What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-06 · 493 added, 281 removed, 620 unchanged (56% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets (unaudited)

September 30,

(In thousands, except share and per share data)

20 unchanged sentences

Stockholders’ equity

Preferred stock, $ 0.01 par value.

Authorized 2,500,000 shares at June 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value.

Authorized 100,000,000 shares at June 30, 2021 and December 31, 2020 ;

issued 49,651,493 at June 30, 2021 and December 31, 2020

Preferred stock, $ 0.01

Authorized 2,500,000 shares at September 30, 2021 and December 31, 2020

Common stock, $ 0.01

Authorized 100,000,000 shares at September 30, 2021 and December 31, 2020 ;

issued 49,651,493 at September 30, 2021 and December 31, 2020

Additional paid-in-capital

1 unchanged sentence

Accumulated other comprehensive (loss) income

Common stock in treasury, at cost, 6,196,130 and 6,022,399 shares at June 30, 2021 and December 31, 2020, respectively

Common stock in treasury, at cost, 6,313,800 and 6,022,399 shares at September 30, 2021 and December 31,

2020, respectively

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30 ,

(In thousands, except per share data)

20 unchanged sentences

Bank owned life insurance income

Net securities gains (losses)

Net securities (losses) gains

Total noninterest income

15 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30 ,

(In thousands)

1 unchanged sentence

Securities available for sale:

Unrealized net holding gains (losses) arising during the period, gross

Unrealized net holding gains (losses) arising during the period, net

Unrealized net holding (losses) gains arising during the period, gross

Unrealized net holding (losses) gains arising during the period, net

Reclassification adjustment for net gains in net income, gross

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Total pension and other benefits, net

Total other comprehensive income (loss)

Total other comprehensive (loss) income

Comprehensive income

6 unchanged sentences

(In thousands, except share and per share data)

Balance at March 31, 2021

Cash dividends - $ 0.27 per share

Purchase of 23,627 treasury shares

Net issuance of 53,788 shares to employee and other stock plans

Stock-based compensation

Other comprehensive income

Balance at June 30, 2021

Balance at March 31, 2020

Cash dividends - $ 0.00 per share

Net issuance of 20,905 shares to employee and other stock plans

Cash dividends - $ 0.28

Purchase of 119,342

treasury shares

Net issuance of 1,672

shares to employee and other stock plans

Stock-based compensation

Other comprehensive income

Other comprehensive (loss)

Balance at September 30 , 2021

Balance at June 30, 2020

Cash dividends - $ 0.27

Net issuance of 3,030

shares to employee and other stock plans

Stock-based compensation

Other comprehensive (loss)

Balance at September 30 , 2020

Comprehensive

2 unchanged sentences

Balance at December 31 , 2020

Cash dividends - $ 0.81 per share

Purchase of 280,658 treasury shares

Net issuance of 106,927 shares to employee and other stock plans

Cash dividends - $ 0.82

Purchase of 400,000

treasury shares

Net issuance of 108,599

shares to employee and other stock plans

Stock-based compensation

Other comprehensive (loss)

Balance at June 30 , 2021

Balance at September 30 , 2021

Balance at December 31, 2019

Cumulative effect adjustment for ASU 2016-13 implementation

Cash dividends - $ 0.54 per share

Purchase of 263,507 treasury shares

Net issuance of 75,246 shares to employee and other stock plans

Cash dividends - $ 0.81

Purchase of 263,507

treasury shares

Net issuance of 78,276

shares to employee and other stock plans

Stock-based compensation

Other comprehensive income

Balance at June 30 , 2020

Balance at September 30 , 2020

See accompanying notes to unaudited interim consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

51 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) (continued)

Six Months Ended

Nine Months Ended

September 30,

Supplemental disclosure of cash flow information

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Notes to Unaudited Interim Consolidated Financial Statements

June 30, 2021

September 30, 2021

Description of Business

NBT Bancorp Inc.

(the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in Norwich, New York.

(the “Company”) is a registered financial holding company incorporated in the state of Delaware in 1986, with its principal headquarters located in

Norwich, New York.

The principal assets of the Company consist of all of the outstanding shares of common stock of its subsidiaries, including:

NBT Bank, National Association (the “Bank”), NBT Financial Services, Inc.

(“NBT Financial”), NBT Holdings, Inc.

(“NBT Financial”), NBT Holdings,

(“NBT Holdings”), CNBF Capital Trust I, NBT Statutory Trust I, NBT Statutory Trust II, Alliance Financial Capital Trust I and Alliance Financial Capital Trust II (collectively, the “Trusts”).

The Company’s principal sources of revenue are the management fees and dividends it receives from the Bank, NBT Financial and NBT Holdings.

The Company’s business, primarily conducted through the Bank, consists of providing commercial banking, retail banking and wealth management services primarily to customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont, the southern coastal Maine area and central Connecticut.

The Company has been, and intends to continue to be, a community-oriented financial institution offering a variety of financial services.

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 Company’s principal sources of revenue are the

management fees and dividends it receives from the Bank, NBT Financial and NBT Holdings.

The Company’s business, primarily conducted through the Bank, consists of providing commercial banking, retail banking and wealth management services primarily to

customers in its market area, which includes central and upstate New York, northeastern Pennsylvania, southern New Hampshire, western Massachusetts, Vermont, the southern coastal Maine area and central Connecticut.

The Company has been, and intends

to continue to be, a community-oriented financial institution offering a variety of financial services.

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.

Summary of Significant Accounting Policies

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The accompanying unaudited interim consolidated financial statements include the accounts of NBT Bancorp Inc.

and its wholly-owned subsidiaries, the Bank, NBT Financial and NBT Holdings.

and its wholly-owned subsidiaries, the Bank, NBT Financial

and NBT Holdings.

Collectively, NBT Bancorp Inc.

and its subsidiaries are referred to herein as (“the Company”).

The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results

for the interim periods in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated

financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other

interim period.

All material intercompany transactions have been eliminated in consolidation.

Amounts previously reported in the consolidated financial statements are reclassified whenever necessary to conform to current period presentation.

The Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.

Company has evaluated subsequent events for potential recognition and/or disclosure and there were none identified.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial

statements and accompanying notes.

Actual results may differ from those estimates and such differences could be material to the financial statements.

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Recently Adopted Accounting Standards

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2019-12, Income Taxes (Topic 740):

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates

(“ASU”) 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes .

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It eliminates the need for an organization to analyze whether the following apply in a given period:

(1) exception to the incremental approach for intraperiod tax allocation;

(1) exception to the incremental approach for intraperiod

tax allocation;

(2) exceptions to accounting for basis differences when there are ownership changes in foreign investments;

and (3) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The ASU also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for:

also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for:

(1) franchise taxes that are partially based on income;

(2) transactions with a government that result in a step up in the tax basis of goodwill;

(2) transactions with a government that result in a step up in the tax basis

(3) separate financial statements of legal entities that are not subject to tax;

and (4) enacted changes in tax laws in interim periods.

The amendments in this ASU were effective for the Company on January 1, 2021, and interim periods within those fiscal years.

The amendments in this ASU were effective for the Company on January 1, 2021, and interim

periods within those fiscal years.

The adoption did not have a material impact on the consolidated financial statements and related disclosures.

3 unchanged sentences

On January 7, 2021, the FASB issued ASU 2021-01, which refines the scope of Accounting Standards Codification 848 (“ASC 848”) and clarifies some of its guidance.

ASU 2020-04 and related amendments provide temporary optional expedients and exceptions to the existing guidance for applying GAAP to affected contract modifications and hedge accounting relationships in the transition away from the London Interbank Offered Rate (“LIBOR”) or other interbank offered rate on financial reporting.

The guidance also allows a one-time election to sell and/or reclassify to available for sale (“AFS”) or trading held to maturity (“HTM”) debt securities that reference an interest rate affected by reference rate reform.

The amendments in this ASU are effective March 12, 2020 through December 31, 2022 and permits relief solely for reference rate reform actions and permits different elections over the effective date for legacy and new activity.

ASU 2020-04 and related

amendments provide temporary optional expedients and exceptions to the existing guidance for applying GAAP to affected contract modifications and hedge accounting relationships in the transition away from the London Interbank Offered Rate

(“LIBOR”) or other interbank offered rate on financial reporting.

The guidance also allows a one-time election to sell and/or reclassify to available for sale (“AFS”) or trading held to maturity (“HTM”) debt securities that reference an interest

rate affected by reference rate reform.

legacy and new activity.

The Company is evaluating the impact of adopting the new guidance on the consolidated financial statements and does not expect it will have a material impact on the consolidated financial statements .

1 unchanged sentence

(In thousands)

As of June 30 , 2021

As of September 30 , 2021

Federal agency

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Total AFS securities

There was no allowance for credit losses on AFS securities as of June 30, 2021 and December 31, 2020.

During the three and six months ended June 30, 2021 there were no gains or losses reclassified out of accumulated other comprehensive income (loss) (“AOCI”) and into earnings.

During the three months ended June 30, 2020 there were no gains or losses reclassified out of AOCI and into earnings.

During the six months ended June 30, 2020, there were $ 3 thousand of gross realized gains reclassified out of AOCI and into earnings.

Included in net realized gains (losses) on AFS securities, the Company recorded gains from calls of approximately $ 3 thousand for the six months ended June 30, 2020.

There was no allowance for credit losses on AFS

securities as of September 30, 2021 and December 31, 2020.

During the three and nine months ended September 30, 2021 there were no

gains or losses reclassified out of accumulated other comprehensive income (loss) (“AOCI”) and into earnings.

During the three months ended September 30, 2020 there were no gains or losses reclassified out of AOCI and into earnings.

During the nine months ended September 30, 2020, there were $ 3 thousand of gross realized gains reclassified out of AOCI and into earnings.

Included in net realized gains (losses) on AFS securities, the Company recorded gains from calls of approximately

$ 3 thousand for the nine months ended September 30, 2020.

The amortized cost, estimated fair value and unrealized gains (losses) of HTM securities are as follows:

(In thousands)

As of June 30 , 2021

As of September 30 , 2021

Federal agency

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Total HTM securities

At June 30, 2021 and December 31, 2020, all of the mortgaged-backed HTM securities were comprised of U.S.

government agency and Government-sponsored enterprises securities.

There was no allowance for credit losses on HTM securities as of June 30, 2021 and December 31, 2020.

Included in net realized gains (losses), the Company recorded no gains from calls on HTM securities for the three months ended June 30, 2021 and approximately $ 15 thousand for the six months ended June 30, 2021.

Included in net realized gains (losses), the Company recorded gains from calls on HTM securities of approximately $ 4 thousand for the three and six months ended June 30, 2020.

AFS and HTM securities with amortized costs totaling $ 1.6 billion at June 30, 2021 and $ 1.4 billion at December 31, 2020 were pledged to secure public deposits and for other purposes required or permitted by law.

Additionally, at June 30, 2021 and December 31, 2020, AFS and HTM securities with an amortized cost of $ 164.5 million and $ 305.2 million, respectively, were pledged as collateral for securities sold under repurchase agreements.

At September 30, 2021 and December 31, 2020, all of the mortgaged-backed HTM securities were comprised of U.S.

government agency and Government-sponsored enterprises

There was no allowance for credit losses on HTM securities as of September 30, 2021 and December 31, 2020.

Included in net realized gains (losses), the Company recorded gains from calls on HTM securities of approximately $ 14 thousand for the three months ended September 30, 2021 and approximately $ 29

thousand for the nine months ended September 30, 2021.

Included in net realized gains (losses), the Company recorded gains from calls on HTM securities of approximately $ 11 thousand for the three months ended September 30, 2020 and approximately $ 15 thousand for the nine months ended September 30, 2020.

There were no sales of HTM

securities during the three and nine months ended September 30, 2021.

During the nine months ended September 30, 2020, the Company sold HTM securities with an amortized cost of $ 1.0 million and resulted in a realized loss of $ 1 thousand.

to significant deterioration in the creditworthiness of the issuer of the HTM securities, the circumstances caused the Company to change its intent to hold the HTM securities sold to maturity, which did not affect the Company’s intent to hold the

remainder of the HTM portfolio to maturity.

AFS and HTM securities with amortized costs totaling $ 1.6

billion at September 30, 2021 and $ 1.4 billion at December 31, 2020 were pledged to secure public deposits and for other purposes required

or permitted by law.

Additionally, at September 30, 2021 and December 31, 2020, AFS and HTM securities with an amortized cost of $ 149.2

million and $ 305.2 million, respectively, were pledged as collateral for securities sold under repurchase agreements.

The following tables set forth information with regard to gains and (losses) on equity securities:

Three Months Ended

September 30,

(In thousands)

Net gains and (losses) recognized on equity securities

Net gains and (losses) recognized on equity securities sold during the period

Unrealized gains and (losses) recognized on equity securities still held

Six Months Ended

Net (losses) and gains recognized on equity securities

Net (losses) and gains recognized on equity securities sold during the period

Unrealized (losses) and gains recognized on equity securities still held

Nine Months Ended

September 30,

(In thousands)

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Unrealized gains and (losses) recognized on equity securities still held

As of June 30, 2021 and December 31, 2020, the carrying value of equity securities without readily determinable fair values was $ 1.0 million and $ 2.0 million, respectively.

The Company performed a qualitative assessment to determine whether the investments were impaired and identified no areas of concern as of June 30, 2021 and 2020.

There were no impairments, downward or upward adjustments recognized for equity securities without readily determinable fair values during the three months ended June 30, 2021 and 2020.

The following table sets forth information with regard to contractual maturities of debt securities at June 30, 2021:

As of September 30, 2021 and

December 31, 2020, the carrying value of equity securities without readily determinable fair values was $ 1.0 million and $ 2.0 million, respectively.

The Company performed a qualitative assessment to determine whether the investments were impaired and identified no areas of

concern as of September 30, 2021 and 2020.

There were no impairments, downward or upward adjustments recognized for equity securities

without readily determinable fair values during the three and nine months ended September 30, 2021 and 2020.

The following table sets forth information with regard to contractual maturities of debt securities at September 30, 2021:

(In thousands)

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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.

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.

Except for U.S.

Government securities and Government-sponsored enterprises securities , there were no holdings, when taken in the aggregate, of any single issuer that exceeded 10% of consolidated stockholders’ equity at June 30, 2021 and December 31, 2020.

The following table sets forth information with regard to investment securities with unrealized losses, for which an allowance for credit losses has not been recorded at June 30, 2021, segregated according to the length of time the securities had been in a continuous unrealized loss position:

government securities and government-sponsored enterprises securities , there were no holdings, when taken in the aggregate, of any single issuer that exceeded 10% of consolidated stockholders’ equity at September 30, 2021 and

December 31, 2020.

The following table sets forth information with regard to investment securities with unrealized losses, for which an allowance for credit losses has not been recorded at

September 30, 2021, segregated according to the length of time the securities had been in a continuous unrealized loss position:

Less Than 12 Months

1 unchanged sentence

(In thousands)

As of June 30 , 2021

As of September 30 , 2021

AFS securities:

7 unchanged sentences

Mortgage-backed

Collateralized mortgage obligation

State & municipal

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Total securities with unrealized losses

The Company does not believe the AFS securities that were in an unrealized loss position as of June 30, 2021 and December 31, 2020, which consisted of 80 and 23 individual securities, respectively, represented a credit loss impairment.

The Company does not believe the AFS securities that were in an unrealized loss position as of September 30, 2021 and December 31, 2020, which consisted of 109 and 23 individual securities,

respectively, represented a credit loss impairment.

AFS debt securities in unrealized loss positions are evaluated for impairment related to credit losses at least quarterly.

As of June 30, 2021 and December 31, 2020, the majority of the AFS securities in an unrealized loss position consisted of debt securities issued by U.S.

As of September 30, 2021 and December 31, 2020, the majority of the AFS

securities in an unrealized loss position consisted of debt securities issued by U.S.

government agencies or U.S.

government-sponsored enterprises that carry the explicit and/or implicit guarantee of the U.S.

government, which are widely recognized as “risk-free” and have a long history of zero credit losses.

Total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities.

government, which are widely recognized

as “risk-free” and have a long history of zero credit losses.

Total gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the

investment securities.

The Company does not intend to sell, nor is it more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, which may be at maturity.

The Company elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis of debt securities.

AIR on AFS debt securities totaled $ 3.5 million at June 30, 2021 and $ 3.3 million at December 31, 2020 and is excluded from the estimate of credit losses and reported in the financial statement line for other assets.

None of the bank’s HTM debt securities were past due or on non-accrual status as of June 30, 2021 and December 31, 2020.

There was no accrued interest reversed against interest income for the three and six months ended June 30, 2021 or the year-ended December 31, 2020 as all securities remained on accrual status.

In addition, there were no collateral-dependent HTM debt securities as of June 30, 2021 and December 31, 2020.

As of June 30, 2021 and December 31, 2020, 56 % and 65 %, respectively, of the Company’s HTM debt securities were issued by U.S.

The Company elected to exclude

accrued interest receivable (“AIR”) from the amortized cost basis of debt securities.

AIR on AFS debt securities totaled $ 3.3 million

at September 30, 2021 and December 31, 2020 and is excluded from the estimate of credit losses and reported in the financial statement line for other assets.

None of the bank’s HTM debt securities were past due

or on non-accrual status as of September 30, 2021 and December 31, 2020.

There was no accrued interest reversed against interest

income for the three and nine months ended September 30, 2021 or the year-ended December 31, 2020 as all securities remained on accrual status.

In addition, there were no collateral-dependent HTM debt securities as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020, 53 % and 65 %, respectively, of the Company’s HTM debt securities

were issued by U.S.

government agencies or U.S.

2 unchanged sentences

government, are widely recognized as “risk free,” and have a long history of zero credit loss.

Therefore, the Company did not record an allowance for credit losses for these securities as of June 30, 2021 and December 31, 2020.

The remaining HTM debt securities at June 30, 2021 and December 31, 2020 were comprised of state and municipal obligations with bond ratings of A to AAA.

Utilizing the Current Expected Credit Losses (“CECL”) approach, the Company determined that the expected credit loss on its HTM municipal bond portfolio was immaterial and therefore no allowance for credit loss was recorded as of June 30, 2021 and December 31, 2020.

AIR on HTM debt securities totaled $ 2.6 million and $ 2.7 million at June 30, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses and reported in the other assets financial statement line.

Therefore, the Company did not record an allowance for credit losses for these securities as of September 30, 2021 and December 31, 2020.

The remaining HTM debt securities at September 30, 2021 and December 31, 2020 were comprised of state and

municipal obligations with bond ratings of A to AAA.

Utilizing the Current Expected Credit Losses (“CECL”) approach, the Company determined that the expected credit loss on its HTM municipal bond portfolio was immaterial and therefore no allowance

for credit loss was recorded as of September 30, 2021 and December 31, 2020.

AIR on HTM debt securities totaled $ 2.6 million and $ 2.7 million at September 30, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses and reported in the other assets

financial statement line.

Allowance for Credit Losses and Credit Quality of Loans

The allowance for credit losses totaled $ 98.5 million at June 30, 2021, compared to $ 110.0 million at December 31, 2020.

The allowance for credit losses as a percentage of loans was 1.31 % at June 30, 2021, compared to 1.47 % at December 31, 2020.

The allowance for credit losses totaled $ 93.0 million at

September 30, 2021, compared to $ 110.0 million at December 31, 2020.

The allowance for credit losses as a percentage of loans was 1.23 % at September 30, 2021, compared to 1.47 %

at December 31, 2020.

The Day 1 increase in the allowance for credit loss on loans relating to adoption of ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments was $ 3.0 million, which decreased retained earnings by $ 2.3 million and increased the deferred tax asset by $ 0.7 million.

The increase in the allowance for credit losses from Day 1 to June 30, 2021 was primarily due to macroeconomic factors surrounding the coronavirus (“COVID-19”) pandemic.

The June 30, 2021, March 31, 2021, December 31, 2020, June 30, 2020 and Day 1 allowance for credit losses calculation incorporated a 6-quarter forecast period to account for forecast economic conditions under each scenario utilized in the measurement.

Measurement of Credit Losses on Financial Instruments

was $ 3.0 million, which decreased retained earnings by $ 2.3 million and increased the deferred tax asset by $ 0.7 million.

The September 30, 2021, June 30, 2021, December 31, 2020, September 30, 2020 and Day 1 allowance for credit losses calculation incorporated a 6-quarter forecast period to

account for forecast economic conditions under each scenario utilized in the measurement.

For periods beyond the 6-quarter forecast, the model reverts to long-term economic conditions over a 4-quarter reversion period on a straight-line basis.

The Company considers a baseline, upside and downside economic forecast in measuring in the allowance.

The quantitative model as of June 30, 2021 incorporated a baseline economic outlook along with alternative upside and downside scenarios sourced from a reputable third-party to accommodate other potential economic conditions in the model.

Company considers a baseline, upside and downside economic forecast in measuring the allowance.

The quantitative model as of September 30, 2021 incorporated a baseline economic outlook along with alternative upside and downside scenarios

sourced from a reputable third-party to accommodate other potential economic conditions in the model.

The baseline outlook reflected an unemployment rate environment initially above pre-COVID-19 levels although steadily improving to below 4% mid-way

through the forecast period.

Northeast GDP’s annualized growth (on a quarterly basis) was expected to start the fourth quarter of 2021 at approximately 10% and steadily fall back down to normalized levels by the end of 2022.

Other utilized economic

variables showed mixed changes in their respective forecasts, with retail sales and business output declining from the prior quarter and housing starts increasing from the prior quarter’s forecast.

Key assumptions in the baseline economic outlook

included abatement of the coronavirus (“COVID-19”) pandemic in November, additional legislation focused on infrastructure and social benefits programs enacted by the end of 2021 totaling $2.5 trillion, and full employment reached by the end of 2022.

The alternative downside scenario assumed deteriorated economic and epidemiological conditions from the baseline outlook.

Under this scenario, northeast unemployment rises from 6.2% in the third quarter of 2021 to a peak of 8.2% in the fourth quarter

of 2022, remaining above 7% for the entire forecast period.

The alternative upside scenario incorporated a more optimistic outlook than the baseline scenario, with a swift return to full employment by the first quarter of 2022 and with northeast

unemployment moving down to 3.1% by the end of the forecast period.

These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of September 30, 2021.

Additional adjustments were

made for COVID-19 related factors not incorporated in the forecasts, such as the mitigating impact of unprecedented stimulus in the second and third quarters of 2020, including direct payments to individuals, increased unemployment benefits, the

Company’s loan deferral and modification initiatives and various government sponsored loan programs.

The Company also continued to monitor the level of criticized and classified loans in the third quarter of 2021 compared to the level contemplated by

the model during similar, historical economic conditions, and an adjustment was made to estimate potential additional losses above modeled losses.

Additionally, a qualitative adjustment was made for isolated model limitations related to modeled

outputs given abnormally high retail sales and business output growth rates.

These factors were considered through separate quantitative processes and incorporated into the estimate of current expected credit losses at September 30, 2021.

The quantitative model as of June 30, 2021 incorporated a baseline economic outlook along with alternative upside and downside scenarios sourced from a reputable

third-party to accommodate other potential economic conditions in the model.

The baseline outlook reflected an unemployment rate environment above pre-COVID-19 levels for the entire forecast period, though steadily improving to below 4% by the end of

Northeast GDP’s annualized growth (on a quarterly basis) was expected to start in the second half of 2021 in the high single digits (9.86%) and steadily fall back down to normalized levels by the end of 2022.

Other utilized economic variables showed mixed changes in their respective forecasts, with retail sales and business output being relatively unchanged and housing starts lowered from the prior quarter forecast.

Key assumptions in the baseline economic outlook included herd “resiliency” expected by summer-2021, additional legislation focused on infrastructure and social benefits enacted in the second half of 2021 and high, near-term GDP growth expectations.

The alternative downside scenario assumed deteriorated economic and epidemiological conditions from the baseline outlook.

Other utilized economic variables

showed mixed changes in their respective forecasts, with retail sales and business output being relatively unchanged and housing starts lowered from the prior quarter forecast.

Key assumptions in the baseline economic outlook included herd

“resiliency” expected by summer-2021, additional legislation focused on infrastructure and social benefits enacted in the second half of 2021 and high, near-term GDP growth expectations.

The alternative downside scenario assumed deteriorated economic

and epidemiological conditions from the baseline outlook.

Under this scenario, northeast unemployment rose from 8.1% in the third quarter of 2021 to a peak of 8.7% in the second quarter of 2022, remaining above 8% for the entire forecast period.

The alternative upside scenario incorporated a more optimistic outlook than the baseline scenario, with a swift return to full employment by the first quarter of 2022 and down to a low of 3.5% by the end of the forecast period.

These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of June 30, 2021.

Additional adjustments were made for COVID-19 related factors not incorporated in the forecasts, such as the mitigating impact of unprecedented stimulus in the second and third quarters of 2020, including direct payments to individuals, increased unemployment benefits, the Company’s loan deferral and modification initiatives and various government sponsored loan programs.

The Company also continued to identify a slightly higher level of criticized and classified loans in the second quarter of 2021 than those contemplated by the model during similar, historical economic conditions for which an adjustment was made to estimate potential additional losses above modeled losses.

alternative upside scenario incorporated a more optimistic outlook than the baseline scenario, with a swift return to full employment by the first quarter of 2022 and down to a low of 3.5% by the end of the forecast period.

These scenarios and their

respective weightings are evaluated at each measurement date and reflect management’s expectations as of June 30, 2021.

Additional adjustments were made for COVID-19 related factors not incorporated in the forecasts, such as the mitigating impact of

unprecedented stimulus in the second and third quarters of 2020, including direct payments to individuals, increased unemployment benefits, the Company’s loan deferral and modification initiatives and various government sponsored loan programs.

Company also continued to identify a slightly higher level of criticized and classified loans in the second quarter of 2021 than those contemplated by the model during similar, historical economic conditions for which an adjustment was made to

estimate potential additional losses above modeled losses.

Additionally, a qualitative adjustment was made for isolated model limitations related to modeled outputs given abnormally high retail sales and business output growth rates.

These factors were considered through separate quantitative processes and incorporated into the estimate of current expected credit losses at June 30, 2021.

The quantitative model as of March 31, 2021 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.

The baseline outlook reflected an unemployment rate environment above pre-COVID-19 levels for the entire forecast period, though steadily improving to below 5% by mid-2022.

Northeast GDP’s annualized growth (on a quarterly basis) was expected to start 2021 in the low to mid-single digits, with a peak growth rate of 10% in the fourth quarter of 2021 and steadily falling back down to normalized levels through 2023.

Other utilized economic variables also showed improvement in their respective forecasts.

Key assumptions in the baseline economic outlook included herd immunity expected by summer 2021, additional legislation focused on infrastructure and social benefits enacted in the second half of 2021 and GDP growth expectations at levels not seen since the 1980s.

The alternative downside scenario assumed deteriorated economic and epidemiological conditions from the baseline outlook, leading to a double-dip recession.

The alternative upside scenario was not incorporated by management because of the underlying assumptions, forecasted economic data and modeled default rates.

These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of March 31, 2021.

Additional adjustments were made for COVID-19 related factors not incorporated in the forecasts, such as the mitigating impact of unprecedented stimulus in 2020 and 2021, including direct payments to individuals, increased unemployment benefits, the Company’s loan deferral and modification initiatives and various government-sponsored loan programs.

Additionally, the Company identified a slightly higher level of criticized and classified loans at in the first quarter of 2021 than those contemplated by the model during similar economic conditions in the past for which an adjustment was made for estimated expected additional losses above modeled output.

These factors were considered through a separate quantitative process and incorporated into the estimate for allowance for credit losses at March 31, 2021.

The quantitative model as of December 31, 2020 incorporated a baseline economic outlook, along with alternative upside and downside scenarios sourced from a reputable third-party to accommodate other potential economic conditions in the model.

The baseline outlook reflected an unemployment rate environment above pre-COVID-19 levels for the entire forecast period, though steadily improving, before returning to low single digits by the end of 2023.

These factors

were considered through separate quantitative processes and incorporated into the estimate of current expected credit losses at June 30, 2021.

The quantitative model as of December 31, 2020 incorporated a baseline economic outlook, along with alternative upside and downside scenarios sourced from a reputable

third-party to accommodate other potential economic conditions in the model.

The baseline outlook reflected an unemployment rate environment above pre-COVID-19 levels for the entire forecast period, though steadily improving, before returning to low

single digits by the end of 2023.

Northeast GDP’s annual growth was expected to start 2021 in the low to mid-single digits, with a peak growth rate of 8% in the fourth quarter of 2021 and steadily falling back down to normalized levels through 2023 and

Other utilized economic variables show improvement in their respective forecasts, namely business output.

Key assumptions in the baseline economic outlook included an additional stimulus package passed at the same timing and a comparable level to that of the actual $900 billion COVID-19 relief package passed in December 2020 along with no significant secondary surge in COVID-19 cases or pandemic-related business closures.

The alternative downside scenario assumed deteriorated economic and epidemiological conditions from the baseline outlook.

Key assumptions in the baseline economic outlook included an additional stimulus package passed at the same timing and a comparable level to

that of the actual $900 billion COVID-19 relief package passed in December 2020 along with no significant secondary surge in COVID-19 cases or pandemic-related business closures.

The alternative downside scenario assumed deteriorated economic and

epidemiological conditions from the baseline outlook.

In the same way, the alternative upside scenario assumed a faster economic recovery and more effective management of the COVID-19 virus from the baseline outlook.

These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of December 31, 2020.

Additional adjustments were made for COVID-19 related factors not incorporated in the forecasts, such as the mitigating impact of unprecedented stimulus in 2020, including direct payments to individuals, increased unemployment benefits, the Company’s loan deferral and modification initiatives and various government-sponsored loan programs.

The commercial & industrial and consumer segment models were based upon percent change in unemployment with modeled values as of December 31, 2020 well outside the observed historical experience.

Therefore, adjustments were required to produce outputs more aligned with default expectations given the forecast economic environment.

Additionally, the Company identified a slightly higher level of criticized and classified loans during 2020 than those contemplated by the model during similar economic conditions in the past for which an adjustment was made for estimated expected additional losses above modeled output.

These scenarios and their

respective weightings are evaluated at each measurement date and reflect management’s expectations as of December 31, 2020.

Additional adjustments were made for COVID-19 related factors not incorporated in the forecasts, such as the mitigating impact

of unprecedented stimulus in 2020, including direct payments to individuals, increased unemployment benefits, the Company’s loan deferral and modification initiatives and various government-sponsored loan programs.

The commercial & industrial and

consumer segment models were based upon percent change in unemployment with modeled values as of December 31, 2020 well outside the observed historical experience.

Therefore, adjustments were required to produce outputs more aligned with default

expectations given the forecast economic environment.

Additionally, the Company identified a slightly higher level of criticized and classified loans during 2020 than those contemplated by the model during similar economic conditions in the past for

which an adjustment was made for estimated expected additional losses above modeled output.

These factors were considered through a separate quantitative process and incorporated into the estimate for allowance for credit losses at December 31, 2020.

On August 3, 2020, the Federal Financial Institutions Examination Council (“FFIEC”) issued a joint statement on additional loan accommodations related to COVID-19.

The joint statement clarifies that for loan modifications in which Section 4013 is being applied, subsequent modifications could also be eligible under Section 4013.

joint statement clarifies that for loan modifications in which Section 4013 is being applied, subsequent modifications could also be eligible under section 4013 (“Section 4013”) of the Coronavirus Aid, Relief and Economic Security Act (the “CARES

Accordingly, the Company is offering modifications made in response to COVID-19 to borrowers who were current and otherwise not past due in accordance with the criteria stated in Section 4013.

These include short-term, 180 days or less, modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment.

These include short-term, 180 days or less,

modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment.

Accordingly, the Company did not account for such loan modifications as TDRs.

As of June 30, 2021, there were $ 32.3 million in loans in modification programs related to COVID-19.

On December 27, 2020, the Consolidated Appropriations Act amended section 2014 of the CARES Act extending the exemption of qualified loan modifications from classification as a troubled debt restructuring as defined by GAAP to the earlier of January 1, 2022, or 60 days after the National Emergency concerning COVID-19 ends.

There were no loans purchased with credit deterioration during the six months ended June 30, 2021 or the year ended December 31, 2020.

During 2021, the Company purchased $ 20.1 million of residential loans at a 2 % premium.

The allowance for credit losses recorded for these loans on the purchase date was $ 0.2 million.

During 2020, the Company purchased $ 51.9 million of consumer loans at a 1 % discount.

The allowance for credit losses recorded for these loans on the purchase date was $ 3.6 million.

The Company made a policy election to report AIR in the other assets line item on the balance sheet.

AIR on loans totaled $ 20.6 million at June 30, 2021 and $ 23.7 million at December 31, 2020 and was included in the allowance for loan credit losses to estimate the impact of accrued interest receivable related to loans with modifications due to the pandemic as the length of time between interest recognition and the write-off of uncollectible interest could exceed 120 days , exempting these loans from our policy election for accrued interest receivable.

The estimated allowance for credit losses related to AIR at June 30, 2021 was $ 0.4 million and $ 0.6 million at December 31, 2020.

As of September 30, 2021, there were $ 2.0 million in loans in modification programs related to COVID-19.

On December 27, 2020, the Consolidated Appropriations Act amended section 2014 of the

CARES Act extending the exemption of qualified loan modifications from classification as a troubled debt restructuring as defined by GAAP to the earlier of January 1, 2022, or 60 days after the National Emergency concerning COVID-19 ends.

There were no loans purchased with credit deterioration during the nine months ended September 30, 2021 or the year ended December 31, 2020.

2021, the Company purchased $ 52.4 million of residential loans at a 2 % premium and $ 60.3 million in consumer loans at par.

The allowance for credit

losses recorded for these loans on the purchase date was $ 4.6 million.

2020, the Company purchased $ 51.9 million of consumer loans at a 1 % discount.

The allowance for credit losses recorded for these loans on the purchase date

was $ 3.6 million.

The Company made a policy election to report AIR in

the other assets line item on the balance sheet.

AIR on loans totaled $ 20.4 million at September 30, 2021 and $ 23.7 million at December

31, 2020 and was included in the allowance for loan credit losses to estimate the impact of accrued interest receivable related to loans with modifications due to the pandemic as the length of time between interest recognition and the write-off of

uncollectible interest could exceed 120 days , exempting these loans

from our policy election for accrued interest receivable.

There was no estimated allowance for credit losses related to AIR at September

30, 2021 and $ 0.6 million at December 31, 2020.

The following tables present the activity in the allowance for credit losses by portfolio segment:

(In thousands)

Balance as of March 31, 2021

Ending balance as of June 30 , 2021

Balance as of March 31, 2020

Ending balance as of June 30 , 2020

Balance as of June 30, 2021

Ending balance as of September 30, 2021

Balance as of June 30, 2020

Ending balance as of September 30 , 2020

(In thousands)

Balance as of December 31, 2020

Ending balance as of June 30 , 2021

Balance as of January 1, 2020 (after adoption of ASC 326)

Ending balance as of June 30 , 2020

The decrease in the allowance for credit losses from December 31, 2020 to March 31, 2021 and June 30, 2021 was primarily due to an improvement in the economic forecast.

The increase in the allowance for credit losses from Day 1 to March 31, 2020 and June 30, 2020 was primarily due to the deterioration of macroeconomic factors surrounding the COVID-19 pandemic.

Ending balance as of September 30, 2021

Balance as of January 1, 2020 (after adoption

Ending balance as of September 30 , 2020

The decrease in the allowance for credit losses from December 31, 2020 to June 30, 2021 and September 30, 2021 was primarily due to an improvement in the economic

The increase in the allowance for credit losses from Day 1 to June 30, 2020 and September 30, 2020 was primarily due to the deterioration of macroeconomic factors surrounding the COVID-19 pandemic.

Individually Evaluated Loans

As of June 30, 2021, there were five relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $ 15.0 million.

These loans’ allowance for credit loss was $ 3.4 million and was determined by an estimate of the fair value of the collateral which consisted of business assets (accounts receivable, inventory, machinery and equipment).

As of December 31, 2020, these same five relationships were identified to be evaluated for loss on an individual basis which had an amortized cost basis of $ 15.2 million and the allowance for credit loss was $ 3.2 million.

As of September 30, 2021, there were five relationships

identified to be evaluated for loss on an individual basis which had an amortized cost basis of $ 12.5 million.

These loans’ allowance for

credit loss was $ 1.3 million and was determined by an estimate of the fair value of the collateral which consisted of business assets

(accounts receivable, inventory, machinery and equipment).

As of December 31, 2020, these same five relationships were identified to be

evaluated for loss on an individual basis with an amortized cost basis of $ 15.2 million and an allowance for credit loss of $ 3.2 million.

The decrease in the allowance for credit losses evaluated on an individual basis from December 31, 2020 to September 30, 2021 was primarily due

to decrease in the amortized cost basis on the loans due to a principal payments and charge-offs.

The following table sets forth information with regard to past due and nonperforming loans by loan segment:

(In thousands)

As of June 30 , 2021

As of September 30 , 2021

Commercial loans:

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Total consumer loans

As of June 30, 2021 and December 31, 2020, there were no loans in non-accrual without an allowance for credit losses.

As of September 30, 2021 and December 31, 2020, there were no

loans in non-accrual without an allowance for credit losses.

Credit Quality Indicators

The Company has developed an internal loan grading system to evaluate and quantify the Company’s loan portfolio with respect to quality and risk.

The system focuses on, among other things, financial strength of borrowers, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business and outlook on particular industries.

The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, enabling recognition and response to problem loans and potential problem loans.

The system focuses on,

among other things, financial strength of borrowers, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business and outlook on particular industries.

The internal grading system

enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, enabling recognition and response to problem loans and potential problem loans.

Commercial Grading System

For Commercial and Industrial (“C&I”), Paycheck Protection Program (“PPP”) and Commercial Real Estate (“CRE”) loans, the Company uses a grading system that relies on quantifiable and measurable characteristics when available.

This includes comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy and comparison of credit history to stated repayment terms and industry averages.

For Commercial and Industrial (“C&I”), Paycheck Protection Program (“PPP”) and Commercial Real Estate (“CRE”) loans, the Company uses a grading system that relies on

quantifiable and measurable characteristics when available.

This includes comparison of financial strength to available industry averages, comparison of transaction factors (loan terms and conditions) to loan policy and comparison of credit history to

stated repayment terms and industry averages.

Some grading factors are necessarily more subjective such as economic and industry factors, regulatory environment and management.

C&I and CRE loans are graded Doubtful, Substandard, Special Mention and Pass.

A Doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as a loss is deferred.

C&I and CRE loans are graded Doubtful, Substandard, Special Mention and

A Doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its

classification as a loss is deferred.

Doubtful borrowers are usually in default, lack adequate liquidity or capital and lack the resources necessary to remain an operating entity.

Pending events can include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral and refinancing.

Pending events can include mergers, acquisitions, liquidations, capital

injections, the perfection of liens on additional collateral, the valuation of collateral and refinancing.

Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information.

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Substandard loans have a high probability of payment default or they have other well-defined weaknesses.

They require more intensive supervision by bank management.

They require more intensive supervision by bank

Substandard loans are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity or marginal capitalization.

Repayment may depend on collateral or other credit risk mitigants.

Repayment may depend on collateral or other credit risk

For some Substandard loans, the likelihood of full collection of interest and principal may be in doubt and those loans should be placed on nonaccrual.

Although Substandard assets in the aggregate will have a distinct potential for loss, an individual asset’s loss potential does not have to be distinct for the asset to be rated Substandard.

Although Substandard assets in the aggregate will have a distinct potential for loss, an

individual asset’s loss potential does not have to be distinct for the asset to be rated Substandard.

Special Mention

Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position at some future date.

Special Mention loans have potential weaknesses that may, if not checked or corrected, weaken the asset or inadequately protect the Company’s position

at some future date.

These loans pose elevated risk, but their weakness does not yet justify a Substandard classification.

Borrowers may be experiencing adverse operating trends (i.e., declining revenues or margins) or may be struggling with an ill-proportioned balance sheet (i.e., increasing inventory without an increase in sales, high leverage, tight liquidity).

Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a Special Mention rating.

Borrowers may be experiencing adverse operating trends (i.e., declining revenues or margins) or may be struggling with an

ill-proportioned balance sheet (i.e., increasing inventory without an increase in sales, high leverage, tight liquidity).

Adverse economic or market conditions, such as interest rate increases or the entry of a new competitor, may also support a

Special Mention rating.

Although a Special Mention loan has a higher probability of default than a Pass asset, its default is not imminent.

Loans graded as Pass encompass all loans not graded as Doubtful, Substandard or Special Mention.

Pass loans are in compliance with loan covenants and payments are generally made as agreed.

Pass loans are in compliance with loan covenants and

payments are generally made as agreed.

Pass loans range from superior quality to fair quality.

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Nonperforming

Nonperforming loans are loans that are 1) over 90 days past due and interest is still accruing or 2) on nonaccrual status.

Nonperforming loans are loans that are (1) over 90

days past due and interest is still accruing or (2) on nonaccrual status.

All loans not meeting any of the above criteria are considered Performing.

1 unchanged sentence

(In thousands)

As of June 30 , 2021

As of September 30 , 2021

By internally assigned grade:

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Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

As of June 30, 2021, the allowance for losses on unfunded commitments totaled $ 5.8 million, compared to $ 6.4 million as of December 31, 2020.

As of September 30, 2021, the allowance for losses on unfunded commitments totaled $ 5.3 million, compared to $ 6.4 million as of December 31, 2020.

Troubled Debt Restructuring

When the Company modifies a loan in a troubled debt restructuring (“TDR”), such modifications generally include one or a combination of the following:

an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk;

an extension of the

maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk;

temporary reduction in the interest rate;

or change in scheduled payment amount.

Residential and Consumer TDRs occurring during 2021 and 2020 were due to the reduction in the interest rate or extension of the term.

An allowance for impaired commercial and consumer loans that have been modified in a TDR is measured based on the present value of the expected future cash flows, discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral.

In these cases, management uses the current fair value of the collateral, less selling costs.

Residential and Consumer TDRs occurring during 2021 and 2020

were due to the reduction in the interest rate or extension of the term.

An allowance for impaired commercial and consumer loans that have been modified in a TDR is measured based on the present value of the expected future cash flows,

discounted at the contractual interest rate of the original loan agreement, except when the sole (remaining) source of repayment for the loan is the operation or liquidation of the collateral.

In these cases, management uses the current fair value of

the collateral, less selling costs.

If management determines that the value of the modified loan is less than the recorded investment in the loan an impairment charge would be recorded.

The Company began offering loan modifications to assist borrowers during the COVID-19 national emergency.

The Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), along with a joint agency statement issued by banking regulatory agencies, provides that modifications made in response to COVID-19 do not need to be accounted for as a TDR.

The Company evaluated the modification programs provided to its borrowers and has concluded the modifications were generally made in accordance with the CARES Act guidance to borrowers who were in good standing prior to the COVID-19 pandemic and are not required to be designated as TDRs.

The following tables illustrate the recorded investment and number of modifications designated as TDRs, including the recorded investment in the loans prior to a modification and the recorded investment in the loans after restructuring:

Three Months Ended June 30, 2021

Three Months Ended June 30 , 2020

The CARES Act, along with a joint agency statement issued by

banking regulatory agencies, provides that modifications made in response to COVID-19 do not need to be accounted for as a TDR.

The Company evaluated the modification programs provided to its borrowers and has concluded the modifications were generally

made in accordance with the CARES Act guidance to borrowers who were in good standing prior to the COVID-19 pandemic and are not required to be designated as TDRs.

The following tables illustrate the recorded investment and number of modifications designated as TDRs, including the recorded investment in the loans prior to a

modification and the recorded investment in the loans after restructuring:

Three Months Ended September 30,

Three Months Ended September 30 , 2020

(Dollars in thousands)

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Total consumer loans

Six Months Ended June 30, 2021

Six Months Ended June 30 , 2020

Nine Months Ended September 30, 2021

Ended September 30 , 2020

(Dollars in thousands)

3 unchanged sentences

Three Months Ended

June 30, 2021

September 30, 2021

Three Months Ended

June 30, 2020

September 30, 2020

(Dollars in thousands)

Commercial loans:

Total commercial loans

Six Months Ended

June 30, 2021

Six Months Ended

June 30, 2020

Nine Months Ended

September 30, 2021

Nine Months Ended

September 30, 2020

(Dollars in thousands)

4 unchanged sentences

Defined Benefit Post-Retirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at June 30, 2021.

Benefits paid from the plan are based on age, years of service, compensation and social security benefits and are determined in accordance with defined formulas.

The Company’s policy is to fund the Plan in accordance with Employee Retirement Income Security Act of 1974 standards.

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at September 30, 2021.

Benefits paid

from the plan are based on age, years of service, compensation and social security benefits and are determined in accordance with defined formulas.

The Company’s policy is to fund the Plan in accordance with Employee Retirement Income Security Act of

1974 standards.

Assets of the Plan are invested in publicly traded stocks and mutual funds.

In addition to the Plan, the Company provides supplemental employee retirement plans to certain current and former executives.

The Company also assumed supplemental retirement plans for former executives of Alliance Financial Corporation (“Alliance”) when the Company acquired Alliance.

These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension Benefits”.

The Company also assumed

supplemental retirement plans for former executives of Alliance Financial Corporation (“Alliance”) when the Company acquired Alliance.

These supplemental employee retirement plans and the Plan are collectively referred to herein as “Pension

In addition, the Company provides certain health care benefits for retired employees.

Benefits were accrued over the employees’ active service period.

Only employees that were employed by the Company on or before January 1, 2000 are eligible to receive post-retirement health care benefits.

In addition, the Company assumed post-retirement medical life insurance benefits for certain Alliance employees, retirees and their spouses, if applicable, in the Alliance acquisition.

Only employees

that were employed by the Company on or before January 1, 2000 are eligible to receive post-retirement health care benefits.

In addition, the Company assumed post-retirement medical life insurance benefits for certain Alliance employees, retirees and

their spouses, if applicable, in the Alliance acquisition.

These post-retirement benefits are referred to herein as “Other Benefits”.

The Company made no voluntary contributions to the pension and other benefits plans during the three and six months ended June 30, 2021 and 2020.

The Company made no voluntary contributions to the

pension and other benefits plans during the three and nine months ended September 30, 2021 and 2020.

The components of expense for Pension Benefits and Other Benefits are set forth below:

2 unchanged sentences

Three Months Ended

September 30,

Three Months Ended

September 30,

(In thousands)

6 unchanged sentences

Other Benefits

Six Months Ended

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(In thousands)

4 unchanged sentences

Total net periodic (benefit) cost

The service cost component of the net periodic (benefit) cost is included in Salaries and Employee Benefits and the interest cost, expected return on plan assets and net amortization components are included in Other Noninterest Expense on the unaudited interim consolidated statements of income.

The service cost component of the net periodic (benefit) cost is included in Salaries and Employee Benefits and the interest cost, expected return on plan assets and net

amortization components are included in Other Noninterest Expense on the unaudited interim consolidated statements of income.

Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity (such as the Company’s dilutive stock options and restricted stock units).

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares

outstanding for the period.

in the earnings of the entity (such as the Company’s dilutive stock options and restricted stock units).

The following is a reconciliation of basic and diluted EPS for the periods presented in the unaudited interim consolidated statements of income:

Three Months Ended

September 30,

(In thousands, except per share data)

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Net income available to common stockholders

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

5 unchanged sentences

Net income available to common stockholders

There was a nominal number of stock options outstanding for the three and six months ended June 30, 2021 and June 30, 2020, that were not considered in the calculation of diluted EPS since the stock options’ exercise prices were greater than the average market price during these periods.

There was a nominal number of stock options outstanding for the three and nine months ended September 30, 2021 and September 30, 2020, that were not considered in the

calculation of diluted EPS since the stock options’ exercise prices were greater than the average market price during these periods.

Reclassification Adjustments Out of Other Comprehensive Income (Loss)

6 unchanged sentences

(In thousands)

September 30,

AFS securities:

19 unchanged sentences

Statement of Comprehensive Income (Loss)

Six Months Ended

Nine Months Ended

(In thousands)

September 30,

AFS securities:

17 unchanged sentences

The Company is exposed to certain risks arising from both its business operations and economic conditions.

The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.

The Company manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities and through the use of derivative instruments.

Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates.

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to certain fixed rate borrowings.

The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities.

The Company principally manages its exposures to a wide

variety of business and operational risks through management of its core business activities.

The Company manages economic risks, including interest rate, primarily by managing the amount, sources and duration of its assets and liabilities and

through the use of derivative instruments.

Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash

amounts, the value of which are determined by interest rates.

The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or

expected cash payments principally related to certain fixed rate borrowings.

The Company also has interest rate derivatives that result from a service provided to certain qualifying customers and, therefore, are not used to manage interest rate

risk in the Company’s assets or liabilities.

The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

1 unchanged sentence

The Company enters into interest rate swaps to facilitate customer transactions and meet their financing needs.

These swaps are considered derivatives, but are not designated in hedging relationships.

These swaps are considered derivatives, but are not

designated in hedging relationships.

These instruments have interest rate and credit risk associated with them.

To mitigate the interest rate risk, the Company enters into offsetting interest rate swaps with counterparties.

The counterparty swaps are also considered derivatives and are also not designated in hedging relationships.

The counterparty swaps

are also considered derivatives and are also not designated in hedging relationships.

Interest rate swaps are recorded within other assets or other liabilities on the consolidated balance sheet at their estimated fair value.

Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of incom e.

Changes to the fair

value of assets and liabilities arising from these derivatives are included, net, in other operating income in the consolidated statement of incom e.

The Company is subject to over-the-counter derivative clearing requirements, which require certain derivatives to be cleared through central clearing houses.

Accordingly, the Company began to clear certain derivative transactions through the Chicago Mercantile Exchange Clearing House (“CME”) in January of 2021.

This clearing house requires the Company to post initial and variation margin to mitigate the risk of non-payment, the latter of which is received or paid daily based on the net asset or liability position of the contracts.

Accordingly, the Company began to clear certain derivative transactions through the Chicago Mercantile Exchange Clearing House (“CME”) in January 2021.

The CME requires the Company to post initial and variation margin payments to mitigate the

risk of non-payment, the latter of which is received or paid daily based on the net asset or liability position of the contracts.

A daily settlement occurs through the CME for changes in the fair value of centrally cleared derivatives.

Not all of the derivatives are required to be cleared through the daily clearing agent.

the derivatives are required to be cleared through the daily clearing agent.

As a result, the total fair values of loan level derivative assets and liabilities recognized on the Company’s financial statements are not equal and offsetting.

As of June 30, 2021 and December 31, 2020, the Company had seventeen risk participation agreements with financial institution counterparties for interest rate swaps related to participated loans.

Risk participation agreements 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 institution s.

As of September 30, 2021 and December 31, 2020, the Company had eighteen and seventeen risk participation agreements, respectively, with financial institution counterparties for interest rate swaps related to participated loans.

Risk participation agreements 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 institution s.

Derivatives Designated as Hedging Instruments

The Company has previously entered into interest rate swaps to modify the interest rate characteristics of certain short-term Federal Home Loan Bank (“FHLB”) advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes.

These agreements are designated as cash flow hedges.

The Company has previously entered into interest rate swaps to modify the interest rate

characteristics of certain short-term Federal Home Loan Bank (“FHLB”) advances from variable rate to fixed rate in order to reduce the impact of changes in future cash flows due to market interest rate changes.

These agreements are designated as

cash flow hedges.

T he following table summarizes the derivatives outstanding:

(In thousands)

As of June 30, 2021

As of September 30, 2021

Derivatives not designated as hedging instruments

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Net derivative amounts

(1) Netting adjustments represents the amounts recorded to convert derivatives assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance on the settle to market rules for cleared derivatives.

The CME legally characterizes the variation margin posted between counterparties as settlements of the outstanding derivative contracts instead of cash collateral.

Netting adjustments represents the amounts recorded to convert

derivatives assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance on the settle to market rules for cleared derivatives.

The CME legally characterizes the variation margin posted

between counterparties as settlements of the outstanding derivative contracts instead of cash collateral.

Company began to clear certain derivative transactions through the CME in 2021.

(2) Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral.

Cash collateral represents the amount that cannot be used to offset our

derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

The other collateral consists of securities and is exchanged under bilateral collateral and master netting

agreements that allow us to offset the net derivative position with the related collateral.

The application of the other collateral cannot reduce the net derivative position below zero.

Therefore, excess other collateral, if any, is not reflected above.

F or derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s short-term rate borrowings.

During the three months ended March 31, 2021 the Company’s final cash flow hedge of interest rate risk matured and the renaming balance was reclassified from AOCI as a reduction to interest expense.

There is no additional amount that will be reclassified from AOCI as a reduction to interest expense .

The following table indicates the effect of cash flow hedge accounting on AOCI and on the unaudited interim consolidated statement of income:

Therefore, excess other collateral, if any, is not

reflected above.

F or derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss

on the derivative is recorded in AOCI and subsequently reclassified into interest expense in the same period during which the hedge transaction affects earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest

expense as interest payments are made on the Company’s short-term rate borrowings.

During the three months ended March 31, 2021 the Company’s final cash flow hedge of interest rate risk matured and the remaining balance was reclassified from AOCI

as a reduction to interest expense.

There is no additional amount

that will be reclassified from AOCI as a reduction to interest expense .

The following table indicates

the effect of cash flow hedge accounting on AOCI and on the unaudited interim consolidated statement of income:

Three Months Ended

Six Months Ended

September 30,

September 30 ,

(In thousands)

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Amount of loss reclassified from AOCI into interest expense

The following table indicates the gain or loss recognized in income on derivatives not designated as a hedging relationship:

The following table indicates the gain or loss recognized in income on

derivatives not designated as a hedging relationship:

Three Months Ended

Six Months Ended

September 30,

September 30 ,

(In thousands)

Derivatives not designated as hedging instruments:

Increase (decrease) in other income

(Decrease) increase in other income

Fair Value Measurements and Fair Value of Financial Instruments

G AAP states that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

G AAP states that fair value is an exit price, representing the amount that would be received to sell an

asset or paid to transfer a liability in an orderly transaction between market participants.

Fair value measurements are not adjusted for transaction costs.

A fair value hierarchy exists within GAAP that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

A fair value hierarchy exists within GAAP that prioritizes the inputs to valuation

techniques used to measure fair value.

measurements).

The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active or inputs that are observable, either

directly or indirectly, for substantially the full term of the asset or liability;

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no

market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The types of instruments valued based on quoted market prices in active markets include most U.S.

government and agency securities, many other sovereign government obligations, liquid mortgage products, active listed equities and most money market securities.

government and agency securities, many other sovereign government

obligations, liquid mortgage products, active listed equities and most money market securities.

Such instruments are generally classified within Level 1 or Level 2 of the fair value hierarchy.

The Company does not adjust the quoted prices for such instruments.

The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency include most investment-grade and high-yield corporate bonds, less liquid mortgage products, less liquid agency securities, less liquid listed equities, state, municipal and provincial obligations and certain physical commodities.

The Company does not adjust the quoted prices for such

The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations or alternative pricing sources with reasonable

levels of price transparency include most investment-grade and high-yield corporate bonds, less liquid mortgage products, less liquid agency securities, less liquid listed equities, state, municipal and provincial obligations and certain physical

Such instruments are generally classified within Level 2 of the fair value hierarchy.

Certain common equity securities are reported at fair value utilizing Level 1 inputs (exchange quoted prices).

Other investment securities are reported at fair value utilizing Level 1 and Level 2 inputs.

The prices for Level 2 instruments are obtained through an independent pricing service or dealer market participants with whom the Company has historically transacted both purchases and sales of investment securities.

Other investment securities are

reported at fair value utilizing Level 1 and Level 2 inputs.

The prices for Level 2 instruments are obtained through an independent pricing service or dealer market participants with whom the Company has historically transacted both purchases and

sales of investment securities.

Prices obtained from these sources include prices derived from market quotations and matrix pricing.

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S.

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows,

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

Management reviews the methodologies used in pricing the securities by its third-party providers.

Management reviews the methodologies used in pricing the

securities by its third-party providers.

Level 3 is for positions that are not traded in active markets or are subject to transfer restrictions.

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In the absence of such evidence, management’s best estimate will be used.

Management’s best estimate consists of both internal and external support on certain Level 3 investments.

Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt markets and changes in financial ratios or cash flow s.

Management’s best estimate

consists of both internal and external support on certain Level 3 investments.

Subsequent to inception, management only changes Level 3 inputs and assumptions when corroborated by evidence such as transactions in similar instruments, completed or

pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt markets and changes in

financial ratios or cash flow s.

The following tables set forth the Company’s financial assets and liabilities measured on a recurring basis that were accounted for at fair value.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

Assets and liabilities

are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:

(In thousands)

June 30, 2021

September 30, 2021

AFS securities

14 unchanged sentences

Equity securities

G AAP requires disclosure of assets and liabilities measured and recorded at fair value on a non-recurring basis such as goodwill, loans held for sale, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights and HTM securities.

The non-recurring fair value measurements recorded during the three and six month periods ended June 30, 2021 and the year ended December 31, 2020 were related to impaired loans, write-downs of other real estate owned and write-down of branch assets to fair value.

G AAP requires disclosure of assets and liabilities measured and recorded at fair value on a non-recurring

basis such as goodwill, loans held for sale, other real estate owned, collateral-dependent impaired loans, mortgage servicing rights and HTM securities.

The non-recurring fair value measurements recorded during the three and nine month periods ended September 30, 2021 and the year ended December 31, 2020 were related to impaired loans, write-downs of

other real estate owned and write-down of branch assets to fair value.

The Company uses the fair value of underlying collateral, less costs to sell, to estimate the allowance for credit losses for individually evaluated collateral dependent loans.

The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10 % to 50 %.

Based on the valuation techniques used, the fair value measurements for collateral dependent individually evaluated loans are classified as Level 3.

A s of June 30, 2021, the Company had collateral dependent individually evaluated loans with a carrying value of $ 15.0 million, which had an estimated allowance for credit loss of $ 3.4 million .

As of December 31, 2020, the Company had collateral dependent individually evaluated loans with a carrying value of $ 15.2 million, which had an estimated allowance for credit loss of $ 3.2 million.

The appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10 %

Based on the valuation techniques used, the fair value measurements for collateral dependent individually evaluated loans are

classified as Level 3.

A s of September 30, 2021, the Company had collateral dependent individually evaluated loans with a

carrying value of $ 12.5 million, which had an estimated allowance for credit loss of $ 1.3 million .

As of December 31, 2020, the Company had collateral dependent individually evaluated loans with a

carrying value of $ 15.2 million, which had an estimated allowance for credit loss of $ 3.2 million.

The following table sets forth information with regard to estimated fair values of financial instruments.

This table excludes financial instruments for which the carrying amount approximates fair value.

Financial instruments for which the fair value approximates carrying value include cash and cash equivalents, AFS securities, equity securities, accrued interest receivable, non-maturity deposits, short-term borrowings, accrued interest payable and derivatives.

June 30, 2021

This table excludes financial instruments for which the

carrying amount approximates fair value.

borrowings, accrued interest payable and derivatives.

September 30, 2021

December 31, 2020

8 unchanged sentences

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.

These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.

These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.

These estimates do not

reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

Because no market exists for a significant portion of the Company’s financial instruments, fair

value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.

These estimates are subjective in nature and involve uncertainties

and matters of significant judgment and therefore cannot be determined with precision.

Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the

value of assets and liabilities that are not considered financial instruments.

For example, the Company has a substantial wealth operation that contributes net fee income annually.

The wealth management operation is not considered a financial instrument and its value has not been incorporated into the fair value estimates.

Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in the market and premises and equipment.

The wealth management operation is not considered a financial

instrument and its value has not been incorporated into the fair value estimates.

Other significant assets and liabilities include the benefits resulting from the low-cost funding of deposit liabilities as compared to the cost of borrowing funds in

the market and premises and equipment.

In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimate of fair value.

1 unchanged sentence

The fair value of the Company’s HTM securities is primarily measured using information from a third-party pricing service.

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S.

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

The fair value measurements consider

observable data that may include dealer quotes, market spreads, cash flows, the U.S.

Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among

other things.

Net loans include portfolio loans and loans held for sale.

Loans were first segregated by type and then further segmented into fixed and variable rate and loan quality categories.

Expected future cash flows were projected based on contractual cash flows, adjusted for estimated prepayments, which also includes credit risk, illiquidity risk and other market factors to calculate the exit price fair value in accordance with ASC 820.

Loans were first segregated by type and then further segmented into fixed and variable rate and loan quality

with ASC 820.

Time Deposits

The fair value of time deposits was estimated using a discounted cash flow approach that applies prevailing market interest rates for similar maturity instruments.

The fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

fair values of the Company’s time deposit liabilities do not take into consideration the value of the Company’s long-term relationships with depositors, which may have significant value.

Long-Term Debt

6 unchanged sentences

The Company is a party to certain financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.

These financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit and certain agricultural real estate loans sold to investors with recourse, with the sold portion having a government guarantee that is assignable back to the Company upon repurchase of the loan in the event of default.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, unused lines of credit, standby letters of credit and loans sold with recourse is represented by the contractual amount of those investments.

The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved with extending loans to customers and is subject to normal credit policies.

financial instruments include commitments to extend credit, unused lines of credit, standby letters of credit and certain agricultural real estate loans sold to investors with recourse, with the sold portion having a government guarantee that is

assignable back to the Company upon repurchase of the loan in the event of default.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit, unused lines of credit, standby letters

of credit and loans sold with recourse is represented by the contractual amount of those investments.

The credit risk associated with commitments to extend credit and standby and commercial letters of credit is essentially the same as that involved

with extending loans to customers and is subject to normal credit policies.

Collateral may be obtained based on management’s assessment of the customer’s credit worthiness.

Commitments to extend credit and unused lines of credit totaled $ 2.3 billion at June 30, 2021 and $ 2.2 billion at December 31, 2020.

Since many loan commitments, standby letters of credit and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts are not necessarily indicative of future cash flows.

Commitments to extend credit and unused lines of credit totaled $ 2.3 billion at September 30, 2021 and $ 2.2 billion at December 31, 2020.

Since many loan commitments, standby letters of credit and guarantees and indemnification contracts expire without being funded in whole or in part, the contract amounts

are not necessarily indicative of future cash flows.

The Company does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit.

1 unchanged sentence

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.

The risk involved in issuing standby letters

of credit is essentially the same as the credit risk involved in extending loan facilities to customers and letters of credit are subject to the same credit origination, portfolio maintenance and management procedures in effect to monitor other

credit and off-balance sheet products.

Typically, these instruments have one year expirations with an option to renew upon annual review;

therefore, the total amounts do not necessarily represent future cash requirements.

Standby letters of credit totaled $ 53.7 million at June 30, 2021 and $ 54.0 million at December 31, 2020.

A s of June 30, 2021 and December 31, 2020 , the fair value of the Company’s standby letters of credit was not significant.

Standby letters of credit totaled $ 50.6 million at September 30, 2021 and $ 54.0 million at December 31, 2020.

A s of September 30, 2021 and December 31, 2020 , the fair value of the Company’s standby letters of credit was not significant.

AND SUBSIDIARIES

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

What changed 10-Q

Item 1. Financial Statements