portfolio's average yield due to the elevated interest rate environment.

The increase in the average yield on consumer loans was largely due to fast turnover in the indirect auto portfolio as older, lower‑yielding balances were replaced by higher‑yielding balances, partially offset by lower yields on originations of promotional home equity lines of credit, and the impact of declines in benchmark interest rates, such as the Prime rate, on variable rate home equity loans and lines.

The decrease in the average yield on commercial loans was largely due to a decrease in interest rates on variable rate commercial and industrial loans, including lines of credit, due to the declining market interest rate environment compared to the prior year.

Interest income on interest‑earning deposits increased largely due to an increase of $38.4 million in average balances of interest‑earning deposits compared to the prior year, mainly consisting of proceeds from the Corporation’s sales of available for sale securities and issuance of subordinated debt in the second quarter of 2025, and despite a decrease of 40 basis points in the average yield on interest‑earning deposits compared to the prior year as a result of the decline in the fed funds rate.

Interest and dividend income on taxable securities decreased primarily due to the Corporation’s sales of available for sale securities with a book value of $244.8 million in the second quarter of 2025.

These sales, as well as normal paydown activity on mortgage‑backed securities and SBA pooled‑loan securities, resulted in a decrease of $169.7 million in average balances of taxable securities, compared to the prior year.

Additionally, the average yield on taxable securities decreased 12 basis points compared to the prior year, largely due to optimization of securities sales proceeds, which reflects the sale of relatively higher‑yielding securities in the second quarter of 2025, partially offset by a decrease in total amortization expense on available for sale securities compared to the prior year.

Average interest‑earning assets decreased $18.0 million, while average interest‑bearing liabilities decreased $32.2 million during 2025, each compared to the prior year, largely the result of the Corporation’s balance sheet repositioning efforts in the current year.

The average yield on interest‑earning assets increased 23 basis points to 4.97%, while the average cost of interest‑bearing liabilities decreased 37 basis points to 2.50%.

The total cost of funds was 1.86% for the year ended December 31, 2025, compared to 2.15% in the prior year, a decrease of 29 basis points.

Average Consolidated Balance Sheet and Interest Analysis

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FHLBNY overnight advances 7,523 336 4.47 % 21,907 1,151 5.17 %

FRBNY advances and other debt 46,363 2,302 4.97 % 3,177 114 3.59 %

Term advances and other debt 34,368 1,546 4.50 % 46,363 2,302 4.97 %

Subordinated debt 24,775 2,003 8.08 % — — — %

Total interest-bearing liabilities 1,830,437 45,678 2.50 % 1,862,645 53,505 2.87 %

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(2) Net interest margin is the ratio of fully taxable equivalent net interest income divided by average interest-earning assets.

(3) Taxable equivalent adjustments have been made using a 19.6% blended rate equaling the 21.0% federal statutory rate less the impact of the Corporation's effective New York State income tax rate of 6.8%

Changes Due to Rate and Volume

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FHLBNY overnight advances (815) (676) (139)

FRBNY advances and other debt 2,188 2,128 60

Term advances and other debt (756) (554) (202)

Subordinated debt 2,003 2,003 —

Total interest expense (7,827) (1,449) (6,378)

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Provision for credit losses

Management's methodology for establishing and maintaining an allowance for credit losses conforms with ASU 2016-13, F inancial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which was adopted by the Corporation effective January 1, 2023.

Based on a combination of quantitative and qualitative analysis, changes to the allowance are recorded through income as a provision (credit).

The quantitative portion of the analysis is significantly influenced by changes in projected economic conditions and the composition of the numerous portfolio segments, while qualitative adjustments reflect the degree to which management anticipates actual credit risk may differ from the results projected by the quantitative analysis.

The provision for credit losses decreased $3.3 million, from a provision of $3.3 million for the year ended December 31, 2023 to a credit of $46 thousand for the year ended December 31, 2024.

The decrease was largely due to the annual review and update of the loss drivers used in the Bank's CECL model.

Updated loss drivers were applied to the CECL model in the first quarter of 2024, resulting in a credit (provision recapture) of $2.0 million for the three months ended March 31, 2024.

Additionally, provisioning during 2023 included a $0.9 million specific allocation on a nonaccrual commercial real estate relationship, and higher growth-related provisioning compared to 2024.

Partially offsetting these decreases were a decline in modeled prepayment speeds, which results in higher estimated credit losses, and an increase of $0.2 million in net charge-offs for the year ended December 31, 2024 compared to the year ended December 31, 2023.

Management has established and maintains a methodology for determining and adjusting its allowance for credit losses in conformity with ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The allowance is based on a combination of quantitative and qualitative analysis and changes in the required allowance are recorded through income as a provision (credit).

The quantitative portion of the model is significantly influenced by changes in projected economic conditions, as well as changes in the composition of the numerous loan portfolio segments.

Qualitative adjustments reflect the degree to which management anticipates future outcomes may differ from those projected by the quantitative model.

The provision for credit losses increased $4.5 million, from a credit of $46 thousand for the year ended December 31, 2024 to a provision of $4.4 million for the year ended December 31, 2025.

The increase was largely due to the annual review and update to the loss drivers which the Bank's CECL model is based upon, resulting in an increase in baseline loss rates during the current year, compared to a decrease in baseline loss rates as a result of the prior year's update, which led to a credit (provision recapture) for the prior year.

Additionally an increase in loan growth for the year ended December 31, 2025 compared to loan growth for the prior year, as well as unfavorable changes in model inputs during 2025, including a decline in modeled prepayment speeds and a higher modeled unemployment rate, also contributed to the increase.

The increase in net charge-offs for the year ended December 31, 2025 compared to the prior year did not meaningfully contribute to the increase in provision for credit losses.

Non-interest income

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Net gains on sales of loans held for sale 261 3.3 % 214 0.9 % 47 22.0 %

Net gains (losses) on sales of other real estate owned (18) (0.1) % 37 0.2 % (55) (148.6) %

Net gains (losses) on sales of other real estate owned 2 — % (18) (0.1) % 20 N/M

Income from bank owned life insurance 32 0.4 % 38 0.2 % (6) (15.8) %

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Non-interest income for the year ended December 31, 2025 was $7.9 million compared with $23.2 million for the prior year, a decrease of $15.3 million, or 65.8%.

The decrease was due primarily to decreases of $2.5 million in other non-interest income and $0.2 million in interchange revenue from debit card transactions, offset by an increase of $1.1 million in wealth management group fee income.

The decrease was due primarily to the loss on securities sales transactions of $17.5 million.

This was partially offset by increases of $1.4 million in other non-interest income and $0.4 million in service charges on deposit accounts, as well as $0.4 million in wealth management group fee income.

Other non-interest income

Other non-interest income decreased compared to the prior year primarily due to the $2.4 million recognition of an employee retention tax credit in the third quarter of 2023.

Interchange Revenue from Debit Card Transactions

The decrease in interchange revenue from debit card transactions was primarily attributable to a decrease in consumer debit card usage when compared to the prior year.

Wealth Management Group Fee Income

The increase in wealth management group fee income was primarily due to improved equity market conditions during 2024.

Non-interest expenses

The following table presents non-interest expenses for the years ended December 31, 2024 and 2023, and the dollar and percent change (in thousands, except percentages):

Other non-interest income increased compared to the prior year primarily due to the gain of $0.6 million on the sale of the previous Ithaca "Station" branch property, interest received from the IRS in relation to the Corporation's receipt of proceeds from the Employee Retention Tax Credit (ERTC), an increase in commercial interest rate swap fee income, and recognition of incentives from a debit card service provider arrangement.

Wealth management group fee income and service charges on deposit accounts

The increases in wealth management group fee income and services charges on deposit accounts were primarily due to fee schedule increases, which were implemented in the second half of 2024.

Non-interest expense

The following table presents non-interest expense for the years ended December 31, 2025 and 2024, and the dollar and percent change (in thousands, except percentages):

NON-INTEREST EXPENSE

2025 2024 2025 v.

Amount % to Total Amount % to Total $ Change % Change

Compensation expenses:

Compensation expense:

Salaries and wages $ 30,569 43.2 % $ 28,457 42.3 % $ 2,112 7.4 %

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Other components of net periodic pension cost (benefits) (452) (0.6) % (909) (1.4) % 457 50.3 %

Total compensation expenses 35,631 52.9 % 33,524 52.2 % 2,107 6.3 %

Non-compensation expenses:

Total compensation expense 39,004 55.2 % 35,631 52.9 % 3,373 9.5 %

Non-compensation expense:

Net occupancy 5,812 8.2 % 5,832 8.7 % (20) (0.3) %

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Other 7,516 10.6 % 7,041 10.4 % 475 6.7 %

Total non-compensation expenses 31,619 47.1 % 30,719 47.8 % 900 2.9 %

Total non-interest expenses $ 67,250 100.0 % $ 64,243 100.0 % $ 3,007 4.7 %

Non-interest expense increased $3.0 million, or 4.7%, in 2024.

The increase was due primarily to increases of $2.1 million in total compensation expenses and $0.9 million in total non-compensation expenses.

Compensation expenses

Compensation expenses increased $2.1 million, or 6.3%, when compared to the prior year, primarily due to increases of $1.6 million in salaries and wages and $0.7 million in pension and other employee benefits, offset by a decrease of $0.2 million in other components of net periodic pension benefits.

The increase in salaries and wages was primarily attributable to additional staffing in the Bank's new Western New York market, merit-based wage increases, and promotions, which was partially offset by savings from the outsourcing of certain back office functions during 2024.

The increase in pension and other employee benefits was largely due to an increase in employee healthcare-related expenses, compared to the prior year.

The decrease in other components of net periodic pension benefits was primarily due to a change in annual actuarial estimates.

Non-compensation expenses

Non-compensation expenses increased $0.9 million, or 2.9%, primarily due to increases of $0.3 million in marketing and advertising, $0.3 million in data processing expense, and $0.2 million in net occupancy expense.

The increase in marketing and advertising expense was primarily attributable to expenditures related to the Bank's 190th anniversary checking account promotion and ongoing certificate of deposit campaigns, the launch of the Bank's new Western New York "Canal Bank" brand, and a general increase in advertising efforts during the current year.

The increase in data processing expense was primarily due to the addition of new contracts, an increase in debit card procurement expenses, and an increase in cybersecurity software expense.

The increase in net occupancy expense was primarily due to an increase in building maintenance expenses including cleaning, lawn care, utilities, and property insurance.

Total non-compensation expense 31,725 44.8 % 31,619 47.1 % 106 0.3 %

Total non-interest expense $ 70,729 100.0 % $ 67,250 100.0 % $ 3,479 5.2 %

Non-interest expense increased $3.5 million, or 5.2%, in 2025, compared to the prior year.

The increase was primarily due to an increase of $3.4 million in total compensation expense, as well as a $0.1 million increase in total non-compensation expense.

Compensation expense

Compensation expense increased $3.4 million, or 9.5%, compared to the prior year, primarily due to increases of $2.1 million in salaries and wages as well as increases of $0.8 million in pension and other employee benefits and $0.5 million in other components of net periodic pension benefits.

The increase in salaries and wages was primarily attributable to additional staffing in the Corporation's Canal Bank division in the Western New York market, including commercial lenders, wealth management professionals, and branch personnel, as well as merit-based wage increases.

The increase in pension and other employee benefits was largely due to an increase in employee healthcare-related expense and payroll tax expense, compared to the prior year.

The increase in other components of net periodic pension benefits was primarily due to a change in annual actuarial estimates.

Non-compensation expense

Non-compensation expense increased $0.1 million, or 0.3%, mainly due to increases of $0.5 million in other non-compensation expense and $0.4 million in professional services, offset by decreases of $0.6 million in FDIC insurance and $0.1 million in other real estate owned expense.

The increase in other non-compensation expense was primarily due to increases in losses on sales of repossessions, charitable donations made during the current year, and expense related to recruitment.

The increase in professional services was primarily due to an increase in consulting services.

The decrease in FDIC insurance was mainly due to improved metrics used to calculate the current year assessment, as well as a smaller decrease associated with a decline in total assessed assets.

The decrease in other real estate owned expense was largely due to a decrease in the quantity of properties owned during 2025 compared to the prior year.

Income tax expense

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The effective tax rate increased to 24.2% for the year ended December 31, 2025 compared with 21.3% for the prior year.

The decrease in income tax expense can be primarily attributed to a decrease in pre-tax income.

The increase in effective tax rate can be primarily attributed to an increase in the valuation allowance.

The decrease in income tax expense can be primarily attributed to a decrease in pre-tax income, largely the result of losses realized on sales of available for sale securities.

Financial Condition

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Total cash and cash equivalents $ 50,097 $ 47,035 $ 3,062 6.5 %

Total investment securities, FHLB, and FRB stock 544,602 593,322 (48,720) (8.2) %

Total investment securities, FHLBNY, and FRBNY stock 294,469 544,602 (250,133) (45.9) %

Loans, net of deferred loan fees 2,269,561 2,071,419 198,142 9.6 %

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Total deposits $ 2,270,674 $ 2,396,883 $ (126,209) (5.3) %

Finance lease obligations and FHLBNY advances 112,889 34,970 77,919 222.8 %

FHLBNY advances and finance lease obligations 90,554 112,889 (22,335) (19.8) %

Subordinated debt, net of deferred issuance costs 44,028 — 44,028 N/M

Other liabilities 50,270 51,066 (796) (1.6) %

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Cash and cash equivalents

The increase in cash and cash equivalents can be mostly attributed to changes in securities, loans, deposits, borrowings, and net income.

The increase in cash and cash equivalents was largely due to proceeds from the Corporation's sales of available for sale securities and issuance of subordinated debt, both in the second quarter of 2025, and normal paydown activity and maturities of available for sale securities, largely offset by loan origination activity during 2025, a decrease in total brokered deposits, and a net decrease in total borrowed funds compared to prior year-end.

Investment securities

The decrease in investment securities was primarily due to a decrease of $52.6 million in securities available for sale, compared to the prior year.

Net paydowns and maturities of securities available for sale for the current year totaled $49.6 million, mainly due to paydowns on mortgage-backed securities and SBA pooled loan securities, and partially offset by purchases of $5.0 million.

The market value of securities available for sale decreased $0.7 million, due to unfavorable changes in market interest rates during the current year.

Partially offsetting the decrease in total investment securities was an increase of $3.6 million in FHLB and FRB stock, at cost, mainly due to an increase in FHLBNY overnight advances as of December 31, 2024, compared to the prior year end.

Loans, net of deferred origination fees and costs increased primarily due to growth concentrated in the commercial loan portfolio, which increased $129.2 million, or 9.3%, compared to the prior year end.

Growth in commercial loans during the current year consisted of $35.1 million in commercial and industrial balances and $94.1 million in commercial real estate balances.

Consumer loans decreased $27.4 million, or 8.9%, compared to the prior year end, largely due to lower indirect auto loan origination activity during the current year, and a relatively fast turnover rate in the portfolio.

Residential mortgages decreased $3.0 million, or 1.1%, compared to the prior year end, as the Corporation continued to elect to sell a portion of originations into the secondary market and demand remained weakened in the current elevated interest rate environment.

The decrease in investment securities was mainly due to sales of available for sale securities with a fair value of $227.3 million, as of the sale dates, in the second quarter of 2025.

Also contributing to the decrease in total investment securities were paydowns and maturities of available for sale securities during 2025, totaling $37.5 million and $2.1 million, respectively.

Partially offsetting the total decrease in investment securities were $4.0 million and $0.2 million in purchases of available for sale and held to maturity securities, respectively, during 2025, and an increase in the fair value of securities due to favorable changes in interest rates as of December 31, 2025 compared to prior year-end.

Loans, net of deferred origination fees and costs, increased primarily due to growth concentrated in the commercial loan portfolio, which increased $217.4 million, or 14.3%.

Growth in total commercial loans was further concentrated in commercial real estate loans, which increased $192.7 million, or 15.8%.

Total commercial real estate loans comprised 62.1% of total loans as of December 31, 2025 compared to 58.7% as of December 31, 2024.

Additionally, commercial and industrial loan balances increased $24.7 million, or 8.2%.

Total residential mortgage loans increased $11.9 million, or 4.3%, largely due to stronger origination activity during 2025 compared to the prior year.

Total consumer loans decreased $31.2 million, or 11.1%, largely due to net runoff of the indirect auto segment as the Corporation prioritized other types of lending during 2025.

Allowance for credit losses

The allowance for credit losses on loans decreased $1.1 million, or 5.0%, from $22.5 million as of December 31, 2023 to $21.4 million as of December 31, 2024.

The decrease was mainly due to the annual review and update of loss drivers used in the Bank's CECL model.

The results of the annual update were applied in the first quarter of 2024 and resulted in a decline in the baseline loss rates used for modeling.

Partially offsetting these declines were a decline in modeled prepayment speeds during 2024 and loan growth, concentrated in the commercial portfolio, during 2024.

The allowance for credit losses on loans increased $2.8 million, or 13.2%, from $21.4 million as of December 31, 2024 to $24.2 million as of December 31, 2025.

The increase was largely due to an increase in total loan volume, particularly concentrated in commercial real estate loans, as well as changes in model inputs between December 31, 2024 and 2025, which included an annual review and update to loss drivers used in the CECL model, which were applied in the first quarter of 2025 and resulted in an increase in baseline modeled loss rates.

Additionally, a decrease in modeled prepayment speeds and an increase in forecasted unemployment contributed to the overall increase in the allowance.

Partially offsetting the increase were improvements in forecasted GDP growth and a net decrease in specific allowance allocations on individually analyzed loans.

Goodwill and other intangible assets, net

There were no impairments of goodwill or other intangible assets during the years ended December 31, 2024 and 2023.

The increase in other assets can be mostly attributed to increases in prepaid expenses and interest receivable on interest rate swaps.

Total deposits decreased by $32.5 million or 1.3%, compared to the prior year end, primarily due to decreases of $50.6 million in brokered deposits, $28.6 million in money market deposits, and $27.4 million in non interest-bearing demand deposits.

These decreases were partially offset by increases of $62.3 million in customer time deposits and $15.4 million in interest-bearing demand deposits.

Additionally, savings deposits decreased $3.6 million.

Non interest-bearing deposits comprised 26.1% and 26.9% of total deposits as of December 31, 2024 and December 31, 2023, respectively.

Finance Lease Obligations and FHLBNY Advances

The increase in finance lease obligations and FHLBNY advances can be mostly attributed to an increase of $77.2 million in FHLBNY overnight advances and an increase of $0.7 million in finance lease obligations.

There were no impairments of goodwill during the years ended December 31, 2025 and 2024, and there were no other intangible assets on the Corporation's Consolidated Balance Sheets as of December 31, 2025 and 2024.

The decrease in other assets was largely due to a decrease in interest rate swap assets of $6.5 million, resulting from a decrease in market interest rates, and a decrease in deferred tax assets, due to an increase in the fair value of available for sale securities, which was also largely attributed to a decrease in market interest rates.

Total deposits decreased largely due to the payoff of brokered deposits with a portion of the proceeds from the Corporation's sales of available for sale securities and issuance of subordinated debt.

There were no brokered deposits outstanding as of December 31, 2025, compared to $92.2 million, or 3.8% of total deposits as of the prior year-end.

Additionally, total customer time deposits decreased $68.1 million compared to prior year-end.

Partially offsetting the decrease in total deposits were increases of $20.1 million, $8.9 million, and $6.3 million in interest-bearing demand deposits, savings deposits, and money market deposits, respectively.

FHLBNY advances and finance lease obligations

FHLBNY advances and finance lease obligations decreased primarily due to a decrease of $22.0 million in FHLBNY overnight advances as of December 31, 2025 compared to prior year-end.

Subordinated debt, net of deferred issuance costs

The Corporation issued $45.0 million in 7.75% fixed-to-floating rate subordinated notes during 2025, net of $1.0 million in total related issuance costs, the majority of which were unamortized as of December 31, 2025.

The subordinated notes were issued as part of the Corporation's strategic balance sheet repositioning during 2025.

Other liabilities

The increase in other liabilities can be mostly attributed to an increase in interest payable on deposits of $0.6 million.

The decrease in other liabilities was mainly due to decreases of $6.4 million in interest rate swap liabilities, resulting from a decrease in market interest rates, and a decrease of $1.6 million in accrued interest payable, largely offset by increases across other components of other liabilities.

Shareholders’ equity

The increase in shareholders' equity was due primarily to an increase of $17.8 million in retained earnings and a decrease of $0.9 million in accumulated other comprehensive loss.

The increase in retained earnings was due primarily to net income of $23.7 million, offset by $5.9 million in dividends declared for the year ended December 31, 2024.

The improvement in accumulated other comprehensive loss was primarily due to revised actuarial assumptions related to the Corporation's pension plans, offset by the unfavorable impact of interest rates on available for sale securities during the current year.

The increase in shareholders' equity was due primarily to a decrease of $29.0 million in accumulated other comprehensive loss, as well as an increase of $8.8 million in retained earnings.

The decrease in accumulated other comprehensive loss was largely due to favorable changes in interest rates compared to prior year-end, while the increase in retained earnings was due to net income of $15.1 million, offset by $6.3 million in dividends declared for the year ended December 31, 2025.

Treasury stock decreased $0.8 million, primarily due to the impact of the issuance of shares related to the Corporation's employee benefit plans.

Assets under management or administration

The market value of total assets under management or administration in WMG was $2.212 billion, including $301.9 million of assets held under management or administration for the Corporation, as of December 31, 2024 compared to $2.242 billion, including $381.3 million of assets held under management or administration for the Corporation as of December 31, 2023, a decrease of $30.4 million, or 1.4%.

Excluding assets under management or administration for the Corporation, total Wealth Management Group assets increased $49.0 million, or 2.6%, primarily due to market improvements during the year.

The market value of total assets under management or administration in the Wealth Management Group was $2.338 billion, including $301.8 million of assets held under management or administration for the Corporation, as of December 31, 2025 compared to $2.212 billion, including $301.9 million of assets held under management or administration for the Corporation as of December 31, 2024, an increase of $126.5 million, or 5.7%.

Excluding assets under management or administration for the Corporation, the total market value of Wealth Management Group assets increased $126.6 million, or 6.6%, primarily due to improvements in financial markets during the current year.

Balance Sheet Comparisons

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(1) Interest-earning assets include:

securities available for sale and securities held to maturity at amortized cost, loans and loans held for sale net of deferred loan fees, interest-earning deposits, FHLBNY stock, FRBNY stock, equity investments, and federal funds sold.

(2) Loans and loans held for sale, net of deferred loan fees.

(3) Investments include securities available for sale at estimated fair value, securities held to maturity, at amortized cost, equity investments, FHLBNY stock, FRBNY stock, federal funds sold and interest-earning deposits.

(4) Borrowings include overnight advances, term advances, and finance lease obligations.

(4) Borrowings include overnight advances, term advances, subordinated debt, and finance lease obligations.

Cash and Cash Equivalents

Total cash and cash equivalents increased $10.2 million compared to December 31, 2023, due to increases of $6.2 million in interest-earning deposits at other financial institutions, and $4.0 million in cash and due from financial institutions.

Total cash and cash equivalents increased $3.1 million compared to December 31, 2024, due to an increase of $6.5 million in interest-earning deposits at other financial institutions, offset by a $3.4 million decrease in cash and due from financial institutions.

The Corporation’s Funds Management Policy includes an investment policy that generally requires debt securities purchased for the bond portfolio to carry a minimum agency rating of "Baa." After an independent credit analysis is performed, the policy also allows the Corporation to purchase local municipal obligations that are not rated.

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The available for sale segment of the securities portfolio totaled $280.6 million as of December 31, 2025, a decrease of $250.8 million, or 47.2%, from $531.4 million as of December 31, 2024.

The decrease was primarily due to net paydowns and maturities of $49.6 million, mainly due to paydowns on mortgage-backed securities and SBA pooled loan securities.

The market value of securities available for sale decreased $0.7 million, due to unfavorable changes in market interest rates during the current year.

Partially offsetting the decrease in total investment securities was an increase of $3.6 million in FHLB and FRB stock, at cost, primarily due to an increase in FHLBNY overnight advances as of December 31, 2024, compared to the prior year.

The decrease was primarily due to the sale of available for sale securities with a market value totaling $227.3 million in the second quarter of 2025.

The sale of securities included the Corporation's entire portfolio of U.S.

Treasury and SBA pooled-loan securities, as well as a portion of the mortgage-backed securities and municipal bonds portfolios.

Also contributing to the decrease were net paydowns and maturities for the year totaling $43.1 million, mainly due to paydowns on mortgage-backed securities and SBA pooled loan securities.

The market value of securities available for sale increased $21.0 million, due to favorable changes in market interest rates during the current year.

Partially offsetting the decrease in total investment securities was an increase of $0.3 million in FHLBNY and FRBNY stock, at cost, primarily due to an increase in membership-based share requirements compared to the prior year-end.

The held to maturity segment of the securities portfolio consists of obligations of political subdivisions in the Corporation’s market areas.

These securities totaled $0.8 million as of December 31, 2024, and December 31, 2023.

These securities totaled $0.6 million and $0.8 million as of December 31, 2025 and December 31, 2024, respectively.

Non-marketable equity securities as of December 31, 2025 include shares of FRBNY stock and FHLBNY stock, carried at their cost of $3.0 million and $6.4 million, respectively.

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The investment in these stocks is regulated by regulatory policies of the respective institutions.

The yield on the Corporation's investment portfolio, inclusive of interest-earnings deposits, as of December 31, 2024 and 2023 was 2.28% and 2.21% respectively, while the duration for the securities portfolio as of December 31, 2024 and 2023 was 4.0 years and 4.6 years, respectively.

The table below presents the composition of the Corporation's available for sale portfolio as of December 31, 2025 and 2024 (in thousands, except percentages):

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Mortgage-backed securities, residential 250,375 89.2 % 365,934 68.9 %

Collateralized mortgage obligations 2,931 1.0 % — — %

Obligations of states and political subdivisions 10,310 3.7 % 35,505 6.6 %

Other securities 73,097 13.8 % 86,151 14.8 %

Corporate bonds and notes 16,982 6.1 % 22,016 4.2 %

SBA loan pools — — % 51,081 9.6 %

Total securities available for sale $ 280,598 100.0 % $ 531,442 100.0 %

The table below sets forth the carrying amounts and maturities of held to maturity debt securities as of December 31, 2024 and the weighted average yields of such securities (all yields are calculated on the basis of the amortized cost and weighted for the scheduled maturity of each security (in thousands, except percentages):

MATURITIES AND YIELDS OF HELD TO MATURITY SECURITIES

The table below sets forth the carrying amounts and maturities of available for sale and held to maturity debt securities as of December 31, 2025 and the weighted average yields of such securities, all yields are calculated on the basis of the amortized cost and weighted for the scheduled maturity of each security.

Mortgage-backed securities and collateralized mortgage obligations are presented based on final maturity dates.

Tax equivalent adjustments have been made in calculating yields on tax-exempt obligations (in thousands, except percentages):

MATURITIES AND YIELDS OF DEBT SECURITIES

Within One Year After One, But Within Five Years After Five, But Within Ten Years After Ten Years

Amount Yield Amount Yield Amount Yield Amount Yield

Obligations of states and political subdivisions $ 200 7.59 % $ 48 3.79 % $ 560 3.92 % $ — N/A

Total $ 200 7.59 % $ 48 3.79 % $ 560 3.92 % $ — N/A

The weighted-average yield on the Corporation's held to maturity debt securities as of December 31, 2024 was 4.83%, related to obligations of states and political subdivisions.

Available for sale

Mortgage-backed securities, residential $ — N/A $ 9,399 1.19 % $ 43,470 2.26 % $ 242,726 1.73 %

Collateralized mortgage obligations — N/A — N/A — N/A 2,990 4.52 %

Obligations of states and political subdivisions 992 3.31 % 573 2.87 % 8,838 3.26 % 150 3.73 %

Corporate bonds and notes — N/A 2,000 4.25 % 16,750 3.68 % — N/A

Total $ 992 3.31 % $ 11,972 1.78 % $ 69,058 2.73 % $ 245,866 1.77 %

Held to maturity

Obligations of states and political subdivisions $ — N/A $ 160 7.46 % $ 480 3.85 % $ — N/A

Total $ — N/A $ 160 7.46 % $ 480 3.85 % $ — N/A

(1) Taxable equivalent adjustments have been made using a 19.6% blended rate equaling the 21.0% federal statutory rate less the impact of the Corporation's effective New York State income tax rate of 6.8%

The weighted-average yield on the Corporation's available for sale and held to maturity debt securities as of December 31, 2025 was 1.98% and 4.75%, respectively.

Management evaluates securities for credit loss exposure on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation.

For the years ended December 31, 2025 and 2024, the Corporation had no provisions for credit losses relating to its investment securities.

The table below presents the Corporation’s loan composition by type and percentage of total loans for the years ended December 31, 2024 and December 31, 2023 (dollars in thousands):

The table below presents the Corporation’s loan composition by type and percentage of total loans as of December 31, 2025 and December 31, 2024 (dollars in thousands):

LOAN COMPOSITION

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Construction 120,418 5.3 % 94,943 4.6 % 25,475 26.8 %

Commercial mortgages, other 1,122,061 54.2 % 984,038 49.9 % 138,023 14.0 %

Owner occupied commercial real estate 178,620 7.9 % 142,279 6.8 % 36,341 25.5 %

Non-owner occupied commercial real estate 1,110,689 48.9 % 979,782 47.3 % 130,907 13.4 %

Residential mortgages 286,885 12.6 % 274,979 13.3 % 11,906 4.3 %

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Portfolio loans totaled $2.270 billion as of December 31, 2025 and $2.071 billion as of December 31, 2024, an increase of $198.1 million, or 9.6%.

The increase was driven by increases of $94.1 million in commercial real estate loans, or 8.4%, and $35.1 million, or 13.3%, in commercial and industrial loans, partially offset by decreases of $32.3 million in indirect consumer loans, or 15.4%, and $3.0 million, or 1.1%, in residential mortgages.

Commercial real estate lending continues to be a primary driver of asset growth for the Corporation, with persistent demand across the Corporation's footprint, particularly in the Capital and Western New York regions.

The increase in total commercial real estate loans was the result of a $138.0 million increase in commercial mortgages, other, primarily driven by increases in non-owner occupied and multifamily properties, partially offset by a $43.9 million decrease in construction loans, which reflect the conversion of a number of projects to permanent financing.

Commercial real estate growth in the Capital Bank division between December 31, 2023 and December 31, 2024 totaled $65.9 million, while growth in the Canal Bank division totaled $28.8 million, Commercial real estate balances in the legacy Chemung Canal Trust Company market decreased by $0.6 million.

Growth in commercial and industrial balances was also primarily concentrated in the Capital and Western New York regions.

The decrease in indirect consumer loans was primarily due to turnover in the Corporation's auto lending portfolio during the year, as runoff of existing loans exceeded originations.

The decrease in residential mortgage loans was primarily due to an increase in residential mortgage originated and sold into the secondary market.

Residential mortgage originations held for investment on the balance sheet totaled $25.1 million and $20.8 million, respectively, for the years ended December 31, 2024 and 2023, an increase of $4.2 million, while mortgage loans originated and sold into the secondary market totaled $11.5 million and $6.4 million, respectively, for the years ended December 31, 2024 and 2023, an increase of $5.1 million.

Additionally, residential mortgage origination activity remained weaker in 2024 due to the elevated interest rate environment and lower market mobility in the current environment.

The table below presents the Corporation’s outstanding loan balance by bank division (in thousands):

The increase was driven by increases of $192.7 million in total commercial mortgages, or 15.8%, $24.7 million in commercial and industrial loans, or 8.2%, and $11.9 million, or 4.3%, in residential mortgages, partially offset by a decrease of $45.4 million in total consumer loans, or 25.5%.

Commercial real estate lending continues to be the primary driver of asset growth for the Corporation, with persistent demand across the Corporation's footprint, particularly in the Capital and Western regions of New York, under the Corporation's Capital Bank and Canal Bank divisions, respectively.

The increase in total commercial real estate loans was largely due to an increase of $130.9 million in non-owner occupied properties, along with smaller increases in both owner occupied properties and construction loans.

Total commercial real estate loans were concentrated in the Capital Bank division in the Corporation's Albany market, comprising $1.044 billion, or 74.0%, and $949.8 million, or 78.0%, of total commercial real estate as of December 31, 2025 and December 31, 2024, respectively, an increase of $93.8 million, or 9.9%.

The decrease in the concentration of total commercial real estate loans in the Capital Bank division was largely due to origination activity in the recently established Canal Bank division in the Corporation's Buffalo market, particularly after the hiring of additional commercial lenders and opening of a regional banking center in Williamsville, NY in the later part of 2024.

Commercial real estate loans in the Corporation's Canal Bank division totaled $188.9 million, or 13.4% of total commercial real estate loans as of December 31, 2025, compared to $112.1 million, or 9.2% of total commercial real estate loans as of December 31, 2024, an increase of $76.8 million, or 68.5%.

Remaining commercial real estate balances were attributable to the Corporation's Chemung Canal Trust Company division in the Southern Tier and Finger Lakes regions of New York, and totaled $177.2 million as of December 31, 2025, or 12.6% of total commercial real estate loans, compared to $155.1 million, or 12.7% of total commercial real estate loans as of December 31, 2024, an increase of $22.1 million, or 14.2%.

The increase in commercial and industrial loans was relatively evenly distributed across the Corporation's three bank divisions, led by increases of $9.5 million and $9.3 million in commercial and industrial loan balances in the Chemung Canal and Canal Bank divisions, respectively, compared to December 31, 2024.

Residential mortgage loans increased largely due to stronger origination volumes of mortgages held for investment during 2025, compared to origination volumes in recent years.

Originations of residential mortgages held for investment for the year ended December 31, 2025 totaled $45.2 million, compared to $25.1 million for the prior year, an increase of $20.1 million, or 80.3%.

The increase in origination volumes was largely due to improvements in market conditions for homebuyers during 2025, as well as the mix of originations in 2025 favoring larger jumbo mortgages compared to the prior year.

Additionally, loans originated for sale and sold into the secondary market to Freddie Mac and the FHLBNY totaled $13.6 million for the year ended December 31, 2025, compared to $11.5 million for the prior year, an increase of $2.1 million, or 18.4%.

Total consumer loans decreased largely due to a decrease in originations of indirect auto loans during 2025, due to the Corporation prioritizing other types of lending during the year, as well as the relatively fast turnover in the portfolio, which exceeded originations during the year.

Indirect consumer loans decreased $45.4 million, or 25.5%, compared to prior year-end.

Partially offsetting the decrease in total consumer loans was an increase of $16.5 million, or 17.7%, in balances of home equity lines and loans compared to prior-year end.

Home equity lines and loans increased largely due to an increase in home equity lines of credit, the result of promotional efforts during 2025, which included offering a below-market introductory interest rate.

The table below presents the Corporation’s outstanding loan balances by bank division (in thousands):

LOANS BY DIVISION

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(1) All loans, excluding those originated by the Capital Bank and Canal Bank Divisions.

Commercial real estate lending represented the largest portion of the Corporation's loan portfolio as of December 31, 2024 and 2023.

Commercial real estate lending is comprised of the Construction and Commercial mortgage, other segments of the loan portfolio, as presented in Note 4 to the Corporation's Consolidated Financial Statements.

As of December 31, 2024 and 2023, total commercial real estate loans totaled $1.217 billion and $1.123 billion, respectively.

As the largest component of the Corporation's loan portfolio, quantitative and qualitative attributes of commercial real estate such as maturity and repricing schedules may have a significant impact on management's strategic initiatives, and understanding such attributes is critical in understanding the Corporation's anticipated future liquidity needs and sensitivity to changes in interest rates.

Commercial real estate lending represented the largest component of the Corporation's loan portfolio as of December 31, 2025 and 2024.

Commercial real estate lending is comprised of the construction, owner occupied commercial real estate, and non-owner occupied commercial real estate categories of the loan portfolio, as presented in Note 4 - Loans and Allowance for Credit Losses to the Consolidated Financial Statements.

As of December 31, 2025 and 2024, total commercial real estate loans were $1.410 billion and $1.217 billion, respectively, representing 62.1% and 58.7% of total loan balances, respectively.

As the largest component of the Corporation's loan portfolio, quantitative and qualitative attributes of commercial real estate have a significant impact on management's strategic initiatives, and understanding such attributes are critical in understanding the Corporation's anticipated future liquidity needs and sensitivity to changes in interest rates.

Management closely monitors maturity and repricing schedules as part of its broader risk management framework, enabling measures to proactively manage economic volatility and promote longer-term portfolio stability.

Management also evaluates the risk inherent in its portfolio of commercial real estate loans using a variety of metrics, including but not limited to type, geography, collateral, and borrower or sponsor industry.

The Corporation also monitors its level of non-owner occupied commercial real estate loans in relation to regulatory capital, as defined by the Bank's regulators.

As of December 31, 2025 and 2024, total non-owner occupied commercial real estate loans divided by total Bank risk-based capital was 384.9% and 399.4%, respectively.

The following table presents commercial real estate loans by maturity and repricing date as of December 31, 2025 (dollars in thousands):

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(1) Includes fixed rate loans

Management evaluates the risk inherent in its portfolio of commercial real estate loans using a variety of metrics, including but not limited to type, geography, collateral, and borrower or sponsor industry.

The Corporation also monitors its level of non-owner occupied commercial real estate loans in relation to regulatory capital, as defined by the Bank's regulators.

As of December 31, 2024 and 2023, total non-owner occupied commercial real estate loans divided by total Bank risk-based capital was 399.4% and 403.6%, respectively.

The table below presents the amortized basis of commercial real estate loans by type and percentage as of December 31, 2025 and 2024 (dollars in thousands):

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Western New York 252,370 17.9 % 155,527 12.8 % 62.3 %

Other 57,057 4.7 % 48,782 4.3 % 17.0 %

82,995 5.9 % 57,057 4.7 % 45.5 %

Total $ 1,409,727 100.0 % $ 1,217,004 100.0 % 15.8 %

(1) Includes $77.6 million in commercial real estate loans located outside of New York State as of December 31, 2025.

The Corporation closely monitors economic and credit trends for the industries in which its commercial real estate borrowers are involved.

Property types are designated based on the purpose of the collateral securing commercial real estate loans.

The table below presents the amortized basis of commercial real estate loans by borrower industry and percentage as of December 31, 2024 and 2023 (dollars in thousands):

The table below presents the amortized basis of commercial real estate loans by borrower industry and percentage as of December 31, 2025 and 2024, as well as the weighted average (WA) loan to value (LTV) ratio for each industry as of December 31, 2025 (dollars in thousands):

Commercial real estate loans by borrower industry:

2024 % of Total 2023 % of Total %

Construction & Land Development $ 94,943 7.8 % $ 138,887 12.4 % (31.6) %

Balances % of Total WA LTV % Balances % of Total %

Construction & Land Development $ 120,418 8.6 % N/M $ 94,943 7.8 % 26.8 %

Industrial 70,402 5.0 % 52.2 % 62,817 5.3 % 12.1 %

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Total $ 1,409,727 100.0 % 59.2 % $ 1,217,004 100.0 % 15.8 %

Loan concentrations are considered to exist when there are amounts loaned to a multiple number of borrowers engaged in similar activities, which may cause them to be similarly impacted by changes in economic or other conditions.

Industries are identified using NAICS codes, and the Corporation monitors specific NAICS industry classifications of commercial loans to identify concentrations greater than 10.0% of total loans.

Loan concentrations are considered to exist when there are amounts loaned to multiple borrowers engaged in similar activities, which may cause them to be similarly impacted by changes in economic or other conditions.

Industries are identified using NAICS codes, and the Corporation monitors specific NAICS industry classifications of commercial loans to identify concentrations of greater than 10.0% of total loans.

As of December 31, 2025 and 2024, commercial loans to borrowers involved in the real estate, and real estate rental and leasing businesses, were 52.1% and 50.9% of total loans, respectively.

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Construction 13,168 44,848 62,402 — 120,418

Commercial mortgages, other 70,046 303,031 719,443 29,541 1,122,061

Owner occupied commercial real estate 6,127 47,038 119,828 5,627 178,620

Non-owner occupied commercial real estate 78,750 429,516 583,236 19,187 1,110,689

Residential mortgages 8,746 12,659 81,030 184,450 286,885

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Construction 4,118 — — 4,118

Commercial mortgages, other 190,280 151,750 6,955 348,985

Owner occupied commercial real estate 17,707 20,576 — 38,283

Non-owner occupied commercial real estate 213,317 90,015 3,254 306,586

Residential mortgages 12,659 77,171 123,233 213,063

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Loans maturing with variable interest rates:

After One But Within Five Years After Five But Within 15 Years After 15 Years Total

Commercial and industrial $ 62,358 $ 32,067 $ 1,218 $ 95,643

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Construction 40,730 62,402 — 103,132

Commercial mortgages, other 112,751 567,693 22,586 703,030

Owner occupied commercial real estate 29,331 99,252 5,627 134,210

Non-owner occupied commercial real estate 216,198 493,221 15,932 725,351

Residential mortgages — 3,859 61,216 65,075

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Total $ 350,021 $ 700,022 $ 129,989 $ 1,180,032

The Corporation has reporting systems to monitor:

(i) loan origination and concentrations, (ii) delinquent loans, (iii) non-performing assets, including non-performing loans, certain loans made with modifications to borrowers experiencing financial difficulty, other real estate owned, and repossessed vehicles (iv) loans analyzed on an individual basis for credit risk, and (v) potential problem loans.

Management reviews the adequacy of these systems on a regular basis.

Non-Performing Loans and Non-Performing Assets

Non-performing assets consist of non-performing loans, other real estate owned that has been acquired in partial or full satisfaction of loan obligations or upon foreclosure, and vehicles that have been repossessed.

Non-performing loans is comprised of nonaccrual loans.

Non-performing loans are comprised of nonaccrual loans.

Past due status on all loans is based on the contractual terms of the loan.

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(1) Not included in non-performing assets above.

Non-performing loans totaled $9.0 million as of December 31, 2024, or 0.43% of total loans, compared with $10.4 million as of December 31, 2023, or 0.53% of total loans.

The decrease in non-performing loans as of December 31, 2024 compared to December 31, 2023 was primarily due to the payoff of two larger nonaccrual commercial real estate loans during 2024, comprised of a $2.2 million construction loan and a $1.9 million non-owner occupied loan.

There was $3.9 million in commercial loan balances added to non-performing loans during 2024, and $1.2 million in paydowns of existing non-performing commercial loans during 2024.

Non-performing assets, which are comprised of non-performing loans, other real estate owned, and repossessed vehicles, was $9.6 million, or 0.35% of total assets, as of December 31, 2024, compared with $10.7 million, or 0.40% of total assets, as of December 31, 2023.

The amortized basis of accruing loans past due 90 days or more was less than $0.1 million as of December 31, 2024 and December 31, 2023, respectively.

Non-performing loans totaled $7.9 million, or 0.35% of total loans, as of December 31, 2025, compared to $9.0 million, or 0.43% of total loans, as of December 31, 2024.

Non-performing assets were $8.2 million, or 0.30% of total assets as of December 31, 2025, compared to $9.6 million, or 0.35% of total assets as of December 31, 2024.

The decrease in non-performing loans was largely due to the payoff of six nonaccrual commercial real estate loans totaling $1.7 million during the year ended December 31, 2025 and the charge-off of three commercial and industrial loans during the year ended December 31, 2025, mostly in the second quarter, totaling $0.8 million.

Additionally, there were $0.8 million in paydowns on other non-performing commercial loans, partially offset by $0.8 million in additions to nonaccrual commercial loans during the year ended December 31, 2025.

Non-performing retail loans increased $1.4 million compared to December 31, 2024, driven by $3.9 million in additions to nonaccrual retail loans, partially offset by $1.2 million in net charge-offs and $1.5 million in paydowns during the year ended December 31, 2025.

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Corporation works closely with borrowers experiencing financial difficulties to identify viable solutions that minimize the potential for loss.

The Corporation monitors modifications made to borrowers experiencing financial difficulty in which contractual cash flows are directly impacted.

Modifications included under this guidance include principal reductions, reductions in effective interest rates, term extensions, significant payment delays, or a combination thereof.

ASU 2022-02 was implemented on January 1, 2023 on a prospective basis.

As of December 31, 2024, the Corporation had nine total loans modified under this accounting guidance, totaling $2.1 million, including four loans which were modified during the current year, compared with five loans as of December 31, 2023, totaling $3.3 million, all of which were modified during the year of initial adoption.

The loans modified during the current year included two term extensions on commercial and industrial loans, one payment delay on a commercial real estate loan, and one payment delay on a residential mortgage.

During the year ended December 31, 2024 one commercial and industrial loan given a payment extension of six months during 2023 experienced a payment default, while the remaining modified loans were performing under their modified terms.

During the year ended December 31, 2024, two commercial mortgages previously modified under ASU 2022-02 were paid off, with a combined amortized basis at payoff of $2.2 million.

The Corporation especially monitors modifications made to borrowers experiencing financial difficulty where contractual cash flows are directly impacted, including through principal reductions, reductions in effective interest rates, term extensions, significant payment delays, or a combination thereof.

As of December 31, 2025, the Corporation had ten active loans modified under such terms, totaling $6.3 million, compared to seven loans as of December 31, 2024, totaling $2.1 million.

There were four loan modification made to borrowers experiencing financial difficulty during the year ended December 31, 2025;

a payment delay on a $3.4 million non-owner occupied commercial real estate loan, a term extension on a $1.0 million non-owner occupied commercial real estate loan, a combination of a payment delay and term extension on a $0.4 million non-owner occupied commercial real estate loan, and a payment delay on a $0.2 million residential mortgage.

During the year ended December 31, 2025, a $0.7 million unsecured commercial and industrial loan which had previously been given a six month term extension was fully charged-off.

All other modified loans made to borrowers experiencing financial difficulty were performing according to their modified terms as of December 31, 2025.

Allowance for Credit Losses

The allowance for credit losses is an amount that management believes will be adequate to absorb the estimated lifetime credit losses inherent in assets exhibiting credit risk as of the measurement date.

The allowance is in conformity with the requirements established by ASC 326 -Financial Instruments-Credit Losses, which was adopted effective January 1, 2023.

The allowance for credit losses covers a broad range of assets including loans, unfunded commitments, and debt securities, incorporating both quantitative and qualitative components.

As of December 31, 2024 and December 31, 2023, the Corporation did not allocate any allowance for credit losses to its portfolios of available for sale or held to maturity debt securities, due to either the explicit or implicit U.S.

The allowance is in conformity with the requirements established by ASC 326 - Financial Instruments - Credit Losses .

The allowance for credit losses covers a range of assets including loans, unfunded commitments, and debt securities, incorporating both quantitative and qualitative components.

As of December 31, 2025 and 2024, the Corporation did not allocate any allowance for credit losses to its portfolios of available for sale or held to maturity debt securities, due to the explicit or implicit U.S.

Government guarantee as to principal and interest payments on the majority of the portfolio, and the immateriality of credit risk on remaining unguaranteed securities.

Loans are analyzed for credit loss on either an individual basis or a pooled (collective) basis, determined by risk characteristics.

The Corporation begins analyzing loans on an individual basis when management determines a loan no longer exhibited risk characteristics consistent with the risk characteristics in its designated pool under the Corporation's CECL methodology.

The amortized cost basis of individually analyzed loans as of December 31, 2024 totaled $6.5 million, compared to $8.0 million as of December 31, 2023.

The Corporation begins analyzing loans on an individual basis when management determines a loan no longer exhibits risk characteristics consistent with the risk characteristics in its designated pool under the Corporation's CECL methodology.

The amortized cost basis of individually analyzed loans as of December 31, 2025 totaled $4.2 million, compared to $6.5 million as

of December 31, 2024.

Remaining loans are analyzed on a pooled basis and are segmented based on groups of assigned FFIEC Call Report codes.

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Individually analyzed loans are reviewed on a quarterly basis to determine if any changes in credit quality or market conditions would require additional allocations to the allowance for credit losses or recognition of additional charge-offs.

Real estate values in each of the Corporation's market areas have remained stable.

Non-real estate collateral may be valued using (i) an appraisal, (ii) net book value of the collateral per the borrower’s financial statements, or (iii) accounts receivable aging reports, that may be adjusted based on management’s knowledge of the client and client’s business.

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For pooled loans, quantitative analysis is based on an estimated discounted cash flow analysis (DCF) performed at the loan level.

The modeled reserve requirement equals the difference between the book balance of the loan as of the measurement date and the present value of assumed cash flows for the life of the loan.

The modeled reserve requirement is equal to the difference between the book balance of the loan as of the measurement date and the present value of assumed cash flows for the life of the loan.

The underlying assumptions of the DCF are based on the relationship between a projected value of an economic indicator, and the implied historical loss experience amongst a group of curated peers.

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civilian unemployment and U.S.

GDP growth, as the source for its readily available and reasonable economic forecast.

GDP growth, as the source for its reasonable, supportable, and readily available economic forecast.

The forecasted values are applied over a rolling four quarter period, and revert to the historic mean of the economic variable over an eight quarter period, on a straight-line basis.

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Qualitative adjustment rates are applied to each loan within a pool on a consistent basis.

Factors considered as part of the qualitative adjustment analysis primarily include economic considerations not captured by the model, changes in conditions within the Bank such as lending standards, personnel, and concentrations of credit, among others, as well as external factors such as change in the regulatory and competitive landscape.

Factors considered as part of the qualitative adjustment analysis primarily include economic considerations not captured by the model, changes in conditions within the Bank such as lending standards, personnel, and concentrations of credit, among others, as well as external factors, such as changes in the regulatory and competitive landscape.

The allowance for credit losses is increased through a provision for credit losses, which is charged to operations.

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The allowance for credit losses on unfunded commitments is included in the line item accrued interest payable and other liabilities in the Consolidated Balance Sheets.

The decrease in the allowance for credit losses during the current year was primarily due to the annual review and update of loss drivers used in the CECL model.

Recalibration of loss drivers are applied in the first quarter of each year, and for 2024 resulted in a decline in baseline loss rates used in the model.

The loss drivers used in each of the Corporation's pools of loans, either U.S.

civilian unemployment or U.S.

GDP growth, did not change as a result of these updates.

Modeled economic conditions were relatively consistent between December 31, 2023 and December 31, 2024.

The increase in the allowance for credit losses was largely due to the annual review and an update performed on the loss drivers used as the basis for the Bank's CECL model, commercial loan growth, and changes in model inputs such as economic forecasts and prepayment speeds.

The overall increase in the allowance for credit losses was partially offset by a decrease in the allowance for credit losses on individually analyzed loans, due to charge-offs on loans which carried specific reserve allocations, as well as a net decrease in qualitative adjustments applied to the Bank's CECL model as of December 31, 2025 compared to December 31, 2024.

Net charge-offs for the year ended December 31, 2025 were $1.9 million compared with net charge-offs of $1.2 million for the year ended December 31, 2024.

The ratio of net charge-offs to average loans outstanding was 0.09% for 2025 and 0.06% for 2024.

Net charge-offs for the year ended December 31, 2024 were primarily due to $0.2 million in net charge-offs on commercial and industrial loans, comprised of $0.3 million in charge-offs on two loans in the fourth quarter of 2024 and $0.1 million in recoveries of previously charged-off loans throughout the year, and $1.0 million in net charge-offs of consumer loans, primarily relating to the indirect auto lending portfolio.

Similarly, net charge-offs for the year ended December 31, 2023 were primarily due to the $0.3 million charge-off of a commercial and industrial loan and consumer charge-offs related to the indirect auto lending portfolio.

The table below summarizes the Corporation’s allowance for credit losses, nonaccrual loans, and ratio of net charge-offs and recoveries to average loans outstanding by loan category at or for the years ended December 31, 2024 and 2023 (in thousands):

Net charge-offs for the year ended December 31, 2025 were primarily due to $1.1 million in net charge-offs of total consumer loans, which were largely concentrated in indirect auto loans, and $0.8 million in net charge-offs of commercial and industrial loans, which included a $0.7 million charge-off in the second quarter of 2025 on a loan which had previously carried a $0.7 million specific allocation in the allowance for credit losses.

Net charge-offs for the year ended December 31, 2024 were primarily due to $1.0 million in net charge-offs of total consumer loans, largely concentrated in indirect auto loans, and $0.2 million in net charge-offs on commercial and industrial loans, comprised of $0.3 million in charge-offs on two loans in the fourth quarter of 2024 and $0.1 million in recoveries of previously charged-off loans throughout the year.

The table below summarizes the Corporation’s allowance for credit losses, non-performing loans, and ratio of net charge-offs and recoveries to average loans outstanding by loan category at or for the years ended December 31, 2025 and 2024 (in thousands):

ALLOWANCE AND LOAN CREDIT RATIOS BY LOAN CATEGORY

Balance as of December 31, 2024 Allowance for credit losses Allowance to loans 1

Balance as of December 31, 2025

Allowance for credit losses Allowance to loans 1

Non-performing loans Non-performing loans to loans 1

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(1) Ratio represents a percentage of year end loan balances.

Balance as of December 31, 2023 Allowance for credit losses Allowance to loans 1

Balance as of December 31, 2024

Allowance for credit losses Allowance to loans 1

Non-performing loans Non-performing loans to loans 1

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Allowance for credit losses to non-performing loans 306.13 % 238.87 %

The increase in the allowance to nonaccrual loans was primarily due to a 14.0% decrease in nonaccrual loans between December 31, 2023 and December 31, 2024, or $1.5 million, which was only partially offset by a 5.0% decrease in the allowance for credit losses, or $1.1 million.

The majority of loan balances removed from nonaccrual loan balances during 2024 either due to payoff or return to accrual status did not have an associated specific allocation in the allowance for credit losses, primarily due to being well collateralized by real estate.

Similarly, a majority of loan balances added to nonaccrual status during 2024 did not have an associated specific allocation in the allowance for credit losses as of December 31, 2024, due to being well collateralized by real estate.

Of the loans added to nonaccrual during 2024 only one loan, a $1.0 million commercial real estate loan secured by 1-4 family residential properties, had a specifc allocation in the allowance for credit losses as of December 31, 2024, which was $0.1 million.

The increase in the allowance to non-performing loans ratio was primarily due to an increase of 13.2% in the allowance for credit losses, or $2.8 million, between December 31, 2024 and December 31, 2025, as well as a decrease of 11.7% in non-performing loans or $1.0 million.

The increase in the allowance for credit losses primarily reflected higher baseline loss rates following the annual review and update of the model’s loss drivers, along with additional reserves attributable to growth in the commercial loan portfolio.

Under the Corporation's CECL methodology, commercial loan pools generally received higher allocation rates within the allowance for credit losses during 2025.

A majority of balances removed from non-performing loans during 2025 due to payoffs or return to accrual status did not have associated specific allocations in the allowance for credit losses.

There were $0.8 million in non-performing commercial loan balances which were charged-off during 2025, which had specific allocation of $0.8 million in the allowance for credit losses at the time of charge-off.

The table below summarizes the Corporation's credit loss experience for the years ended December 31, 2025 and 2024 (in thousands, except ratio data):

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Allowance for credit losses at beginning of year $ 21,388 $ 22,517

Impact of ASC 326 Adoption — 374

Commercial and industrial 797 302

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Net charge-offs 1,872 1,160

Provision (credit) for credit losses on-balance sheet exposure (1)

Provision for credit losses on-balance sheet exposure (1)

Allowance for credit losses at end of year $ 24,209 $ 21,388

Ratio of net charge-offs during year to average loans outstanding 0.09% 0.06%

Ratio of allowance for credit losses to total loans outstanding 1.07% 1.03%

(1) Additional provision related to off-balance sheet exposure was a credit of $256 thousand for the year ended December 31, 2025 and a credit of $77 thousand for the year ended December 31, 2024.

Other Real Estate Owned and Repossessed Vehicles

As of December 31, 2024, OREO totaled $0.4 million compared to $0.3 million as of December 31, 2023.

There were four properties relating to residential mortgages and four properties relating to residential home equity loans added to OREO in 2024.

Three properties relating to residential mortgages and three properties relating to home equity loans were sold from OREO during 2024, resulting in a net loss on sale of OREO of $18 thousand for the year ended December 31, 2024.

The Corporation had $0.2 million in repossessed vehicles as of December 31, 2024, which is included in other assets on the Consolidated Balance Sheet, and is a component of non-performing assets.

As of December 31, 2025, there was no other real estate owned (OREO), compared to $0.4 million as of December 31, 2024.

There were no properties added to OREO during 2025, while five properties were sold from OREO during 2025, two relating to residential mortgage loans and three relating to home equity loans, resulting in net gains on sales of OREO of $2 thousand for the year ended December 31, 2025, compared to net losses on sales of OREO of $18 thousand for the year ended December 31, 2024.

The Corporation had $0.3 million in repossessed vehicles as of December 31, 2025, which is included in other assets on the Consolidated Balance Sheets, and is a component of non-performing assets, compared to $0.2 million as of December 31, 2024.

The table below summarizes the Corporation’s deposit composition by segment as of December 31, 2025, and 2024, and the dollar and percent change from December 31, 2024 to December 31, 2025 (in thousands, except percentages):

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As of December 31, 2025, demand deposit and insured money market deposits comprised 68.4% of total deposits compared with 63.7% as of December 31, 2024.

The decrease in deposits was attributable to decreases of $50.6 million in brokered deposits, $28.6 million in insured money market deposits, $27.4 million in non interest-bearing demand deposits, and $3.6 million in savings deposits.

These decreases were partially offset by increases of $62.3 million in customer time deposits and $15.4 million in interest-bearing demand deposits, primarily due the higher interest rate environment and a a shift in the mix of deposits towards higher cost interest-bearing accounts such as time deposits, when compared to the prior year.

Excluding brokered deposits, total deposits increased $18.1 million compared to December 31, 2023.

The decrease in deposits was attributable to decreases of $92.2 million in brokered deposits, $68.1 million in customer time deposits, and $1.2 million in non interest-bearing demand deposits, primarily due to maturities of previous certificates of deposit campaign offerings, which were not renewed.

These decreases were partially offset by increases of $20.1 million in interest-bearing demand deposits, $8.9 million in savings deposits, and $6.3 million in insured money market deposits.

The table below summarizes the Corporation’s deposit composition by customer as of December 31, 2025, and 2024 (in thousands, except percentages):

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Total deposits $ 2,270,674 100.0 % $ 2,396,883 100.0 %

As of December 31, 2024, public funds deposits totaled $266.3 million, compared with $293.1 million as of December 31, 2023.

As of December 31, 2025, public funds deposits, excluding public deposits from ICS/CDARs, totaled $161.4 million, compared with $145.6 million as of December 31, 2024.

The Corporation has developed a program for the retention and management of public funds deposits.

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Public funds deposit accounts above the FDIC insured limit are collateralized by municipal bonds and eligible government and government agency securities such as those issued by the FHLB, Fannie Mae, and Freddie Mac.

The table below summarizes the Corporation’s public funds deposit composition by segment (in thousands, except percentages) as of December 31, 2024 and 2023:

The table below summarizes the Corporation’s public funds deposit composition, excluding public deposits from ICS/CDARs, by segment (in thousands, except percentages) as of December 31, 2025 and 2024:

Public Funds :

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Deposits placed in the CDARS and ICS programs were $326.5 million and $387.3 million as of December 31, 2025 and 2024, respectively.

Brokered deposits, which include funds obtained through brokers or the CDARS and ICS one-way buy programs, were $92.2 million and $142.8 million as of December 31, 2024 and 2023.

Brokered deposits, which include funds obtained through brokers or the CDARS and ICS one-way buy programs, were $92.2 million as of December 31, 2024.

The Corporation had no brokered deposits as of December 31, 2025.

The Corporation’s deposit strategy is to fund the Bank with stable, low-cost deposits, primarily checking account deposits and other low interest-bearing deposit accounts.

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Information regarding deposits is included in Note 8 to the audited Consolidated Financial Statements appearing elsewhere in this report.

FHLBNY overnight advances were $109.1 million and $31.9 million as of December 31, 2024 and 2023, respectively, an increase of $77.2 million as of December 31, 2024, compared to December 31, 2023.

FHLBNY overnight advances were $87.1 million and $109.1 million as of December 31, 2025 and 2024, respectively, a decrease of $22.0 million as of December 31, 2025, compared to December 31, 2024.

For each year ended December 31, 2025, and 2024 respectively, the average outstanding balance of borrowings that mature in one year or less did not exceed 30% of shareholders' equity.

There were no FHLBNY or FRB term advances as of December 31, 2025, and 2024.

Information regarding FHLBNY advances is included in Note 9 of the audited Consolidated Financial Statements appearing elsewhere in this report.

On June 10, 2025, the Corporation issued $45.0 million of 7.75% fixed-to-floating rate subordinated notes due June 15, 2035 in a private offering (the "Notes").

The Notes bear interest at a fixed rate of 7.75% per year, payable semi-annually, for the first five years.

From June 15, 2030 to the June 15, 2035 maturity date, the interest rate will adjust to a floating rate equal to a benchmark rate which is expected to be the then-current three-month term SOFR plus 415 basis points, payable quarterly.

The subordinated notes were $44.0 million as of December 31, 2025.

Information regarding FHLBNY advances and the Corporation's subordinated notes are included in Note 9 of the audited Consolidated Financial Statements appearing elsewhere in this report.

There were no securities sold under agreements to repurchase as of and for the years ended December 31, 2025, or 2024.

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Since the terms of mirroring interest rate swap agreements are identical, the income statement impact to the Corporation is limited to the day one gain and a valuation allowance for potential credit loss exposure, in the event of nonperformance.

The Corporation recognized $0.3 million in swap income for each of the years ended December 31, 2024 and 2023, respectively.

The Corporation recognized $0.5 million and $0.3 million in swap income for the years ended December 31, 2025 and 2024, respectively.

The Corporation also participates in the credit exposure of certain interest rate swaps of lead banks in which it is a participant in the related commercial loan.

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Total shareholders’ equity was $254.7 million as of December 31, 2025, compared with $215.3 million as of December 31, 2024, an increase of $39.4 million, or 18.3%.

The increase in shareholders' equity was due primarily to an increase of $17.8 million in retained earnings and a decrease of $0.9 million in accumulated other comprehensive loss.

The increase in retained earnings was due primarily to net income of $23.7 million, offset by $5.9 million in dividends declared during the year ended December 31, 2024.

The decrease in accumulated other comprehensive loss was primarily due to revised actuarial assumptions related to the Corporation's pension plans, offset by the unfavorable impact of interest rates on available for sale securities during the current year.

Treasury stock decreased $0.3 million primarily due to the Corporation's issuance of shares related to the Corporation's employee benefit plans.

The increase in shareholders' equity was due primarily to a decrease of $29.0 million in accumulated other comprehensive loss and an increase of $8.8 million in retained earnings.

The decrease in accumulated other comprehensive loss was mainly due to an increase in the fair value of available for sale securities due to favorable changes in market interest rates, as well as a portion of accumulated other comprehensive loss being reclassified into current period earnings as a result of the Corporation's sales of available for sale securities in the second quarter of 2025.

The increase in retained earnings was largely due to net income of $15.1 million, inclusive of a $13.2 million net loss on sales of available for sale securities in the second quarter of 2025, offset by $6.3 million in dividends declared during the year ended December 31, 2025.

Total shareholders’ equity to total assets ratio was 9.40% as of December 31, 2025 compared with 7.76% as of December 31, 2024.

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As of December 31, 2025, the Bank’s capital ratios were in excess of those required to be considered well capitalized under regulatory capital guidelines.

A comparison of the Bank’s actual capital ratios to the ratios required to be adequately or well-capitalized as of December 31, 2024 and 2023, is included in Footnote 19 of the audited Consolidated Financial Statements.

A comparison of the Bank’s actual capital ratios to the ratios required to be adequately or well capitalized as of December 31, 2025 and 2024, is included in Footnote 19 to the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

For more information regarding current capital regulations see Part I-“Business-Supervision and Regulation-Regulatory Capital Requirements.”

Cash dividends declared during 2024 and 2023 each totaled $5.9 million, or $1.24 per share.

Cash dividends declared during 2025 totaled $6.3 million, or $1.32 per share, while cash dividends declared during 2024 totaled $5.9 million, or $1.24 per share.

Dividends declared during 2025 amounted to 41.88% of net income compared to 24.91% of net income for 2024.

The increase in the dividend payout ratio for the year ended December 31, 2025 compared to the prior year was largely due to the loss recognized on the Corporation's sales of available for sale securities in the second quarter of 2025.

Management seeks to continue generating sufficient capital internally, while continuing to pay dividends to the Corporation’s shareholders.

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The Corporation uses a variety of resources to meet its liquidity needs.

These include short term investments, cash flow from lending and investing activities, core-deposit growth and non-core funding sources, such as time deposits of $250,000 or more, brokered deposits, FHLBNY overnight and term advances, FRB advances, and securities sold under agreements to repurchase.

These may include short term investments, cash flow from lending and investing activities, core-deposit growth and non-core funding sources, such as time deposits greater than $250,000, brokered deposits, FHLBNY overnight and term advances, FRB advances, and securities sold under agreements to repurchase.

Borrowings may be used on a short-term basis for liquidity purposes or on a long-term basis to fund asset growth.

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The Corporation considers the level of uninsured deposits to be an important factor when considering liquidity management and strategic decisions due to their fluidity.

The increase in the ratio of uninsured deposits to total deposits as of December 31, 2025 compared to December 31, 2024 was largely due to a decrease in total brokered deposits as of December 31, 2025 compared to December 31, 2024.

As of December 31, 2025, the Corporation's cash and cash equivalents balance was $50.1 million.

The Corporation also maintains an investment portfolio of securities available for sale, comprised primarily of mortgage-backed securities, U.S.

Government Treasury securities, Small Business Administration loan pools, and municipal bonds.

The Corporation also maintains an investment portfolio of securities available for sale, comprised primarily of agency mortgage-backed securities, collateralized mortgage obligations, corporate bonds, and municipal bonds.

Although this portfolio generates interest income for the Corporation, it also serves as an available source of liquidity and capital if the need should arise.

As of December 31, 2025, the Corporation's investment in securities available for sale was $280.6 million, $102.4 million of which was not pledged as collateral.

The Corporation is a member of the FHLBNY, which allows it to access borrowings to enhance management's ability to satisfy future liquidity needs.

The Bank is a member of the FHLBNY, which allows it to access borrowings to enhance management's ability to satisfy future liquidity needs.

The Bank has pledged $255.1 million and $244.6 million of residential mortgage loans and home equity loans under a blanket lien arrangement as collateral for future borrowings, as of December 31, 2025 and 2024, respectively.

Borrowings may be used on a short-term basis for liquidity or on a long-term basis to fund asset growth.

The below table summarizes the Corporation's total sources of liquidity as of December 31, 2025 and 2024 (in millions):

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Net cash provided by operating activities $ 45,499 $ 29,815

Net cash used by investing activities (57,723) (82,381)

Net cash provided by financing activities 38,096 32,478

Net cash provided (used in) by investing activities 68,320 (57,723)

Net cash provided (used in) by financing activities (110,757) 38,096

Net increase (decrease) in cash and cash equivalents $ 3,062 $ 10,188

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Investing activities

Cash used in investing activities during the years ended December 31, 2024 and 2023 predominantly resulted from a net increase in loans, offset by maturities, and principal collected on securities available for sale.

Cash provided by investing activities during the year ended December 31, 2025 largely resulted from proceeds from the Corporation's sales of available for sale securities, totaling $227.3 million, as well as proceeds from normal paydown activity and maturities of available for sale securities, partially offset by a net increase in loans.

Cash used in investing activities during the year ended December 31, 2024 was largely due to a net increase in loans, partially offset by proceeds from paydown activity and maturities of available for sale securities.

Financing activities

Cash provided by financing activities during the years ended December 31, 2024 and 2023 resulted primarily from an increase in certificate of deposits, brokered deposits, and FHLBNY overnight advances, offset by the payment of dividends to shareholders.

Cash used in financing activities during the year ended December 31, 2025 primarily resulted from a net decrease in total deposits, due to decreases in brokered deposits and customer time deposits, as well as a net decrease in total FHLBNY advances, partially offset by the issuance of $45.0 million in subordinated debt during the second quarter of 2025.

Cash provided by financing activities during the year ended December 31, 2024 was largely due to a net increase in total FHLBNY advances, partially offset by a net decrease in deposits other than time deposits.

Off-balance Sheet Arrangements

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That presentation provides the reader with an understanding of the Corporation’s results that can be tracked consistently from year-to-year and enables a comparison of the Corporation’s performance with other companies’ GAAP financial statements.

In addition to analyzing the Corporation’s results on a reported basis, management uses certain non-GAAP financial measures, because it believes these non-GAAP financial measures provide information to investors about the underlying operational performance and trends of the Corporation and, therefore, facilitate a comparison of the Corporation with the performance of its competitors.

Non-GAAP financial measures used by the Corporation may not be comparable to similarly named non-GAAP financial measures used by other companies.

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Non-interest income (GAAP) $ 7,945 $ 23,230

net (gains) losses on security transactions — 39

recognition of employee retention tax credit — (2,370)

net (gains) losses on securities transactions 17,498 —

(gain) loss on sale of branch property (629) —

Adjusted non-interest income (non-GAAP) $ 24,814 $ 23,230

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Reported net income (GAAP) $ 15,104 $ 23,671

Net (gains) losses on security transactions (net of tax) — 29

Recognition of employee retention tax credit — (1,873)

Net (gains) losses on securities transactions (net of tax) 13,237 —

Net (gain) loss on sale of branch property (net of tax) (463) —

Net income (non-GAAP) $ 27,878 $ 23,671

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis