The quantitative model as of March 31, 2025 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, 2025, the weightings were 75% and 25% for the baseline and downside economic forecasts, respectively. The baseline outlook reflected an economic environment where the unemployment rate increases from 4.1% to 4.4% during the forecast period. Northeast Gross Domestic Product (“GDP’s”) annualized growth (on a quarterly basis) is expected to start the second quarter of 2025 at approximately 5% and decrease to 3.9% before increasing to 4.1% by the end of the forecast period. Key assumptions in the baseline economic outlook included the Federal Reserve cutting rates with two 25 basis point cuts at the September and December meetings, the economy remaining at full employment and continued tapering of the Federal Reserve balance sheet. The alternative downside scenario assumed deteriorated economic conditions from the baseline outlook. Under this scenario, national unemployment rises from 4.1% in the first quarter of 2025 to a peak of 7.6% in the second quarter of 2026. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of March 31, 2025. Additional qualitative adjustments were made for factors not incorporated in the forecasts or the model, such as loss rate expectations for certain loan pools and recent trends in asset value indices. Additional monitoring for industry concentrations, loan growth and policy exceptions was also conducted.

During the quarter, the Company performed an annual update to its econometric, probability of default (“PD”)/ loss given default (“LGD”) models. Segment specific, multi-variate regression model inputs and assumptions were updated and recent period observed losses and behavior were incorporated into the models (“model refreshment”). The incorporation of recent observations did not have a material impact on most loan class segments except for the Auto class segment which resulted in an improvement in PD/LGD outcomes. The total allowance decreased by approximately 3% as of March 31, 2025 due to the model refreshment.

The quantitative model as of December 31, 2024 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, 2024, the weightings were 80% and 20% for the baseline and downside economic forecasts, respectively. The baseline outlook reflected a Northeast unemployment rate environment starting at 4.1% and increasing slightly during the forecast period to 4.2%. Northeast GDP’s annualized growth (on a quarterly basis) is expected to start the first quarter of 2025 at approximately 3.8% before decreasing to a low of 2.6% in the third quarter of 2025 and then increasing to 3.9% by the end of the forecast period. Key assumptions in the baseline economic outlook included two 25 basis point federal funds rate cuts in 2025, quantitative tightening ending in early 2025, a post-election fiscal outlook with lower spending, lower taxes, and higher tariffs, and the economy currently being near full employment. The alternative downside scenario assumed deteriorated economic conditions from the baseline outlook. Under this scenario, Northeast unemployment increases to a peak of 7.5% in the first quarter of 2026. These scenarios and their respective weightings are evaluated at each measurement date and reflect management’s expectations as of December 31, 2024. Additional qualitative 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.

There were no loans purchased with credit deterioration during the three months ended March 31, 2025 and the year ended December 31, 2024. During the three months ended March 31, 2025, the Company purchased $1.3 million of residential loans at a 6.6% premium with a $13 thousand allowance for credit losses recorded for these loans. During 2024, the Company purchased $3.0 million of residential loans at a 7.0% premium with a $31 thousand allowance for credit losses recorded for these loans.

The Company made a policy election to report AIR in the other assets line item on the consolidated balance sheets. AIR on loans totaled $34.8 million at March 31, 2025 and December 31, 2024 and with no estimated allowance for credit losses related to AIR as of March 31, 2025 and December 31, 2024 as it is excluded from amortized cost.

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

Individually Evaluated Loans

The threshold for evaluating classified, Commercial & Industrial (“C&I”) and Commercial Real Estate (“CRE”) loans risk graded substandard or doubtful, and nonperforming loans specifically evaluated for individual credit loss is $1.0 million. As of March 31, 2025, three relationships were identified for individual credit loss evaluation which had an amortized cost basis of $26.7 million. These relationships were in nonaccrual status with no allowance for credit loss. As of December 31, 2024, the same three relationships were identified for individual credit loss evaluation, had an amortized cost basis of $28.8 million and were in nonaccrual status with no allowance for credit loss.

The decrease in the amortized cost basis on an individual relationship basis from December 31, 2024 to March 31, 2025 was primarily due to a partial charge-off of $2.1 million on one of the relationships to the estimated fair value that resulted from a new appraisal received in the first quarter of 2025.

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

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, focusing on, among other things, borrower’s financial strength, experience and depth of borrower’s management, primary and secondary sources of repayment, payment history, nature of the business and industry outlook. The internal grading system enables the Company to monitor the quality of the entire loan portfolio on a consistent basis and provide management with an early warning system, which facilitates recognition and response to problem loans and potential problem loans.

Commercial Grading System

For C&I and 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.

Doubtful

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

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.

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 PD than a Pass asset, its default is not imminent.

Pass

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.

Consumer and Residential Grading System

Consumer and Residential loans are graded as either Nonperforming or Performing.

Nonperforming

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

Performing

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 includes gross charge-offs by loan class by vintage. Included in other consumer gross charge-offs for the three months ended March 31, 2025, the Company recorded $0.3 million in overdrawn deposit accounts reported as 2024 originations. Included in other consumer gross charge-offs for the year ended December 31, 2024, the Company recorded $0.2 million in overdrawn deposit accounts reported as 2023 originations and $0.7 million in overdrawn deposit accounts reported as 2024 originations.

(In thousands)		2025				2024				2023				2022				2021				Prior				Revolving Loans Amortized Cost Basis				Revolving Loans Converted to Term				Total
As of March 31, 2025
C&I
By internally assigned grade:
Pass		$	55,246			$	231,494			$	153,167			$	167,191			$	163,502			$	203,561			$	393,135			$	4,780			$	1,372,076
Special mention			-				966				916				4,094				148				5,448				13,499				-				25,071
Substandard			330				4,247				4,032				3,354				1,359				4,217				22,572				358				40,469
Doubtful			-				-				67				2				9				2				-				-				80
Total C&I		$	55,576			$	236,707			$	158,182			$	174,641			$	165,018			$	213,228			$	429,206			$	5,138			$	1,437,696
Current-period gross charge-offs		$	-			$	-			$	(45	)		$	(5	)		$	-			$	(72	)		$	-			$	-			$	(122	)
CRE
By internally assigned grade:
Pass		$	67,722			$	402,959			$	365,237			$	550,145			$	515,537			$	1,273,081			$	293,804			$	40,029			$	3,508,514
Special mention			-				3,632				9,924				26,372				7,485				34,190				1,897				-				83,500
Substandard			657				2,671				6,051				19,130				18,007				63,798				1,519				296				112,129
Total CRE		$	68,379			$	409,262			$	381,212			$	595,647			$	541,029			$	1,371,069			$	297,220			$	40,325			$	3,704,143
Current-period gross charge-offs		$	-			$	-			$	-			$	-			$	-			$	(2,100	)		$	-			$	-			$	(2,100	)
Auto
By payment activity:
Performing		$	176,401			$	503,155			$	290,000			$	209,548			$	75,676			$	24,219			$	-			$	-			$	1,278,999
Nonperforming			57				898				830				621				360				131				-				-				2,897
Total auto		$	176,458			$	504,053			$	290,830			$	210,169			$	76,036			$	24,350			$	-			$	-			$	1,281,896
Current-period gross charge-offs		$	-			$	(311	)		$	(391	)		$	(540	)		$	(273	)		$	(89	)		$	-			$	-			$	(1,604	)
Residential solar
By payment activity:
Performing		$	2,802			$	2,435			$	117,592			$	390,848			$	163,034			$	122,699			$	-			$	-			$	799,410
Nonperforming			-				-				68				392				150				70				-				-				680
Total residential solar		$	2,802			$	2,435			$	117,660			$	391,240			$	163,184			$	122,769			$	-			$	-			$	800,090
Current-period gross charge-offs		$	-			$	-			$	(245	)		$	(1,481	)		$	(481	)		$	(347	)		$	-			$	-			$	(2,554	)
Other consumer
By payment activity:
Performing		$	5,761			$	12,078			$	5,837			$	9,212			$	22,565			$	22,409			$	21,819			$	21			$	99,702
Nonperforming			-				22				20				102				169				265				7				14				599
Total other consumer		$	5,761			$	12,100			$	5,857			$	9,314			$	22,734			$	22,674			$	21,826			$	35			$	100,301
Current-period gross charge-offs		$	-			$	(307	)		$	-			$	(376	)		$	(612	)		$	(423	)		$	-			$	-			$	(1,718	)
Residential
By payment activity:
Performing		$	28,955			$	189,982			$	227,910			$	363,471			$	414,318			$	1,141,607			$	265,605			$	12,054			$	2,643,902
Nonperforming			-				606				764				539				2,237				7,699				-				394				12,239
Total residential		$	28,955			$	190,588			$	228,674			$	364,010			$	416,555			$	1,149,306			$	265,605			$	12,448			$	2,656,141
Current-period gross charge-offs		$	-			$	(16	)		$	(41	)		$	-			$	-			$	-			$	-			$	-			$	(57	)
Total loans		$	337,931			$	1,355,145			$	1,182,415			$	1,745,021			$	1,384,556			$	2,903,396			$	1,013,857			$	57,946			$	9,980,267
Current-period gross charge-offs		$	-			$	(634	)		$	(722	)		$	(2,402	)		$	(1,366	)		$	(3,031	)		$	-			$	-			$	(8,155	)

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The allowance for credit losses on unfunded commitments totaled $4.5 million as of March 31, 2025, compared to $4.4 million as of December 31, 2024. The reserve for unfunded loan commitments was $0.1 million for the three months ended March 31, 2025, compared to $(0.5) million for the three months ended March 31, 2024 was recorded within other noninterest expense in the unaudited interim consolidated statements of income. 

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; a change in scheduled payment amount; or principal forgiveness.

		Three Months Ended March 31, 2025
		Term Extension
(Dollars in thousands)		Amortized Cost				% of Total Class of Financing Receivables
Residential		$	789				0.030	%
Total		$	789

		Three Months Ended March 31, 2024
		Term Extension
(Dollars in thousands)		Amortized Cost				% of Total Class of Financing Receivables
Residential		$	294				0.011	%
Total		$	294

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

	Three Months Ended March 31, 2025
Loan Type	Term Extension
Residential	Added a weighted-average 5.2 years to the life of loans, which reduced monthly payment amounts for the borrowers.

During the three months ended March 31, 2025, there were $59 thousand in Residential financing receivables with term extension modifications that had payment defaults during the period, that were modified to borrowers experiencing financial difficulty in the twelve months prior to the default. There were no financing receivables that had payment defaults during the three months ended March 31, 2024, that were modified to borrowers experiencing financial difficulty in the prior twelve months.

The following table depicts the performance of loans that have been modified to borrowers experiencing financial difficulty that were modified in the prior twelve months:

		Payment Status (Amortized Cost Basis)
(In thousands)		Current				31-60 Days Past Due				61-90 Days Past Due				Greater than 90 Days Past Due
As of March 31, 2024
Residential		$	863			$	-			$	-			$	29
Total		$	863			$	-			$	-			$	29