NBT BANCORP INC (NBTB) FY 2021 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is an analysis of the Company’s results of operations for the fiscal years ended
December 31, 2021, 2020, and 2019, and financial condition as of December 31, 2021 and 2020. This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes.

Forward-Looking Statements

Certain statements in this filing and future filings by the NBT Bancorp Inc. (the “Company”) with the
Securities and Exchange Commission (“SEC”), in the Company’s press releases or other public or stockholder communications or in oral statements made with the approval of an authorized executive officer, contain forward-looking statements, as
defined in the Private Securities Litigation Reform Act. These statements may be identified by the use of phrases such as “anticipate,” “believe,” “expect,” “forecasts,” “projects,” “will,” “can,” “would,” “should,” “could,” “may,” or other
similar terms. There are a number of factors, many of which are beyond the Company’s control that could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that may cause actual results
to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) local, regional, national and international economic conditions and the impact they may have on the Company
and its customers and the Company’s assessment of that impact; (2) changes in the level of nonperforming assets and charge-offs; (3) changes in estimates of future reserve requirements based upon the periodic review thereof under relevant
regulatory and accounting requirements; (4) the effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board (“FRB”); (5) inflation, interest rate, securities
market and monetary fluctuations; (6) political instability; (7) acts of war or terrorism; (8) the timely development and acceptance of new products and services and perceived overall value of these products and services by users; (9) changes
in consumer spending, borrowings and savings habits; (10) changes in the financial performance and/or condition of the Company’s borrowers; (11) technological changes; (12) acquisitions and integration of acquired businesses; (13) the ability
to increase market share and control expenses; (14) changes in the competitive environment among financial holding companies; (15) the effect of changes in laws and regulations (including laws and regulations concerning taxes, banking,
securities and insurance) with which the Company and its subsidiaries must comply, including those under the Dodd-Frank Act, Economic Growth, Regulatory Relief, Consumer Protection Act of 2018, Coronavirus Aid, Relief and Economic Security Act
(“CARES Act”), and other legislative and regulatory responses to the coronavirus (“COVID-19”) pandemic; (16) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company
Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”) and other accounting standard setters; (17) changes in the Company’s organization, compensation and benefit plans; (18) the costs and effects of legal and regulatory
developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews; (19) greater than expected costs or difficulties related to the integration of new
products and lines of business; (20) the adverse impact on the U.S. economy, including the markets in which we operate, of the COVID-19 global pandemic; and (21) the Company’s success at managing the risks involved in the foregoing items. A
discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward looking statements is included in “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” within this Annual Report on Form 10-K.

Currently, one of the most significant factors that could cause actual outcomes to differ materially from the
Company’s forward-looking statements is the potential adverse effect of the current COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company, its customers and the global economy and
financial markets. The extent to which the COVID-19 pandemic impacts the Company will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic,
treatment developments, public adoption rates of COVID-19 vaccines, including booster shots, and their effectiveness against emerging variants of COVID-19, including the Delta and Omicron variants, the impact of the COVID-19 pandemic on the
Company’s customers and demand for financial services, the actions governments, businesses and individuals take in response to the pandemic, the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and
regional economies, national and local economic activity, and the pace of recovery when the COVID-19 pandemic subsides, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section entitled “Risk
Factors” in this Form 10-K as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.

The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only
as of the date made, and advises readers that various factors, including, but not limited to, those described above and other factors discussed in the Company’s annual and quarterly reports previously filed with the SEC, could affect the
Company’s financial performance and could cause the Company’s actual results or circumstances for future periods to differ materially from those anticipated or projected.

Unless required by law, the Company does not undertake, and specifically disclaims any obligations to,
publicly release any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

General

NBT Bancorp Inc. is a financial holding company headquartered in Norwich, New York, with total assets of
$12.0 billion at December 31, 2021. The Company’s business, primarily conducted through the Bank and its full-service retirement plan administration and recordkeeping subsidiary and full-service insurance agency subsidiary, consists of
providing commercial banking, retail banking, wealth management and other financial services primarily to customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, New Hampshire, Massachusetts,
Vermont, Maine and Connecticut. The Company’s business philosophy is to operate as a community bank with local decision-making, providing a broad array of banking and financial services to individual, commercial and municipal customers. The
financial review that follows focuses on the factors affecting the consolidated financial condition and results of operations of the Company and its wholly-owned subsidiaries, the Bank, NBT Financial and NBT Holdings during 2021 and, in summary
form, the preceding two years. Collectively, the registrant and its subsidiaries are referred to herein as “the Company.” Net interest margin is presented in this discussion on a fully taxable equivalent (“FTE”) basis. Average balances
discussed are daily averages unless otherwise described. The audited consolidated financial statements and related notes as of December 31, 2021 and 2020 and for each of the years in the three-year period ended December 31, 2021 should be read
in conjunction with this review.

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Critical Accounting Policies

The Company has identified policies as being critical because they require management to make particularly
difficult, subjective and/or complex judgments about matters that are inherently uncertain. The judgment and assumptions made are based upon historical experience or other factors that management believes to be reasonable under the
circumstances. Because of the nature of the judgment and assumptions, actual results could differ from estimates, which could have a material effect on our financial condition and results of operations. These policies relate to the allowance
for credit losses, pension accounting and provision for income taxes.

The allowance for credit losses consists of the allowance for credit losses and the allowance for losses on
unfunded commitments. As a result of the Company’s January 1, 2020, adoption of Accounting Standards Updates (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments (“CECL”) and its related amendments, our methodology for estimating the reserve for credit losses changed significantly from December 31, 2019. The standard replaced the “incurred loss” approach with an “expected
loss” approach known as current expected credit loss. The CECL approach requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). It removes the incurred loss approach’s threshold that delayed the
recognition of a credit loss until it was “probable” a loss event was “incurred.” The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and
supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience
should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic
conditions that are reasonable and supportable. The allowance for credit losses for loans, as reported in our consolidated statements of financial condition, is adjusted by an expense for credit losses, which is recognized in earnings, and
reduced by the charge-off of loan amounts, net of recoveries. The allowance for losses on unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby
letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The allowance for losses on unfunded commitments is determined by estimating future draws and applying the expected loss rates
on those draws.

Management of the Company considers the accounting policy relating to the allowance for credit losses to be a
critical accounting policy given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of our loan portfolio. Determining the
appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may
result in significant changes in the allowance for credit losses in those future periods. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be
increased under adversely different conditions or assumptions. Going forward, the impact of utilizing the CECL approach to calculate the reserve for credit losses will be significantly influenced by the composition, characteristics and quality
of our loan portfolio, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the reserve for credit losses, and therefore, greater
volatility to our reported earnings.

Management is required to make various assumptions in valuing the Company’s pension assets and liabilities.
These assumptions include the expected rate of return on plan assets, the discount rate, the rate of increase in future compensation levels and interest rate of credit for cash balance plans. Changes to these assumptions could impact earnings
in future periods. The Company takes into account the plan asset mix, funding obligations and expert opinions in determining the various rates used to estimate pension expense. The Company also considers market interest rates and discounted
cash flows in setting the appropriate discount rate. In addition, the Company reviews expected inflationary and merit increases to compensation in determining the rate of increase in future compensation levels.

The Company is subject to examinations from various taxing authorities. These tax laws are complex and
subject to different interpretations by the taxpayer and the relevant government taxing authorities. In establishing a provision for income tax expense, we must make judgments and interpretations about the application of these inherently
complex tax laws. Quarterly, a review of income tax expense and the carrying value of deferred tax assets and liabilities is performed and balances are adjusted as appropriate. In establishing a provision for income tax expense, we must make
judgments and interpretations about the application of these inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions. Although management
believes that the assumptions and judgments used to record tax-related assets or liabilities have been reasonable and appropriate, actual results could differ and we may be exposed to losses or gains that could be material. Should tax laws
change or the taxing authorities during their examinations determine that management’s assumptions differ from management’s and we do not prevail in a dispute over interpretations of tax laws, an adjustment may be required which could have a
material effect on the Company’s results of operations.

The Company’s policies on the CECL method for allowance for credit losses, pension accounting and provision
for income taxes are disclosed in Note 1 to the consolidated financial statements of this Form 10-K. All accounting policies are important and as such, the Company encourages the reader to review each of the policies included in Note 1 to the
consolidated financial statements to obtain a better understanding of how the Company’s financial performance is reported. Refer to Note 2 to the consolidated financial statements for recently adopted accounting standards.

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Non-GAAP Measures

This Annual Report on Form 10-K contains financial information determined by methods other than in accordance
with accounting principles generally accepted in the United States of America (“GAAP”). Where non-GAAP disclosures are used in this Annual Report on Form 10-K, the comparable GAAP measure, as well as a reconciliation to the comparable GAAP
measure, is provided in the accompanying tables. Management believes that these non-GAAP measures provide useful information that is important to an understanding of the results of the Company’s core business as well as provide information
standard in the financial institution industry. Non-GAAP measures should not be considered a substitute for financial measures determined in accordance with GAAP and investors should consider the Company’s performance and financial condition as
reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company.

Overview

Significant factors management reviews to evaluate the Company’s operating results and financial condition
include, but are not limited to: net income and earnings per share, return on average assets and equity, net interest margin, noninterest income, operating expenses, asset quality indicators, loan and deposit growth, capital management,
liquidity and interest rate sensitivity, enhancements to customer products and services, technology advancements, market share and peer comparisons. The Company’s results in 2021 and 2020 have been impacted by the COVID-19 pandemic and the CECL
accounting methodology, including the estimated impact of the COVID-19 pandemic on expected credit losses. The following information should be considered in connection with the Company’s results for the fiscal year ended December 31, 2021:

COVID-19 Pandemic and Company Response

The COVID-19 pandemic and countermeasures taken to contain its spread have caused economic and financial
disruptions globally. The impact of the COVID-19 pandemic on the Company’s results of operations and the ultimate effect of the pandemic will depend on numerous factors that are highly uncertain, including how long restrictions for business
and individuals will last, further information around the severity of the virus and any variants, additional actions taken by federal, state and local governments to contain and treat COVID-19 and what, if any, additional government relief
will be provided. The expected impact of the pandemic on the Company’s business, financial condition, results of operations, and its customers has not fully manifested. The fiscal stimulus and relief programs appear to have delayed or
mitigated any materially adverse financial impact to the Company. Once these stimulus programs have been exhausted, the Company’s credit metrics are expected to worsen and loan losses could ultimately materialize. Any potential loan losses
will be contingent upon the resurgence of the virus, including any new strains, offset by the potency of the vaccine along with its extensive distribution, and the ability for customers and businesses to return to their pre-pandemic routines.
However, economic uncertainty remains high and volatility is expected to continue in 2022.

In March 2020, the Company formed an Executive Task Force and engaged its established Incident Response
Team under its Business Continuity Plan to execute a comprehensive pandemic response plan. The Company has taken significant steps to address the needs of its customers impacted by COVID-19. The Company provided payment relief for all its
customers for 180 days or less, waiving associated late fees while not reporting these payment deferrals as late payments to the credit bureaus for all its consumer customers who were current prior to this event. The Company also offered
longer payment deferral options on a limited, case by case basis to address certain customers’ hardships related to the pandemic where it was able to gather information on the ongoing viability of the borrower’s long-term ability to return to
full payment. The Company continues to responsibly lend to qualified consumer and commercial customers, has designed special lending programs and continues to participate in government sponsored relief programs to respond to customers’ needs
during the pandemic. The Company believes its historically strong underwriting practices, diverse and granular portfolios and geographic footprint will help to mitigate any adverse impact to the Company.

The Company has participated in the Small Business Administration’s (“SBA”) PPP, a loan guarantee program
created under the CARES Act targeted to provide small businesses with support to cover payroll and certain other expenses. Loans made under the PPP are fully guaranteed by the SBA, whose guarantee is backed by the full faith and credit of the
United States government. PPP covered loans also afford borrowers forgiveness up to the principal amount of the PPP covered loan, plus accrued interest, if the loan proceeds are used to retain workers and maintain payroll or to make certain
mortgage interest, lease and utility payments, and certain other criteria are satisfied. The SBA will reimburse PPP lenders for any amount of a PPP covered loan that is forgiven, and PPP lenders will not be held liable for any representations
made by PPP borrowers in connection with their requests for loan forgiveness. Lenders receive pre-determined fees for processing and servicing PPP loans. In addition, PPP loans are risk-weighted at zero percent under the generally-applicable
Standardized Approach used to calculate risk-weighted assets for regulatory capital purposes.

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On December 27, 2020, the President signed into law the Consolidated Appropriation Act (“CAA”). The CAA,
among other things, extended the life of the PPP, effectively creating a second round of PPP loans for eligible businesses. The Company participated in the CAA’s second round of PPP lending. The Company processed approximately 3,100 loans
totaling $287 million in relief during 2021 as compared to 3,000 loans totaling over $548 million in 2020. The Company is supporting the forgiveness process under the PPP with online resources, educational webinars and a partnership with a
certified public accounting firm. During 2021, the Company has received payment from the SBA on 4,505 loans totaling $632.4 million as compared to 214 loans totaling $72.7 million in 2020.

The Company established a committee to ensure employee and customer safety and nimble response across
geographic and functional areas. The teams that make up this committee are focused on employee well-being, alternate work plans, physical workspace, working with customers and vendors, and policies, training and communication. The Committee
monitors the pandemic and the latest guidance at the local, state and national level. Health and safety protocols are in place to protect branch and onsite workers and are adjusted based on current information. Remote team members have
transitioned to hybrid work schedules. The Company has also offered additional benefits for health, childcare/eldercare needs and well-being to employees. New mobile, online, business banking and mortgage banking platforms were launched in
2020, and a new commercial banking platform was launched in 2021.

Results of Operations

The Company reported net income of $154.9 million for 2021, up 48.4% from net income of $104.4 million for
2020. Net interest income was $321.1 million for the year ended December 31, 2021, up $5.4 million, or 1.7%, from 2020. Average interest-earning assets were up $1.1 billion, or 11.1%, for the year ended December 31, 2021, as compared to 2020.
The provision for loan losses was a net benefit of $8.3 million for the year ended December 31, 2021, as compared with a net expense of $51.1 million for the year ended December 31, 2020. Significant non-recurring transactions occurring in
2021 included a $4.3 million estimated litigation settlement cost related to a pending lawsuit regarding certain of the Company’s deposit products and related disclosures. Significant non-recurring transactions occurring in 2020 included a
$4.8 million expense related to branch optimization.

The following table sets forth certain financial highlights:

The following tables provide non-GAAP reconciliations:

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2022 Outlook

The Company’s 2021 earnings reflected the Company’s continued ability to operate and manage through the
volatile economic conditions and challenges in the economy, while investing in the Company’s future. Throughout 2021, the Company, along with other financial services companies, experienced continued material disruptions from the COVID-19
pandemic and the subsequent rapid downward shift in the yield curve, which remained relatively flat for the majority of the year. However, the Company continues to see signs of recovery in the United States as the economy is poised for
continued above average growth in 2022, with consensus estimates for GDP growth approximately 4%. The combination of strong consumer demand, strong consumer and corporate balance sheets, a continuing reopening of the economy and historically
low interest rates provide fuel for growth. Significant items that may have an impact on 2022 results include:

The Company’s 2022 outlook is subject to factors in addition to those identified above and those risks and uncertainties that could impact the
Company’s future results are explained in ITEM 1A. RISK FACTORS.

Asset/Liability Management

The Company attempts to maximize net interest income and net income, while actively managing its liquidity
and interest rate sensitivity through the mix of various core deposit products and other sources of funds, which in turn fund an appropriate mix of earning assets. The changes in the Company’s asset mix and sources of funds, and the resulting
impact on net interest income, on a FTE basis, are discussed below. The following table includes the condensed consolidated average balance sheet, an analysis of interest income/expense and average yield/rate for each major category of
earning assets and interest-bearing liabilities on a taxable equivalent basis. Interest income for tax-exempt securities and loans has been adjusted to a taxable-equivalent basis using the statutory Federal income tax rate of 21% for 2021,
2020 and 2019.

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Average Balances and Net Interest Income

2021 OPERATING RESULTS AS COMPARED TO 2020 OPERATING RESULTS

Net Interest Income

Net interest income for the year ended 2021 was $321.1 million, up $5.4 million, or 1.7%, from 2020. FTE net interest margin of 3.03% for the year ended December 31, 2021, was down from 3.31% for the year ended December 31, 2020. Interest income decreased $8.4 million, or 2.4%, as the yield on average interest-earning
assets decreased 44 basis points (“bps”) from 2020 to 3.21%, while average interest-earning assets increased $1.1 billion primarily due to excess liquidity which was invested in both investment securities and loans resulting in an increase to
the average balance of investment securities. Interest expense was down $13.8 million, or 42.4%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020 as the cost of interest-bearing liabilities decreased 24
bps. The Federal Reserve lowered its target fed funds rate by 150 basis points in the first quarter of 2020.

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Analysis of Changes in FTE Net Interest Income

Loans and Corresponding Interest and Fees on Loans

The average balance of loans increased by approximately $81.4 million, or 1.1%, from 2020 to 2021 with the increases in commercial, commercial
real estate, residential mortgage and specialty lending portfolios being partly offset by the reduction in the average balance of PPP loans. The yield on average loans decreased from 4.13% in 2020 to 4.01% in 2021, as loans re-priced downward
due to the interest rate environment in 2021. FTE interest income from loans decreased 1.9%, from $308.1 million in 2020 to $302.3 million in 2021. This decrease was due to the decreases in yields. Net interest income in 2021 included $21.3
million of interest and fees on PPP loans.

Total loans were $7.5 billion at December 31, 2021 and 2020. Total PPP loans as of December
31, 2021 were $101.2 million (net of unamortized fees). The following PPP loan activity occurred during 2021: $286.6 million in PPP loan originations, $632.4 million of loans forgiven and $21.3 million of interest and fees recognized into
interest income. Excluding PPP loans, period end loans increased $329.2 million or 4.7% from December 31, 2020. Commercial and industrial loans increased $37.9 million to $1.5 billion; commercial real estate loans increased $124.7 million
to $2.3 billion; and total consumer loans increased $166.6 million to $3.6 billion. Total loans represent approximately 62.4% of assets as of December 31, 2021, as compared to 68.6% as of December 31, 2020.

The following table reflects the loan portfolio by major categories(1), net of deferred fees and origination costs, for the years indicated:

Composition of Loan Portfolio

Residential real estate loans consist primarily of loans secured by a first or second mortgage on primary
residences. We originate adjustable-rate and fixed-rate, one-to-four-family residential loans for the construction or purchase of a residential property or refinancing of a mortgage. These loans are collateralized by properties located in the
Company’s market area. Subprime mortgage lending, which has been the riskiest sector of the residential housing market, is not a market that the Company has ever actively pursued. The market does not apply a uniform definition of what
constitutes “subprime” lending. Our reference to subprime lending relies upon the “Statement on Subprime Mortgage Lending” issued by the OTS and the other federal bank regulatory agencies (the “Agencies”), on June 29, 2007, which further
referenced the “Expanded Guidance for Subprime Lending Programs,” or the Expanded Guidance, issued by the Agencies by press release dated January 31, 2001.

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Loans in the commercial and commercial real estate, consist primarily of loans made to small and
medium-sized entities. The Company offers a variety of loan options to meet the specific needs of our commercial customers including term loans, time notes and lines of credit. Such loans are made available to businesses for working capital
needs such as inventory and receivables, business expansion, equipment purchases, livestock purchases and seasonal crop expenses. These loans typically are collateralized by business assets such as equipment, accounts receivable and
perishable agricultural products, which are exposed to industry price volatility. The Company offers commercial real estate (“CRE”) loans to finance real estate purchases, refinancings, expansions and improvements to commercial and
agricultural properties. CRE loans are loans secured by liens on real estate, which may include both owner-occupied and nonowner-occupied properties, such as apartments, commercial structures, health care facilities and other facilities.

The Company offers a variety of Consumer loan products including indirect auto, specialty lending, home
equity and other consumer loans. Indirect auto loans include indirect installment loans to individuals, which are primarily secured by automobiles. Although automobile loans have generally been originated through dealers, all applications
submitted through dealers are subject to the Company’s normal underwriting and loan approval procedures. The specialty lending portfolio includes unsecured consumer loans across a national footprint originated through our relationship with
national technology-driven consumer lending companies that began over 10 years ago beginning with our investment in Springstone Financial LLC (“Springstone”) which was subsequently acquired by LendingClub in 2014. In 2017, the Company
partnered with Sungage Financial, Inc. to offer financing to consumers for solar ownership with the program tailored for delivery through solar installers. Advances of credit through this specialty lending business line are to prime borrowers
and are subject to the Company’s underwriting standards. Other Consumer loans consist of direct installment loans to individuals most secured by automobiles and other personal property. In addition to installment loans, the Company also
offers personal lines of credit, overdraft protection, home equity lines of credit and second mortgage loans (loans secured by a lien position on one-to-four family residential real estate) to finance home improvements, debt consolidation,
education and other uses. For home equity loans, consumers are able to borrow up to 85% of the equity in their homes, and are generally tied to Prime with a ten year draw followed by a fifteen year amortization. As of December 31, 2021, there
were $200.5 million in construction and development loans included in total loans.

Risks associated with the commercial real estate portfolio include the ability of borrowers to pay interest
and principal during the loan’s term, as well as the ability of the borrowers to refinance at the end of the loan term.

Loans by Maturity and Interest Rate Sensitivity

The following table presents the maturity distribution and an analysis of loans that have predetermined and floating interest rates. Scheduled
repayments are reported in the maturity category in which the contractual payment is due. Commercial includes PPP and other consumer includes specialty lending, home equity and other consumer loans.

Securities and Corresponding Interest and Dividend Income

The average balance of taxable securities available for sale (“AFS”) and held to maturity (“HTM”) increased
$379.4 million, or 24.8%, from 2020 to 2021. The yield on average taxable securities was 1.67% for 2021 compared to 2.20% in 2020. The average balance of tax-exempt securities AFS and HTM increased from $173.0 million in 2020 to $220.8
million in 2021. The FTE yield on tax-exempt securities decreased from 2.97% in 2020 to 2.23% in 2021.

The average balance of Federal Reserve Bank and Federal Home Loan Bank (“FHLB”) stock decreased to $25.3
million in 2021 from $33.6 million in 2020. The yield on investments in Federal Reserve Bank and FHLB stock decreased from 6.24% in 2020 to 2.44% in 2021.

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Securities Portfolio

The Company’s mortgage-backed securities, U.S. agency notes and CMOs are all guaranteed by Fannie Mae,
Freddie Mac, the FHLB, Federal Farm Credit Banks or Ginnie Mae (“GNMA”). GNMA securities are considered similar in credit quality to U.S. Treasury securities, as they are backed by the full faith and credit of the U.S. government. Currently,
there are no subprime mortgages in our investment portfolio.

The following tables set forth information with regard to contractual maturities of debt securities shown
in amortized cost ($) and weighted average yield (%) at December 31, 2021. Weighted-average yields are an arithmetic computation of income (not FTE adjusted) divided by amortized cost. Maturities of mortgage-backed, collateralized mortgage
obligations and asset-backed securities are stated based on their estimated average lives. Actual maturities may differ from estimated average lives or contractual maturities because, in certain cases, borrowers have the right to call or
prepay obligations with or without call or prepayment penalties.

Funding Sources and Corresponding Interest Expense

The Company utilizes traditional deposit products such as time, savings, NOW, money market and demand deposits as its primary source for funding.
Other sources, such as short-term FHLB advances, federal funds purchased, securities sold under agreements to repurchase, brokered time deposits and long-term FHLB borrowings are utilized as necessary to support the Company’s growth in assets
and to achieve interest rate sensitivity objectives. The average balance of interest-bearing liabilities increased $380.9 million from 2020 primarily due to the increase in interest-bearing deposits and totaled $6.6 billion in 2021. The rate
paid on interest-bearing liabilities decreased from 0.53% in 2020 to 0.29% in 2021. This decrease in rates caused a decrease in interest expense of $13.8 million, or 42.4%, from $32.6 million in 2020 to $18.8 million in 2021.

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Deposits

Average interest-bearing deposits increased $632.5 million, or 11.2%, from 2020 to 2021. Average money market deposits increased $266.8 million,
or 11.5% during 2021 compared to 2020. Average NOW accounts increased $258.2 million, or 21.6% during 2021 as compared to 2020. The average balance of savings accounts increased $263.5 million, or 18.9% during 2021 compared to 2020. The
average balance of time deposits decreased $155.9 million, or 21.3%, from 2020 to 2021. The average balance of demand deposits increased $670.4 million, or 23.2%, during 2021 compared to 2020. The high rate of deposit growth was primarily due
to funding of PPP loans and various government support programs.

The rate paid on average interest-bearing deposits was down 22 basis points to 0.17% for 2021. The rate
paid for money market deposit accounts decreased from 0.44% during 2020 to 0.20% during 2021. The rate paid for NOW deposit accounts decreased from 0.06% in 2020 to 0.05% in 2021. The rate paid for savings deposits was a consistent at 0.05%
for 2020 and 2021. The rate paid for time deposits decreased from 1.40% during 2020 to 0.70% during 2021.

The following table presents the estimated amounts of uninsured deposits based on the same methodologies
and assumptions used for the bank regulatory reporting:

The following table presents the maturity distribution of time deposits of $250,000 or more:

Borrowings

Average repurchase agreements decreased to $100.5 million in 2021 from $154.4 million in 2020. The average rate paid on repurchase agreements
decreased from 0.17% in 2020 to 0.13% in 2021. Average short-term borrowings decreased to $1.3 million in 2021 from $183.7 million in 2020. The average rate paid on short-term borrowings increased from 1.55% in 2020 to 2.00% in 2021. Average
long-term debt decreased from $63.0 million in 2020 to $15.5 million in 2021. The average balance of junior subordinated debt remained at $101.2 million in 2021. The average rate paid for junior subordinated debt in 2021 was 2.07%, down from
2.70% in 2020.

Total short-term borrowings consist of federal funds purchased, securities sold under repurchase
agreements, which generally represent overnight borrowing transactions and other short-term borrowings, primarily FHLB advances, with original maturities of one year or less. The Company has unused lines of credit with the FHLB and access to
brokered deposits available for short-term financing of approximately $3.4 billion and $3.1 billion at December 31, 2021 and 2020, respectively. Securities collateralizing repurchase agreements are held in safekeeping by nonaffiliated
financial institutions and are under the Company’s control. Long-term debt, which is comprised primarily of FHLB advances, are collateralized by the FHLB stock owned by the Company, certain of its mortgage-backed securities and a blanket lien
on its residential real estate mortgage loans.

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On June 23, 2020, the Company issued $100.0 million of 5.00% fixed-to-floating rate subordinated notes due
2030. The subordinated notes, which qualify as Tier 2 capital, bear interest at an annual rate of 5.00%, payable semi-annually in arrears commencing on January 1, 2021, and a floating rate of interest equivalent to the three-month Secured
Overnight Financing Rate (“SOFR”) plus a spread of 4.85%, payable quarterly in arrears commencing on October 1, 2025. The subordinated debt issuance cost, which is being amortized on a straight-line basis, was $2.2 million. As of December 31,
2021 and 2020 the subordinated debt net of unamortized issuance costs was $98.5 million and $98.1 million, respectively.

Noninterest Income

Noninterest income is a significant source of revenue for the Company and an important factor in the
Company’s results of operations. The following table sets forth information by category of noninterest income for the years indicated:

Noninterest income for the year ended December 31, 2021 was $157.8 million, up $11.5 million, or 7.9%, from the year ended
December 31, 2020. Excluding net securities gains (losses), noninterest income for the year ended December 31, 2021 was $157.2 million, up $10.6 million or 7.2%, from the year ended December 31, 2020. The increase from the prior year was driven
by an increase in ATM and debit card fees due to increased volume and higher per transaction rates, retirement plan administration fees driven by the April 1, 2020 acquisition of Alliance Benefit Group of Illinois Inc. (“ABG”) and wealth
management fees driven by market performance and organic growth, partly offset by other noninterest income driven by lower swap fees and lower mortgage banking income.

Noninterest Expense

Noninterest expenses are also an important factor in the Company’s results of operations. The following
table sets forth the major components of noninterest expense for the years indicated:

Noninterest expense for the year ended December 31, 2021 was $287.3 million, up $9.5 million or 3.4%, from
the year ended December 31, 2020. The increase from the prior year was driven by higher salaries and employee benefits due to annual merit pay increases, the ABG acquisition, higher medical expenses and higher levels of incentive
compensation. In addition, the increase in professional fees and outside services was a result of projects paused during the COVID-19 pandemic and the increase in equipment expenses was due to higher technology costs associated with several
digital upgrades. The increase in expenses was partly offset by lower other noninterest expense due to a $4.0 million decrease in the provision for unfunded commitments and lower nonrecurring expenses due to a $4.3 million estimated
litigation settlement expense in 2021 compared to a $4.8 million branch optimization charge in 2020.

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Income Taxes

We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in
income tax returns filed during the subsequent year. Adjustments based on filed returns are recorded when identified, which is generally in the fourth quarter of the subsequent year for U.S. federal and state provisions.

The amount of income taxes the Company pays is subject at times to ongoing audits by U.S. federal and state
tax authorities, which may result in proposed assessments. Future results may include favorable or unfavorable adjustments to the estimated tax liabilities in the period the assessments are proposed or resolved or when statutes of limitation
on potential assessments expire. As a result, the Company’s effective tax rate may fluctuate significantly on a quarterly or annual basis.

Income tax expense for the year ended December 31, 2021 was $45.0 million, up $16.3 million, or 56.7%, from the year ended
December 31, 2020. The effective tax rate of 22.5% in 2021 was up from 21.6% in 2020. The increase in income tax expense from the prior year was due to a higher level of taxable income as a result of the decreased provision for loan losses.

Risk Management – Credit Risk

Credit risk is managed through a network of loan officers, credit committees, loan policies and oversight
from senior credit officers and Board of Directors. Management follows a policy of continually identifying, analyzing and grading credit risk inherent in each loan portfolio. An ongoing independent review of individual credits in the
commercial loan portfolio is performed by the independent loan review function. These components of the Company’s underwriting and monitoring functions are critical to the timely identification, classification and resolution of problem
credits.

Nonperforming assets consist of nonaccrual loans, loans over 90 days past due and still accruing,
restructured loans, other real estate owned (“OREO”) and nonperforming securities. Loans are generally placed on nonaccrual when principal or interest payments become 90 days past due, unless the loan is well secured and in the process of
collection. Loans may also be placed on nonaccrual when circumstances indicate that the borrower may be unable to meet the contractual principal or interest payments. The threshold for evaluating classified and nonperforming loans
specifically evaluated for impairment is $1.0 million. OREO represents property acquired through foreclosure and is valued at the lower of the carrying amount or fair value, less any estimated disposal costs.

Nonperforming Assets

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The following tables are related to non-performing loans in prior periods. Non-performing loans are
summarized by business line which do not align to how the Company assesses credit risk in the estimate for credit losses under CECL for 2021 and 2020.

Total nonperforming assets were $32.9 million at December 31, 2021, compared to $49.3 million at December 31,
2020. Nonperforming loans at December 31, 2021 were $32.7 million or 0.44% of total loans (0.44% excluding PPP loan originations), compared with $47.8 million or 0.64% of total loans (0.68% excluding PPP loan originations) at December 31, 2020.
The decrease in nonperforming loans primarily resulted from a reduction in commercial and residential mortgage nonaccrual loans during 2021. Total nonaccrual loans were $30.3 million or 0.40% of total loans at December 31, 2021, compared to
$44.6 million or 0.60% of total loans at December 31, 2020. Past due loans as a percentage of total loans was 0.29% at December 31, 2021 (0.29% excluding PPP loan originations), down from 0.37% of total loans (0.39% excluding PPP loan
originations) at December 31, 2020.

The Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic.
The CARES Act, along with a joint agency statement issued by banking regulatory agencies, provides that short-term modifications made in response to COVID-19 do not need to be accounted for as a troubled debt restructuring (“TDR”). The
Company evaluated the short-term modification programs provided to its borrowers and has concluded the modifications were generally made to borrowers who were in good standing prior to the COVID-19 pandemic and the modifications were
temporary and minor in nature and therefore do not qualify for designation as TDRs. As of December 31, 2021, $1.4 million of total loans outstanding were in payment deferral programs, of which 5% are commercial borrowers and 95% are consumer
borrowers. As of December 31, 2020, $110.8 million of total loans outstanding were in payment deferral programs, of which 80% were commercial borrowers and 20% were consumer borrowers.

In addition to nonperforming loans discussed above, the Company has also identified approximately $74.9
million in potential problem loans at December 31, 2021 as compared to $136.6 million at December 31, 2020. The decrease in potential problem loans from December 31, 2020 is primarily due to the improved economic conditions which resulted in
loans coming off deferral and returning to payment in 2021. Higher risk industries include entertainment, restaurants, retail, healthcare and accommodations. As of December 31, 2021, 8.9% of the Company’s outstanding loans were in higher risk
industries due to the COVID-19 pandemic. Potential problem loans are loans that are currently performing, with a possibility of loss if weaknesses are not corrected. Such loans may need to be disclosed as nonperforming at some time in the
future. Potential problem loans are classified by the Company’s loan rating system as “substandard.” Management cannot predict the extent to which economic conditions may worsen or other factors, which may impact borrowers and the potential
problem loans. Accordingly, there can be no assurance that other loans will not become over 90 days past due, be placed on nonaccrual, become restructured or require increased allowance coverage and provision for loan losses. To mitigate this
risk the Company maintains a diversified loan portfolio, has no significant concentration in any particular industry and originates loans primarily within its footprint.

Allowance for Loan Losses

Beginning January 1, 2020, the Company calculated the allowance for credit losses using current expected
credit losses methodology. As a result of our January 1, 2020, adoption of CECL and its related amendments, our methodology for estimating the allowance for credit losses changed significantly from December 31, 2019. The Company recorded a
net decrease to retained earnings of $4.3 million as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13. The transition adjustment included a $3.0 million impact due to the allowance for credit losses on loans, $2.8 million
impact due to the allowance for unfunded commitments reserve, and $1.5 million impact to the deferred tax asset.

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Management considers the accounting policy relating to the allowance for credit losses to be a critical
accounting policy given the degree of judgment exercised in evaluating the level of the allowance required to estimate expected credit losses over the expected contractual life of our loan portfolio and the material effect that such judgments
can have on the consolidated results of operations.

The CECL approach requires an estimate of the credit losses expected over the life of a loan (or pool of
loans). It replaces the incurred loss approach’s threshold that required recognition of a credit loss when it was probable a loss event was incurred. The allowance for credit losses is a valuation account that is deducted from, or added to,
the loans’ amortized cost basis to present the net, lifetime amount expected to be collected on the loans. Loan losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible. Expected
recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

Required additions or reductions to the allowance for credit losses are made periodically by charges or credits to the provision for loan losses.
These are necessary to maintain the allowance at a level which management believes is reasonably reflective of the overall loss expected over the contractual life of the loan portfolio. While management uses available information to recognize
losses on loans, additions or reductions to the allowance may fluctuate from one reporting period to another. These fluctuations are reflective of changes in risk associated with portfolio content and/or changes in management’s assessment of
any or all of the determining factors discussed above. Management considers the allowance for credit losses to be appropriate based on evaluation and analysis of the loan portfolio.

Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events,
current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Company historical loss experience was supplemented with peer information when
there was insufficient loss data for the Company. Significant management judgment is required at each point in the measurement process.

The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a
quarterly basis, when similar risk characteristics exist. The respective quantitative allowance for each segment is measured using an econometric, discounted PD/LGD modeling methodology in which distinct, segment-specific multi-variate
regression models are applied to multiple, probabilistically weighted external economic forecasts. Under the discounted cash flows methodology, expected credit losses are estimated over the effective life of the loans by measuring the
difference between the net present value of modeled cash flows and amortized cost basis. After quantitative considerations, management applies additional qualitative adjustments so that the allowance for credit loss is reflective of the
estimate of lifetime losses that exist in the loan portfolio at the balance sheet date.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for
credit losses. Upon adoption of CECL, management revised the manner in which loans were pooled for similar risk characteristics. Management developed segments for estimating loss based on type of borrower and collateral which is generally
based upon federal call report segmentation and have been combined or subsegmented as needed to ensure loans of similar risk profiles are appropriately pooled.

Additional information about our Allowance for Loan Losses is included in Notes 1 and 6 to the consolidated financial statements. The Company’s
management considers the allowance for credit losses to be appropriate based on evaluation and analysis of the loan portfolio.

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The allowance for credit losses totaled $92.0 million at December 31, 2021, compared to $110.0 million at
December 31, 2020. The allowance for credit losses as a percentage of loans was 1.23% (1.24% excluding PPP loans) at December 31, 2021, compared to 1.47% (1.56% excluding PPP loans) at December 31, 2020. The decrease in the allowance for
credit losses from December 31, 2020 to December 31, 2021 was primarily due to the improved economic conditions in the CECL forecast, partly offset by providing for the increase in loan balances.

Prior to the adoption of ASU 2016-13 on January 1, 2020, the Company’s calculated allowance for loan losses
used the incurred loss methodology. The following tables related to the allowance for loan losses in prior periods under the incurred methodology. Charge-off and recoveries are summarized by business line which do not align to how the Company
assesses credit risk in the estimate for credit losses under CECL for 2021 and 2020.

The provision for loan losses was a net benefit of $8.3 million for year ended December 31, 2021, compared to
provision expense of $51.1 million in for the year ended December 31, 2020. The allowance for credit losses was 280.98% of nonperforming loans at December 31, 2021 as compared to 230.14% at December 31, 2020. The allowance for credit losses was
303.78% of nonaccrual loans at December 31, 2021 as compared to 246.38% at December 31, 2020. The allowance for credit losses as a percentage of loans was 1.23% (1.24% excluding PPP loan originations) at December 31, 2021 compared to 1.47%
(1.56% excluding PPP loan originations) at December 31, 2020. The decrease to the December 31, 2021 allowance for credit loss and provision expense was primarily due to the improved economic conditions in the CECL forecast.

Total net charge-offs for 2021 were $9.7 million, down from $17.1 million in 2020. Net charge-offs to average
loans was 13 bps for 2021 compared to 23 bps for 2020. Net charge-offs to average loans decreased during 2021 due to COVID-19 pandemic relief programs during 2020 and 2021 and improved economic conditions in 2021.

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Allocation of the Allowance for Loan Losses

Prior to the adoption of ASU 2016-13 on January 1, 2020, the Company’s calculated allowance for loan losses
used the incurred loss methodology. The following tables are related to the allowance for loan losses in prior periods. Category percentage of loans are summarized by business line which do not align to how the Company assesses credit risk in
the estimate for credit losses under CECL for 2021 and 2020.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company has exposure
to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted as an expense in other
noninterest expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. As of December 31, 2021, the
allowance for losses on unfunded commitments totaled $5.1 million, compared to $6.4 million as of December 31, 2020. The decrease in the allowance in 2021 compared to 2020 is related to a decrease in expected losses due to the adoption of
CECL and the deterioration of the economic forecast due to COVID-19. Prior to January 1, 2020, the Company calculated the allowance for losses on unfunded commitments using the incurred loss methodology.

Liquidity Risk

Liquidity risk arises from the possibility that we may not be able to satisfy current or future financial commitments or may become unduly
reliant on alternate funding sources. The objective of liquidity management is to ensure the Company can fund balance sheet growth, meet the cash flow requirements of depositors wanting to withdraw funds or borrowers needing assurance that
sufficient funds will be available to meet their credit needs. Management’s Asset Liability Committee (“ALCO”) is responsible for liquidity management and has developed guidelines, which cover all assets and liabilities, as well as
off-balance sheet items that are potential sources or uses of liquidity. Liquidity policies must also provide the flexibility to implement appropriate strategies, regular monitoring of liquidity and testing of the contingent liquidity plan.
Requirements change as loans grow, deposits and securities mature and payments on borrowings are made. Liquidity management includes a focus on interest rate sensitivity management with a goal of avoiding widely fluctuating net interest
margins through periods of changing economic conditions. Loan repayments and maturing investment securities are a relatively predictable source of funds. However, deposit flows, calls of investment securities and prepayments of loans and
mortgage-related securities are strongly influenced by interest rates, the housing market, general and local economic conditions, and competition in the marketplace. Management continually monitor marketplace trends to identify patterns that
might improve the predictability of the timing of deposit flows or asset prepayments.

The primary liquidity measurement the Company utilizes is called “Basic Surplus,” which captures the
adequacy of its access to reliable sources of cash relative to the stability of its funding mix of average liabilities. This approach recognizes the importance of balancing levels of cash flow liquidity from short and long-term securities
with the availability of dependable borrowing sources, which can be accessed when necessary. At December 31, 2021, the Company’s Basic Surplus measurement was 28.5% of total assets or approximately $3.4 billion as compared to the December 31,
2020 Basic Surplus measurement of 25.7% of total assets, or $2.8 billion, and was above the Company’s minimum of 5% (calculated at $600.6 million and $546.6 million, of period end total assets as of December 31, 2021 and 2020, respectively)
set forth in its liquidity policies.

At December 31, 2021 and 2020, FHLB advances outstanding totaled $14.0 million and $64.1 million,
respectively. At December 31, 2021 and 2020, the Bank had $81.0 million and $74.0 million, respectively, of collateral encumbered by municipal letters of credit. The Bank is a member of the FHLB system and had additional borrowing capacity
from the FHLB of approximately $1.7 billion and $1.6 billion at December 31, 2021 and 2020, respectively. In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $999.1 million and
$839.4 million at December 31, 2021 and 2020, respectively, or used to collateralize other borrowings, such as repurchase agreements. The Company also has the ability to issue brokered time deposits and to borrow against established borrowing
facilities with other banks (federal funds), which could provide additional liquidity of $2.0 billion at December 31, 2021 and $1.8 billion at December 31, 2020. In addition, the Bank has a “Borrower-in-Custody” program with the FRB with the
addition of the ability to pledge automobile loans as collateral. At December 31, 2021 and 2020, the Bank had the capacity to borrow $580.8 million and $658.1 million, respectively, from this program. The Company’s internal policies authorize
borrowings up to 25% of assets. Under this policy, remaining available borrowings capacity totaled $2.9 billion at December 31, 2021 and $2.6 billion at December 31, 2020.

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This Basic Surplus approach enables the Company to appropriately manage liquidity from both operational and
contingency perspectives. By tempering the need for cash flow liquidity with reliable borrowing facilities, the Company is able to operate with a more fully invested and, therefore, higher interest income generating securities portfolio. The
makeup and term structure of the securities portfolio is, in part, impacted by the overall interest rate sensitivity of the balance sheet. Investment decisions and deposit pricing strategies are impacted by the liquidity position. The Company
considered its Basic Surplus position to be strong. However, certain events may adversely impact the Company’s liquidity position in 2022. The large inflow of deposits experienced since the second quarter of 2020 could reverse itself and flow
out. In the current economic environment, draws against lines of credit could drive asset growth higher. Disruptions in wholesale funding markets could spark increased competition for deposits. These scenarios could lead to a decrease in the
Company’s Basic Surplus measure below the minimum policy level of 5%. Significant monetary and fiscal policy actions taken by the federal government have helped to mitigate these risks. Enhanced liquidity monitoring was put in place to
quickly respond to the changing environment during the COVID-19 pandemic including increasing the frequency of monitoring and adding additional sources of liquidity.

At December 31, 2021, a portion of the Company’s loans and securities were pledged as collateral on
borrowings. Therefore, once on-balance-sheet liquidity is depleted, future growth of earning assets will depend upon the Company’s ability to obtain additional funding, through growth of core deposits and collateral management and may require
further use of brokered time deposits or other higher cost borrowing arrangements.

Net cash flows provided by operating activities totaled $157.6 million and $142.4 million in 2021 and 2020,
respectively. The critical elements of net operating cash flows include net income, adjusted for non-cash income and expense items such as the provision for loan losses, deferred income tax expense, depreciation and amortization and cash
flows generated through changes in other assets and liabilities.

Net cash flows used in investing activities totaled $546.1 million and $709.7 million in 2021 and 2020,
respectively. Critical elements of investing activities are loan and investment securities transactions.

Net cash flows provided by financing activities totaled $1.0 billion in 2021 and 2020. The critical
elements of financing activities are proceeds from deposits, borrowings and stock issuance. In addition, financing activities are impacted by dividends and treasury stock transactions.

Commitments to Extend Credit

The Company makes contractual commitments to extend credit, which include unused lines of credit, which are subject to the Company’s credit
approval and monitoring procedures. At December 31, 2021 and 2020, commitments to extend credit in the form of loans, including unused lines of credit, amounted to $2.3 billion and $2.2 billion, respectively. In the opinion of management,
there are no material commitments to extend credit, including unused lines of credit that represent unusual risks. All commitments to extend credit in the form of loans, including unused lines of credit, expire within one year.

Standby Letters of Credit

The Company does not issue any guarantees that would require liability-recognition or disclosure, other
than its standby letters of credit. The Company guarantees the obligations or performance of customers by issuing standby letters of credit to third-parties. These standby letters of credit are frequently issued in support of third-party
debt, such as corporate debt issuances, industrial revenue bonds and municipal securities. The risk involved in issuing standby letters of credit is essentially the same as the credit risk involved in extending loan facilities to customers
and letters of credit are subject to the same credit origination, portfolio maintenance and management procedures in effect to monitor other credit and off-balance sheet products. Typically, these instruments have one year expirations with an
option to renew upon annual review; therefore, the total amounts do not necessarily represent future cash requirements. At December 31, 2021 and 2020, outstanding standby letters of credit were approximately $55.1 million and $54.0 million,
respectively. The fair value of the Company’s standby letters of credit at December 31, 2021 and 2020 was not significant. The following table sets forth the commitment expiration period for standby letters of credit at:

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Interest Rate Swaps

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the
fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the
criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability or firm commitment attributable to a particular risk, such as interest rate risk,
are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting
generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair
value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not
apply or the Company elects not to apply hedge accounting.

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged
item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, changes in fair value of the cash flow hedges are reported in OCI. When the cash flows associated with the hedged item are realized, the
gain or loss included in OCI is recognized in the consolidated statements of income.

When the Company purchases or sells a portion of a commercial loan that has an existing interest rate swap, it may enter into a risk
participation agreement to provide credit protection to the financial institution that originated the swap transaction should the borrower fail to perform on its obligation. The Company enters into both risk participation agreements in which
it purchases credit protection from other financial institutions and those in which it provides credit protection to other financial institutions. Any fee paid to the Company under a risk participation agreement is in consideration of the
credit risk of the counterparties and is recognized in the income statement. Credit risk on the risk participation agreements is determined after considering the risk rating, probability of default and loss given default of the
counterparties.

Loans Serviced for Others and Loans Sold with Recourse

The total amount of loans serviced by the Company for unrelated third parties was approximately $575.9 million and $614.5 million at December 31,
2021 and 2020, respectively. At December 31, 2021 and 2020, the Company had approximately $1.0 million and $1.3 million, respectively, of mortgage servicing rights. At December 31, 2021 and 2020, the Company serviced $25.6 million and $25.7
million, respectively, of agricultural loans sold with recourse. Due to sufficient collateral on these loans and government guarantees, no reserve is considered necessary at December 31, 2021 and 2020. As of December 31, 2021 and 2020, the
Company serviced Springstone consumer loans of $11.4 million and $11.8 million, respectively.

Capital Resources

Consistent with its goal to operate a sound and profitable financial institution, the Company actively
seeks to maintain a “well-capitalized” institution in accordance with regulatory standards. The principal source of capital to the Company is earnings retention. The Company’s capital measurements are in excess of both regulatory minimum
guidelines and meet the requirements to be considered well-capitalized.

The Company’s primary source of funds to pay interest on trust preferred debentures and pay cash dividends to its stockholders are dividends from its subsidiaries.
Various laws and regulations restrict the ability of banks to pay dividends to their stockholders. Generally, the payment of dividends by the Company in the future as well as the payment of interest on the capital securities will require
the generation of sufficient future earnings by its subsidiaries.

The Bank also is subject to substantial regulatory restrictions on its ability to pay dividends to the Company. Under Office of the Comptroller
of the Currency (“OCC”) regulations, the Bank may not pay a dividend, without prior OCC approval, if the total amount of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of its retained net
income to date during the calendar year and its retained net income over the preceding two years. At December 31, 2021 and 2020, approximately $164.6 million and $194.2 million, respectively, of the total stockholders’ equity of the Bank was
available for payment of dividends to the Company without approval by the OCC. The Bank’s ability to pay dividends also is subject to the Bank being in compliance with regulatory capital requirements. The Bank is currently in compliance with
these requirements. Under the State of Delaware General Corporation Law, the Company may declare and pay dividends either out of accumulated net retained earnings or capital surplus.

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Stock Repurchase Plan

The Company purchased 604,637 shares of its common stock during the year ended December 31, 2021 at an
average price of $35.91 per share under its previously announced share repurchase program. The repurchase program under which these shares were purchased expired on December 31, 2021. On December 20, 2021, the NBT Board of Directors
authorized a repurchase program for the Company to repurchase up to an additional 2,000,000 shares of its outstanding common stock. The plan expires on December 31, 2023.

Recent Accounting Updates

See Note 2 to the consolidated financial statements for a detailed discussion of new accounting pronouncements.

2020 OPERATING RESULTS AS COMPARED TO 2019 OPERATING RESULTS

For similar operating and financial data and
discussion of our results for the year ended December 31, 2020 compared to our results for the year ended December 31, 2019, refer to Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 1,
2021 and is incorporated herein by reference.

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