What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-09 · 435 added, 329 removed, 628 unchanged (55% of the section changed)

2 unchanged sentences

and Subsidiaries

Consolidated Balance Sheets (unaudited)

Balance Sheets (unaudited)

(In thousands, except share and per share data)

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Preferred stock, $ 0.01

Authorized 2,500,000 shares at March 31, 2022 and December 31, 2021

Authorized 2,500,000 shares at June 30, 2022 and December 31, 2021

Common stock, $ 0.01

Authorized 100,000,000 shares at March 31, 2022 and December 31, 2021, issued 49,651,493 at March 31, 2022 and December 31, 2021

Authorized 100,000,000 shares at June 30, 2022 and December 31, 2021;

issued 49,651,493 at June 30, 2022 and December 31, 2021

Additional paid-in-capital

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Accumulated other comprehensive loss

Common stock in treasury, at cost, 6,659,170 and 6,483,481 shares at March 31, 2022 and December 31, 2021, respectively

Common stock in treasury, at cost, 6,815,087 and 6,483,481 shares at June 30, 2022 and December 31, 2021, respectively

Total stockholders’ equity

3 unchanged sentences

and Subsidiaries

Consolidated Statements

of Income (unaudited)

Statements of Income (unaudited)

Three Months Ended

Six Months Ended

(In thousands, except per share data)

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Office supplies and postage

FDIC expenses

Amortization of intangible assets

7 unchanged sentences

and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)

Statements of Comprehensive Income (unaudited)

Three Months Ended

Six Months Ended

(In thousands)

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Securities available for sale:

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

Unrealized net holding (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

Amortization of unrealized net gains for the reclassification of available for sale securities to held to maturity, gross

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Total pension and other benefits, net

Total other comprehensive (loss)

Comprehensive (loss) income

Total other comprehensive (loss) income

Comprehensive income (loss)

See accompanying notes to unaudited interim consolidated financial statements.

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and Subsidiaries

Consolidated Statements of Stockholders’ Equity (unaudited)

Statements of Stockholders’ Equity (unaudited)

Comprehensive

1 unchanged sentence

(In thousands, except share and per share data)

Balance at December 31, 2021

Balance at March 31, 2022

Cash dividends - $ 0.28

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Other comprehensive (loss)

Balance at June 30 , 2022

Balance at March 31, 2021

Cash dividends - $ 0.27

Purchase of 23,627 treasury

Net issuance of 53,788

shares to employee and other stock plans

Stock-based compensation

Other comprehensive income

Balance at June 30 , 2021

Comprehensive

(Loss) Income

(In thousands, except share and per share data)

Balance at December 31 , 2021

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Other comprehensive (loss)

Balance at March 31, 2021

Balance at June 30 , 2022

Balance at December 31, 2020

Cash dividends - $ 0.54

Purchase of 280,658

treasury shares

Net issuance of 106,927

shares to employee and other stock plans

Stock-based compensation

Other comprehensive (loss)

Balance at June 30 , 2021

See accompanying notes to unaudited interim consolidated financial statements.

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and Subsidiaries

Statements of Cash Flows (unaudited)

Three Months Ended

Statements of

Cash Flows (unaudited)

Six Months Ended

(In thousands)

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Originations of loans held for sale

Net gain on sale of loans held for sale

Net gains on sale of loans held for sale

Net security losses (gains)

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Investing activities

Net cash used in acquisitions

Securities available for sale:

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Proceeds from maturities, calls and principal paydowns

Equity securities:

Proceeds from calls

Net increase in loans

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Proceeds from settlement of bank owned life insurance

Purchases of bank owned life insurance

Purchases of premises and equipment, net

2 unchanged sentences

Financing activities

Net increase in deposits

Net (decrease) increase in deposits

Net decrease in short-term borrowings

1 unchanged sentence

Proceeds from the issuance of shares to employee and other stock plans

Cash paid by employer for tax-withholding on stock issuance

Cash paid by employer for tax-withholdings on stock issuance

Purchase of treasury stock

Cash dividends

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

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Consolidated Statements of Cash Flows (unaudited) (continued)

Three Months Ended

Six Months Ended

Supplemental disclosure of cash flow information

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Income taxes paid, net of refund

Noncash investing activities:

Loans transferred to other real estate owned

Acquisitions:

Fair value of assets acquired

See accompanying notes to unaudited interim consolidated financial statements.

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Notes to Unaudited Interim Consolidated Financial Statements

March 31, 2022

June 30, 2022

Description of Business

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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.

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,

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

Basis of Presentation

The accompanying unaudited

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

The accompanying

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

and its wholly-owned subsidiaries:

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Collectively, NBT Bancorp Inc.

and its subsidiaries are referred to herein as (the

In the opinion of management, 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 2021 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 combined ATM and debit cards fees with card related income previously

reported in Other noninterest income which is now disclosed as Card services income.

The Company reclassified Data processing and communications expense into Technology and data services expense.

The Company reclassified Equipment expense into

Occupancy expense and Technology and data services expense.

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

and its subsidiaries are referred to herein as

(the “Company”).

accounting principles in the United States of America (“GAAP”) and in accordance with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”).

the consolidated financial statements do not include all of the information and notes necessary for complete financial statements in conformity with 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 2021 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 combined ATM and debit card fees with card related income previously reported in Other noninterest income which is now disclosed as Card services income.

The Company reclassified Data processing and communications expense

into Technology and data services expense.

The Company reclassified Equipment expense into Occupancy expense and Technology and data services expense.

The 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

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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.

The ASU and related

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

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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.

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

and new activity.

The Company does not expect that the impact of adopting the new guidance on the consolidated financial

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consolidated financial statements .

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

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

(In thousands)

As of March 31, 2022

As of June 30 , 2022

Federal agency

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Total AFS securities

There was no allowance for credit losses on AFS securities

as of March 31, 2022 and December 31, 2021.

During the three months ended March 31, 2022 and 2021 there were no

There was no allowance for credit losses on AFS

securities as of June 30, 2022 and December 31, 2021.

During the three and six months ended June 30, 2022 and 2021 there were no

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

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

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

(In thousands)

As of March 31, 2022

As of June 30 , 2022

Federal agency

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Total HTM securities

At March 31, 2022 and December 31, 2021, all of the mortgaged-backed HTM securities were comprised of U.S.

At June 30, 2022 and December 31, 2021, 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 March 31, 2022 and December 31, 2021 because the

expectations of nonrepayment of the amortized cost is zero, except for State & municipal which is inconsequential.

Included in net realized gains (losses), the Company recorded gains from calls on HTM securities of approximately $ 4 thousand and $ 15 thousand for the three months ended March 31, 2021

and 2022, respectively.

There was no allowance for credit losses on HTM

securities as of June 30, 2022 and December 31, 2021 because the expectation of nonrepayment of the amortized cost is zero, except for state & municipal securities, which such expected losses are immaterial .

The Company recorded no gains from calls on HTM securities for the three months ended June 30, 2022 and 2021.

I ncluded in net realized gains (losses), the Company recorded gains from calls on HTM securities of approximately $ 4 thousand and $ 15 thousand

for the six months ended June 30, 2022 and 2021, respectively.

AFS and HTM securities with amortized costs totaling $ 1.7

billion at March 31, 2022 and $ 1.6 billion at December 31, 2021 were pledged to secure public deposits and for other purposes required or

billion at June 30, 2022 and $ 1.6 billion at December 31, 2021 were pledged to secure public deposits and for other purposes required or

permitted by law.

Additionally, at March 31, 2022 and December 31, 2021, AFS and HTM securities with an amortized cost of $ 144.9 million and

Additionally, at June 30, 2022 and December 31, 2021, AFS and HTM securities with an amortized cost of $ 137.0 million and

$ 162.1 million, respectively, were pledged as collateral for securities sold under repurchase agreements.

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

Three Months Ended March 31,

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

Three Months Ended

(In thousands)

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

As of March 31, 2022 and December 31, 2021, the carrying value of equity securities without readily determinable fair values was $ 1.0 million.

The Company performed a qualitative assessment to determine whether the investments were impaired and identified no areas of concern as of March 31, 2022 and 2021.

There were no impairments, downward or upward adjustments recognized for equity securities without readily determinable fair values

during the three months ended March 31, 2022 and 2021.

The following table sets forth information with regard to contractual maturities of debt securities at March 31, 2022:

Six Months Ended

(In thousands)

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

As of June 30, 2022 and December 31, 2021, the carrying value of equity securities without readily

determinable fair values was $ 1.0 million.

The Company performed a qualitative assessment to determine whether the investments were

impaired and identified no areas of concern as of June 30, 2022 and 2021.

There were no impairments, downward or upward adjustments

recognized for equity securities without readily determinable fair values during the three and six months ended June 30, 2022 and 2021.

The following table sets forth information with regard to contractual maturities of debt securities at June 30, 2022:

(In thousands)

AFS debt securities:

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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 March 31, 2022 and December 31, 2021.

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, 2022 and December

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,

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(In thousands)

As of March 31, 2022

As of June 30 , 2022

AFS securities:

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Mortgage-backed

Collateralized mortgage obligations

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 March 31, 2022 and December 31, 2021, which consisted of 321 and 149 individual securities,

The Company does not believe the AFS securities that were in an unrealized loss position as of June 30, 2022 and December 31, 2021, which consisted of 373 and 149 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 March 31, 2022 and December 31, 2021, the majority of the AFS

As of June 30, 2022 and December 31, 2021, the majority of the AFS

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

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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.

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

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AIR on AFS debt securities totaled $ 4.1 million at

March 31, 2022 and $ 3.9 million at December 31, 2021 and is excluded from the estimate of credit losses and reported in the financial

June 30, 2022 and $ 3.9 million at December 31, 2021 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 nonaccrual status as of March 31, 2022 and December 31, 2021.

There was no accrued interest reversed against interest income for the

three months ended March 31, 2022 or the year ended December 31, 2021 as all securities remained on accrual status.

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

or on nonaccrual status as of June 30, 2022 and December 31, 2021.

There was no accrued interest reversed against interest income for

the three and six months ended June 30, 2022 or the year ended December 31, 2021 as all securities remained on accrual status.

In addition, there were no

collateral-dependent HTM debt securities as of March 31, 2022 and December 31, 2021.

As of March 31, 2022 and December 31, 2021, 63 % and 56 %, respectively, of the Company’s HTM debt securities were issued by U.S.

collateral-dependent HTM debt securities as of June 30, 2022 and December 31, 2021.

As of June 30, 2022 and December 31, 2021, 69 % and 56 %, respectively, of the Company’s HTM debt securities were issued by U.S.

government agencies or U.S.

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carry the explicit and/or implicit guarantee of the U.S.

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

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

Therefore, the Company did not record an allowance for credit losses for these securities as of

March 31, 2022 and December 31, 2021.

The remaining HTM debt securities at March 31, 2022 and December 31, 2021 were comprised of state and municipal obligations with bond ratings of A to AAA.

June 30, 2022 and December 31, 2021.

The remaining HTM debt securities at June 30, 2022 and December 31, 2021 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 March 31, 2022 and December 31, 2021.

AIR on HTM debt securities totaled $ 3.0 million at March 31, 2022 and $ 2.7

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, 2022 and December 31, 2021.

AIR on HTM debt securities totaled $ 3.2 million at June 30, 2022 and $ 2.7

million at December 31, 2021 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 $ 90.0 million at March 31, 2022, compared to $ 92.0 million at December 31, 2021.

The allowance for credit losses as a percentage of loans was 1.18 %

at March 31, 2022, compared to 1.23 % at December 31, 2021.

The March 31, 2022, December 31, 2021, March 31, 2021 and December 31, 2020 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 the allowance.

The quantitative model as

of March 31, 2022 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, particularly significant unknowns relating to

downside risks as of the measurement date.

The baseline outlook reflected an unemployment rate environment initially above pre-COVID-19 levels at 4.3% but falling below pre-coronavirus (“COVID-19”) pandemic levels by the fourth quarter of the

forecast period and to a low of 3.4%.

The allowance for credit losses totaled $ 93.6 million at

June 30, 2022, compared to $ 92.0 million at December 31, 2021.

The allowance for credit losses as a percentage of loans was 1.20 % at June 30, 2022, compared to 1.23 % at

December 31, 2021.

The allowance for credit losses calculation incorporated a 6-quarter forecast period to account for forecast economic conditions under each scenario utilized in the

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

the allowance.

The quantitative

model as of June 30, 2022 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, particularly significant unknowns

relating to downside risks as of the measurement date.

The baseline outlook reflected an unemployment rate environment initially at pre-coronavirus (“COVID-19”) pandemic levels of 3.8% but falling below pre-COVID-19 pandemic levels by the end of

the forecast period to a low of 3.4%.

Northeast GDP’s annualized growth (on a quarterly basis) is expected to start the third quarter of 2022 at about 9.5% and hover around 5% by the end of the forecast period.

Other utilized economic variables

worsened overall during the quarter, with outlooks for annualized growth in retail sales and business output declining from the prior quarter along with housing starts.

Key assumptions in the baseline economic outlook included the containment of

the European conflict to only Russia and Ukraine, further interest rate hikes by the Federal Reserve, and achievement of full employment by the end of 2022.

The alternative downside scenario assumed deteriorated economic and pandemic related

conditions from the baseline outlook.

Under this scenario, northeast unemployment rises from 4.2% in the second quarter of 2022 to a peak of 7.0% in the third quarter of 2023.

The alternative upside scenario incorporated a more optimistic outlook

than the baseline scenario, with an imminent return to full employment, with northeast unemployment declining to 2.9% 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, 2022.

At June 30, 2022, the weightings were 50%, 0%, and 50% for the baseline, upside, and downside economic forecasts, respectively.

Additionally, qualitative adjustments were made for isolated

model limitations related to modeled outputs given abnormally high retail sales and business output growth rates in prior quarters.

These factors were considered through separate quantitative processes and incorporated into the estimate of

current expected credit losses at June 30, 2022.

The quantitative

model as of March 31, 2022 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, particularly significant

unknowns relating to downside risks as of the measurement date.

The baseline outlook reflected an unemployment rate environment initially above pre-COVID-19 levels at 4.3% but falling below pre-coronavirus pandemic levels by the fourth quarter of

the forecast period and to a low of 3.4%.

Northeast GDP’s annualized growth (on a quarterly basis) was expected to start the second quarter of 2022 at approximately 9% and hover around 5.5% by the middle and end of the forecast period.

Other utilized

economic variables either improved or remained relatively flat, with retail sales and business output remaining steady from the prior quarter and housing starts increasing from the prior quarter’s forecast.

Key assumptions in the baseline economic

outlook included continued abatement of COVID-19, the containment of the European conflict to only Russia and Ukraine, further increase of interest rates by the Federal Reserve, and achievement of full employment 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 4.8% in the first quarter of 2022 to a peak of 7.15% in the second quarter of 2023.

alternative upside scenario incorporated a more optimistic outlook than the baseline scenario, with an imminent return to full employment with northeast unemployment declining to 2.99% 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 March 31, 2022.

At March 31, 2022, the weightings were 60%, 0% and 40% for the baseline, upside and downside economic forecasts, respectively.

The Company also continued to monitor the level of criticized and classified loans in the first quarter of 2022 compared to the level contemplated by the model during similar, historical economic conditions, and determined that an adjustment was no

longer required.

utilized economic variables either improved or remained relatively flat, with retail sales and business output remaining steady from the prior quarter and housing starts increasing from the prior quarter’s forecast.

Key assumptions in the

baseline economic outlook included continued abatement of COVID-19, the containment of the European conflict to only Russia and Ukraine, further increase of interest rates by the Federal Reserve, and achievement of full employment by the end of

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

Under this scenario, northeast unemployment rises from 4.8% in the first quarter of 2022 to a peak of 7.15% in the

second quarter of 2023.

The alternative upside scenario incorporated a more optimistic outlook than the baseline scenario, with an imminent return to full employment with northeast unemployment declining to 2.99% by the end of the forecast

These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of March 31, 2022.

At March 31, 2022, the weightings were 60%, 0% and 40% for the baseline, upside and

downside economic forecasts, respectively.

The Company also continued to monitor the level of criticized and classified loans in the first quarter of 2022 compared to the level contemplated by the model during similar, historical economic

conditions, and determined that an adjustment was no longer required.

The quantitative model as

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Northeast GDP’s annualized growth (on a quarterly basis) was expected to start the first

quarter of 2022 at approximately 9% and hovering around 5% by the middle and end of the forecast period.

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 continued abatement of the COVID-19 pandemic, enactment of the Build Back Better Act by the end of 2021,

near-term peaking of consumer price acceleration, accelerated asset purchase tapering at the Federal Reserve, and full employment 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 5.7% in the fourth quarter of 2021 to a peak of 8% in the first quarter of 2023, remaining around or 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 second 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 December 31, 2021.

At December 31, 2021, the weightings were 60%, 10% and 30% for the baseline, upside and downside economic forecasts,

respectively.

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 fourth 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, qualitative adjustments were made for Moody’s

baseline economic forecast to include impacts of the Build Back Better Act not passing by December 31, 2021 and to address potential economic deterioration due to Omicron, as well as isolated model limitations related to modeled outputs given

abnormally high retail sales and business output growth rates in historical periods.

quarter of 2022 at approximately 9% and hover around 5% by the middle and end of the forecast period.

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

Under this scenario,

northeast unemployment rose from 5.7% in the fourth quarter of 2021 to a peak of 8% in the first quarter of 2023, remaining around or 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 second 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 December 31, 2021.

At December 31, 2021, the weightings were 60%, 10% and 30% for the baseline, upside and downside economic forecasts, respectively.

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 fourth 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, qualitative adjustments were made for Moody’s baseline economic forecast to include impacts

of the Build Back Better Act not passing by December 31, 2021 and to address potential economic deterioration due to Omicron, as well as isolated model limitations related to modeled outputs given abnormally high retail sales and business output

growth rates in historical periods.

These factors were considered through separate quantitative processes and incorporated into the estimate of current expected credit losses at December 31, 2021.

There were no loans purchased with credit deterioration during the three months ended March 31, 2022 or the year ended December 31, 2021.

During 2022, the Company purchased $ 3.0 million of residential loans at a 1.35 %

premium and $ 33.5 million in consumer loans at par.

There were no loans purchased with credit deterioration during the six months ended June 30, 2022 or the year ended December 31, 2021.

2022, the Company purchased $ 8.0 million of residential loans at a slight discount and $ 50.1 million in consumer loans at par.

The allowance for credit losses recorded for these loans on the purchase date was $ 3.2 million.

During 2021, the Company purchased $ 58.9

million of residential loans at a 2 %- 5 %

premium and $ 92.5 million in consumer loans at par.

During 2021, the Company purchased $ 58.9 million of residential loans at a 2 %- 5 % premium and $ 92.5 million in consumer loans at par.

The allowance for credit losses recorded for these loans on the purchase date was $ 6.8 million.

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

AIR on loans totaled $ 19.1 million at March 31, 2022 and $ 19.5

million at December 31, 2021 and there was no estimated allowance for credit losses related to AIR as of March 31, 2022 and December

The provision for loan losses was an expense of $ 0.6 million and a benefit of $ 2.8 million

for the three months ended March 31, 2022 and March 31, 2021, respectively.

The increase in provision expense was driven by providing for the increase in loan balances in the first quarter of 2022 and the changes in the economic condition forecasts

from quarter to quarter.

The following tables present the activity in the allowance for credit losses by our

portfolio segments:

AIR on loans totaled $ 19.6 million at June 30, 2022 and $ 19.5 million at December 31, 2021 and there was no estimated allowance for credit losses related to AIR as of June 30, 2022 and December 31, 2021.

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

(In thousands)

Balance as of March 31, 2022

Ending balance as of June 30, 2022

Balance as of March 31, 2021

Ending balance as of June 30 , 2021

(In thousands)

Balance as of December 31, 2021

Ending balance as of March 31 , 2022

Ending balance as of June 30, 2022

Balance as of December 31, 2020

Ending balance as of March 31 , 2021

decrease in the allowance for credit losses from December 31, 2021 to March 31, 2022 was primarily due to an improvement in the economic forecast, partly offset by providing for the increase in loan balances.

The decrease in the allowance for

credit losses from December 31, 2020 to March 31, 2021 was primarily due to an improvement in the economic forecast.

Ending balance as of June 30 , 2021

The increase in the allowance for credit

losses from December 31, 2021 and March 31, 2022 to June 30, 2022 was due to an increase in loan balances, an additional specific reserve established during the second quarter and a modest deterioration in the economic forecast.

The decrease in the allowance for credit losses

from December 31, 2020 and March 31, 2021 to June 30, 2021 was primarily due to an improvement in the economic forecast.

Individually Evaluated Loans

As of March 31, 2022,

there were five relationships identified to be evaluated for loss on an individual basis which had an amortized cost basis of $ 9.9 million and no allowance for credit

As of December 31, 2021, the same five relationships were identified to be evaluated for loss on an individual basis with an

amortized cost basis of $ 10.2 million and no

allowance for credit loss.

The following table sets forth information with regard to past due and nonperforming

loans by loan segment:

As of June 30, 2022, there were five relationships

identified to be evaluated for loss on an individual basis which, in aggregate, had an amortized cost basis of $ 9.3 million, with an

allowance for credit loss of $ 0.8 million, which was deemed collateral dependent, and therefore 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, 2021, these same five

relationships were identified to be evaluated for loss on an individual basis with an aggregate amortized cost basis of $ 10.2 million and no allowance for credit loss.

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

(In thousands)

Than 90 Days Past

Recorded Total

As of March 31 , 2022

As of June 30 , 2022

Commercial loans:

4 unchanged sentences

(In thousands)

Recorded Total

As of December 31, 2021

4 unchanged sentences

Total consumer loans

As of March 31, 2022 and December 31, 2021, there were no loans in nonaccrual without an allowance for credit losses.

As of June 30, 2022 and December 31, 2021, 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 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, which facilitates 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.

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

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.

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

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.

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

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.

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

Nonaccrual treatment is required for Doubtful assets because of the high probability of loss.

Substandard loans have a high probability of payment default or

they have other well-defined weaknesses.

They require more intensive supervision by bank management.

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.

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

They require more intensive supervision by bank

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

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.

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 (e.g., declining revenues or margins) or may be struggling with an

ill-proportioned balance sheet (e.g., increasing inventory without an increase in sales, high leverage, and/or 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.

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 range from superior quality to fair quality.

Pass loans also include any portion of a government guaranteed loan,

including PPP loans.

Pass loans also include any portion of a government guaranteed loan, including PPP loans.

Consumer and Residential Grading System

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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.

All loans not meeting any of the above criteria are considered

The following tables illustrate the Company’s credit quality by loan class by vintage:

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.

The following tables illustrate the Company’s credit quality by loan class by year of origination (vintage):

(In thousands)

As of March 31 , 2022

As of June 30 , 2022

By internally assigned grade:

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Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

As of March 31, 2022, the allowance for losses on unfunded commitments totaled $ 4.8 million, compared to $ 5.1 million as of

December 31, 2021.

The allowance for losses on unfunded commitments totaled $ 5.1

million as of June 30, 2022 and December 31, 2021.

Troubled Debt Restructuring

When the Company modifies a loan in a 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;

temporary reduction in the interest rate;

or change in scheduled payment amount.

Residential and Consumer TDRs occurring during 2022 and 2021 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

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

national emergency.

The Coronavirus Aid, Relief and Economic Security Act (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 March 31, 2022

Three Months Ended March 31 , 2021

When the Company modifies a loan in a 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;

a temporary reduction in the interest rate;

or a change in scheduled payment amount.

Residential and Consumer TDRs occurring during 2022 and 2021 were due to reductions in

the interest rate and/or extensions 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.

TheCompany began offering loan modifications to assist borrowers

during the COVID-19 national emergency.

need to be accounted for as a TDR.

The Company evaluated the modification programs provided to its borrowers and 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, 2022

Three Months Ended June 30 ,

(Dollars in thousands)

Pre-Modification

Post-Modification

Pre-Modification

Outstanding Recorded

Post-Modification

The following table illustrates the recorded investment and number of modifications

for TDRs where a concession has been made and subsequently defaulted during the period:

Consumer loans:

Total consumer loans

Six Months Ended June 30, 2022

Ended June 30 , 2021

(Dollars in thousands)

Consumer loans:

Total consumer loans

The following table illustrates the recorded investment and number of modifications for TDRs where a concession has been made and subsequently defaulted during the period:

Three Months Ended

March 31, 2022

June 30, 2022

Three Months Ended

March 31, 2021

June 30, 2021

(Dollars in thousands)

Six Months Ended

June 30, 2022

Six Months Ended

June 30, 2021

(Dollars in thousands)

Consumer loans:

1 unchanged sentence

Defined Benefit Post-Retirement Plans

The Company has a qualified, noncontributory, defined benefit pension plan (“the Plan”) covering substantially all of its employees at March 31, 2022.

The Company has a qualified, noncontributory, defined benefit pension plan (the “Plan”) covering substantially all of its employees at June 30, 2022.

Benefits paid from

14 unchanged sentences

The Company made no voluntary contributions to the

pension and other benefits plans during the three months ended March 31, 2022 and 2021.

pension and other benefits plans during the three and six months ended June 30, 2022 and 2021.

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

9 unchanged sentences

Total net periodic (benefit) cost

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

Pension Benefits

Other Benefits

Six Months Ended

(In thousands)

Components of net periodic (benefit) cost:

Interest cost

Expected return on plan assets

Net amortization

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.

13 unchanged sentences

Net income available to common stockholders

There was a nominal number of weighted average stock options outstanding for the three months ended March 31, 2022 and March 31, 2021, 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.

Six Months Ended

(In thousands, except per share data)

Weighted average common shares outstanding

Net income available to common stockholders

Weighted average common shares outstanding

Dilutive effect of common stock options and restricted stock

Weighted average common shares and common share equivalents

Net income available to common stockholders

There was a nominal number of weighted average stock options outstanding for the three and six months ended June 30, 2022 and June 30, 2021, 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)

3 unchanged sentences

Affected Line Item in the

Consolidated Statements of

Consolidated Statement of

Comprehensive Income (Loss)

1 unchanged sentence

(In thousands)

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

AFS securities:

13 unchanged sentences

Total reclassifications, net of tax

Detail About AOCI Components

Amount Reclassified from AOCI

Affected Line item in the

Consolidated Statement of

Comprehensive Income (Loss)

Six Months Ended

(In thousands)

June 30, 2022

June 30, 2021

AFS securities:

Amortization of unrealized gains related to securities transfer

Interest income

Income tax (benefit)

Cash flow hedges:

Net unrealized losses on cash flow hedges reclassified to interest expense

Interest expense

Income tax (benefit)

Pension and other benefits:

Amortization of net losses

Other noninterest expense

Amortization of prior service costs

Other noninterest expense

Income tax (benefit)

Total reclassifications, net of tax

Derivative Instruments and Hedging Activities

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 may enter 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.

Generally, the Company may use derivative financial instruments 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.

Currently, the Company 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.

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 risk, 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.

Generally, the Company may use derivative financial instruments 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.

Currently, the Company 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.

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

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

These swaps are considered derivatives, but are not

designated in hedging relationships.

designated as 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.

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.

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 March 31, 2022 and December 31, 2021, the Company had sixteen and eighteen 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

institutions .

As of June 30, 2022 and December 31, 2021, the Company had sixteen and eighteen 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 institutions.

Derivatives Designated as Hedging Instruments

1 unchanged sentence

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

The following table summarizes the derivatives outstanding:

These agreements are designated as

cash flow hedges with currently none outstanding.

T he following table summarizes the derivatives outstanding:

(In thousands)

As of March 31 , 2022

As of June 30, 2022

Derivatives not designated as hedging instruments

21 unchanged sentences

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.

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 consist 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.

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.

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

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

(In thousands)

D erivatives designated as hedging

Derivatives designated as hedging instruments:

Interest rate derivatives - included component

Amount of loss reclassified from AOCI into interest expense

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

(In thousands)

Derivatives not designated as hedging instruments:

(Decrease) in other income

(Decrease) increase in other income

Fair Value Measurements and Fair Value of Financial Instruments

10 unchanged sentences

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

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

market activity).

5 unchanged sentences

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

The types of instruments valued based on quoted prices in markets that are not active, broker or dealer quotations or quote from 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.

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, the

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 by its third-party

providers in pricing the securities.

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

6 unchanged sentences

financial ratios or cash flow s.

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

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

1 unchanged sentence

(In thousands)

March 31, 2022

June 30, 2022

AFS securities

16 unchanged sentences

real estate owned, collateral-dependent impaired loans and HTM securities.

The non-recurring fair value measurements recorded during the three month period ended March 31, 2022 and the year ended December 31, 2021 were related to impaired loans and

write-downs of other real estate owned.

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.

As of March 31, 2022,

the Company had collateral dependent individually evaluated loans with a carrying value of $ 9.9 million, which had no estimated allowance for credit loss.

As of December 31, 2021, the Company had collateral dependent individually evaluated loans with a carrying value

of $ 10.2 million, which had no

The non-recurring fair value measurements recorded during the three and six month periods ended June 30, 2022 and the year ended December 31, 2021 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.

As of June 30, 2022,

the Company had collateral dependent individually evaluated loans with a carrying value of $ 9.3 million, which had an estimated allowance

for credit loss of $ 0.8 million.

As of December 31, 2021, the Company had collateral dependent individually evaluated loans with a

carrying value of $ 10.2 million, which had no

estimated allowance for credit loss.

4 unchanged sentences

accrued interest payable and derivatives.

March 31, 2022

June 30, 2022

December 31, 2021

49 unchanged sentences

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 creditworthiness.

Commitments to extend credit and unused lines of credit totaled $ 2.2 billion at March 31, 2022 and $ 2.3 billion at December 31, 2021.

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 $ 2.4 billion at June 30, 2022 and $ 2.3 billion at December 31, 2021.

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

8 unchanged sentences

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

Standby letters of credit totaled $ 54.5 million at March 31, 2022 and $ 55.1 million at December 31, 2021.

A s of March 31, 2022 and December 31, 2021 , the fair value of the Company’s standby letters of credit was not significant.

Standby letters of credit totaled $ 56.2 million at June 30, 2022 and $ 55.1 million at December 31, 2021.

A s of June 30, 2022 and December 31, 2021 , the fair value of the Company’s standby letters of credit was not significant.

NBT BANCORP INC.

1 unchanged sentence

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