What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-10 compared with 2025-08-05 · 132 added, 119 removed, 424 unchanged (37% of the section changed)

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• the possibility that any of the anticipated benefits of the Merger (as defined below) will not be realized or will not be realized within the expected time period;

the risk that integration of the operations of Penns Woods operations with those of the Company will be materially delayed or will be more costly or difficult than expected;

the diversion of management’s attention from ongoing business operations and opportunities due to the integration of Penns Woods' operations with those of the Company;

the challenges of integrating and retaining key employees;

the effect of the Merger on the combined company’s customer and employee relationships and operating results;

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• the effects of any federal government shutdown or the inability of the federal government to manage debt limits:

• a prolonged government shutdown, which could adversely affect the U.S.

and global economy;

• changes in the financial performance and/or condition of our borrowers;

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• changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

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• our ability to access cost-effective funding;

• the effect of global or national war, conflict, or terrorism;

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• our ability to manage market risk, credit risk and operational risk;

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Early adoption is permitted.

In September 2025, the FASB issued ASU 2025-06, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software”.

This ASU addresses the challenges of applying current internal-use software accounting requirements due to the evolution of software development since the original guidance was issued.

The ASU removes all references to project stages.

The amendments require an entity to start capitalizing software costs when management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended.

The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2027, and for interim reporting periods beginning after December 15, 2027.

Early adoption is permitted as of the beginning of an annual reporting period.

We do not believe this guidance will have a material impact on the Company's financial statements.

On July 4, 2025, President Trump signed into law the legislation formally titled “An Act to Provide for Reconciliation Pursuant to Title II of H.

14” and commonly referred to as the One Big Beautiful Bill Act(“the Act”).

The Company is currently evaluating income tax implications of the Act.

The Company does not expect the Act to have a material impact on the Company’s financial statem ents.

The enactment of the Act did not have a material impact on the company's financial statements.

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Acquisition of Penns Woods

On July 25, 2025, the Company completed its acquisition of Penns Woods, pursuant to the Merger Agreement, which was entered into by the Company and Penns Woods on December 16, 2024.

On July 25, 2025, the Company completed its acquisition of Penns Woods, pursuant to the merger agreement, which was entered into by the Company and Penns Woods on December 16, 2024 (the "Merger Agreement").

In accordance with the Merger Agreement, the Company and Penns Woods completed a business combination whereby Penns Woods merged with and into the Company (the “Merger”), with the Company as the surviving corporation in the Merger.

Immediately after the effective time of the Merger (the “Effective Time”), Penns Woods’ wholly-owned subsidiary banks, Luzerne Bank, a Pennsylvania-chartered state bank, and Jersey Shore State Bank, a Pennsylvania-chartered state bank, merged with and into Northwest Bank, with Northwest Bank as the surviving bank in the subsidiary bank mergers.

Under the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each share of

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Penns Woods’ common stock, $5.55 par value, issued and outstanding immediately prior to the Effective Time (except for Treasury Shares (as provided for in the Merger Agreement), converted, in accordance with the procedures set forth in the Merger Agreement, into a right to receive 2.385 shares of common stock, $0.01 par value, of the Company.

Under the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each share of Penns Woods’ common stock, $5.55 par value, issued and outstanding immediately prior to the Effective Time (except for Treasury Shares (as provided for in the Merger Agreement), converted, in accordance with the procedures set forth in the Merger Agreement, into a right to receive 2.385 shares of common stock, $0.01 par value, of the Company.

The Penns Woods results of operations are included in the Company’s consolidated results since the date of acquisition.

Therefore, the Company’s third quarter and year to date 2025 results reflect increased levels of average balances, net interest income, and noninterest expense compared to the prior quarter and 2024 results.

After purchase accounting fair value adjustments, the acquisition added $2.2 billion of total assets, including $1.8 billion of loans, $160 million of investments, of which $82 million were immediately sold, as well as $2.0 billion of total liabilities, primarily consisting of $1.6 billion in deposits.

The Company recorded preliminary goodwill of $57 million and core deposit intangibles of $48 million re lated to the acquisition.

Comparison of Financial Condition

Total assets at June 30, 2025 were $14.5 billion, an increase of $77 million from December 31, 2024.

This increase in assets was primarily driven by increases in marketable securities and loans receivable.

Total assets at September 30, 2025 were $16.4 billion, an increase of $2.0 billion from December 31, 2024.

This increase in assets was primarily driven by the addition of the Penns Woods assets.

A discussion of significant changes follows.

Cash and cash equivalents decreased by $21 million, or 7%, to $267 million at June 30, 2025, from $288 million at December 31, 2024 due to these funds being invested into higher yielding loans and marketable securities.

Total marketable securities remained flat at $1.9 billion at June 30, 2025, increasing by $55 million, or 3%, from December 31, 2024.

Available-for-sale securities increased by $86 million, driven by a increase in net portfolio purchases during the quarter, while held-to-maturity securities decreased $31 million, driven by maturities and regular monthly cash flows.

Gross loans receivable was $11.3 billion at June 30, 2025, increasing $162 million from December 31, 2024.

Our personal banking loan portfolio increased by $98 million, to $6.4 billion at June 30, 2025 while our commercial banking loans increased by $64 million, to $4.9 billion at June 30, 2025.

This increase represents organic loan growth resulting from our vehicle loan portfolio and the new commercial lending verticals that we implemented during the prior year.

Specifically, our vehicle loans increased by $214 million, or 11%, while our commercial and industrial (C&I) loan portfolio increased by $131 million, or 7% compared to December 31, 2024.

The following table provides the various loan sectors in our commercial real estate portfolio at June 30, 2025:

Cash and cash equivalents decreased by $10 million, or 3%, to $279 million at September 30, 2025, from $288 million at December 31, 2024 due to these funds being invested into higher yielding loans and marketable securities.

Total marketable securities increased to $2.0 billion at September 30, 2025, increasing by $114 million, or 6%, from December 31, 2024.

Available-for-sale securities increased by $162 million, this was driven by the acquisition of Penns Woods which included $160 million is marketable securities, of which $82 million were immediately sold.

Additional increases were driven by the purchase of additional securities and the improvement of our unrealized loss position.

Held-to-maturity securities decreased $48 million, driven by maturities and regular monthly cash flows.

Gross loans receivable was $12.9 billion at September 30, 2025, increasing $1.8 billion from December 31, 2024.

This increase is attributed to the Penns Woods acquisition of $1.8 billion in loans.

Our personal banking loan portfolio increased by $810 million, to $7.1 billion at September 30, 2025 while our commercial banking loans increased by $951 million, to $5.8 billion at September 30, 2025.

The following table provides the various loan sectors in our commercial real estate portfolio at September 30, 2025:

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Property type Percent of portfolio

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Agricultural real estate 1.5

2-4 family 1.2

Commercial acquisition and development 1.6

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Total 100.0 %

The following table describes the collateral of our commercial real estate portfolio by state at June 30, 2025:

The following table describes the collateral of our commercial real estate portfolio by state at September 30, 2025:

State Percent of portfolio

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Pennsylvania 42.2

New Jersey 2.1

All other 10.5

Total 100.0 %

Total deposits increased by $56 million, to $12.2 billion at June 30, 2025 from $12.1 billion at December 31, 2024.

This increase was driven by a $145 million, or 7%, increase in money market accounts and $40 million, or 2%, increase in savings deposits.

Partially offsetting these increases was a decrease in time deposits of $107 million, or 4%, driven primarily by a decrease in brokered CDs, and

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a $44 million, or 2%, decrease in interest demand deposit accounts.

T he increase in both money market and saving account balances was partly due to customers shifting funds to these competitively priced products as their time deposits matured.

As of June 30, 2025, we had $106 million of brokered deposits, which made up 4% of our time deposits and 1% of our total deposit balance at quarter end.

The balance carried an average all-in cost of 4.18% and an average original term of 12 months.

Total deposits increased by $1.6 billion, to $13.7 billion at September 30, 2025 from $12.1 billion at December 31, 2024.

This increase was driven by the acquisition which resulted in an additional $1.6 billion in deposits.

As of September 30, 2025, we ha d $115 million of brokered deposits, which made up 4% of our time deposits and 1% of our total deposit balance at quarter end.

As of December 31, 2024, we had $201 million of brokered deposits, which made up 7% of our time deposits and 2% of our total deposit balance at year end.

The balance carried an avera ge all-in cost of 4.18% and 4.32% as of September 30, 2025 and December 31, 2024, respectively and an average original term of 12 months.

These deposits were purchased through a registered broker, as part of an Asset/Liability Committee (“ALCO”) strategy to increase and diversify funding sources.

In addition, at quarter end we had $731 million of deposits through our participation in the IntraFi Network Deposits and FIS Insured Deposit programs.

In addition, we had $795 million and had $713 million of deposits t hrough our participation in the IntraFi Network Deposits and FIS Insured Deposit programs as of September 30, 2025 and December 31, 2024, respectively .

These deposits are part of a reciprocal program that allows our depositors to receive expanded FDIC coverage by placing multiple interest-bearing demand accounts at other member banks and Northwest Bank receives an equal amount of deposits from other member banks.

The balance carried an average cost of 3.37%.

At June 30, 2025 and December 31, 2024, we had total deposits in excess of $250,000 (the limit for FDIC insurance) of $2.0 billion.

The balance carried an average cost of 3.34% as of September 30, 2025 and 3.68% as of December 31, 2024.

At September 30, 2025 and December 31, 2024, we had total deposits in excess of $250,000 (the limit for FDIC insurance) of $1.9 billion.

At those dates, we had no deposits that were uninsured for any other reason.

The following table presents details regarding the Company's uninsured deposits portfolio:

As of June 30, 2025

As of September 30, 2025

Balance Percent of

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(1) Uninsured deposits presented may be different from actual amounts due to titling of accounts.

Our largest uninsured depositor, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $40 million, or 0.24% of total deposits, as of June 30, 2025.

Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $194 million, or 1.59%, of total deposits, as of June 30, 2025.

The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $300,249 as of June 30, 2025.

Total shareholders’ equity remained stable at $1.6 billion, or $12.84 per share, at June 30, 2025 compared to $12.52 per share at December 31, 2024, increasing by $45 million in the current year.

This increase was the result of year-to-date earnings of $77 million as well as an improvement in accumulated other comprehensive loss of $15 million, or 14%, primarily due to a decrease in unrealized losses in the available-for-sale investment portfolio, partially offset by $51 million of cash dividend payments for the six months ended June 30, 2025.

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Our largest uninsured depositor, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $39 million, or 0.28% of total deposits, as of September 30, 2025.

Our top ten largest uninsured depositors, excluding intercompany and collateralized deposit accounts, had an aggregate uninsured deposit balance of $198 million, or 1.45%, of total deposits, as of September 30, 2025.

The average uninsured deposit account balance, excluding intercompany and collateralized accounts, was $323,353 as of September 30, 2025.

Total shareholders’ equity increased to $1.9 billion, or $12.70 per share, at September 30, 2025 compared to $12.52 per share at December 31, 2024, increasing by $259 million in the current year, primarily driven by the issuance of common stock in connection with the Penns Woods acquisition.

The additional increase was the result of the an improvement in accumulated other comprehensive loss of $24 million, or 21%, primarily due to a decrease in unrealized losses in the available-for-sale investment portfolio, partially offset by 81 million of cash dividend payments for the nine months ended September 30, 2025.

Regulatory Capital

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Capital requirements are presented in the tables below (dollars in thousands).

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At June 30, 2025

At September 30, 2025

Actual Minimum capital requirements (1) Well capitalized requirements (2)

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(2) Reflects the well-capitalized standard applicable to Northwest Bank and the well-capitalized standard applicable to the Company under the Federal Reserve Board’s Regulation Y.

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At December 31, 2024 (1)

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(3) Reflects the well-capitalized standard applicable to Northwest Bank and the well-capitalized standard applicable to the Company under the Federal Reserve Board’s Regulation Y.

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Regulatory Considerations

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These include the impact of tariffs, immigration reform, and changes at the agencies that regulate us, including the modification, rescission, withdrawal or changes to the approach and enforcement of rules and guidance relating to us.

In May 2025, President Trump signed a Congressional Review Act resolution that overturned the Consumer Financial Protection Bureau's December 2024 final rule that would have taken effect October 1, 2025 and imposed certain requirements on overdraft fees, similar to those that apply to credit cards, unless the financial institution limited the overdraft fee to an amount that covered the institution's costs and losses to provide the service or $5.

In July 2025, the FDIC, the Federal Reserve Board and the Office of the Comptroller of the Currency issued a notice of proposed rulemaking which, if finalized, would rescind the Community Reinvestment Act ("CRA") final rule issued in October 2023 and reinstate the CRA framework that existed prior to the issuance of that rule.

Implementation of the October 2023 final rule, which was subject to an injunction and has not taken effect, would have changed how the agencies evaluate CRA performance.

Northwest Bank is required to maintain a sufficient level of liquid assets, as determined by management and reviewed for adequacy by the FDIC and the Pennsylvania Department of Banking and Securities during their regular examinations.

Northwest frequently monitors its liquidity position primarily using the ratio of unencumbered available-for-sale liquid assets as a percentage of deposits and borrowings (“liquidity ratio”).

Northwest Bank’s liquidity ratio at June 30, 2025 was 12.51%.

Northwest Bank’s liquidity ratio at September 30, 2025 was 12.95%.

No rthwest Bank adjusts liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes and insurance on mortgage loan escrow accounts, repayment of borrowings and loan commitments.

At June 30, 2025, Northwest had $3.8 billion of additional borrowing capacity available with the FHLB, including $250 million on an overnight line of credit, which had no balance as of June 30, 2025, as well as $590 million of borrowing capacity available with the Federal Reserve Bank and $105 million with two correspondent banks.

We paid $26 million in cash dividends during the quarter ended June 30, 2025 compared to $25 million for the quarter ended June 30, 2024.

The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) for June 30, 2025 and 2024 was 76.9% and 500.0% on dividends of $0.20 per share.

On July 17, 2025, the Board of Directors declared a cash dividend of $0.20 per share payable on August 19, 2025 to shareholders of record as of August 8, 2025.

At September 30, 2025, Northwest had $3.7 billion of additional borrowing capacity available with the FHLB, including $250 million on an overnight line of credit, which had no balance as of September 30, 2025, as well as $795 million of borrowing capacity available with the Federal Reserve Bank and $369 million with four correspondent banks.

We paid $29 million in cash dividends during the quarter ended September 30, 2025 compared to $25 million for the quarter ended June 30, 2024.

The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) for the quarters ended September 30, 2025 and 2024 was 1000.0% and 76.9% on dividends of $0.20 per share.

On October 16, 2025, the Board of Directors declared a cash dividend of $0.20 per share payable on November 18, 2025 to shareholders of record as of November 6, 2025.

This represents the 124 th consecutive quarter we have paid a cash dividend.

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Exceptions are made for loans that have contractually matured, are in the process of being modified to extend the maturity date and are otherwise current as to principal and interest, and well-secured loans that are in the process of collection.

Loans may also be placed on nonaccrual before they reach 90 days past due if conditions exist that call into question our ability to collect all contractual interest.

Loans may also be placed on nonaccrual before they reach 90 days past due if conditions exist that call into question our ability to collect all

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contractual interest.

Other nonperforming assets represent property acquired through foreclosure or repossession.

Foreclosed property is carried at the lower of its fair value less estimated costs to sell or the principal balance of the related loan.

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June 30, 2025 December 31, 2024

September 30, 2025 December 31, 2024

(in thousands)

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For the purpose of calculating reserves, we have grouped our loans into seven segments:

residential mortgage loans, home equity loans, vehicle loans, consumer loans, commercial real estate loans, commercial real estate loans - owner occupied and commercial loans.

The allowance for credit losses is measured using a combination of statistical models and qualitative

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mortgage loans, home equity loans, vehicle loans, consumer loans, commercial real estate loans, commercial real estate loans - owner occupied and commercial loans.

The allowance for credit losses is measured using a combination of statistical models and qualitative assessments.

We use a twenty four month forecasting period and revert to historical average loss rates thereafter.

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We utilize a structured methodology each period when analyzing the adequacy of the allowance for credit losses and the related provision for credit losses, which the ACL Committee assesses regularly for appropriateness.

As part of the analysis as of June 30, 2025, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events.

As part of the analysis as of September 30, 2025, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events.

In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations.

The ACL increased by $12 million to $129 million, or 1.14% of total loans at June 30, 2025, up from 1.04% at December 31, 2024.

This increase was driven by downgrades and individual assessments within our commercial real estate portfolio offset by changes in the economic forecasts.

Total classified loans increased by $246 million to $518 million at June 30, 2025 compared to $272 million at December 31, 2024.

The ACL increased by $41 million to $157 million, or 1.22% of total loans at September 30, 2025, up from 1.04% at December 31, 2024.

This increase was primarily driven by the Day 1 initial provision from the Penns Woods acquisition of $20.6 million.

Excluding the Day 1 provision for credit losses from the acquisition, the provision for credit losses for the quarter ended September 30, 2025 was $10.5 million, which increased compared to the prior year primarily due to an increase in net charge offs coupled with an increase due to individually assessed loans.

Total classified loans increased by $255 million to $527 million at September 30, 2025 compared to $272 million at December 31, 2024.

This increase was driven by changes in our commercial real estate portfolio which increased $141 million.

The increase in classified loans was primarily driven by the remaining long-term healthcare portfolio being returned to held for investment, construction projects with lease up rates lower than projected and a few larger C&I borrowers whose performance deteriorateded during the year.

The increase in classified loans was driven by the Penns Woods acquisition, the remaining long-term healthcare portfolio being returned to held for investment, construction projects with lease up rates lower than projected and a few larger C&I borrowers whose performance deteriorated during the year.

We also consider how the levels of nonaccrual loans and historical charge-offs have influenced the required amount of allowance for credit losses.

Nonaccrual loans of $102 million at June 30, 2025 increased by $41 million, or 67%, from $61 million at December 31, 2024, or 0.90% of total loans receivable as of June 30, 2025 and 0.55% of total loans receivable as of December 31, 2024.

As a percentage of average loans, annualized net charge-offs remained low at 0.18% for the three months ended June 30, 2025 compared to 0.32% for the year ended December 31, 2024 which included a $15 million write-down on certain loans to fair value before they were transferred to held for sale.

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Comparison of Operating Results for the Quarters Ended June 30, 2025 and 2024

The following chart provides a reconciliation of net income from the quarter ended June 30, 2024 to the the quarter ended June 30, 2025 (dollars in thousands):

Net income for the quarter ended June 30, 2025 was $34 million, or $0.26 per diluted share, an increase of $29 million, or 609%, from net income of $5 million, or $0.04 per diluted share, for the quarter ended June 30, 2024.

This increase in net income resulted primarily from a increase in net interest income of $13 million, or 12% and noninterest income of $40 million or partially offset by a $9 million increase in the provision for credit losses, an increase in noninterest expense of $5 million, or 6% and a $9 million, increase in income tax expense.

Net income for the quarter ended June 30, 2025 represents annualized returns on average equity and average assets of 8.26% and 0.93%, respectively, compared to 1.24% and 0.13% for the same quarter last year.

Nonaccrual loans of $128 million at September 30, 2025 increased by $67 million, or 109%, from $61 million at December 31, 2024, or 0.99% of total loans receivable as of September 30, 2025 and 0.55% of total loans receivable as of December 31, 2024.

As a percentage of average loans, annualized net charge-offs were 0.29% for the three months ended September 30, 2025 compared to 0.32% for the year ended December 31, 2024 which included a $15 million write-down on certain loans to fair value before they were transferred to held for sale.

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Comparison of Operating Results for the Quarters Ended September 30, 2025 and 2024

The following chart provides a reconciliation of net income from the quarter ended September 30, 2024 to the quarter ended September 30, 2025 (dollars in thousands):

Net income for the quarter ended September 30, 2025 was $3 million, or $0.02 per diluted share, a decrease of $31 million, or 91%, from net income of $34 million, or $0.26 per diluted share, for the quarter ended September 30, 2024.

This decrease in net income resulted primarily from an increase in noninterest expense of $43 million which was driven by the increase in acquisition expense of $31 million and compensation and employee benefits of $7 million.

This was offset by an increase in net interest income of $25 million which was driven by an increase in income on loans receivable of $21 million.

Net income for the quarter ended September 30, 2025 represents annualized returns on average equity and average assets of 0.69% and 0.08%, respectively, compared to 8.50% and 0.93% for the same quarter last year.

To make it easier to compare both the results across several periods and the yields on various types of earning assets (some taxable, some not), we present net interest income in the discussion below on a fully taxable equivalent “FTE basis” (i.e., as if all income were taxable and at the same rate).

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Net Interest Income

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Net interest income for the second quarter of 2025 was $119 million which increased $13 million, or 12%, from the second quarter of 2024.

Net interest income (FTE) was $120 million for the quarter ended June 30, 2025 and net interest margin (FTE) was 3.56%.

Compared to the same quarter of the prior year, net interest income (FTE) increased $13 million and net interest margin (FTE) increased by thirty-six basis points .

The increase in net interest income (FTE) and net interest margin (FTE) was driven by an increase in interest income resulting from higher earning asset yields, inclusive of an non-accrual interest recovery, coupled with a decrease in interest expense due to decline in the average balance of borrowings and higher cost brokered CD.

Partly offsetting this increase was a decrease in the average balance of earning assets.

For the six months ended June 30, 2025 , net interest income (FTE) was $249 million , an increase of $37 million , or 18% from the same period last year.

Net interest margin increased by fifty-seven basis points.

Similar to the quarterly fluctuations noted above, the increase in net interest income (FTE) included increases in interest income driven by higher interest-earning asset yields, including the non-accrual interest recovery, and balances, partially offset by lower interest-bearing liability costs and balances.

Average loans receivable decreased $120 million, or 1%, from the quarter ended June 30, 2024.

This decrease was driven by personal banking loans and commercial real estate loans, which decreased by $265 million and $187 million, respectively.

These decreases were partially offset by an increase in commercial loans of $332 million from the quarter ended June 30, 2024 as we have continued to build-out our commercial lending verticals.

Interest income on loans receivable increased by $1 million, or 1%, from the same quarter in the prior year, and by $16 million, or 5%, from the same six-month period in the prior year, driven by a loan mix shift towards higher yielding commercial loan s and an interest recovery of $13.1 million on a non-accrual commercial real estate loan payoff during the first quarter of 2025.

Average investments increased 2% from the second quarter of 2024 driven by the reinvestment of cash flows from regular principal payments and maturities.

Interest income on investment securities increased by $3 million, or 29%, from the quarter ended June 30, 2024 and increased $7 million, or 35%, for the six months ended June 30, 2024.

The increase is due to the increase in the average

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yield on investments (FTE) to 2.69% for the quarter ended June 30, 2025 and 2.65% for the six months ended June 30, 2025 coupled with growth in the average balance of investments.

Average deposits grew 1% from the quarter ended June 30, 2024 driven by an increase in our average money market and saving deposit accounts which grew by $163 million and $68 million, respectively, from the quarter ended June 30, 2024 partly due to customers shifting funds to these competitively priced products as their time deposits matured .

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Net interest income for the third quarter of 2025 was $136 million which increased $25 million, or 22%, from the third quarter of 2024.

Net interest income (FTE) was $137 million for the quarter ended September 30, 2025 and net interest margin (FTE) was 3.65%.

Compared to the same quarter of the prior year, net interest income (FTE) increased $25 million and net interest margin (FTE) increased by thirty-two basis points.

The increase in net interest income (FTE) and net interest margin (FTE) was driven by an increase in interest income resulting from higher earning asset yields, coupled with a decrease in interest expense due to decline in the average balance of borrowings and higher cost brokered CD.

For the nine months ended September 30, 2025 , net interest income (FTE) was $386 million , an increase of $62 million , or 19% from the same period last year.

Net interest margin increased by forty-eight basis points.

Similar to the quarterly fluctuations noted above, the increase in net interest income (FTE) included increases in interest income driven by higher interest-earning asset yields, including a $13.1 million non-accrual interest recovery in the first quarter of 2025, and balances, partially offset by lower interest-bearing liability costs and balances.

Average loans receivable increased $1.3 billion, or 12%, from the quarter ended September 30, 2024.

This increase was driven by the acquisition of Penns Woods which resulted in an additional $1.8 billion in loans.

Interest income on loans receivable increased by $21 million, or 14%, from the same quarter in the prior year, and by $37 million, or 8%, from the same nine-month period in the prior year, driven by the Penns Woods acqusition and a loan mix shift towards higher yielding commercial loan s and an interest recovery of $13.1 million on a non-accrual commercial real estate loan payoff during the first quarter of 2025.

Average investments increased 6% from the third quarter of 2024 driven by the Penns Woods acquisition and the reinvestment of cash flows from regular principal payments and maturities.

Interest income on investment securities increased by $2 million, or 19%, from the quarter ended September 30, 2024 and increased $9 million, or 29%, for the nine months ended September 30, 2024.

The increase is due to the increase in the average balance of investment and the increase in yield on investments (FTE) to 2.81% for the quarter ended September 30, 2025 and 2.71% for the nine months ended September 30, 2025.

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Average deposits grew 10% from the quarter ended September 30, 2024 driven by an increase in average balances from the Penns Woods merger.

Our average money market and interest-bearing checking deposit accounts grew by $426 million and $215 million, respectively, from the quarter ended September 30, 2024 partly due to acquisition and customers shifting funds to these competitively priced products as their time deposits matured .

These increases were partially offset by a decrease in time deposits of $12 million.

Interest expense on deposits decreased by $6 million, or 11% from the quarter ended June 30, 2024, and by $6 million, or 6% from the six months ended June 30, 2024, primarily attributable to decrease in average yield and an increase in average balance of deposit accounts as we continued competitively positioning our deposit products.

Compared to the quarter ended June 30, 2024, average borrowings saw a 36% reduction.

This decrease was attributable to the strategic pay-down of wholesale borrowings with the proceeds from our investment portfolio restructuring in the second quarter of 2024 .

The decrease in the average balance of borrowings resulted in a decrease in interest expense on borrowings by $2 million from the quarter ended June 30, 2024 and $6 million from the six months ended June 30, 2024.

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Interest expense on deposits decreased by $2 million, or 4% from the quarter ended September 30, 2024, and by $9 million, or 6% from the nine months ended September 30, 2024, primarily attributable to decrease in average yield paid on deposits which was partially offset by an increase in average balance of deposit accounts.

Compared to the quarter ended September 30, 2024, average borrowings saw a 57% increase.

This increase was attributable to the acquisition of long-term borrowings from Penns Woods.

The increase in the average balance of borrowings resulted in an increase in interest expense on borrowings by $1 million from the quarter ended September 30, 2024.

Interest expense decreased $5 million from the nine months ended September 30, 2024 from the strategic pay-down of wholesale borrowings with the proceeds from our investment portfolio restructuring in the second quarter of 2024.

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Average Balance Sheet

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Average balances are calculated using daily averages.

Quarter ended June 30,

Quarter ended September 30,

balance Interest Avg.

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(h) Annualized.

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Rate/Volume Analysis

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Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.

For the quarter ended June 30, 2025 vs.

For the quarter ended September 30, 2025 vs.

Increase/(decrease) due to Total

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Net change in net interest income (FTE) $ 9,137 15,591 24,728

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Average Balance Sheet

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Average balances are calculated using daily averages

Six months ended June 30,

Nine months ended September 30,

balance Interest Avg.

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(h) Annualized.

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Rate/Volume Analysis

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Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.

For the six months ended June 30, 2025 vs.

For the nine months ended September 30, 2025 vs.

Increase/(decrease) due to Total

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Annualized net charge-offs to average loans 0.18 % 0.87 % 0.08 % 0.18 % 0.29 %

The provision for credit losses increased by $9 million from the quarter ended June 30, 2024.

This increase included a $9 million increase in the provision for credit losses - loans, as well as a $0.2 million decrease in the provision for credit losses - unfunded commitments.

The changes in the provision noted above is primarily driven by downgrades within our commercial real estate portfolio offset by changes in the economic forecasts coupled with a decline in our reserves for unfunded commitments in the current period.

This decline is based on the timing of origination and funding of commercial construction loans and lines of credit.

Additionally, the Company saw an increase in classified loans to $518 million, or 4.57% of total loans, at June 30, 2025 from $257 million, or 2.26% of total loans, at June 30, 2024 and $279 million, or 2.49% of total loans, at March 31, 2025.

This increase was driven by changes in our commercial real estate portfolio which increased $195 million.

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The provision for credit losses increased by $26 million from the quarter ended September 30, 2024.

This increase included a $26 million increase in the provision for credit losses - loans, as well as a $0.7 million increase in the provision for credit losses - unfunded commitments.

This increase is due to the initial Day 1 provision from the Penns Woods acquisition of $20.6 million.

Excluding the Day 1 provision for credit losses from the acquisition, the provision for credit losses for the quarter ended September 30, 2025 was $10.5 million, which increased compared to the prior year and the prior quarter primarily due to an increase in net charge offs coupled with an increase due to individually assessed loans.

The increase in our provision for unfunded commitments in the current period is due to the Penns Woods acquisition offset by a decline based on the timing of organic origination and funding of commercial construction loans and lines of credit.

Additionally, the Company saw an increase in classified loans to $527 million, or 4.07% of total loans, at September 30, 2025 from $320 million, or 2.83% of total loans, at September 30, 2024 and $518 million, or 4.57% of total loans, at June 30, 2025.

This increase was driven by changes in our commercial real estate portfolio which increased $141 million from the prior year.

from the prior quarter was primarily due to classified loans acquired in the Penns Woods acquisition which were partially offset by improvements in our legacy loan portfolio.

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In determining the amount of the current period provision, we considered current and forecasted economic conditions, including but not limited to improvements in unemployment levels, expected economic growth, bankruptcy filings, and changes in real estate values and the impact of these factors on the quality of our loan portfolio and historical loss experience.

We analyze the allowance for credit losses as described in the section entitled “ Allowance for Credit Losses.

” The provision that is recorded is appropriate, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at June 30, 2025.

Noninterest Income

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Financial Statements of this report.

Noninterest income for the quarter ended June 30, 2025 was $31 million, an increase of $40 million from the quarter ended June 30, 2024, and an increase of $40 million from the six months ended June 30, 2024 which was driven by the loss on sale in investments that occurred in the second quarter of 2024 .

Excluding the loss on sale of securities, noninterest income was flat from the quarter ended June 30, 2025 and increased $1 million, or 1%, from the six months ended June 30, 2024, driven by growth within our trust and other financial services operations.

Noninterest income for the quarter ended September 30, 2025 was $32 million, an increase of $4 million from the quarter ended September 30, 2024, driven by an increase in other operating income from a gain on equity method investments during the current quarter compared to a loss on equity method investments and the sale of a building during the prior year.

From the nine months ended September 30, 2024 noninterest income increased $45 million which was driven by the loss on sale in investments that occurred in the second quarter of 2024 .

Excluding the loss on sale of securities, noninterest income increased $5 million, or 6%, from the nine months ended September 30, 2024, driven by growth within our trust and other financial services operations.

Noninterest Expense

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Financial Statements of this report.

Noninterest expense increased by $5 million, or 6%, from the quarter ended June 30, 2024 and $7 million, or 4% from the six months ended June 30, 2024.

The increase from the prior year quarter was primarily attributable to the increase in acquisition expense of $4 million, or 226.1%, to $6 million for the quarter ended June 30, 2025, which is driven by the Penns Woods acquisition and an increase in c ompensation and employee benefits expense of $2 million, or 3%, to $55 million for the quarter ended June 30, 2025

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driven primarily by an increase in core and incentive compensation.

Partially offsetting this was a decrease in processing expense of $2 millions , or 12% based on lower software spend.

The increase from the six months ended June 30, 2024 was driven by an increase in acquisition expense of $4 million, or 157%, driven by the Penns Woods acquisition and an increase in compensation and employee benefits expense of $5 million or 4% driven primarily by an increase in core and incentive compensation and benefit costs.

These increases were offset by a decrease in processing expense of $2 million, or 8%, for the same reasons discussed above.

The provision for income taxes increased by $9 million from the quarter ended June 30, 2024 and by $14 million from the six months ended June 30, 2024 primarily due to higher income before income taxes.

Noninterest expense increased by $43 million, or 47%, from the quarter ended September 30, 2024 and $50 million, or 18% from the nine months ended September 30, 2024.

The increase from the prior year quarter was primarily attributable to the increase in merger and restructuring expenses of $31 million for the quarter ended September 30, 2025, which is driven by the Penns Woods acquisition and an increase in c ompensation and employee benefits expense of $7 million, or 12%, to $63 million for the quarter ended

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September 30, 2025 driven primarily by an increase in core compensation and benefits expense due to the addition of Penns Woods employees coupled with an increase in performance based incentive compensation expense.

Additionally, there was a $1 million in amortization of intangible expense related to the acquisition.

The increase from the nine months ended September 30, 2024 was driven by an increase in merger and restructuring expenses of $36 million, driven by the Penns Woods acquisition and an increase in compensation and employee benefits expense of $12 million or 7% driven primarily by the same factors discussed above.

The provision for income taxes decreased by $10 million from the quarter ended September 30, 2024 due to lower income before taxes caused by the large acquisition expense in during the third quarter.

The provision for income taxes increased by $4 million from the nine months ended September 30, 2024 primarily due to higher income before income taxes from the loss on sale in investments that occurred in the second quarter of 2024 .

The provision for income taxes is primarily driven by changes in our current period income before taxes.

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Quarter ended

September 30,

2025 June 30,

2025 March 31,

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2024 September 30,

2024 June 30,

Net interest income fully tax equivalent (FTE)

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Net interest income FTE 136,944 120,322 128,685 115,048 112,216

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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-Q

Item 2. Management’s Discussion and Analysis