# NBT BANCORP INC (NBTB) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from NBT BANCORP INC's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/790359/000114036125006528/ef20039015_10k.htm
Accession: 0001140361-25-006528
Filing date: 2025-02-28
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/NBTB/
All MD&A years: /company/NBTB/mda/
Previous year: /company/NBTB/mda/fy2023/ (FY 2023)
Next year: /company/NBTB/mda/fy2025/ (FY 2025)

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

The purpose of this discussion and analysis is to provide a concise description of the consolidated financial condition and results of operations of NBT Bancorp Inc. (“NBT”) and its wholly-owned
subsidiaries, including NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc. (“NBT Financial”) and NBT Holdings, Inc. (“NBT Holdings”) (collectively referred to herein as the “Company”). When references to “NBT,” “we,”
“our,” “us,” and “the Company” are made in this report, we mean NBT Bancorp Inc. and our consolidated subsidiaries, unless the context indicates that we refer only to the parent company, NBT Bancorp Inc. When we refer to the “Bank” in this
report, we mean our only bank subsidiary, NBT Bank, National Association, and its subsidiaries. This discussion will focus on results of operations for the fiscal years ended December 31, 2024, 2023, and 2022, and financial condition as of
December 31, 2024 and 2023, including capital resources and asset/liability management. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and related notes.

Forward-Looking Statements

Certain statements in this filing and future filings by the Company with the 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 of 1995. 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. The discussion in Item 1A. Risk Factors lists some of the factors that could cause our actual results to vary materially from those
expressed or implied by any forward-looking statements, and such discussion is incorporated into this discussion by reference.

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 registered financial holding company headquartered in Norwich, NY, with total assets of $13.79 billion at December 31, 2024.
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 upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont, southern Maine and central
and northwestern 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 retail, 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 2024 and, in summary form, the
preceding two years. NIM is presented in this discussion on a FTE basis. Average balances discussed are daily averages unless otherwise described. The audited consolidated financial statements and related notes as of December 31, 2024 and 2023
and for each of the years in the three-year period ended December 31, 2024 should be read in conjunction with this review.

Critical Accounting Policies

The SEC defines critical accounting policies as accounting policies that are most important to a company’s financial results and condition. These
policies are often subjective and require management to make estimates about uncertain matters. The accounting and reporting policies followed by the Company conform, in all material respects, to accounting principles GAAP and to general
practices within the financial services industry. In the course of normal business activity, management must select and apply many accounting policies and methodologies and make estimates and assumptions that lead to the financial results
presented in the Company’s consolidated financial statements and accompanying notes. There are uncertainties inherent in making these estimates and assumptions, which could materially affect the Company’s results of operations and financial
position.

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Management considers accounting estimates to be critical to reported financial results if (i) the accounting estimates require management to make assumptions about matters that are highly
uncertain, and (ii) different estimates that management reasonably could have used for the accounting estimate in the current period, or changes in the accounting estimate that are reasonably likely to occur from period to period, could have a
material impact on the Company’s financial statements. Management considers the accounting policies relating to the allowance for credit losses (“allowance”, or “ACL”) and the determination of fair values for acquired assets and assumed
liabilities in a business combination, including intangible assets such as goodwill, to be critical accounting policies because of the uncertainty and subjectivity involved in these policies and the material effect that estimates related to
these areas can have on the Company’s results of operations.

The Company’s methodology for estimating the allowance considers available relevant information about the collectability of cash flows, including information about past events, current conditions,
and reasonable and supportable forecasts. Refer to Note 1 and Note 6 to the consolidated financial statements included elsewhere in this report.

Goodwill represents the cost of the acquired business in excess of the fair value of the related net assets acquired. Following a merger, the determination of fair values for acquired assets and
assumed liabilities, including intangible assets such as goodwill, becomes critical. All acquired assets, including goodwill and other intangible assets, and assumed liabilities in purchase acquisitions are recorded at fair value as of the
acquisition date. The Company expenses all acquisition-related costs as incurred as required by ASC Topic 805, “Business Combinations.”

The determination of fair values for acquired loans in a business combination is a significant aspect of our financial reporting process. The
valuation of acquired loans relied on a discounted cash flow approach applied on a pooled basis, utilizing a forecast of principal and interest payments. This methodology segmented the acquired loan portfolio by loan type, term, interest rate,
payment frequency and payment, and incorporated specific key valuation assumptions, encompassing prepayments, PD, LGD, and the discount rate to ascertain the fair value of these assets. Given the inherent subjectivity and reliance on future
cash flows and market conditions, this process involves considerable judgment and estimation uncertainty.

The Company conducts an annual review of goodwill impairment and conducts quarterly analyses to identify any events that may necessitate an interim
assessment. The Company initially undertakes a qualitative evaluation of goodwill to ascertain whether certain events or circumstances indicate a likelihood that the fair value of a reporting unit is less than its carrying amount. This
qualitative evaluation demands considerable managerial discretion, and if it suggests that the fair value of a reporting unit is unlikely to be less than the carrying value, no quantitative analysis is required. Inputs for this qualitative
analysis requiring managerial judgment encompass macroeconomic conditions, industry and market conditions, the financial performance of the reporting unit, and other pertinent events influencing the fair value of the reporting unit.

For information on the Company’s significant accounting policies and to gain a greater understanding of how the Company’s financial performance is reported, refer to Note 1 to the consolidated financial statements included elsewhere in
this report.

Critical Accounting Estimates

SEC guidance requires disclosure of “critical accounting estimates.” The SEC defines “critical accounting estimates” as those estimates made in accordance with GAAP that involve a significant
level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the registrant. The Company follows financial accounting and reporting policies that are in
accordance with GAAP. The allowance for credit losses and the allowance for unfunded commitments policies are deemed to meet the SEC’s definition of a critical accounting estimate.

Allowance for Credit Losses and Unfunded Commitments

The allowance for credit losses consists of the allowance for credit losses and the allowance for losses on unfunded commitments. The measurement of CECL on financial instruments requires an
estimate of the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses under the CECL methodology 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.

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Management of the Company considers the accounting policy relating to the allowance for credit losses to be a critical accounting estimate 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. The impact of utilizing the CECL
methodology 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.

One of the most significant judgments involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate expected credit losses over the
forecast period. As of December 31, 2024, the quantitative model incorporated a baseline economic outlook along with an alternative downside scenario sourced from a reputable third-party to accommodate other potential economic conditions in the
model. At December 31, 2024, the weightings were 80% and 20% for the baseline and downside economic forecasts, respectively. The baseline outlook reflected a Northeast unemployment rate environment starting at 4.1% and increasing slightly
during the forecast period to 4.2%. Northeast GDP’s annualized growth (on a quarterly basis) is expected to start the first quarter of 2025 at approximately 3.8% before decreasing to a low of 2.6% in the third quarter of 2025 and then
increasing to 3.9% by the end of the forecast period. Key assumptions in the baseline economic outlook included two 25 basis point federal funds rate cuts in 2025, quantitative tightening ending in early 2025, a post-election fiscal outlook
with lower spending, lower taxes, and higher tariffs, and the economy currently being near full employment. The alternative downside scenario assumed deteriorated economic conditions from the baseline outlook. Under this scenario, Northeast
unemployment increases to a peak of 7.5% in the first quarter of 2026. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of December 31, 2024. Additional qualitative
adjustments were made for factors not incorporated in the forecasts or the model, such as loss rate expectations for certain loan pools, considerations for inflation and recent trends in asset value indices. Additional monitoring for industry
concentrations, loan growth and policy exceptions was also conducted.

To demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of December 31, 2024, the Company attributed the change in scenario
weightings to the change in the allowance for credit losses, with a 10% decrease to the downside scenario and a 10% increase to the baseline scenario causing a 4% decrease in the overall estimated allowance for credit losses. To further
demonstrate the sensitivity of the allowance for credit losses estimate to macroeconomic forecast weightings assumptions as of December 31, 2024, the Company increased the downside scenario to 100% which resulted in a 33% increase in the
overall estimated allowance for credit losses.

Non-GAAP Measures

This Annual Report on Form 10-K contains financial information determined by methods other than in accordance with 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. Amounts previously reported in the
consolidated financial statements are reclassified whenever necessary to conform to current period presentation.

Evans Bancorp, Inc. Merger

On September 9, 2024, the Company and the Bank, entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Evans and Evans Bank, Evans’s subsidiary, pursuant to which the Company
will acquire Evans. Evans, with assets of approximately $2.19 billion at December 31 2024, is headquartered in Williamsville, New York. Its primary subsidiary, Evans Bank, is a federally-chartered national banking association operating 18
banking locations in Western New York.

Subject to the terms and conditions of the Merger Agreement, which has been approved by the boards of directors of each party, Evans will merge with and into the Company, with the Company as the
surviving entity, and immediately thereafter, Evans Bank will merge with and into the Bank, with the Bank as the surviving bank (the “Merger”).

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Under the terms of the Merger Agreement, each outstanding share of Evans common stock will be converted into the right to receive 0.91 shares of
the Company’s common stock. In December 2024, the Company announced that it had received the regulatory approval from the OCC and the waiver from Federal Reserve Bank of New York necessary to complete its acquisition of Evans. Also in December
2024, the shareholders of Evans voted to approve the Merger. Evans reported over 75% of the issued and outstanding shares of Evans were represented at a special shareholder meeting and over 96% of the votes cast were voted to approve the
Merger. NBT and Evans anticipate closing the transaction in second quarter of 2025 in conjunction with the core system conversion, pending customary closing conditions.

The Company incurred acquisition expenses related to the Merger of $1.5 million for the year ended December 31, 2024.

Salisbury Bancorp, Inc. Merger

On August 11, 2023, NBT completed its acquisition of Salisbury. Salisbury Bank was a Connecticut-chartered commercial bank headquartered in
Lakeville, Connecticut, operating 13 banking offices in northwestern Connecticut, the Hudson Valley region of New York, and southwestern Massachusetts. In connection with the acquisition, the Company issued 4.32 million shares of common stock
and acquired approximately $1.46 billion of identifiable assets, including $1.18 billion of loans, $122.7 million in investment securities which were sold immediately after the merger, $31.2 million of core deposit intangibles and $4.7 million
in a wealth management customer intangible, as well as $1.31 billion in deposits. As of the acquisition date, the fair value discount was $78.7 million for loans, net of the reclassification of the purchase credit deteriorated allowance, and
was $3.0 million for subordinated debt. The Company established a $14.5 million allowance for acquired Salisbury loans which included both the $5.8 million allowance for PCD loans reclassified from loans and the $8.8 million allowance for
non-PCD loans recognized through the provision for loan losses.

The Company incurred acquisition expenses related to the merger with Salisbury of $10.0 million and $1.0 million for the years ended December 31,
2023 and 2022, respectively.

Executive Summary

Significant factors management reviews to evaluate the Company’s operating results and financial condition include, but are not limited to, net
income and EPS, return on average assets and equity, NIM, 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.

Net income for the year ended December 31, 2024 was $140.6 million, or $2.97 per diluted common share, up $21.9 million from $118.8 million, or
$2.65 per diluted common share, for the year ended December 31, 2023.

Operating net income(1), a non-GAAP measure, was $139.7 million, or $2.94 per diluted common share, for the year ended December 31,
2024, compared to $144.7 million, or $3.23 per diluted common share for the year ended December 31, 2023.

In the first quarter of 2023, the Company incurred a $5.0 million securities loss on the write-off of an AFS subordinated debt investment of a
failed financial institution. In the first quarter of 2024, the Company sold the previously written-off subordinated debt security and recognized a gain of $2.3 million. In the second quarter 2023, the Company incurred a $4.5 million securities
loss on the sale of two subordinated debt securities held in the AFS portfolio. In the fourth quarter of 2023 the Company recorded a full $4.8 million impairment of its minority interest equity investment in a provider of financial and
technology services to residential solar equipment installers due to the uncertainty in the realizability of the investment in other noninterest expense in the consolidated statements of income.

The following information should be considered in connection with the Company’s results as of and for the year ended December 31, 2024:

[[GREPCENT_TABLE]]
[["","\u25cf","Net interest income for the year ended December 31, 2024 was $400.1 million, up $21.9 million, or 5.8%, from 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The Company recorded a provision for loan losses of $19.6 million for the year ended December 31, 2024, compared to $25.3 million in 2023. Included in the provision expense for the year ended December 31, 2023 was $8.8 million of acquisition-related provision for loan losses."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Excluding securities gains (losses), noninterest income represented 30% of total revenues and was $174.0 million for the year ended December 31, 2024, up $22.5 million, or 14.9%, from the prior year."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Noninterest expense, excluding acquisition expenses, was up $44.7 million, or 13.5%, from the prior year."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Period end total loans were $9.97 billion, up $319.2 million, or 3.3% from December 31, 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Credit quality metrics including net charge-offs to average loans were 0.18% and allowance for loan losses to total loans was 1.16%."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","Period end total deposits were $11.55 billion, up $577.8 million, or 5.3%, from December 31, 2023."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Non-GAAP measure - Refer to non-GAAP reconciliation below."]]
[[/GREPCENT_TABLE]]

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Results of Operations

The following table sets forth certain financial highlights:

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","","2023","","","2022"],["Performance:"],["Diluted earnings per share","","$","2.97","","","$","2.65","","","$","3.52"],["Return on average assets","","","1.04","%","","","0.95","%","","","1.29","%"],["Return on average equity","","","9.57","%","","","9.34","%","","","12.67","%"],["Return on average tangible common equity","","","13.75","%","","","13.02","%","","","16.89","%"],["Net interest margin (FTE)","","","3.23","%","","","3.29","%","","","3.34","%"],["Capital:"],["Equity to assets","","","11.07","%","","","10.71","%","","","10.00","%"],["Tangible equity ratio","","","8.42","%","","","7.93","%","","","7.73","%"],["Book value per share","","$","32.34","","","$","30.26","","","$","27.38"],["Tangible book value per share","","$","23.88","","","$","21.72","","","$","20.65"],["Leverage ratio","","","10.24","%","","","9.71","%","","","10.32","%"],["Common equity tier 1 capital ratio","","","11.93","%","","","11.57","%","","","12.12","%"],["Tier 1 capital ratio","","","12.83","%","","","12.50","%","","","13.19","%"],["Total risk-based capital ratio","","","15.03","%","","","14.75","%","","","15.38","%"]]
[[/GREPCENT_TABLE]]

The following tables provide non-GAAP reconciliations:

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["(In thousands, except per share data)","","2024","","","2023","","","2022"],["Return on average tangible common equity:"],["Net income","","$","140,641","","","$","118,782","","","$","151,995"],["Amortization of intangible assets (net of tax)","","","6,332","","","","3,551","","","","1,698"],["Net income, excluding intangible amortization","","$","146,973","","","$","122,333","","","$","153,693"],["Average stockholders\u2019 equity","","$","1,468,861","","","$","1,272,333","","","$","1,199,383"],["Less: average goodwill and other intangibles","","","399,989","","","","332,667","","","","289,238"],["Average tangible common equity","","$","1,068,872","","","$","939,666","","","$","910,145"],["Return on average tangible common equity","","","13.75","%","","","13.02","%","","","16.89","%"],["Tangible equity ratio:"],["Stockholders\u2019 equity","","$","1,526,141","","","$","1,425,691","","","$","1,173,554"],["Intangibles","","","399,023","","","","402,294","","","","288,545"],["Assets","","$","13,786,666","","","$","13,309,040","","","$","11,739,296"],["Tangible equity ratio","","","8.42","%","","","7.93","%","","","7.73","%"],["Tangible book value:"],["Stockholders\u2019 equity","","$","1,526,141","","","$","1,425,691","","","$","1,173,554"],["Intangibles","","","399,023","","","","402,294","","","","288,545"],["Tangible equity","","$","1,127,118","","","$","1,023,397","","","$","885,009"],["Diluted common shares outstanding","","","47,195","","","","47,110","","","","42,858"],["Tangible book value per share","","$","23.88","","","$","21.72","","","$","20.65"],["Operating net income:"],["Net income","","$","140,641","","","$","118,782","","","$","151,995"],["Acquisition expenses","","","1,531","","","","9,978","","","","967"],["Acquisition-related provision for credit losses","","","-","","","","8,750","","","","-"],["Acquisition-related reserve for unfunded loan commitments","","","-","","","","836","","","","-"],["Impairment of a minority interest equity investment","","","-","","","","4,750","","","","-"],["Securities (gains) losses","","","(2,789",")","","","9,315","","","","1,131"],["Adjustment to net income","","$","(1,258",")","","$","33,629","","","$","2,098"],["Adjustment to net income (net of tax)","","$","(984",")","","$","25,965","","","$","1,623"],["Operating net income","","$","139,657","","","$","144,747","","","$","153,618"],["Operating diluted earnings per share","","$","2.94","","","$","3.23","","","$","3.56"]]
[[/GREPCENT_TABLE]]

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2025 Outlook

The Company’s 2024 earnings reflected its continued ability to invest in the Company’s future while managing significant volatility in the
interest rate environment and overall economic conditions, which have presented challenges across the financial services industry. 2024 was marked by resilience for both economic growth and inflation. Entering the year, forecasts called for
a slowing economy and a moderation in inflation due to the rapid change in interest rates engineered by the FRB throughout 2022-2023. GDP growth rate of 1.6% in the first quarter of 2024 was weak, but growth strongly rebounded with 3.0% and
2.8% growth in the second and third quarters, respectively. Overall, 2024 annualized economic growth was 2.8%, a full percentage point higher than initial forecasts. At the same time, inflation continued to trend lower in the first half of
2024. However, that improvement stalled in the second half of the year, with the Core Personal Consumption Expenditure index increasing from 2.6% to 2.8% over the last 5 months of the year. The combination of stronger-than-expected GDP
growth and stubborn inflation forced the FRB to delay their pivot to an easier monetary policy that was anticipated in 2024. The yield curve remained inverted through the majority of 2024. However, in September of 2024 the FOMC lowered the
Federal Funds rate by 50 bps followed by consecutive 25 bps reductions in November and December of 2024. These rate cuts flattened the yield curve, and in some instances, led to a modestly upward-sloping yield curve at certain term points.

Economic indicators remained mixed, but trended toward an improved yet elevated level of inflation. While inflation has declined, continued
economic resilience has lowered the probability of further Federal Funds rate reductions in 2025. The “higher for longer” interest rate environment is expected to persist, though strong consumer and corporate balance sheets suggest that any
potential economic slowdown may be mild. Significant items that may have an impact on 2025 results include:

[[GREPCENT_TABLE]]
[["","\u25cf","Excess liquidity in the banking system has significantly decreased:"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u03bf","loan growth may be negatively impacted as interest rates have risen and lenders have reverted back to historical credit spreads to account for overall higher cost of funds;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u03bf","cost of deposits as well as overall cost of funds could continue to negatively impact NIM. While the recent decline to short-term interest rates may allow for some continued cost of funds reductions, the elevated level of relative interest rates and the bank failures in early 2023 continue to pressure competition for deposits as well as the associated cost of funds;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u03bf","higher short-term interest rates as compared to recent history have continued to afford deposit customers investment opportunities outside the banking system resulting in deposit declines across the industry, however, a decline to short-term interest rates could potentially mitigate this;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u03bf","investment purchases have slowed, however, reinvestment of investment cash flows at higher rate levels has allowed for improved yield on the portfolio as a whole."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The FRB has continued to combat elevated inflation, with the result being inflationary pressures being much more under control in 2024 and into 2025:"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u03bf","this reduced inflation has had a material impact on current and expected FRB monetary policy;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u03bf","the tightening of monetary policy through measures to raise interest rates seen in 2022 and 2023 began to reverse itself in 2024 given softening inflation;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u03bf","the loosening of monetary policy through the reduction to short-term interest rates in 2024 and into 2025 could have a negative impact on overall net interest income given the decline in interest rates on floating rate assets. This risk has been mitigated by the Bank\u2019s migration to a more neutral interest rate sensitivity position."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The Company\u2019s continued focus on long-term strategies including growth in its markets, diversification of revenue sources, improving operating efficiencies and investing in technology."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","The Company\u2019s anticipated merger with Evans is expected to provide earnings benefit and incremental growth potential in new markets."]]
[[/GREPCENT_TABLE]]

The Company’s 2025 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 an 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.

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Average Balances and Net Interest Income

[[GREPCENT_TABLE]]
[["","","2024","","","2023","","","2022"],["(Dollars in thousands)","","Average Balances","","","Net Interest Income","","","Yield/ Rate","","","Average Balances","","","Net Interest Income","","","Yield/ Rate","","","Average Balances","","","Net Interest Income","","","Yield/ Rate"],["Assets:"],["Short-term interest-bearing accounts","","$","86,213","","","$","4,412","","","","5.12","%","","$","126,765","","","$","6,259","","","","4.94","%","","$","440,429","","","$","3,072","","","","0.70","%"],["Securities taxable(1)","","","2,285,725","","","","45,588","","","","1.99","%","","","2,377,596","","","","45,176","","","","1.90","%","","","2,424,925","","","","43,229","","","","1.78","%"],["Securities tax-exempt(1) (3)","","","221,273","","","","7,788","","","","3.52","%","","","214,053","","","","6,730","","","","3.14","%","","","233,515","","","","5,070","","","","2.17","%"],["FRB and FHLB stock","","","37,789","","","","2,672","","","","7.07","%","","","48,641","","","","3,368","","","","6.92","%","","","27,040","","","","995","","","","3.68","%"],["Loans(2) (3)","","","9,818,064","","","","553,784","","","","5.64","%","","","8,803,228","","","","463,290","","","","5.26","%","","","7,772,962","","","","333,008","","","","4.28","%"],["Total interest-earning assets","","$","12,449,064","","","$","614,244","","","","4.93","%","","$","11,570,283","","","$","524,823","","","","4.54","%","","$","10,898,871","","","$","385,374","","","","3.54","%"],["Other assets","","","1,071,455","","","","","","","","","","","","923,850","","","","","","","","","","","","893,197"],["Total assets","","$","13,520,519","","","","","","","","","","","$","12,494,133","","","","","","","","","","","$","11,792,068"],["Liabilities and stockholders\u2019 equity:"],["Money market deposit accounts","","$","3,308,433","","","$","116,982","","","","3.54","%","","$","2,418,450","","","$","62,475","","","","2.58","%","","$","2,447,978","","","$","4,955","","","","0.20","%"],["NOW deposit accounts","","","1,617,456","","","","13,442","","","","0.83","%","","","1,555,414","","","","8,298","","","","0.53","%","","","1,578,831","","","","2,600","","","","0.16","%"],["Savings deposits","","","1,580,517","","","","734","","","","0.05","%","","","1,715,749","","","","650","","","","0.04","%","","","1,829,360","","","","592","","","","0.03","%"],["Time deposits","","","1,408,410","","","","55,790","","","","3.96","%","","","1,006,867","","","","33,218","","","","3.30","%","","","464,912","","","","1,776","","","","0.38","%"],["Total interest-bearing deposits","","$","7,914,816","","","$","186,948","","","","2.36","%","","$","6,696,480","","","$","104,641","","","","1.56","%","","$","6,321,081","","","$","9,923","","","","0.16","%"],["Federal funds purchased","","","13,016","","","","721","","","","5.54","%","","","24,575","","","","1,269","","","","5.16","%","","","14,644","","","","588","","","","4.02","%"],["Repurchase agreements","","","95,879","","","","2,255","","","","2.35","%","","","70,251","","","","747","","","","1.06","%","","","69,561","","","","67","","","","0.10","%"],["Short-term borrowings","","","103,963","","","","5,693","","","","5.48","%","","","450,377","","","","23,592","","","","5.24","%","","","46,371","","","","1,968","","","","4.24","%"],["Long-term debt","","","29,715","","","","1,166","","","","3.92","%","","","24,247","","","","925","","","","3.81","%","","","6,579","","","","161","","","","2.45","%"],["Subordinated debt, net","","","120,420","","","","7,232","","","","6.01","%","","","105,756","","","","6,076","","","","5.75","%","","","98,439","","","","5,424","","","","5.51","%"],["Junior subordinated debt","","","101,196","","","","7,533","","","","7.44","%","","","101,196","","","","7,320","","","","7.23","%","","","101,196","","","","3,749","","","","3.70","%"],["Total interest-bearing liabilities","","$","8,379,005","","","$","211,548","","","","2.52","%","","$","7,472,882","","","$","144,570","","","","1.93","%","","$","6,657,871","","","$","21,880","","","","0.33","%"],["Demand deposits","","","3,377,352","","","","","","","","","","","","3,463,608","","","","","","","","","","","","3,696,957"],["Other liabilities","","","295,301","","","","","","","","","","","","285,310","","","","","","","","","","","","237,857"],["Stockholders\u2019 equity","","","1,468,861","","","","","","","","","","","","1,272,333","","","","","","","","","","","","1,199,383"],["Total liabilities and stockholders\u2019 equity","","$","13,520,519","","","","","","","","","","","$","12,494,133","","","","","","","","","","","$","11,792,068"],["Net interest income (FTE)","","","","","","$","402,696","","","","","","","","","","","$","380,253","","","","","","","","","","","$","363,494"],["Interest rate spread","","","","","","","","","","","2.41","%","","","","","","","","","","","2.61","%","","","","","","","","","","","3.21","%"],["Net interest margin (FTE)","","","","","","","","","","","3.23","%","","","","","","","","","","","3.29","%","","","","","","","","","","","3.34","%"],["Taxable equivalent adjustment","","","","","","$","2,574","","","","","","","","","","","$","2,034","","","","","","","","","","","$","1,304"],["Net interest income","","","","","","$","400,122","","","","","","","","","","","$","378,219","","","","","","","","","","","$","362,190"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Securities are shown at average amortized cost."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(2)","For purposes of these computations, nonaccrual loans and loans held for sale are included in the average loan balances outstanding."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(3)","Interest income for tax-exempt securities and loans have been adjusted to an FTE basis using the statutory Federal income tax rate of 21%."]]
[[/GREPCENT_TABLE]]

2024 OPERATING RESULTS AS COMPARED TO 2023 OPERATING RESULTS

Net Interest Income

Net interest income for the year ended December 31, 2024 was $400.1 million, up $21.9 million, or 5.8%, from 2023. FTE NIM was 3.23% for the year ended December 31, 2024, a decrease of 6 bps from 2023. Interest income increased $88.9 million, or 17.0%, as the yield on average interest-earning assets
increased 39 bps from 2023 to 4.93%, while average interest-earning assets of $12.45 billion increased $878.8 million primarily due to the Salisbury acquisition and organic loan growth, partially offset by a decrease in securities. Interest
expense was up $67.0 million, or 46.3%, for the year ended December 31, 2024 as compared to the year ended December 31, 2023, driven by interest-bearing deposit costs increasing 80 bps to 2.36% and a $1.22 billion increase in
interest-bearing deposits as a result of the Salisbury acquisition, partly offset by a decrease of $346.4 million in the average balances of short-term borrowings and the 548 bps rate paid on those borrowings. Included in net interest
income was $10.4 million and $4.3 million for the years ended December 31, 2024 and 2023, respectively, of acquisition-related net accretion.

37

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Analysis of Changes in FTE Net Interest Income

[[GREPCENT_TABLE]]
[["","","Increase (Decrease) 2024 over 2023","","","Increase (Decrease) 2023 over 2022"],["(In thousands)","","Volume","","","Rate","","","Total","","","Volume","","","Rate","","","Total"],["Short-term interest-bearing accounts","","$","(2,068",")","","$","221","","","$","(1,847",")","","$","(3,583",")","","$","6,770","","","$","3,187"],["Securities taxable","","","(1,784",")","","","2,196","","","","412","","","","(856",")","","","2,803","","","","1,947"],["Securities tax-exempt","","","233","","","","825","","","","1,058","","","","(452",")","","","2,112","","","","1,660"],["FRB and FHLB stock","","","(766",")","","","70","","","","(696",")","","","1,128","","","","1,245","","","","2,373"],["Loans","","","55,771","","","","34,723","","","","90,494","","","","47,841","","","","82,441","","","","130,282"],["Total FTE interest income","","$","51,386","","","$","38,035","","","$","89,421","","","$","44,077","","","$","95,372","","","$","139,449"],["Money market deposit accounts","","","27,225","","","","27,282","","","","54,507","","","","(60",")","","","57,580","","","","57,520"],["NOW deposit accounts","","","343","","","","4,801","","","","5,144","","","","(39",")","","","5,737","","","","5,698"],["Savings deposits","","","(54",")","","","138","","","","84","","","","(38",")","","","96","","","","58"],["Time deposits","","","15,016","","","","7,556","","","","22,572","","","","4,164","","","","27,278","","","","31,442"],["Federal funds purchased","","","(634",")","","","86","","","","(548",")","","","479","","","","202","","","","681"],["Repurchase agreements","","","349","","","","1,159","","","","1,508","","","","1","","","","679","","","","680"],["Short-term borrowings","","","(18,924",")","","","1,025","","","","(17,899",")","","","21,058","","","","566","","","","21,624"],["Long-term debt","","","214","","","","27","","","","241","","","","632","","","","132","","","","764"],["Subordinated debt, net","","","871","","","","285","","","","1,156","","","","414","","","","238","","","","652"],["Junior subordinated debt","","","-","","","","213","","","","213","","","","-","","","","3,571","","","","3,571"],["Total FTE interest expense","","$","24,406","","","$","42,572","","","$","66,978","","","$","26,610","","","$","96,080","","","$","122,690"],["Change in FTE net interest income","","$","26,980","","","$","(4,537",")","","$","22,443","","","$","17,467","","","$","(708",")","","$","16,759"]]
[[/GREPCENT_TABLE]]

Loans and Corresponding Interest and Fees on Loans

The average balance of loans increased by approximately $1.01 billion, or 11.5%, from 2023 to 2024 driven by the Salisbury acquisition and organic loan growth, with increases in C&I,
CRE, indirect auto and residential mortgage portfolios being partially offset by a reduction in the average balance of residential solar and other consumer loans. The yield on average loans increased from 5.26% in 2023 to 5.64% in 2024, as
loans re-priced upward due to the interest rate environment in 2024. FTE interest income from loans increased 19.5%, from $463.3 million in 2023 to $553.8 million in 2024. This increase was due to the increases in yields and an increase in
the average balance.

Composition of Loan Portfolio

A summary of the loan portfolio by major categories(1), net of deferred fees and origination costs, for the periods indicated is as follows:

[[GREPCENT_TABLE]]
[["","","December 31,"],["(In thousands)","","2024","","","2023","","","2022","","","2021","","","2020"],["Commercial & industrial","","$","1,426,358","","","$","1,353,725","","","$","1,265,082","","","$","1,155,240","","","$","1,121,224"],["Commercial real estate","","","3,876,698","","","","3,626,910","","","","2,807,941","","","","2,655,367","","","","2,526,813"],["Paycheck protection program","","","124","","","","523","","","","949","","","","101,222","","","","430,810"],["Residential real estate","","","2,142,249","","","","2,125,804","","","","1,649,870","","","","1,571,232","","","","1,466,662"],["Home equity","","","334,268","","","","337,214","","","","314,124","","","","330,357","","","","387,974"],["Indirect auto","","","1,273,253","","","","1,130,132","","","","989,587","","","","859,454","","","","931,286"],["Residential solar","","","820,079","","","","917,755","","","","856,798","","","","440,016","","","","282,224"],["Other consumer","","","96,881","","","","158,650","","","","265,796","","","","385,571","","","","351,892"],["Total loans","","$","9,969,910","","","$","9,650,713","","","$","8,150,147","","","$","7,498,459","","","$","7,498,885"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Loans are summarized by business line which does not align with how the Company assesses credit risk in the estimate for credit losses under CECL."]]
[[/GREPCENT_TABLE]]

Total loans were $9.97 billion and $9.65 billion at December 31, 2024 and 2023, respectively. Excluding the other consumer and residential solar portfolios that are in a planned run-off status,
period end loans increased $478.6 million, or 5.6%. C&I loans increased $72.2 million to $1.43 billion; CRE loans increased $249.8 million to $3.88 billion; and total consumer loans decreased $2.8 million to $4.67 billion. Total loans
represent approximately 72.3% of assets as of December 31, 2024, as compared to 72.5% as of December 31, 2023.

38

Table of Contents

Loans in the C&I and CRE portfolios consist primarily of loans extended to small and medium-sized entities. The Company offers a variety of
loan products tailored to meet the needs of 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 are typically collateralized by business assets such as equipment, accounts receivable and perishable agricultural products, which are inherently
subject to industry price volatility. The Company extends CRE loans to support real estate transactions, including acquisitions, refinancings, expansions and property improvements to both commercial and agricultural properties. These loans
are secured by liens on real estate assets, covering a spectrum of properties including apartments, commercial structures, healthcare facilities and others, whether occupied by owners or non-owners. Risks associated with the CRE portfolio
pertain to the borrowers’ ability to meet interest and principal payments over the life of the loan, as well as their ability to secure financing upon the loan’s maturity. The Company has a risk management framework that includes rigorous
underwriting standards, targeted portfolio stress testing, interest rate sensitivities on commercial borrowers and comprehensive credit risk monitoring mechanisms. The Company remains vigilant in monitoring market trends, economic indicators
and regulatory developments to promptly adapt our risk management strategies as needed.

Within the CRE portfolio, approximately 81% comprises Non-Owner Occupied CRE, with the remaining 19% being Owner-Occupied CRE. Non-Owner Occupied CRE includes diverse sectors across the
Company’s markets such as residential rental properties (43%) and office spaces (18%), along with retail, manufacturing, mixed use, hotels and others. Notably, office CRE loans account for 6% of the total outstanding loans, predominantly
serving suburban medical and professional tenants across suburban and small urban markets. These loans carry an average size of $1.9 million, with 9% maturing over the next two years. As of December 31, 2024 and December 31, 2023, the total
CRE construction and development loans amounted to $314.8 million and $347.2 million, respectively.

Residential real estate loans consist primarily of loans secured by a first or second mortgage on primary residences. The Company originates both 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. The Company has never actively
participated in subprime mortgage lending, which has historically been one of the riskiest sectors in the residential housing market. Given the absence of a universally accepted definition of what constitutes “subprime” lending, the Company
follows guidance from the Office of Thrift Supervision and other federal bank regulators (the “Agencies”), as outlined in the “Expanded Guidance for Subprime Lending Programs,” or the Expanded Guidance, issued by the Agencies by press release
dated January 31, 2001. As of December 31, 2024, there were $40.5 million in residential construction and development loans included in total loans.

The Company participated in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”), a guaranteed, forgivable loan program created under the Coronavirus Aid, Relief and
Economic Security Act (“CARES Act”) and the Consolidated Appropriation 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, the 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.

In 2017, the Company partnered with Sungage Financial, LLC. to offer financing to consumers for solar ownership with the program tailored for delivery through solar installers. Advances of
credit through this business line are to prime borrowers and are subject to the Company’s underwriting standards. Typically, the Company collects fees at origination that are deferred and recognized into interest income over the estimated
life of the loan. Residential solar loans are in a planned-run off status.

The Company offers a variety of consumer loan products including indirect auto, 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. Other
consumer loans consist of direct installment loans to individuals most secured by automobiles and other personal property and 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. Springstone and LendingClub loans are
in a planned run-off status. 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.

39

Table of Contents

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 maturity is due. For loans without contractual maturities, classification of maturity is consistent with the policy elections to measure the allowance for credit losses. Specifically, C&I and CRE lines of credit
assume one year maturity for relationships over $1.0 million and five year maturity for relationships under $1.0 million, while home equity line of credits maturities are classified based on their fixed rate conversion date plus five years.
C&I includes PPP and other consumer includes home equity and other consumer loans.

[[GREPCENT_TABLE]]
[["","","Remaining Maturity at December 31, 2024"],["(In thousands)","","C&I","","","CRE","","","Indirect Auto","","","Residential Solar","","","Other Consumer","","","Residential","","","Total"],["Within one year","","$","342,668","","","$","192,219","","","$","11,760","","","$","217","","","$","17,226","","","$","468","","","$","564,558"],["From one to five years","","","563,191","","","","1,160,766","","","","719,867","","","","16,762","","","","90,575","","","","36,984","","","","2,588,145"],["From five to fifteen years","","","315,437","","","","2,197,911","","","","541,626","","","","258,232","","","","319,451","","","","375,232","","","","4,007,889"],["After fifteen years","","","205,186","","","","325,802","","","","-","","","","544,868","","","","3,897","","","","1,729,565","","","","2,809,318"],["Total","","$","1,426,482","","","$","3,876,698","","","$","1,273,253","","","$","820,079","","","$","431,149","","","$","2,142,249","","","$","9,969,910"],["Interest rate terms on amounts due after one year:"],["Fixed","","$","755,929","","","$","833,674","","","$","1,261,493","","","$","819,862","","","$","178,174","","","$","1,820,592","","","$","5,669,724"],["Variable","","$","327,885","","","$","2,850,805","","","$","-","","","$","-","","","$","235,749","","","$","321,189","","","$","3,735,628"]]
[[/GREPCENT_TABLE]]

Securities and Corresponding Interest and Dividend Income

The average balance of taxable securities AFS and HTM decreased $91.9 million, or 3.9%, from 2023 to 2024. The yield on average taxable securities was 1.99% for 2024 compared to 1.90% in 2023.
The average balance of tax-exempt securities AFS and HTM increased from $214.1 million in 2023 to $221.3 million in 2024. The FTE yield on tax-exempt securities increased from 3.14% in 2023 to 3.52% in 2024.

The average balance of FRB and FHLB stock decreased to $37.8 million in 2024 from $48.6 million in 2023. The yield on investments in FRB and FHLB stock increased from 6.92% in 2023 to 7.07% in
2024.

Securities Portfolio

[[GREPCENT_TABLE]]
[["","","As of December 31,"],["","","2024","","","2023","","","2022"],["(In thousands)","","Amortized Cost","","","Fair Value","","","Amortized Cost","","","Fair Value","","","Amortized Cost","","","Fair Value"],["AFS securities:"],["U.S. treasury","","$","108,838","","","$","102,790","","","$","133,302","","","$","125,024","","","$","132,891","","","$","121,658"],["Federal agency","","","248,348","","","","218,517","","","","248,384","","","","214,740","","","","248,419","","","","206,419"],["State & municipal","","","95,457","","","","87,490","","","","96,251","","","","86,306","","","","97,036","","","","82,851"],["Mortgage-backed","","","512,353","","","","464,365","","","","473,813","","","","422,268","","","","536,021","","","","473,694"],["Collateralized mortgage obligations","","","725,821","","","","656,488","","","","614,886","","","","541,544","","","","669,111","","","","588,363"],["Corporate","","","48,482","","","","45,014","","","","48,442","","","","40,976","","","","60,404","","","","54,240"],["Total AFS securities","","$","1,739,299","","","$","1,574,664","","","$","1,615,078","","","$","1,430,858","","","$","1,743,882","","","$","1,527,225"],["HTM securities:"],["Federal agency","","$","100,000","","","$","83,344","","","$","100,000","","","$","82,216","","","$","100,000","","","$","79,322"],["Mortgage-backed","","","224,190","","","","189,326","","","","245,806","","","","213,630","","","","267,907","","","","230,473"],["Collateralized mortgage obligations","","","228,924","","","","206,125","","","","251,335","","","","228,463","","","","274,366","","","","249,848"],["State & municipal","","","289,807","","","","271,150","","","","308,126","","","","290,215","","","","277,244","","","","253,004"],["Total HTM securities","","$","842,921","","","$","749,945","","","$","905,267","","","$","814,524","","","$","919,517","","","$","812,647"]]
[[/GREPCENT_TABLE]]

The Company’s mortgage-backed securities, U.S. agency notes and collateralized mortgage obligations are all guaranteed by Fannie Mae, Freddie Mac, 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 the investment portfolio.

40

Table of Contents

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, 2024.
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.

[[GREPCENT_TABLE]]
[["","","Less than 1 Year","","","1 Year to 5 Years","","","5 Years to 10 Years","","","Over 10 Years","","","Total"],["(Dollars in thousands)","","$","","","","%","","","$","","","","%","","","$","","","","%","","","$","","","","%","","","$","","","","%"],["AFS securities:"],["U.S. treasury","","$","29,815","","","","1.80","%","","$","79,023","","","","1.72","%","","$","-","","","","-","","","$","-","","","","-","","","$","108,838","","","","1.74","%"],["Federal agency","","","-","","","","-","","","","225,600","","","","1.02","%","","","22,748","","","","1.18","%","","","-","","","","-","","","","248,348","","","","1.04","%"],["State & municipal","","","4,001","","","","1.69","%","","","86,217","","","","1.36","%","","","5,239","","","","1.40","%","","","-","","","","-","","","","95,457","","","","1.38","%"],["Mortgage-backed","","","594","","","","2.64","%","","","87,354","","","","1.28","%","","","136,867","","","","2.45","%","","","287,538","","","","2.45","%","","","512,353","","","","2.25","%"],["Collateralized mortgage obligations","","","5,416","","","","3.38","%","","","146,623","","","","2.42","%","","","28,662","","","","1.52","%","","","545,120","","","","2.87","%","","","725,821","","","","2.73","%"],["Corporate","","","-","","","","-","","","","-","","","","-","","","","48,482","","","","4.03","%","","","-","","","","-","","","","48,482","","","","4.03","%"],["Total AFS securities","","$","39,826","","","","2.01","%","","$","624,817","","","","1.52","%","","$","241,998","","","","2.52","%","","$","832,658","","","","2.72","%","","$","1,739,299","","","","2.25","%"],["HTM securities:"],["Federal agency","","$","-","","","","-","","","$","25,000","","","","1.01","%","","$","75,000","","","","1.14","%","","$","-","","","","-","","","$","100,000","","","","1.11","%"],["Mortgage-backed","","","-","","","","-","","","","3,483","","","","3.49","%","","","12,128","","","","4.23","%","","","208,579","","","","2.01","%","","","224,190","","","","2.15","%"],["Collateralized mortgage obligations","","","-","","","","-","","","","69,154","","","","3.03","%","","","33,855","","","","2.77","%","","","125,915","","","","2.73","%","","","228,924","","","","2.83","%"],["State & municipal","","","97,329","","","","3.58","%","","","65,769","","","","2.45","%","","","72,587","","","","1.90","%","","","54,122","","","","1.81","%","","","289,807","","","","2.57","%"],["Total HTM securities","","$","97,329","","","","3.58","%","","$","163,406","","","","2.50","%","","$","193,570","","","","1.90","%","","$","388,616","","","","2.22","%","","$","842,921","","","","2.36","%"]]
[[/GREPCENT_TABLE]]

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 totaled $8.38 billion in 2024 and increased $906.1 million from 2023. The increase was primarily driven by the interest-bearing deposits acquired from Salisbury partially offset
by a decrease in short-term borrowings. The rate paid on interest-bearing liabilities increased from 1.93% in 2023 to 2.52% in 2024. This increase in rates caused an increase in interest expense of $67.0 million, or 46.3%, from $144.6 million
in 2023 to $211.5 million in 2024.

Deposits

Average interest-bearing deposits increased $1.22 billion, or 18.2%, from 2023 to 2024. Average money market deposits increased $890.0
million, or 36.8%, during 2024 compared to 2023. Average NOW accounts increased $62.0 million, or 4.0%, during 2024 as compared to 2023. The average balance of savings accounts decreased $135.2 million, or 7.9%, during 2024 compared to
2023. The average balance of time deposits increased $401.5 million, or 39.9%, from 2023 to 2024. The average balance of demand deposits decreased $86.3 million, or 2.5%, during 2024 compared to 2023. The Company continues to experience
some migration incremental from noninterest bearing and low interest checking and savings
accounts into higher cost money market and time deposit instruments. The increase in average balances was primarily due to the $1.31 billion in deposits acquired from Salisbury in the third quarter of 2023. The Company’s composition of
total deposits is diverse and granular with over 561,000 accounts with an average per account balance of $20,574 as of December 31, 2024.

The rate paid on average interest-bearing deposits was up 80 bps to 2.36% for 2024. The rate paid for MMDA increased 96 bps to 3.54% from 2023 to 2024. The rate paid for NOW deposit accounts increased from 0.53% in 2023 to 0.83% in 2024.
The rate paid for savings deposits increased from 0.04% in 2023 to 0.05% in 2024. The rate paid for time deposits increased from 3.30% during 2023 to 3.96% during 2024.

41

Table of Contents

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["","","2024","","","2023","","","2022"],["(In thousands)","","Average Balance","","","Yield/Rate","","","Average Balance","","","Yield/Rate","","","Average Balance","","","Yield/Rate"],["Demand deposits","","$","3,377,352","","","","","","$","3,463,608","","","","","","$","3,696,957"],["Money market deposit accounts","","","3,308,433","","","","3.54","%","","","2,418,450","","","","2.58","%","","","2,447,978","","","","0.20","%"],["NOW deposit accounts","","","1,617,456","","","","0.83","%","","","1,555,414","","","","0.53","%","","","1,578,831","","","","0.16","%"],["Savings deposits","","","1,580,517","","","","0.05","%","","","1,715,749","","","","0.04","%","","","1,829,360","","","","0.03","%"],["Time deposits","","","1,408,410","","","","3.96","%","","","1,006,867","","","","3.30","%","","","464,912","","","","0.38","%"],["Total interest-bearing deposits","","$","7,914,816","","","","2.36","%","","$","6,696,480","","","","1.56","%","","$","6,321,081","","","","0.16","%"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","As of December 31,"],["(In thousands)","","2024","","","2023","","","2022"],["Estimated amount of uninsured deposits","","$","4,731,363","","","$","4,077,186","","","$","3,555,342"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["(In thousands)","","December 31, 2024"],["Portion of time deposits in excess of insurance limit","","$","251,607"],["Time deposits otherwise uninsured with a maturity of:"],["Within three months","","$","127,284"],["After three but within six months","","","97,092"],["After six but within twelve months","","","4,632"],["Over twelve months","","","22,599"]]
[[/GREPCENT_TABLE]]

Borrowings

Average federal funds purchased decreased to $13.0 million in 2024. The rate paid on federal funds purchased was 5.54% in 2024. Average repurchase agreements increased to $95.9 million in 2024
from $70.3 million in 2023. The average rate paid on repurchase agreements increased from 1.06% in 2023 to 2.35% in 2024. Average short-term borrowings decreased to $104.0 million in 2024 from $450.4 million in 2023. The average rate paid on
short-term borrowings increased from 5.24% in 2023 to 5.48% in 2024. Average long-term debt increased from $24.2 million in 2023 to $29.7 million in 2024. The average balance of junior subordinated debt remained at $101.2 million in 2024. The
average rate paid for junior subordinated debt in 2024 was 7.44%, up from 7.23% in 2023.

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. Those sources totaled approximately
$3.46 billion and $2.87 billion at December 31, 2024 and 2023, 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.

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 SOFR plus a spread of 4.85%, payable quarterly in arrears commencing on October 1, 2025. The
subordinated debt issuance cost of $2.2 million is being amortized on a straight-line basis into interest expense over five years. The Company repurchased $2.0 million of the subordinated notes in 2022 at a discount of $0.1 million.

Subordinated notes assumed in connection with the Salisbury acquisition included $25.0 million of 3.50% fixed-to-floating rate subordinated notes due 2031. The subordinated notes, which
qualify as Tier 2 capital, bear interest at an annual rate of 3.50%, payable quarterly in arrears commencing on June 30, 2021, and a floating rate of interest equivalent to the three-month SOFR plus a spread of 2.80%, payable quarterly in
arrears commencing on June 30, 2026. As of the acquisition date, the fair value discount was $3.0 million, which will be amortized into interest expense over the expected call or maturity date.

As of December 31, 2024 and December 31, 2023 the subordinated debt net of unamortized issuance costs and fair value discount was $121.2 million and $119.7 million, respectively.

42

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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:

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["(In thousands)","","2024","","","2023","","","2022"],["Service charges on deposit account","","$","17,087","","","$","15,425","","","$","14,630"],["Card services income","","","22,331","","","","20,829","","","","29,058"],["Retirement plan administration fees","","","56,587","","","","47,221","","","","48,112"],["Wealth management","","","41,641","","","","34,763","","","","33,311"],["Insurance services","","","17,032","","","","15,667","","","","14,696"],["Bank owned life insurance income","","","8,325","","","","6,750","","","","6,044"],["Net securities gains (losses)","","","2,789","","","","(9,315",")","","","(1,131",")"],["Other","","","11,032","","","","10,838","","","","10,858"],["Total noninterest income","","$","176,824","","","$","142,178","","","$","155,578"]]
[[/GREPCENT_TABLE]]

Noninterest income for the year ended December 31, 2024 was $176.8 million, up $34.6 million, or 24.4%, from the year ended December 31, 2023. Excluding net
securities gains (losses), noninterest income for the year ended December 31, 2024 was $174.0 million, up $22.5 million, or 14.9%, from the year ended December 31, 2023. The increase from the prior year was primarily due to an increase in
retirement plan administration fees and wealth management fees. The increase in retirement plan administration fees was driven by higher market level, the acquisition of Retirement Direct, LLC and PACO, Inc., organic growth and higher
activity-based fees. The increase in wealth management fees was driven by the addition of Salisbury revenues, organic growth and market performance.

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:

[[GREPCENT_TABLE]]
[["","","Years Ended December 31,"],["(In thousands)","","2024","","","2023","","","2022"],["Salaries and employee benefits","","$","232,487","","","$","194,250","","","$","187,830"],["Technology and data services","","","39,139","","","","38,163","","","","35,712"],["Occupancy","","","31,309","","","","28,408","","","","26,282"],["Professional fees and outside services","","","19,132","","","","17,601","","","","16,810"],["Office supplies and postage","","","7,525","","","","6,917","","","","6,140"],["FDIC assessment","","","6,765","","","","6,257","","","","3,197"],["Advertising","","","3,386","","","","3,054","","","","2,822"],["Amortization of intangible assets","","","8,443","","","","4,734","","","","2,263"],["Loan collection and other real estate owned, net","","","2,505","","","","2,618","","","","2,647"],["Acquisition expenses","","","1,531","","","","9,978","","","","967"],["Other","","","25,659","","","","29,684","","","","19,795"],["Total noninterest expense","","$","377,881","","","$","341,664","","","$","304,465"]]
[[/GREPCENT_TABLE]]

Noninterest expense for the year ended December 31, 2024 was $377.9 million, up $36.2 million, or 10.6%, from the year ended December 31,
2023. Excluding acquisition expenses and the impairment of a minority interest equity investment, noninterest expense for the year ended December 31, 2024 was $376.4 million, up $49.4 million, or 15.1%, from the year ended December 31,
2023. The increase from the prior year was driven by higher salaries and employee benefits due to the Salisbury acquisition, merit pay increases, higher levels of incentive compensation and higher medical and other benefit costs. In
addition, the increase in occupancy expense, professional fees and outside services and amortization of intangible assets were impacted by additional expenses from the Salisbury acquisition.

43

Table of Contents

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 limitations on potential assessments expire. As a result, the Company’s effective tax rate may
fluctuate significantly on a quarterly or annual basis.

On August 16, 2022, H.R. 5376, the Inflation Reduction Act (“IRA”), was signed into law. The IRA, among other things, introduced a corporate
alternative minimum tax, excise tax on stock repurchases and a clean vehicle credit. The Company has evaluated the impact of the IRA and does not expect it to be material. However, the Company will continue to monitor any future implication on
its tax position and business operations.

Income tax expense for the year ended December 31, 2024 was $38.8 million, up $4.1 million, or 11.9%, from the year ended December 31, 2023. The effective tax rate
was 21.6% in 2024 and was 22.6% in 2023. The decrease in the effective tax rate from 2023 was due to a higher level of tax-exempt income as a percentage of total taxable income.

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 the
Board. 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.

Allowance for Credit Losses

Beginning January 1, 2023, the Company adopted ASU 2022-02 Financial Instruments - CECL Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures (“ASU 2022-02”), which resulted in an insignificant change to the Company’s methodology for estimating the allowance for credit losses on TDRs since December 31, 2022. The January 1, 2023 decrease in allowance for credit
loss on TDR loans relating to adoption of ASU 2022-02 was $0.6 million, which increased retained earnings by $0.5 million and decreased the deferred tax asset by $0.1 million.

Management considers the accounting policy relating to the allowance for credit losses to be a critical estimate 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 methodology requires an estimate of the credit losses expected over the life of a loan (or pool of loans). 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, adjusted for expected prepayments and
curtailments. 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 for credit losses 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.

44

Table of Contents

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 and 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 Credit Losses is included in Notes 1 and 6 to the consolidated financial statements as well as in the “Critical Accounting Estimates” section of
the Management Discussion and Analysis. The Company’s management considers the allowance for credit losses to be appropriate based on evaluation and analysis of the loan portfolio.

The allowance for credit losses totaled $116.0 million at December 31, 2024, compared to $114.4 million at December 31, 2023. The allowance for credit losses as a percentage of loans was 1.16%
at December 31, 2024, compared to 1.19% at December 31, 2023. The increase in the allowance for credit losses from December 31, 2023 to December 31, 2024 was primarily due to providing for organic loan growth, the slowing of prepayment speed
assumptions, including the changes in prepayment model assumptions. These increases to the allowance for credit losses were partially offset by a change in forecast scenario weightings from 70% baseline and 30% downside to 80% baseline and
20% downside, and the shift in loan composition driven by other consumer and residential solar portfolios that are in a planned run-off status.

The allowance for credit losses as of December 31, 2023 incorporates the recording of $14.5 million of allowance for acquired Salisbury loans as of the acquisition date, which included both the
$8.8 million of non-PCD allowance recognized through the provision for loan losses and the $5.8 million of PCD allowance reclassified from loans.

The allowance for credit losses was 224.73% of nonperforming loans at December 31, 2024 as compared to 302.05% at December 31, 2023. The
allowance for credit losses was 253.17% of nonaccrual loans at December 31, 2024 as compared to 334.38% at December 31, 2023. The decline in the coverage of the allowance to nonperforming and nonaccrual loans from December 31, 2023 to
December 31, 2024 largely relates to one nonperforming relationship with an amortized cost basis of $14.0 million that is individually evaluated for purposes of the allowance for credit losses which had no reserve established at December
31, 2024.

The provision for loan losses was $19.6 million for the year ended December 31, 2024, compared to $25.3 million for the year ended December 31, 2023. Provision expense decreased from the prior
year primarily due to the $8.8 million of acquisition-related provision for loan losses due to the Salisbury acquisition recorded in 2023, providing for current year loan growth, the slowing of prepayment speed assumptions in the current year,
changes in model assumptions including the extension of the expected duration of the portfolio. Net charge-offs totaled $18.0 million for 2024, up from $16.8 million in 2023. Net charge-offs to average loans was 18 bps for 2024 compared to 19
bps for 2023.

[[GREPCENT_TABLE]]
[["(Dollars in thousands)","","2024","","","2023","","","2022","","","2021","","","2020"],["Balance at January 1*","","$","114,400","","","$","100,152","","","$","92,000","","","$","110,000","","","$","75,999"],["Loans charged-off"],["Commercial","","","5,042","","","","4,154","","","","1,870","","","","4,638","","","","4,005"],["Residential","","","211","","","","517","","","","633","","","","979","","","","1,135"],["Consumer**","","","20,475","","","","22,107","","","","16,140","","","","14,489","","","","21,938"],["Total loans charged-off","","$","25,728","","","$","26,778","","","$","18,643","","","$","20,106","","","$","27,078"],["Recoveries"],["Commercial","","$","839","","","$","3,625","","","$","2,430","","","$","723","","","$","786"],["Residential","","","415","","","","496","","","","852","","","","1,069","","","","618"],["Consumer**","","","6,467","","","","5,859","","","","7,014","","","","8,571","","","","8,541"],["Total recoveries","","$","7,721","","","$","9,980","","","$","10,296","","","$","10,363","","","$","9,945"],["Net loans charged-off","","$","18,007","","","$","16,798","","","$","8,347","","","$","9,743","","","$","17,133"],["Allowance for credit loss on PCD acquired loans","","$","-","","","$","5,772","","","$","-","","","$","-","","","$","-"],["Provision for loan losses","","","19,607","","","","25,274","","","","17,147","","","","(8,257",")","","","51,134"],["Balance at December 31","","$","116,000","","","$","114,400","","","$","100,800","","","$","92,000","","","$","110,000"],["Allowance for loan losses to loans outstanding at end of year","","","1.16","%","","","1.19","%","","","1.24","%","","","1.23","%","","","1.47","%"],["Commercial net charge-offs to average loans outstanding","","","0.04","%","","","0.01","%","","","(0.01",")%","","","0.05","%","","","0.04","%"],["Residential net charge-offs to average loans outstanding","","","-","","","","-","","","","-","","","","-","","","","0.01","%"],["Consumer net charge-offs to average loans outstanding","","","0.14","%","","","0.18","%","","","0.12","%","","","0.08","%","","","0.18","%"],["Net charge-offs to average loans outstanding","","","0.18","%","","","0.19","%","","","0.11","%","","","0.13","%","","","0.23","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["*","2020 includes an adjustment of $3.0 million as a result of the January 1, 2020, adoption of ASC 326 and 2023 includes an adjustment of $0.6 million as a result of the January 1, 2023, adoption of ASU 2022-02."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["**","Consumer charge-off and recoveries include consumer and home equity."]]
[[/GREPCENT_TABLE]]

45

Table of Contents

Nonperforming Assets

Nonperforming assets consist of nonaccrual loans, loans over 90 days past due and still accruing, troubled loans modifications, 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 commercial and CRE loans risk graded substandard or doubtful, and nonperforming loans
individually evaluated for credit loss 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.

[[GREPCENT_TABLE]]
[["","","As of December 31,"],["(Dollars in thousands)","","2024","","","%","","","2023","","","%","","","2022","","","%","","","2021","","","%","","","2020","","","%"],["Nonaccrual loans:"],["Commercial","","$","32,144","","","","70","%","","$","21,567","","","","63","%","","$","7,664","","","","44","%","","$","15,942","","","","53","%","","$","23,557","","","","53","%"],["Residential","","","10,464","","","","23","%","","","9,632","","","","28","%","","","4,835","","","","28","%","","","8,862","","","","29","%","","","13,082","","","","29","%"],["Consumer","","","2,529","","","","6","%","","","2,566","","","","8","%","","","1,667","","","","10","%","","","1,511","","","","5","%","","","3,020","","","","7","%"],["Troubled loan modifications(1)","","","682","","","","1","%","","","448","","","","1","%","","","3,067","","","","18","%","","","3,970","","","","13","%","","","4,988","","","","11","%"],["Total nonaccrual loans","","$","45,819","","","","100","%","","$","34,213","","","","100","%","","$","17,233","","","","100","%","","$","30,285","","","","100","%","","$","44,647","","","","100","%"],["Loans over 90 days past due and still accruing:"],["Commercial","","$","-","","","","-","","","$","1","","","","-","","","$","4","","","","-","","","$","-","","","","-","","","$","493","","","","16","%"],["Residential","","","2,411","","","","42","%","","","554","","","","15","%","","","771","","","","20","%","","","808","","","","33","%","","","518","","","","16","%"],["Consumer","","","3,387","","","","58","%","","","3,106","","","","85","%","","","3,048","","","","80","%","","","1,650","","","","67","%","","","2,138","","","","68","%"],["Total loans over 90 days past due and still accruing","","$","5,798","","","","100","%","","$","3,661","","","","100","%","","$","3,823","","","","100","%","","$","2,458","","","","100","%","","$","3,149","","","","100","%"],["Total nonperforming loans","","$","51,617","","","","","","","$","37,874","","","","","","","$","21,056","","","","","","","$","32,743","","","","","","","$","47,796"],["OREO","","","182","","","","","","","","-","","","","","","","","105","","","","","","","","167","","","","","","","","1,458"],["Total nonperforming assets","","$","51,799","","","","","","","$","37,874","","","","","","","$","21,161","","","","","","","$","32,910","","","","","","","$","49,254"],["Total nonaccrual loans to total loans","","","0.46","%","","","","","","","0.35","%","","","","","","","0.21","%","","","","","","","0.40","%","","","","","","","0.60","%"],["Total nonperforming loans to total loans","","","0.52","%","","","","","","","0.39","%","","","","","","","0.26","%","","","","","","","0.44","%","","","","","","","0.64","%"],["Total nonperforming assets to total assets","","","0.38","%","","","","","","","0.28","%","","","","","","","0.18","%","","","","","","","0.27","%","","","","","","","0.45","%"],["Total allowance for loan losses to nonperforming loans","","","224.73","%","","","","","","","302.05","%","","","","","","","478.72","%","","","","","","","280.98","%","","","","","","","230.14","%"],["Total allowance for loan losses to nonaccrual loans","","","253.17","%","","","","","","","334.38","%","","","","","","","584.92","%","","","","","","","303.78","%","","","","","","","246.38","%"]]
[[/GREPCENT_TABLE]]

(1) TDRs prior to adoption of ASU 2022-02.

Total nonperforming assets were $51.8 million at December 31, 2024, compared to $37.9 million at December 31, 2023. Nonperforming loans at
December 31, 2024 were $51.6 million or 0.52% of total loans, compared with $37.9 million or 0.39% of total loans at December 31, 2023. The increase in nonperforming assets from

the same period in the prior year was attributable to a CRE relationship that was placed into a nonaccrual status in the fourth quarter of 2024. The relationship is being actively managed and was written down to estimated fair value in the fourth quarter of 2024, and as such, no specific reserve has been established. Total nonaccrual loans were $45.8 million or 0.46% of total loans
at December 31, 2024, compared to $34.2 million or 0.35% of total loans at December 31, 2023. Past due loans as a percentage of total loans was 0.34% at December 31, 2024, up from 0.32% of total loans at December 31, 2023.

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In addition to nonperforming loans discussed above, the Company has also identified approximately $116.1 million in potential problem loans at
December 31, 2024 as compared to $87.7 million at December 31, 2023. 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.” Potential problem loans have increased to
more normalized levels and the increase primarily relates to a few CRE relationships reflecting changing conditions in certain CRE markets including construction delays, rising costs and delays in leasing up spaces. The increase in
potential problem loans from December 31, 2023 is primarily due to the net migration of $41.9 million to substandard, partially offset by an increase of $10.0 million in nonaccrual commercial loan balances. 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 troubled loans modifications 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.

Allocation of the Allowance for Loan Losses

[[GREPCENT_TABLE]]
[["","","December 31,"],["","","2024","","","2023","","","2022","","","2021","","","2020"],["(Dollars in thousands)","","Allowance","","","Category Percent of Loans","","","Allowance","","","Category Percent of Loans","","","Allowance","","","Category Percent of Loans","","","Allowance","","","Category Percent of Loans","","","Allowance","","","Category Percent of Loans"],["Commercial","","$","45,453","","","","51","%","","$","45,903","","","","50","%","","$","34,722","","","","48","%","","$","28,941","","","","51","%","","$","50,942","","","","53","%"],["Residential","","","26,560","","","","27","%","","","22,070","","","","27","%","","","15,127","","","","26","%","","","18,806","","","","27","%","","","21,255","","","","26","%"],["Consumer","","","43,987","","","","22","%","","","46,427","","","","23","%","","","50,951","","","","26","%","","","44,253","","","","22","%","","","37,803","","","","21","%"],["Total","","$","116,000","","","","100","%","","$","114,400","","","","100","%","","$","100,800","","","","100","%","","$","92,000","","","","100","%","","$","110,000","","","","100","%"]]
[[/GREPCENT_TABLE]]

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 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. The allowance for losses on unfunded commitments totaled $4.4 million as of December 31, 2024, compared to $5.1 million as of December
31, 2023. December 31, 2023 included $0.8 million of acquisition-related provision for unfunded loan commitments.

Liquidity Risk

Liquidity risk arises from the possibility that the Company 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 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, along with 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 monitors 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, 2024, the Company’s Basic Surplus measurement was 17.0% of total assets, or $2.34 billion, as compared to the December 31, 2023 Basic Surplus of 11.6%, or $1.54 billion, and was above the Company’s minimum of 5% (calculated at
$689.3 million and $665.5 million, of period end total assets as of December 31, 2024 and December 31, 2023, respectively) set forth in its liquidity policies.

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At December 31, 2024 and 2023, FHLB advances outstanding totaled $45.6 million and $322.7 million, respectively. At December 31, 2024 and 2023, the Bank had $199.0 million and $77.0 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 $1.71 billion at December 31, 2024 and $1.11 billion at
December 31, 2023. In addition, unpledged securities could have been used to increase borrowing capacity at the FHLB by an additional $957.3 million and $823.3 million at December 31, 2024 and 2023, 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 $2.01 billion at December 31, 2024 and December 31, 2023. In addition, the Bank has a “Borrower-in-Custody” program with the FRB with the addition of the ability to pledge automobile and residential solar loans as collateral. At
December 31, 2024 and 2023, the Bank had the capacity to borrow $1.13 billion and $1.02 billion, respectively, from this program. The Company’s internal policies authorize borrowing up to 25% of assets. Under this policy, remaining available
borrowing capacity totaled $3.38 billion at December 31, 2024 and $2.99 billion at December 31, 2023.

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 considers its Basic
Surplus position to be strong. However, certain events may adversely impact the Company’s liquidity position in 2025. While short-term interest rates have declined, they
remain elevated relative to recent history, which could result in deposit declines as depositors have alternative opportunities for yield on their excess funds. 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%. Note, enhanced liquidity monitoring was put in place to quickly respond to the changing environment during the pandemic including increasing the frequency of monitoring and adding additional sources of liquidity. While the pandemic
has come to an end, this enhanced monitoring continues as elevated interest rates and the recent bank failures have led to a deposit decline in the banking system and increased volatility to liquidity risk.

At December 31, 2024, a portion of the Company’s loans and securities were pledged as collateral on borrowings. Therefore, once on-balance sheet liquidity is reduced, 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 $188.6 million and $157.5 million in 2024 and 2023, 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 $399.2 million and $44.2 million in 2024 and 2023, respectively. Critical elements of investing activities are loan and investment securities
transactions.

Net cash flows provided by financing activities totaled $289.5 million and net cash flows used in financing activities totaled $105.4 million
in 2024 and 2023. 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, 2024 and 2023, commitments to extend credit in the form of loans, including unused lines of credit, amounted to $2.84 billion and $2.68 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.

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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 generally 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 terms with an option to renew upon annual review; therefore, the total amounts do not necessarily
represent future cash requirements. At December 31, 2024 and 2023, standby letters of credit were $50.8 million and $44.7 million, respectively. As of December 31, 2024 and 2023, the fair value of the Company’s standby letters of credit was
not significant. The following table sets forth the commitment expiration period for standby letters of credit at:

[[GREPCENT_TABLE]]
[["(In thousands)","","December 31, 2024"],["Within one year","","$","38,810"],["After one but within three years","","","11,109"],["After three but within five years","","","590"],["After five years","","","323"],["Total","","$","50,832"]]
[[/GREPCENT_TABLE]]

Interest Rate Swaps

The Company records all derivatives at fair value on the consolidated balance sheet. 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. The Company may enter into derivative
contracts that are intended to economically hedge certain of its risks, even if hedge accounting does not apply or if 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.

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, PD and LGD 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 $982.5 million and $856.9 million at December 31, 2024 and 2023, respectively. At December 31,
2024 and 2023, the Company had $0.9 million and $1.0 million, respectively, of mortgage servicing rights. At December 31, 2024 and 2023, the Company serviced $24.7 million and $26.4 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, 2024 and 2023.

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 and the Bank’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 is 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.

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Certain restrictions exist regarding the ability of the Bank to transfer funds to the Company in the form of cash dividends. The approval of the OCC is required to pay dividends when a bank
fails to meet certain minimum regulatory capital standards or when such dividends are in excess of a subsidiary bank’s earnings retained in the current year plus retained net profits for the preceding two years as specified in applicable OCC
regulations. At December 31, 2024 and 2023, approximately $107.6 million and $106.6 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.

Stock Repurchase Plan

The Company purchased 7,600 shares of its common stock during the year ended December 31, 2024 at an average price of $33.02 per share under
its previously announced share repurchase program. The Company may repurchase shares of its common stock from time to time to mitigate the potential dilutive effect of stock-based incentive plans and other potential uses of common stock for
corporate purposes. The Company did not purchase any shares of its common stock during the fourth quarter of 2024. As of December 31, 2024, there were 1,992,400 shares available for repurchase under this plan authorized on December 18, 2023, which is set to expire on December 31, 2025.

Recent Accounting Updates

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

2023 OPERATING RESULTS AS COMPARED TO 2022 OPERATING RESULTS

For similar operating and financial data and discussion of our results for the year ended December 31, 2023 compared to our results for the year ended December 31, 2022, 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, 2023, which was filed with the SEC on February 29, 2024 and is
incorporated herein by reference.

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