Financial Institutions (FISI) Status Update summary

Settlement of civil lawsuit and financial impact

• Settled a civil lawsuit filed in 2017 regarding auto loan repossession notices, subject to court approval, with a $29.5 million payment, $6.5 million of which is covered by insurance proceeds.

• The settlement releases liability on about $55 million in fully charged-off loans and ends adverse credit reporting for affected borrowers.

• A $23 million pre-tax provision for litigation settlement was recorded, resulting in an after-tax impact of $17.1 million and increasing net loss to $82.8 million for Q4 and $41.6 million for the year.

• The settlement does not affect 2025 financial guidance, including targets for return on assets, return on equity, and efficiency ratio.

• Regulatory capital ratios remain well above required levels, with only a 30 basis point reduction.

Legal and operational context

• The lawsuit stemmed from technical non-compliance in borrower notices, specifically regarding storage fee disclosures and contact information, with no evidence of borrower harm.

• Class action certification was granted in 2021; prior mediation attempts failed until a preliminary agreement was reached in February 2025.

• The company is pursuing damages from former external legal counsel for alleged malpractice in handling the case.

• Updated documentation and compliance measures were implemented independently of the lawsuit, with the class period extended to 2021 for broad coverage.

• Other financial institutions have faced similar lawsuits, indicating a broader industry issue.

Business outlook and strategy

• Performance in the first quarter of 2025 is tracking favorably to plan, with revenue and expenses as expected.

• The company exited the auto market over a year ago, focusing on new car dealerships in upstate New York, and expects consumer indirect balances to remain flat through 2025.

• The settlement has no impact on the go-forward indirect auto business, as the company has already exited the affected market.

• Regulatory communication has been proactive, and capital ratios remain strong.

• Financial planning for 2025 incorporated market uncertainty, and current balance sheet and P&L are in line with projections.