What changed in this filing

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Item 1. Financial Statements

2023-05-10 compared with 2022-11-09 · 395 added, 487 removed, 599 unchanged (60% of the section changed)

3 unchanged sentences

Balance Sheets (unaudited)

September 30,

(In thousands, except share and per share data)

21 unchanged sentences

Preferred stock, $ 0.01

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

Authorized 2,500,000 shares at March 31 , 2023 and December 31, 2022

Common stock, $ 0.01

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

issued 49,651,493 at September 30 , 2022 and

December 31, 2021

Authorized 100,000,000 shares at March 31 , 2023 and December 31, 2022 , issued 49,651,493 at March 31 , 2023 and December

Additional paid-in-capital

1 unchanged sentence

Accumulated other comprehensive loss

Common stock in treasury, at cost, 6,812,238 and 6,483,481 shares at September 30 , 2022 and

December 31, 2021 , respectively

Common stock in treasury, at cost, 6,747,161 and 6,793,670 shares at March 31 , 2023 and December 31, 2022 , respectively

Total stockholders’ equity

3 unchanged sentences

and Subsidiaries

Statements of Income (unaudited)

Consolidated Statements

Income (unaudited)

Three 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 (losses) gains

Net securities (losses)

Total noninterest income

4 unchanged sentences

Office supplies and postage

FDIC assessment

Amortization of intangible assets

Loan collection and other real estate owned, net

Acquisition expenses

Total noninterest expense

5 unchanged sentences

and Subsidiaries

Statements of Comprehensive Income (Loss) (unaudited)

Consolidated Statements of

Comprehensive Income (Loss) (unaudited)

Three Months Ended

September 30,

Nine Months Ended

September 30 ,

(In thousands)

1 unchanged sentence

Securities available for sale:

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

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

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

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

Reclassification adjustment for net losses in net income, gross

Reclassification adjustment for net losses in net income, net

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

1 unchanged sentence

Total securities available for sale, net

Cash flow hedges:

Reclassification of net unrealized losses on cash flow hedges to interest expense, gross

Reclassification of net unrealized losses on cash flow hedges to interest expense, net

Total cash flow hedges, net

Pension and other benefits:

2 unchanged sentences

Total pension and other benefits, net

Total other comprehensive (loss)

Comprehensive (loss) income

Total other comprehensive income (loss)

Comprehensive income (loss)

See accompanying notes to unaudited interim consolidated financial statements.

1 unchanged sentence

and Subsidiaries

Statements of Stockholders’ Equity (unaudited)

Comprehensive

(Loss) Income

(In thousands, except share and per share data)

Balance at June 30, 2022

Cash dividends - $ 0.30

Net issuance of 2,849

shares to employee and other stock plans

Stock-based compensation

Other comprehensive (loss)

Balance at September 30 , 2022

Balance at June 30, 2021

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 (loss)

Balance at September 30 , 2021

Consolidated Statements of

Changes in Stockholders’ Equity (unaudited)

Comprehensive

2 unchanged sentences

Balance at December 31, 2022

Cumulative effect adjustment for ASU 2022-02 implementation as of January 1, 2023

Cash dividends - $ 0.30

Purchase of 400,000

treasury shares

Net issuance of 46,509

1 unchanged sentence

Stock-based compensation

Other comprehensive (loss)

Balance at September 30 , 2022

Other comprehensive income

Balance at March 31, 2023

Balance at December 31, 2021

6 unchanged sentences

Other comprehensive (loss)

Balance at September 30 , 2021

Balance at March 31, 2022

See accompanying notes to unaudited interim consolidated financial statements.

2 unchanged sentences

Statements of

Cash Flows (unaudited)

Nine Months Ended

September 30,

Three Months Ended

(In thousands)

12 unchanged sentences

Originations of loans held for sale

Net gains on sale of loans held for sale

Net security losses (gains)

Net gain on sale of loans held for sale

Net securities losses

Net gains on sale of other real estate owned

7 unchanged sentences

Proceeds from maturities, calls and principal paydowns

Equity securities:

Proceeds from calls

Net increase in loans

Proceeds from Federal Home Loan Bank stock redemption

Purchases of Federal Reserve Bank and Federal Home Loan Bank stock

Purchases of Federal Home Loan Bank stock

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 (decrease) increase in deposits

Net increase in deposits

Net decrease in short-term borrowings

Proceeds from long-term debt

Repayments of long-term debt

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

Cash paid by employer for tax-withholdings on stock issuance

Cash paid by employer for tax-withholding on stock issuance

Purchase of treasury stock

Cash dividends

Net cash (used in) provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

3 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) (continued)

Nine Months Ended

September 30,

Three Months Ended

Supplemental disclosure of cash flow information

2 unchanged sentences

Income taxes paid, net of refund

Noncash investing activities:

Loans transferred to other real estate owned

Acquisitions:

3 unchanged sentences

and Subsidiaries

Notes to Unaudited Interim Consolidated

Financial Statements

September 30, 2022

to Unaudited Interim Consolidated Financial Statements

March 31, 2023

Description of Business

33 unchanged sentences

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.

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

3 unchanged sentences

Recent Accounting Pronouncements

Accounting Standards Issued Not Yet Adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates

(“ASU”) 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

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 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

statements will have a material impact on the consolidated financial statements .

In March 2022, the FASB issued ASU 2022-02, Financial Instruments - CECL Losses (Topic 326):

Debt Restructurings and Vintage Disclosures .

The ASU eliminates the guidance on

Troubled Debt Restructurings (“TDRs”) and requires an evaluation on all loan modifications to determine if they result in a new loan or a continuation of the existing loan.

The ASU also requires that entities disclose current-period gross

charge-offs by year of origination.

The elimination of the TDR guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a

cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses.

R ecently Adopted Accounting Standards

I n March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) 2022-02, Financial Instruments - CECL Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”).

The ASU eliminates the guidance on Troubled Debt Restructurings (“TDRs”) and requires an evaluation on

all loan modifications to determine if they result in a new loan or a continuation of the existing loan.

The ASU also requires that entities disclose current-period gross charge-offs by year of origination.

The elimination of the TDR guidance may

be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption

for changes in the allowance for credit losses.

The amendments in this ASU are effective for the Company on January 1, 2023, with early adoption permitted.

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 .

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

The Company adopted the ASU on January 1, 2023 (“Day 1”) using the modified retrospective

method and recorded a net increase to retained earnings of $ 0.5 million.

The transition adjustment includes a $ 0.6 million impact to the allowance for credit losses on loans and $ 0.1 million impact to the deferred tax asset .

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

(In thousands)

As of September 30 , 2022

As of March 31, 2023

Federal agency

18 unchanged sentences

There was no allowance for credit losses on AFS

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

During the three and nine months ended September 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 and losses of HTM securities are as follows:

securities as of March 31, 2023 and December 31, 2022.

During the three months ended March 31, 2023, the Company incurred a $ 5.0

million loss on the write-off of an AFS corporate debt security from a subordinated debt investment of a bank that failed.

million loss was reclassified out of accumulated other comprehensive income (loss) (“AOCI”) and into earnings in net securities losses in the consolidated statement of income.

During the three months ended March 31, 2022 there were no gains or losses reclassified out of AOCI and into earnings.

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

(In thousands)

As of September 30 , 2022

As of March 31, 2023

Federal agency

17 unchanged sentences

Total HTM securities

At September 30, 2022 and December 31, 2021, all of the mortgaged-backed HTM securities were comprised of U.S.

At March 31, 2023 and December 31, 2022, 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, 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 from nonrepayment are immaterial .

T he Company recorded no gains from calls on HTM securities for the three months ended September 30, 2022.

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.

Included in net realized gains (losses), the Company recorded

gains from calls on HTM securities of approximately $ 4 thousand and $ 29 thousand for the nine months ended September 30, 2022 and 2021, respectively.

There was no allowance for credit losses on HTM securities as of March 31, 2023 and December 31, 2022 because the

expectation of nonrepayment of the amortized cost is zero, except for state & municipal securities, which such expected losses from nonrepayment are immaterial.

The Company recorded no gains from calls on HTM

securities for the three months ended March 31, 2023.

Included in net realized gains (losses), the Company recorded gains from calls on HTM securities of approximately $ 4 thousand for the three months ended March 31, 2022.

AFS and HTM securities with amortized costs totaling $ 1.76

billion at September 30, 2022 and $ 1.63 billion at

December 31, 2021 were pledged to secure public deposits and for other purposes required or permitted by law.

Additionally, at September 30, 2022 and

December 31, 2021, AFS and HTM securities with an amortized cost of $ 126.2 million and $ 162.1 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 (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,

billion at March 31, 2023 and $ 1.73 billion at December 31, 2022 were pledged to secure public deposits and for other purposes required or

permitted by law.

Additionally, at March 31, 2023 and December 31, 2022, AFS and HTM securities with an amortized cost of $ 142.2 million

and $ 149.5 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,

(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 September

30, 2022 and December 31, 2021, the carrying value of equity securities without readily determinable fair values was $ 1.0

The Company performed a qualitative assessment to determine whether the investments were impaired and identified no areas of concern as of September 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 nine months ended September 30, 2022 and 2021.

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

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

As of March 31, 2023 and December 31, 2022, 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, 2023 and 2022.

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

determinable fair values during the three months ended March 31, 2023 and 2022.

The following table sets forth information with regard to contractual maturities of debt securities at March 31, 2023:

(In thousands)

15 unchanged sentences

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 September 30, 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 March 31, 2023 and December 31, 2022.

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,

3 unchanged sentences

(In thousands)

As of September 30 , 2022

As of March 31, 2023

AFS securities:

23 unchanged sentences

Total securities with unrealized losses

The Company does not believe the AFS securities that were in an unrealized loss position as of September 30, 2022 and December 31, 2021, which consisted of 415 and 149 individual securities,

The Company does not believe the AFS securities that were in an unrealized loss position as of March 31, 2023 and December 31, 2022, which consisted of 394 and 415 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 September 30, 2022 and December 31, 2021, the majority of the AFS

As of March 31, 2023 and December 31, 2022, the majority of the AFS

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

9 unchanged sentences

AIR on AFS debt securities totaled $ 4.1 million at

September 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.

March 31, 2023 and $ 4.2 million at December 31, 2022 and is excluded from the estimate of credit losses and reported in the other assets financial statement line.

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

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

There was no accrued interest reversed against interest income

for the three and nine months ended September 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 September 30, 2022 and December 31, 2021.

As of September 30, 2022 and December 31, 2021, 69 % and 56 %, respectively, of the Company’s HTM debt securities

were issued by U.S.

or on nonaccrual status as of March 31, 2023 and December 31, 2022.

There was no accrued interest reversed against interest income for

the three months ended March 31, 2023 or the year ended December 31, 2022 as all securities remained on accrual status.

In addition, there were no

collateral-dependent HTM debt securities as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022, 70 %

of the Company’s HTM debt securities were issued by U.S.

government agencies or U.S.

1 unchanged sentence

These securities 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

Therefore, the Company did not record an allowance for credit losses for these securities as of September 30, 2022 and December 31, 2021.

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

AIR on HTM debt securities totaled $ 3.3 million at

September 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.

government, which 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 March 31, 2023 and December 31, 2022.

The remaining HTM debt securities at March 31, 2023 and December 31,

2022 were comprised of state and municipal obligations generally 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, 2023 and December 31, 2022.

AIR on HTM debt securities totaled $ 3.8

million at March 31, 2023 and December 31, 2022 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 $ 96.8 million at

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

The allowance for credit losses as a percentage of loans was 1.22 % at September 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

The Company’s adoption of ASU 2022-02 resulted in an insignificant change to our

methodology for estimating the allowance for credit losses on TDRs.

The Day 1 decrease in allowance for credit loss on TDR loans relating to adoption of ASU 2022-02 was $ 0.6 million.

The allowance for credit losses totaled $ 100.3 million at March 31, 2023, compared to $ 100.8 million at

December 31, 2022.

The allowance for credit losses as a percentage of loans was 1.21 % at March 31, 2023, compared to 1.24 % at December 31, 2022.

During the first quarter of 2023, the Company made adjustments to the class segments

within the portfolios to better align risk characteristics and reflect the monitoring and assessment of risks as the portfolios continue to evolve.

Paycheck Protection Program was consolidated with Commercial & Industrial, as the portfolio had

decreased to less than $ 1 million and no longer warranted a material class segment.

The Other Consumer class segment was further separated

into Residential Solar and Other Consumer.

The growth in our Residential Solar portfolio warranted evaluation of this class separately from the Other Consumer class segments.

The change to the class segments was applied retrospectively and did not

have a significant impact on the allowance for loan losses.

The following table illustrates the portfolio and class segments for the Company’s loan portfolio:

Portfolio Segment

Commercial Loans

Commercial & Industrial

Commercial Real Estate

Consumer Loans

Residential Solar

Other Consumer

Residential Loans

The 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 September 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 at pre-coronavirus (“COVID-19”) pandemic levels of 3.8% and maintaining those levels to the end of the forecast period.

Northeast GDP’s

annualized growth (on a quarterly basis) is expected to start the fourth quarter of 2022 at about 4.5% and hover around that level across the forecast period.

Other utilized economic variables worsened overall during the fourth quarter of

the forecast, 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 economy reaching full employment

in the coming quarters, further interest rate increases by the Federal Reserve, and the global oil market remaining relatively balanced into 2023.

The alternative downside scenario assumed deteriorated economic conditions from the baseline

Under this scenario, northeast unemployment rises from 4.0% in the third quarter of 2022 to a peak of 6.9% in the fourth quarter of 2023.

The alternative upside scenario incorporated a more optimistic outlook than the baseline

scenario, with an imminent return to full employment and northeast unemployment declining to 3.3% 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, 2022.

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

Qualitative adjustments were made for isolated model

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

Additionally, a qualitative adjustment for inflation was added to adjust for potential model

limitations arising from the use of a macroeconomic variable denominated in nominal dollar terms.

These factors were considered through separate quantitative processes and incorporated into the estimate of current expected credit losses at

September 30, 2022.

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-COVID-19 levels of 3.8% but falling below pre-COVID-19 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 increases 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

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 December 31, 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 at 4.8% but falling below pre-COVID-19 levels by the end of the forecast period to 3.5%.

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

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

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

The quantitative model as of March 31, 2023 incorporates a baseline economic outlook

along with an alternative downside scenario sourced from a reputable third-party to accommodate other potential economic conditions in the model.

At March 31, 2023, the weightings were 50%, 0% and 50% for the baseline, upside and downside economic

forecasts, respectively.

The baseline outlook reflected an unemployment rate environment below pre-coronavirus (“COVID-19”) pandemic levels throughout much of the forecast period.

Northeast GDP’s annualized growth (on a quarterly basis) is expected

to start the second quarter of 2023 at approximately 3.9% and rise to 4.4% before falling slightly to 4.1% by the end of the forecast period.

Other utilized economic variables have generally remained stable in their respective forecasts, with the

exception of northeast housing starts which deteriorated since December 31, 2022 and served as a counter-balance to the improved unemployment outlook.

Key assumptions in the baseline economic outlook included the Federal Reserve raising rates with

two more 25 basis point hikes at the May and June meetings bringing the terminal range to 5%-5.25%, recent bank failures not being symptomatic of a serious broader problem in the financial system, the economy remaining at full employment, continued

tapering of the Federal Reserve balance sheet, a slowly increasing yield on ten-year treasury securities, and a continued decline in oil prices.

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

Under this scenario, northeast unemployment rises from 3.7% in the first quarter of 2023 to a peak of 7.1% in the second quarter of 2024.

These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s

expectations as of March 31, 2023.

Additional adjustments were made for factors not incorporated in the forecasts or the model, such as loss rate expectations for certain loan pools, considerations for inflation, and recent trends in asset value

Additional monitoring for industry concentrations, loan growth, and policy exceptions was also conducted.

All these factors were considered through separate quantitative processes and incorporated when applicable into the estimate of current

expected credit losses at March 31, 2023.

The quantitative model as of December 31, 2022 incorporates a baseline economic

outlook along with an alternative downside scenario sourced from a reputable third-party to accommodate other potential economic conditions in the model.

At December 31, 2022, the weightings were 50%, 0% and 50% for the baseline, upside and downside

economic forecasts, respectively.

The baseline outlook reflected an unemployment rate environment initially around pre-COVID-19 levels at 3.9% that increases slightly during the forecast period to 4.0%.

Northeast GDP’s annualized growth (on a

quarterly basis) is expected to start the first quarter of 2023 at approximately 3.9% and hovering around 4.6% by the end of the forecast period.

Other utilized economic variables have generally deteriorated in their respective forecasts, with retail

sales and housing starts forecasts declining from the prior year.

Key assumptions in the baseline economic outlook included a full employment economy being realized in the near future, continued tapering of the Federal Reserve balance sheet, an

increasing yield on ten-year treasury securities, and a gradual decline in global oil prices.

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

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.

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 nine months ended September 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.

Under this scenario, northeast

unemployment rises from 3.9% in the fourth quarter of 2022 to a peak of 6.9% in the first quarter of 2024.

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

Additional monitoring

for industry concentrations, loan growth, and policy exceptions was also conducted.

All these factors were considered through separate quantitative processes and incorporated when applicable into the estimate of current expected credit losses at

December 31, 2022.

There were no loans purchased with credit deterioration during the three months ended March 31, 2023 or the year ended December 31, 2022.

The Company purchased no loans during the three months ended March 31, 2023.

During 2022, the Company purchased $ 11.5 million of residential loans at a 1.53 % premium and $ 50.1 million in consumer loans at par.

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

AIR on loans totaled $ 21.2 million at September 30, 2022 and $ 19.5 million at December 31, 2021 and there was no estimated allowance for credit losses related to AIR as of September 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 June 30, 2022

Ending balance as of September 30, 2022

Balance as of June 30, 2021

Ending balance as of September 30 , 2021

AIR on loans totaled $ 25.4 million

at March 31, 2023 and $ 25.0 million at December 31, 2022 and there was no estimated allowance for credit losses related to AIR as of March 31, 2023 and December 31, 2022.

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

portfolio segments:

(In thousands)

Balance as of December 31, 2021

Ending balance as of September 30, 2022

Balance as of January

1, 2023 (after adoption of ASC 2022-02)

Ending balance as of March 31 , 2023

Balance as of December 31, 2021

Ending balance as of September 30 , 2021

The increase in the allowance for credit losses from December 31, 2021 and June 30, 2022 to September 30, 2022 was due to an increase in loan balances and a modest deterioration in the economic

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

Ending balance as of March 31 , 2022

The decrease in the allowance for credit losses at March 31, 2023 compared to December 31, 2022 was primarily due to a reduction in expected losses in the residential solar portfolios, an improvement in

economic forecasts and reduction in allowance on TDRs related to the adoption of ASU 2022-02.

These decreases were partly offset by an increase in providing for the increase in loan balances and a decline in prepayment speeds.

The 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 the increase in loan balances.

Individually Evaluated Loans

As of September 30, 2022, there were four relationships

identified to be evaluated for loss on an individual basis which, in aggregate, had an amortized cost basis of $ 4.3 million, with no allowance for credit loss.

As of December 31, 2021, there were five relationships 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 decrease in the amortized cost basis on an individual basis from December 31, 2021 to

September 30, 2022 was primarily due to principal payments and resolution of one relationship in which the cost basis was substantially

collected and the related $ 0.8 million allowance for credit losses was reversed.

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

As of March 31, 2023,

there were two relationships identified to be evaluated for loss on an individual basis which, in aggregate, had an amortized cost basis

of $ 2.3 million, with no

allowance for credit loss.

As of December 31, 2022, the same two relationships were identified to be evaluated for loss on an individual

basis, in aggregate, had an amortized cost basis of $ 2.4 million, with no allowance for credit loss.

The decrease in the amortized cost basis on an individual basis from December 31, 2022 to March 31, 2023 was primarily due to principal

payments received during the first quarter of 2023.

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

loans by loan segment:

(In thousands)

As of September 30 , 2022

As of March 31 , 2023

Commercial loans:

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Consumer loans:

Residential solar

Other consumer

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Consumer loans:

Residential solar

Other consumer

Total consumer loans

As of September 30, 2022 and December 31, 2021, there were no

loans in nonaccrual without an allowance for credit losses.

As of March 31, 2023 and December 31, 2022, there were $ 1.0 million and $ 1.1 million, respectively,

of loans in nonaccrual that were specifically evaluated for individual expected credit loss 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, which facilitates 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, 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”) 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.

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

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 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 and/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 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.

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 (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.

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, 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 Paycheck Protection Program 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 Performing.

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

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

vintage and beginning in 2023 with the Company’s January 1, 2023 adoption of ASU 2022-02 also includes gross charge-offs by loan class by vintage for the three months ended March 31, 2023.

Included in other consumer gross charge-offs, the Company

recorded $ 0.2 million in overdrawn deposit accounts reported as 2022 originations, for the three months ended March 31, 2023.

(In thousands)

As of September 30 , 2022

As of March 31 , 2023

By internally assigned grade:

Special mention