What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-10 · 422 added, 310 removed, 684 unchanged (52% of the section changed)

26 unchanged sentences

Preferred stock, $ 0.01

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

Authorized 2,500,000 shares at June 30 , 2023 and December 31, 2022

Common stock, $ 0.01

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

Authorized 100,000,000 shares at June 30 , 2023 and December 31, 2022 ;

issued 49,651,493 at June 30 , 2023 and December 31,

Additional paid-in-capital

1 unchanged sentence

Accumulated other comprehensive loss

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

Common stock in treasury, at cost, 6,824,729 and 6,793,670 shares at June 30 , 2023 and December 31, 2022 , respectively

Total stockholders’ equity

3 unchanged sentences

and Subsidiaries

Consolidated Statements

Income (unaudited)

Statements of Income (unaudited)

Three Months Ended

Six Months Ended

(In thousands, except per share data)

38 unchanged sentences

and Subsidiaries

Consolidated Statements of

Comprehensive Income (Loss) (unaudited)

Statements of Comprehensive Income (Loss)

Three Months Ended

Six Months Ended

(In thousands)

1 unchanged sentence

Securities available for sale:

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

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

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

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

Reclassification adjustment for net losses in net income, gross

7 unchanged sentences

Total pension and other benefits, net

Total other comprehensive income (loss)

Total other comprehensive (loss)

Comprehensive income (loss)

2 unchanged sentences

and Subsidiaries

Consolidated Statements of

Changes in Stockholders’ Equity (unaudited)

Statements of Changes in

Stockholders’ Equity (unaudited)

(In thousands, except share and per share data)

Comprehensive

(Loss) Income

Balance at March 31, 2023

Cash dividends - $ 0.30

Purchase of 87,000 treasury shares

Net issuance of 9,432

shares to employee and other stock plans

Stock-based compensation

Other comprehensive (loss)

Balance at June 30 , 2023

Balance at March 31, 2022

Cash dividends - $ 0.28

Purchase of 182,900 treasury

Net issuance of 26,983

shares to employee and other stock plans

Stock-based compensation

Other comprehensive (loss)

Balance at June 30 , 2022

(In thousands, except share and per share data)

Comprehensive

(Loss) Income

Balance at December 31 , 2022

1 unchanged sentence

Cash dividends - $ 0.60

Purchase of 87,000 treasury

Net issuance of 55,941

1 unchanged sentence

Stock-based compensation

Other comprehensive income

Balance at March 31, 2023

Other comprehensive (loss)

Balance at June 30 , 2023

Balance at December 31, 2021

6 unchanged sentences

Other comprehensive (loss)

Balance at March 31, 2022

Balance at June 30 , 2022

See accompanying notes to unaudited interim consolidated financial statements.

2 unchanged sentences

Statements of

Three Months Ended

Six Months Ended

(In thousands)

21 unchanged sentences

Proceeds from maturities, calls and principal paydowns

Proceeds from sales

Securities held to maturity:

8 unchanged sentences

Financing activities

Net increase in deposits

Net decrease in short-term borrowings

Net increase (decrease) in deposits

Net increase (decrease) in short-term borrowings

Proceeds from long-term debt

3 unchanged sentences

Cash dividends

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

4 unchanged sentences

Consolidated Statements of Cash Flows (unaudited) (continued)

Three Months Ended

Six 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:

4 unchanged sentences

to Unaudited Interim Consolidated Financial Statements

March 31, 2023

June 30, 2023

Description of Business

5 unchanged sentences

(“NBT Financial”), NBT Holdings,

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

The Company’s principal sources of revenue are the

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

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

The Company’s principal sources of revenue are the management fees and dividends

it receives from the Bank, NBT Financial and NBT Holdings.

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

30 unchanged sentences

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):

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

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

5 unchanged sentences

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

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:

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

The amortized cost, estimated fair value and unrealized gains (losses) of availa ble for sale (“AFS”) securit ies are as follows:

(In thousands)

As of March 31, 2023

As of June 30 , 2023

Federal agency

18 unchanged sentences

There was no allowance for credit losses on AFS

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:

securities as of June 30, 2023 and December 31, 2022.

During the three months ended June 30, 2023, there were $ 4.5 million of gross realized losses reclassified out of accumulated other comprehensive income (loss) (“AOCI”) and into earnings.

During the six months ended June 30, 2023,

there were $ 4.5 million of gross realized losses reclassified out of AOCI and into earnings and 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.

These losses were

reclassified out of AOCI and into earnings in net securities losses in the consolidated statement of income.

During the three and six months ended June 30, 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 March 31, 2023

As of June 30 , 2023

Federal agency

17 unchanged sentences

Total HTM securities

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 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.

At June 30, 2023 and

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

government agency and government-sponsored enterprises securities.

There was no allowance for credit losses on HTM securities as of June 30, 2023 and December 31, 2022 because the expectation of nonrepayment of the amortized cost was zero,

except for state & municipal securities, which such expected losses from nonrepayment were immaterial .

The Company recorded no gains from calls on HTM securities for the three months ended June 30, 2023 and

The Company recorded no gains from calls on HTM securities for the six months ended June 30, 2023.

Included in net realized gains

(losses), the Company recorded gains from calls on HTM securities of approximately $ 4 thousand for the six months ended June 30, 2022.

AFS and HTM securities with amortized costs totaling $ 1.68

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,

billion at June 30, 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 June 30, 2023 and December 31, 2022, AFS and HTM securities with an amortized cost of $ 142.7 million and $ 149.5 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

(In thousands)

Net gains and (losses) recognized on equity securities

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

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

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:

Net (losses) recognized on equity securities

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

Unrealized (losses) recognized on equity securities still held

Six Months Ended

(In thousands)

Net (losses) recognized on equity securities

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

Unrealized (losses) recognized on equity securities still held

As of June 30, 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 June 30, 2023 and 2022.

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

equity securities without readily determinable fair values during the three and six months ended June 30, 2023 and 2022.

The following table sets forth information with regard to contractual maturities of debt securities at June 30, 2023:

(In thousands)

AFS debt securities:

10 unchanged sentences

Total HTM debt securities

Maturities of mortgage-backed, collateralized mortgage obligations and asset-backed securities are stated based on their estimated average lives.

Actual maturities may

differ from estimated average lives or contractual maturities because, in certain cases, borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

of mortgage-backed, collateralized mortgage obligations and asset-backed securities are stated based on their estimated average lives.

Actual maturities may differ from estimated average lives or contractual maturities because, in certain cases,

borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

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, 2023 and December 31, 2022.

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, 2023 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,

3 unchanged sentences

(In thousands)

As of March 31, 2023

As of June 30 , 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 March 31, 2023 and December 31, 2022, which consisted of 394 and 415 individual securities,

The Company does not believe the AFS securities that were in an unrealized loss position as of June 30, 2023 and December 31, 2022, which consisted of 411 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 March 31, 2023 and December 31, 2022, the majority of the AFS

As of June 30, 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 $ 4.0 million at

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.

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

or on nonaccrual status as of June 30, 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.

the three and six months ended June 30, 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.

collateral-dependent HTM debt securities as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 and December 31, 2022, 68 % and 70 %, respectively, of the Company’s HTM debt securities were issued by U.S.

government agencies or U.S.

government-sponsored enterprises.

These securities 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 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.

These securities

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.

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

as of June 30, 2023 and December 31, 2022.

The remaining HTM debt securities at June 30, 2023 and December 31, 2022 were comprised of state and municipal obligations with bond ratings of A to AAA.

Utilizing the Current Expected Credit Losses (“CECL”)

approach, the Company determined that the expected credit loss on its HTM municipal bond portfolio was immaterial and therefore no allowance for credit loss was recorded as of June 30, 2023 and December 31, 2022.

AIR on HTM debt securities totaled $ 3.8 million at June 30, 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 Company’s adoption of ASU 2022-02 resulted in an insignificant change to our

methodology for estimating the allowance for credit losses on TDRs.

As described in Note 3 Recent Accounting Pronouncements, 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 allowance for credit losses totaled $ 100.4 million at

June 30, 2023, compared to $ 100.8 million at December 31, 2022.

The allowance for credit losses as a percentage of loans was 1.20 % at June 30, 2023, compared to 1.24 %

at December 31, 2022.

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

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:

7 unchanged sentences

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.

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.

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 Company considers a baseline, upside and downside economic forecast in

measuring the allowance.

The quantitative model as of June 30, 2023 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 increasing gradually to 4.2% by the end of the forecast period.

Northeast GDP’s annualized growth (on a quarterly basis) was expected to start the third quarter of 2023 at about 3.6% and

reach 4.1% by the end of the forecast period.

Other utilized economic variables worsened overall, with outlooks for annualized growth in retail sales and business output declining from the prior quarter and housing starts staying relatively

Key assumptions in the baseline economic outlook include the economy being at full employment in the coming quarters, recent bank failures not being symptomatic of broader issues in the financial system, and the reduction in the

Federal Reserve’s balance sheet remaining on autopilot.

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

Under this scenario, northeast unemployment jumps to 5.2% in the third quarter of 2023

and rises to a peak of 7.0% in the third quarter of 2024.

These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of June 30, 2023.

At June 30, 2023, the weightings were 60%,

40% and 0% for the baseline, upside and downside economic forecasts,

respectively.

Qualitative adjustments were made for isolated model limitations related to modeled inputs given abnormally high retail sales and business output growth rates in prior quarters along with low unemployment.

Additionally, a

qualitative adjustment for inflation is applied to adjust for potential model limitations arising from the use of a macroeconomic variable denominated in nominal dollar terms as well as a qualitative adjustment for potential weakness in auto

collateral values.

These factors were considered through separate quantitative processes and incorporated into the estimate of current expected credit losses at June 30, 2023.

The quantitative model as of March 31, 2023 incorporated a baseline economic outlook along with an alternative downside

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

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

baseline outlook reflected an unemployment rate environment below pre-COVID-19 levels throughout much of the forecast period.

Northeast GDP’s annualized growth (on a quarterly basis) was 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.

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,

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,

2 unchanged sentences

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.

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

March 31, 2023.

The quantitative model as of December 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.

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

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) was 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.

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, 2022.

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 indices.

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 six months ended June 30, 2023 or the year ended December 31, 2022.

During 2023, the Company purchased $ 2.4

million of residential loans at a 7.01 % premium with a $ 17 thousand allowance for credit losses recorded for these loans.

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 with an allowance for credit losses recorded on the purchase date of $ 3.2 million.

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

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:

AIR on loans totaled $ 28.0 million at June 30, 2023 and $ 25.0 million at December 31, 2022 and there was no estimated allowance for credit losses related to AIR

as of June 30, 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 March 31, 2023

Ending balance as of June 30, 2023

Balance as of March 31, 2022

Ending balance as of June 30 , 2022

(In thousands)

Balance as of January

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

Ending balance as of March 31 , 2023

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

Ending balance as of June 30, 2023

Balance as of December 31, 2021

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.

Ending balance as of June 30, 2022

allowance for credit losses as of June 30, 2023 was fairly consistent with the allowance estimates as of December 31, 2022 and March 31, 2023.

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 of 2022 and a modest deterioration in the economic forecast.

Individually Evaluated Loans

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:

As of June 30, 2023, there was one relationship

identified to be evaluated for loss on an individual basis which had an amortized cost basis of $ 2.0 million, with no allowance for credit loss.

As of December 31, 2022, two

different relationships were identified to be evaluated for loss on an individual basis, which in aggregate, had an amortized cost basis of $ 2.4

millio n, with no allowance for credit loss .

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

(In thousands)

As of March 31 , 2023

As of June 30 , 2023

Commercial loans:

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Total consumer loans

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.

As of June 30, 2023 and December 31, 2022, there were $ 2.0

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, 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, enabling recognition and response to problem loans and potential problem loans.

Commercial Grading System

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.

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 information.

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

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 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

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.

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, 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.

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, 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.

Pass loans range from superior quality to fair quality.

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

including Paycheck Protection Program 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

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.

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 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 six

months ended June 30, 2023.

Included in other consumer gross charge-offs, the Company recorded $ 0.2 million in overdrawn deposit accounts

reported as 2022 originations and $ 0.2 million in overdrawn deposit accounts reported as 2023 originations, for the six months ended June

(In thousands)

As of March 31 , 2023

As of June 30 , 2023

By internally assigned grade:

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Residential solar

By payment activity:

By Internally Assigned Grade:

Nonperforming

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Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The allowance for losses on unfunded commitments totaled $ 4.5 million as March 31, 2023, compared to $ 5.1

million as of December 31, 2022.

The allowance for losses on unfunded commitments totaled $ 4.4

million as of June 30, 2023, compared to $ 5.1 million as of December 31, 2022.

Loan Modifications to Borrowers Experiencing Financial Difficulties

As previously mentioned in Note 3 Recent Accounting Pronouncements, the Company’s January 1, 2023 adoption of ASU 2022-02

eliminates the recognition and measurement of TDRs.

Upon adoption of this guidance, the Company will no longer recognize an allowance for credit losses for the economic concession granted to a borrower for changes in the timing and amount of

contractual cash flows when a loan is restructured.

As discussed in Note 3 Recent Accounting Pronouncements, the Company’s January 1, 2023 adoption of ASU 2022-02 eliminates

the recognition and measurement of TDRs.

Upon adoption of this guidance, the Company will no longer recognize an allowance for credit losses for the economic concession granted to a borrower for changes in the timing and amount of contractual cash

flows when a loan is restructured.

The adoption of ASU 2022-02 results in a change to reporting for loan modifications to borrowers experiencing financial difficulties.

With the adoption of ASU 2022-02 these modifications require

enhanced reporting on the type of modifications granted and the financial magnitude of the concessions granted.

When the Company modifies a loan with financial difficulty, such modifications generally include one or a combination of the

With the adoption of ASU 2022-02 these modifications require enhanced reporting

on the type of modifications granted and the financial magnitude of the concessions granted.

When the Company modifies a loan with financial difficulty, 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;

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or principal forgiveness.

The following table shows the amortized cost basis at the end of the reporting period

of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:

Three Months Ended March 31, 2023

The following table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficulty,

disaggregated by class of financing receivable and type of concession granted:

Three Months Ended June 30, 2023

Term Extension

Combination - Term Extension

and Interest Rate Reduction

(Dollars in thousands)

Amortized Cost

% of Total Class of

Financing Receivables

The following table describes the financial effect of the modifications made to

borrowers experiencing financial difficulties:

Three Months Ended March 31, 2023

% of Total Class

Amortized Cost

% of Total Class

Six Months Ended June 30, 2023

Term Extension

Added a weighted-average 18 years to the life of loan, which reduced monthly

Combination - Term Extension

and Interest Rate Reduction

(Dollars in thousands)

Amortized Cost

% of Total Class

Amortized Cost

% of Total Class

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulties:

Three Months Ended June 30, 2023

Term Extension

Interest Rate Reduction

Added a weighted-average 10 years to the

life of loans, which reduced monthly

payment amounts for the borrowers.

There were no financing receivables that had a payment default during the three months ended March 31, 2023 that were modified to borrowers experiencing financial difficulty since the

adoption of ASU 2022-02 effective January 1, 2023.

The following table depicts the performance of loans that have been modified since

the adoption of ASU 2022-02 effective January 1, 2023:

Interest rates were reduced by an

average of three and a half percent

Six Months Ended June 30, 2023

Term Extension

Interest Rate Reduction

Added a weighted-average 14 years to the

life of loans, which reduced monthly payment

amounts for the borrowers.

Interest rates were reduced by an

average of three and a half percent

There were no financing receivables that had a payment default during the three months ended June 30, 2023 that were modified to borrowers experiencing financial

difficulty since the adoption of ASU 2022-02 effective January 1, 2023.

The following table depicts the performance of loans that have been modified since the adoption of ASU 2022-02 effective January 1, 2023:

Payment Status (Amortized Cost Basis)

(In thousands)

31-60 Days Past Due

Greater than 90

Days Past Due

Three Months Ended June 30, 2023

Payment Status (Amortized Cost Basis)

(In thousands)

Greater than 90

Days Past Due

March 31, 2023

Six Months Ended June 30, 2023

Troubled Debt Restructuring

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The following tables are disclosures related to TDRs in prior periods.

The following table illustrates the recorded investments 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

The following table

illustrates the recorded investments 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

Six Months Ended June 30, 2022

(Dollars in thousands)

Pre-Modification

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:

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

Six Months Ended

June 30, 2022

(Dollars in thousands)

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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, 2023.

The Company has a qualified, noncontributory, defined benefit pension plan (the “Plan”) covering substantially all of its employees at June 30, 2023.

Benefits paid from

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The Company made no voluntary contributions to the

pension and other benefits plans during the three months ended March 31, 2023 and 2022.

pension and other benefits plans during the three and six months ended June 30, 2023 and 2022.

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

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Total net periodic cost (benefit)

The service cost component of net periodic cost (benefit) 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 cost (benefit):

Interest cost

Expected return on plan assets

Net amortization

Total net periodic cost (benefit)

The service cost component of the net periodic cost (benefit) 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.

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

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

The following is a reconciliation of basic and diluted EPS and the anti-dilutive stock options and restricted stock outstanding for the periods presented in the

unaudited interim consolidated statements of income:

Three Months Ended

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Net income available to common stockholders

There was a nominal number of weighted average stock options outstanding for the three months ended March 31, 2023 and March 31, 2022, 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.

Anti-dilutive stock options and restricted stock outstanding

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

Anti-dilutive stock options and restricted stock outstanding

Reclassification Adjustments Out of Other Comprehensive Income (Loss)

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(In thousands)

March 31, 2023

March 31, 2022

June 30, 2023

June 30, 2022

AFS securities:

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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, 2023

June 30, 2022

AFS securities:

Losses on AFS securities

Net securities (gains) losses

Amortization of unrealized gains related to securities transfer

Interest income

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.

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, 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.

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

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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, 2023 and December 31, 2022, the Company had fourteen and fifteen 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 .

The following table summarizes the derivatives outstanding:

In 2017, the U.K.

Financial Conduct Authority announced its intention to stop compelling banks to submit rates for the

calculation of London Interbank Offered Rate (“LIBOR”) after 2021.

In 2022, the Federal Reserve adopted a final rule implementing the Adjustable Interest Rate (LIBOR) Act by identifying benchmark rates based on the Secured Overnight Financing

Rate (“SOFR”) that will replace LIBOR in certain financial contracts after June 30, 2023.

As of June 30, 2023, the Company has transitioned substantially all of its financial instruments to an alternative benchmark rate.

As of June 30, 2023 and December 31, 2022, the Company had twelve and fifteen 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.

T he following table summarizes the derivatives outstanding:

(In thousands)

As of March 31 , 2023

As of June 30 , 2023

Derivatives not designated as hedging instruments

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Net derivative amounts

(1) Netting adjustments represents

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

The CME legally characterizes the

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

(2) Cash collateral represents

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

The other collateral consists of securities and is exchanged under bilateral

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

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.

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.

The following table indicates the gain or loss recognized in

income on derivatives not designated as a hedging relationship:

Therefore, excess other collateral, if any, is not

reflected above.

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

derivatives not designated as a hedging relationship:

Three Months Ended

1 unchanged sentence

Derivatives not designated as hedging instruments:

Increase (decrease) in other income

(Decrease) in other income

Fair Value Measurements and Fair Value of Financial Instruments

41 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.

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

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

Assets and liabilities

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

(In thousands)

March 31, 2023

June 30, 2023

AFS securities

17 unchanged sentences

The non-recurring fair value

measurements recorded during the three month period ended March 31, 2023 and the year ended December 31, 2022 were related to loans individually evaluated for expected credit losses with fair value of $ 1.0 million and $ 1.1 million as of March 31, 2023 and December

measurements recorded during the six month period ended June 30, 2023 and the year ended December 31, 2022 were related to loans individually evaluated for expected credit losses with fair value of $ 2.0 million and $ 1.1 million as of June 30, 2023 and December 31,

2022, respectively.

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 % .

The appraisals may be adjusted by management for

qualitative factors such as economic conditions and estimated liquidation expenses ranging from 10 % to 50 % .

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

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borrowings, accrued interest payable and derivatives.

March 31, 2023

June 30, 2023

December 31, 2022

44 unchanged sentences

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Commitments to extend credit and unused lines of credit totaled $ 2.43 billion at March 31, 2023 and $ 2.42 billion at December 31, 2022.

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

are not necessarily indicative of future cash flows.

Commitments to extend credit and unused lines of credit totaled $ 2.31 billion at June 30, 2023 and $ 2.42 billion at December 31, 2022.

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

amounts are not necessarily indicative of future cash flows.

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

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credit and off-balance sheet products.

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

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

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

Standby letters of credit totaled $ 40.9 million at March 31, 2023 and $ 53.3 million at December 31, 2022.

A s of March 31, 2023 and December 31, 2022 , the fair value of the Company’s standby letters of credit was not significant.

Subsequent Event

On May 4, 2023, the Company sold two subordinated debt

securities held in the AFS securities portfolio for a $ 4.5 million pre-tax loss.

These subordinated securities were issued by two regional financial institutions and had an aggregate amortized cost of $ 7.0 million and a fair value of $ 4.8 million as of March 31, 2023.

During April, the Company was notified

that these two issuers debt ratings were downgraded.

In early May, both experienced significant declines in their respective equity market

capitalizations and the fair values of the Company’s subordinated debt securities for these two issuers also experienced further declines

from March 31, 2023.

These factors indicated

to the Company a higher level of uncertainty relative to their operational and market risks.

Standby letters of credit totaled $ 39.6

million at June 30, 2023 and $ 53.3 million at December 31, 2022.

A s of June 30, 2023 and December 31, 2022 , the fair value of the Company’s standby letters of credit was not significant.

NBT BANCORP INC.

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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