3 unchanged sentences
(Dollars in thousands, except share and per share data)
−Removed: September 30,
Cash and due from banks
12 unchanged sentences
Investments in low-income housing partnerships
−Removed: Foreclosed assets held for resale
+Added: Deferred income taxes
Non-interest bearing
11 unchanged sentences
Preferred stock, par value $ 2.00 per share;
−Removed: authorized 1,000,000 shares as of September 30, 2021 and December 31, 2020;
−Removed: issued 0 as of September 30, 2021 and December 31, 2020
+Added: authorized 1,000,000 shares as of March 31, 2022 and December 31, 2021;
+Added: issued 0 as of March 31, 2022 and December 31, 2021
Common stock, par value $ 2.00 per share;
−Removed: authorized 20,000,000 shares as of September 30, 2021 and December 31, 2020;
−Removed: issued 6,162,075 as of September 30, 2021 and 6,115,281 as of December 31, 2020;
−Removed: outstanding 5,930,463 as of September 30, 2021 and 5,883,669 as of December 31, 2020
+Added: authorized 20,000,000 shares as of March 31, 2022 and December 31, 2021;
+Added: issued 6,195,132 as of March 31, 2022 and 6,178,835 as of December 31, 2021;
+Added: outstanding 5,963,521 as of March 31, 2022 and 5,947,223 as of December 31, 2021
Retained earnings
−Removed: Accumulated other comprehensive income
−Removed: Treasury stock, at cost, 231,612 shares as of September 30, 2021 and December 31, 2020
+Added: Accumulated other comprehensive (loss) income
+Added: Treasury stock, at cost, 231,611 shares as of March 31, 2022 and 231,612 shares as of December 31, 2021
TOTAL STOCKHOLDERS’ EQUITY
3 unchanged sentences
CONSOLIDATED STATEMENTS OF INCOME
−Removed: THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
+Added: THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Dollars in thousands, except per share data)
Three Months Ended
−Removed: Nine Months Ended
−Removed: September 30,
−Removed: September 30,
Interest and fees on loans
17 unchanged sentences
ATM fees and debit card income
−Removed: Gains on sales of mortgage loans
−Removed: Net securities gains (losses)
+Added: (Losses) gains on sales of mortgage loans
+Added: Net securities (losses) gains
Total non-interest income
18 unchanged sentences
FIRST KEYSTONE CORPORATION AND SUBSIDIARY
−Removed: CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
−Removed: THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
+Added: CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
+Added: THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Dollars in thousands)
Three Months Ended
−Removed: September 30,
−Removed: Other comprehensive (loss) income:
−Removed: Unrealized net holding (losses) gains on debt securities available-for-sale arising during the period, net of income taxes of $( 654 ) and $ 290 , respectively
−Removed: Less reclassification adjustment for net gains included in net income, net of income taxes of $( 1 ) and $( 13 ), respectively (a) (b)
−Removed: Total other comprehensive (loss) income
−Removed: Total Comprehensive Income
−Removed: (Dollars in thousands)
−Removed: Nine Months Ended
−Removed: September 30,
−Removed: Other comprehensive (loss) income:
−Removed: Unrealized net holding (losses) gains on debt securities available-for-sale arising during the period, net of income taxes of $( 1,113 ) and $ 1,880 , respectively
−Removed: Less reclassification adjustment for net gains included in net income, net of income taxes of $( 1 ) and $( 48 ), respectively (a) (b)
−Removed: Total other comprehensive (loss) income
−Removed: Total Comprehensive Income
−Removed: (a) Gross amounts are included in net securities gains (losses) on the consolidated statements of income in non-interest income.
−Removed: (b) Income tax amounts are included in income tax expense on the consolidated statements of income.
+Added: Other comprehensive loss:
+Added: Unrealized net holding losses on debt securities available-for-sale arising during the period, net of income taxes of $( 4,594 ) and $( 1,042 ), respectively
+Added: Total other comprehensive loss
+Added: Total Comprehensive Loss
See accompanying notes to consolidated financial statements.
1 unchanged sentence
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
−Removed: NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
+Added: THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Dollars in thousands, except
2 unchanged sentences
Stockholders’
+Added: (Loss) Income
Balance at January 1, 2022
3 unchanged sentences
Balance at March 31, 2022
−Removed: Other comprehensive income, net of taxes
−Removed: Issuance of common stock under dividend reinvestment plan
−Removed: Dividends - $ 0.27 per share
−Removed: Balance at June 30, 2021
−Removed: Other comprehensive loss, net of taxes
−Removed: Issuance of common stock under dividend reinvestment plan
−Removed: Dividends - $ 0.28 per share
−Removed: Balance at September 30, 2021
−Removed: (Dollars in thousands, except
−Removed: per share data)
−Removed: Comprehensive
−Removed: Stockholders’
Balance at January 1, 2021
−Removed: Other comprehensive income, net of taxes
+Added: Other comprehensive loss, net of taxes
Issuance of common stock under dividend reinvestment plan
1 unchanged sentence
Balance at March 31, 2021
−Removed: Other comprehensive income, net of taxes
−Removed: Issuance of common stock under dividend reinvestment plan
−Removed: Dividends - $ 0.27 per share
−Removed: Balance at June 30, 2020
−Removed: Other comprehensive income, net of taxes
−Removed: Issuance of common stock under dividend reinvestment plan
−Removed: Dividends - $ 0.27 per share
−Removed: Balance at September 30, 2020
See accompanying notes to consolidated financial statements.
1 unchanged sentence
CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
+Added: THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Dollars in thousands)
4 unchanged sentences
Net premium amortization on securities
−Removed: Deferred income tax benefit
−Removed: Gains on sales of mortgage loans
+Added: Deferred income tax expense (benefit)
+Added: Net losses (gains) on sales of mortgage loans
Proceeds from sales of mortgage loans originated for sale
Originations of mortgage loans originated for sale
−Removed: Net securities (gains) losses
−Removed: Net losses on sales of foreclosed real estate held for resale, including write-downs
−Removed: Decrease (increase) in accrued interest receivable
+Added: Net securities losses (gains)
+Added: Decrease in accrued interest receivable
Increase in cash surrender value of bank owned life insurance
Net losses on disposals of premises and equipment
−Removed: (Increase) decrease in other assets
+Added: Increase in other assets
Amortization of investment in low-income housing partnerships
−Removed: Increase (decrease) in accrued interest payable
−Removed: Increase (decrease) in other liabilities
−Removed: NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
+Added: Increase in accrued interest payable
+Added: (Decrease) increase in other liabilities
+Added: NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
−Removed: Proceeds from sales of equity securities and debt securities available-for-sale
Proceeds from maturities and redemptions of debt securities available-for-sale
Purchases of debt securities available-for-sale
+Added: Net decrease in time deposits with other banks
Net change in restricted investment in bank stocks
4 unchanged sentences
CASH FLOWS FROM FINANCING ACTIVITIES:
−Removed: Net increase in deposits
−Removed: Net increase (decrease) in short-term borrowings
+Added: Net (decrease) increase in deposits
+Added: Net increase in short-term borrowings
Repayment of finance lease obligations
2 unchanged sentences
Dividends paid
−Removed: NET CASH PROVIDED BY FINANCING ACTIVITIES
−Removed: INCREASE IN CASH AND CASH EQUIVALENTS
+Added: NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
+Added: (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING
2 unchanged sentences
Interest paid
−Removed: Income taxes paid
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
−Removed: Loans transferred to foreclosed assets held for resale
−Removed: Loans transferred from held for sale portfolio
Common stock subscription receivable
11 unchanged sentences
In the opinion of management, all adjustments considered necessary for fair presentation have been included.
−Removed: Operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results for the year ending December 31, 2021.
+Added: Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results for the year ending December 31, 2022.
For further information, refer to the consolidated financial statements and notes thereto included in First Keystone Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021.
Subsequent Events
−Removed: The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of September 30, 2021 for items that should potentially be recognized or disclosed in these consolidated financial statements.
+Added: The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of March 31, 2022 for items that should potentially be recognized or disclosed in these consolidated financial statements.
The evaluation was conducted through the date these consolidated financial statements were issued.
1 unchanged sentence
Recently adopted ASUs:
−Removed: In January 2021, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-01, Reference Rate Reform (Topic 848):
−Removed: Scope , which refines the scope of Topic 848, Reference Rate Reform , and clarifies some of its guidance as part of the FASB’s ongoing monitoring of global reference rate reform activities.
−Removed: The ASU provides certain optional expedients and exceptions when applying U.S.
−Removed: GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”), or by another reference rate that is expected to be discontinued.
−Removed: The amendments are effective for all entities as of March 12, 2020 through December 31, 2022.
−Removed: The Company has evaluated the provisions of ASU 2021-01 on our financial condition, results of operations and cash flows, and determined that there is no material impact on the consolidated financial statements and related disclosures.
+Added: There were no ASUs adopted during the first quarter of 2022.
Pending ASUs:
−Removed: In June 2016, the FASB issued ASU No.
−Removed: 2016-13, Financial Instruments-Credit Losses (Topic 326):
+Added: In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments .
−Removed: 2016-13 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis.
+Added: ASU 2016-13 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis.
The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.
−Removed: 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019.
+Added: ASU 2016-13 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019.
In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), to delay the effective date for smaller reporting companies to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.
−Removed: While the Company (a smaller reporting company) is currently evaluating the provisions of ASU 2016-13 to determine the potential impact of the new standard will have on the Company's consolidated financial statements, it has taken steps to prepare for the implementation when it becomes effective, such
+Added: It is currently unclear how the adoption of this standard will impact the Company’s consolidated financial statements, but the Company is currently evaluating the provisions of ASU 2016-13 to determine the potential impact that the adoption of the standard may have on the Company.
+Added: The Company has taken steps to prepare for the implementation when it becomes effective, such as:
forming an internal committee, gathering pertinent data, consulting with outside professionals, subscribing to a new software system, and running existing and new methodologies concurrently through the period of implementation.
+Added: In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326):
+Added: Troubled Debt Restructurings and Vintage Disclosures , which eliminates the accounting guidance on troubled debt restructurings (“TDRs”) by creditors that have adopted the current expected credit losses (“CECL”) model and enhances disclosure requirements for certain loan refinancing and restructurings by creditors made to borrowers experiencing financial
+Added: The ASU also amends the guidance on “vintage disclosures” to require disclosure of current-period gross charge-offs by year of origination.
+Added: For entities that have not yet adopted ASU 2016-13, the amendments in ASU 2022-02 are effective upon adoption of ASU 2016-13.
+Added: Entities may elect to apply the guidance on TDR recognition and measurement by using a modified retrospective transition method, which would result in a cumulative-effect adjustment to retained earnings, or to adopt the amendments prospectively.
+Added: If an entity elects to adopt the updated guidance on TDR recognition and measurement prospectively, the guidance should be applied to modifications occurring after the date of adoption.
+Added: The amendments on TDR disclosures and vintage disclosures should be adopted prospectively.
+Added: The Company plans to adopt ASU 2022-02 upon the adoption of ASU 2016-13 and is currently evaluating the provisions of ASU 2022-02 to determine the potential impact the new standard will have on the Company’s consolidated financial statements.
NOTE 3 — SECURITIES
4 unchanged sentences
Debt securities not classified as Held-to-Maturity are included in the Available-for-Sale category and are carried at fair value.
−Removed: The amount of any unrealized gain or loss, net of the effect of deferred income taxes, is reported as accumulated other comprehensive income (AOCI) in the consolidated balance sheets and consolidated statements of changes in stockholders’ equity.
+Added: The amount of any unrealized gain or loss, net of the effect of deferred income taxes, is reported as accumulated other comprehensive (loss) income (AOCI) in the consolidated balance sheets and consolidated statements of changes in stockholders’ equity.
Management’s decision to sell Available-for-Sale securities is based on changes in economic conditions, controlling the sources and applications of funds, terms, availability of and yield of alternative investments, interest rate risk and the need for liquidity.
5 unchanged sentences
The cost of securities sold, redeemed or matured is based on the specific identification method.
−Removed: The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as “Available-For-Sale” were as follows at September 30, 2021 and December 31, 2020:
+Added: The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as “Available-For-Sale” were as follows at March 31, 2022 and December 31, 2021:
Debt Securities Available-for-Sale
(Dollars in thousands)
−Removed: September 30, 2021:
+Added: March 31, 2022:
Treasury securities
17 unchanged sentences
Corporate debt securities
−Removed: Securities Available-for-Sale with an aggregate fair value of $ 406,792,000 at September 30, 2021 and $ 315,146,000 at December 31, 2020, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $ 335,068,000 at September 30, 2021 and $ 231,750,000 at December 31, 2020.
−Removed: The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at September 30, 2021.
+Added: Securities Available-for-Sale with an aggregate fair value of $ 365,293,000 at March 31, 2022 and $ 401,861,000 at December 31, 2021, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $ 285,453,000 at March 31, 2022 and $ 318,074,000 at December 31, 2021.
+Added: The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at March 31, 2022.
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
−Removed: September 30, 2021
+Added: March 31, 2022
Debt Securities Available-For-Sale
13 unchanged sentences
Government and U.S.
−Removed: Government Agencies and Corporations) which exceeded ten percent of consolidated stockholders’ equity at September 30, 2021.
−Removed: The quality rating of the obligations of state and political subdivisions are generally investment grade, as rated by
−Removed: Moody’s, Standard and Poor’s or Fitch.
+Added: Government Agencies and Corporations) which exceeded ten percent of consolidated stockholders’ equity at March 31, 2022.
+Added: The quality rating of the obligations of state and political subdivisions are generally investment grade, as rated by Moody’s, Standard and Poor’s or Fitch.
The typical exceptions are local issues which are not rated, but are secured by the full faith and credit obligations of the communities that issued these securities.
−Removed: Proceeds from sales of investments in Debt Securities Available-For-Sale for the three months ended September 30, 2021 and 2020 were $ 0 and $ 8,140,000 , respectively.
−Removed: Gross gains realized on these sales were $ 0 and $ 142,000 , respectively.
−Removed: Gross losses realized on these sales were $ 0 and $ 81,000 , respectively.
−Removed: There were no impairment losses realized on Debt Securities Available-For-Sale during the three months ended September 30, 2021 or 2020.
−Removed: Proceeds from sales of investments in Debt Securities Available-For-Sale for the nine months ended September 30, 2021 and 2020 were $ 0 and $ 21,692,000 , respectively.
−Removed: Gross gains realized on these sales were $ 0 and $ 414,000 , respectively.
−Removed: Gross losses realized on these sales were $ 0 and $ 186,000 , respectively.
−Removed: There were no impairment losses realized on Debt Securities Available-For-Sale during the nine months ended September 30, 2021 or 2020.
−Removed: At September 30, 2021 and December 31, 2020, the Company had $ 1,805,000 and $ 1,646,000 , respectively, in equity securities recorded at fair value.
−Removed: The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the nine months ended September 30, 2021 and 2020:
+Added: There were no proceeds from sales of investments in Debt Securities Available-For-Sale for the three months ended March 31, 2022 or 2021.
+Added: Therefore, there were no gains or losses realized during these periods.
+Added: At March 31, 2022 and December 31, 2021, the Company had $ 1,899,000 and $ 1,962,000 , respectively, in equity securities recorded at fair value.
+Added: The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three months ended March 31, 2022 and 2021:
(Dollars in thousands)
−Removed: Nine months ended
−Removed: Nine months ended
−Removed: September 30, 2021
−Removed: September 30, 2020
−Removed: Net gains and (losses) recognized during the period on equity securities
+Added: Three months ended
+Added: Three months ended
+Added: March 31, 2022
+Added: March 31, 2021
+Added: Net (losses) and gains recognized during the period on equity securities
Net gains recognized during the period on equity securities sold during the period
−Removed: Net gains and (losses) recognized during the reporting period on equity securities still held at the reporting date
−Removed: There were no proceeds from sales of investments in Held-to-Maturity debt securities during the nine months ended September 30, 2021 or 2020.
+Added: Net (losses) and gains recognized during the reporting period on equity securities still held at the reporting date
+Added: There were no proceeds from sales of investments in Held-to-Maturity debt securities during the three months ended March 31, 2022 or 2021.
Therefore, there were no gains or losses realized during these periods.
7 unchanged sentences
The amount of the total OTTI related to the credit loss is determined based on the present value of cash flows expected to be collected, and the realized loss is recognized as impairment charges on securities on the consolidated statements of income.
−Removed: The amount of the total OTTI related to the other factors shall be recognized in other comprehensive income (loss), net of applicable taxes.
−Removed: The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment.
+Added: The amount of the total OTTI related to the other factors shall be recognized in other comprehensive (loss) income, net of applicable taxes.
+Added: The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the security.
The Company and its investment advisors monitor the entire portfolio monthly with particular attention given to securities in a continuous loss position of at least ten percent for over twelve months.
−Removed: Based on the factors described above, management did not consider any securities to be other-than-temporarily impaired at September 30, 2021 or December 31, 2020.
+Added: Based on the factors described above, management did not consider any securities to be other-than-temporarily impaired at March 31, 2022 or December 31, 2021.
The summary below shows the gross unrealized losses and fair value of the Company’s debt securities.
−Removed: Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of September 30, 2021 and December 31, 2020:
−Removed: September 30, 2021
+Added: Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of March 31, 2022 and December 31, 2021:
+Added: March 31, 2022
(Dollars in thousands)
31 unchanged sentences
These factors change continuously and therefore the market value of these securities may be higher or lower than the Company’s carrying value at any measurement date.
−Removed: Management does not believe any of their 47 debt securities with a
−Removed: less than one year unrealized loss position, or any of their 16 debt securities with a one year or greater unrealized loss position as of September 30, 2021, represent an other-than-temporary impairment, as the unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.
−Removed: The Company expects to collect all principal and interest payments defined under the original terms as all contracted payments on securities in the portfolio are current as of September 30, 2021.
+Added: Management does not believe any of their 125 debt securities with a less than one year unrealized loss position, or any of their 29 debt securities with a one year or greater unrealized loss position as of March 31, 2022, represent an other-than-temporary impairment, as the unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.
+Added: The Company expects to collect all principal and interest payments defined under the original terms as all contracted payments on securities in the portfolio are current as of March 31, 2022.
NOTE 4 — LOANS AND ALLOWANCE FOR LOAN LOSSES
6 unchanged sentences
Commercial and Industrial Lending
−Removed: The Company originates commercial and industrial loans primarily to businesses located in its primary market area and surrounding areas.
+Added: The Company originates commercial and industrial loans principally to businesses located in its primary market area and surrounding areas.
These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment, inventory and accounts receivable.
16 unchanged sentences
The loans are sponsored by one of the various government agencies including the SBA, United States Department of Agriculture (“USDA”), and the Farm Service Agency (“FSA”).
−Removed: Government Guaranteed Loans ("GGLs") carry no credit risk due to
−Removed: an unconditional and irrevocable guarantee (which is supported by the full faith and credit of the U.S.
+Added: Government Guaranteed Loans ("GGLs") carry no credit risk due to an unconditional and irrevocable guarantee (which is supported by the full faith and credit of the U.S.
Government) on all principal and the balance of interest accruing through ninety days beyond the date that demand is made to the originating bank for repurchase of the loan.
−Removed: As of September 30, 2021, the Company's balance of GGLs amounted to $ 4,897,000 , compared to $ 5,128,000 at December 31, 2020.
+Added: As of March 31, 2022, the Company's balance of GGLs was $ 5,326,000 , compared to $ 3,829,000 at December 31, 2021.
Commercial Real Estate Lending
10 unchanged sentences
These loans originate primarily within or with customers from the Company’s market area.
−Removed: The Company’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas.
+Added: The Company’s one-to-four family residential mortgage originations are secured principally by properties located in its primary market area and surrounding areas.
The Company offers fixed-rate mortgage loans with terms up to a maximum of thirty years for both permanent structures and those under construction.
11 unchanged sentences
Residential mortgage loans held for sale are carried at the lower of cost or market on an aggregate basis determined by independent pricing from appropriate federal or state agency investors.
−Removed: These loans are sold without
−Removed: Loans held for sale amounted to $ 18,220,000 and $ 17,300,000 at September 30, 2021 and December 31, 2020, respectively.
+Added: These loans are sold without recourse.
+Added: Loans held for sale amounted to $ 4,706,000 and $ 6,006,000 at March 31, 2022 and December 31, 2021, respectively.
Consumer Lending
−Removed: The Company offers a variety of secured and unsecured consumer loans, including vehicle loans, stock loans and loans secured by financial institution deposits.
+Added: The Company offers a variety of secured and unsecured consumer loans, including vehicle loans, stock secured loans and loans secured by financial institution deposits.
These loans originate primarily within or with customers from the Company’s market area.
15 unchanged sentences
All PPP loans are carried in the Company’s Commercial and Industrial loan portfolio.
−Removed: As of September 30, 2021, the Company held 240 PPP loans in its Commercial and Industrial portfolio which carried a balance of $ 12,648,000 , of which 2 loans carrying an aggregate balance of $ 165,000 were granted during the first round of PPP issuance and 238 loans carrying an aggregate balance of $ 12,483,000 were granted during the second round of PPP issuance.
−Removed: At December 31, 2020, the Company held 441 PPP loans in its Commercial and Industrial portfolio which carried a balance of $ 22,976,000 , all of which were granted during the first round of PPP issuance.
−Removed: An additional provision of the CARES Act, Section 4013 provides financial institutions the option to suspend requirements to categorize certain loan modifications as troubled debt restructurings (“TDRs”), as long as specific criteria are met.
+Added: As of March 31, 2022, the Company held 51 PPP loans in its Commercial and Industrial portfolio which carried a balance of $ 1,244,000 , of which 2 loans carrying an aggregate balance of $ 148,000 were granted during the first round of PPP issuance and 49 loans carrying an aggregate balance of $ 1,096,000 were granted during the second round of PPP issuance.
+Added: At December 31, 2021, the Company held 122 PPP loans in its Commercial and Industrial portfolio, which carried an aggregate balance of $ 4,894,000 , of which 2 loans carrying an aggregate balance of $ 160,000 were granted during the first round of PPP issuance and 120 loans carrying an aggregate balance of $ 4,734,000 were granted during the second round of PPP issuance.
+Added: An additional provision of the CARES Act, Section 4013 provides financial institutions the option to suspend requirements to categorize certain loan modifications as troubled debt restructurings as long as specific criteria are met.
To qualify, the loan modifications must be made on a good-faith basis in response to the COVID-19 pandemic, must occur between March 1, 2020 and the earlier of September 30, 2021 or the termination date of the national emergency related to the COVID-19 pandemic as declared by the President of the United States, and the loans must have been paid current (less than 30 days past due prior to any relief) as of December 31, 2019.
−Removed: In compliance with Section 4013 of the CARES Act, the Company has granted modification requests to defer principal and/or interest payments or modify interest rates on various loans across all portfolio segments.
−Removed: Of the loan modifications that have been granted in compliance with Section 4013 of the CARES Act, there was 1 loan modification still actively on deferral carrying a balance of $ 9,423,000 as of September 30, 2021, compared to December 31, 2020 when there were 44 loan modifications still actively on deferral carrying an aggregate balance of $ 16,541,000 .
+Added: In compliance with Section 4013 of the CARES Act, the Company granted modification requests to defer principal and/or interest payments or modify interest rates on various loans across all portfolio segments.
+Added: Of the loan modifications that were granted in compliance with Section 4013 of the CARES Act, there were no loan modifications still actively on deferral as of March 31, 2022, compared to December 31, 2021 when there was 1 loan modification still actively on deferral carrying a balance of $ 9,423,000 .
See page 22 for additional information regarding the Section 4013 CARES Act modifications.
32 unchanged sentences
Factors considered by management in determining impairment include payment status and the probability of collecting scheduled principal and interest payments when due.
−Removed: experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
+Added: Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
1 unchanged sentence
TDRs are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s contractual rate at inception.
−Removed: If a troubled debt restructuring is considered to be a collateral dependent loan, the loan may be reported at the net realizable value of the collateral.
−Removed: For troubled debt restructurings that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.
+Added: If a TDR is considered to be a collateral dependent loan, the loan may be reported at the net realizable value of the collateral.
+Added: For TDRs that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan losses.
The general component covers all other loans not identified as impaired (aside from GGLs, which do not require an allowance) and is based on historical losses and qualitative factors.
2 unchanged sentences
delinquency trends, loan volume trends, Bank policy changes, management processes and oversight, economic trends (including change in consumer and business disposable incomes, unemployment and under-employment levels, and other conditions), concentrations by industry or product, internal and external loan review processes, collateral value and market conditions, and external factors including regulatory issues and competition.
−Removed: In response to the COVID-19 pandemic and its impact on the current economy, the qualitative factors related to the local/regional economy were increased by two basis points across all loan segments during the first quarter of 2020 and increased by an additional basis point across all loan segments during the second quarter of 2020.
−Removed: The qualitative factor relating to the impact of external factors/conditions for the Commercial Real Estate portfolio segment was increased by an additional basis point during the third quarter of 2020.
−Removed: The qualitative factors relating to the impact of external factors/conditions were increased by two additional basis points across all loan segments during the fourth quarter of 2020.
−Removed: Qualitative factors remained unchanged during the first quarter of 2021.
−Removed: During the second quarter of 2021, the qualitative factors related to the local/regional economy were decreased by one basis point across all loan segments, as the economy and job growth in the Company’s market areas demonstrated marked improvement over the prior quarter, and the qualitative factor related to collateral values was increased by one basis point for both the Commercial Real Estate and Residential Real Estate portfolio segments due to increasing market values in the real estate sector.
−Removed: Qualitative factors remained unchanged during the third quarter of 2021.
−Removed: Modifications granted in compliance with Section 4013 of the CARES Act were highest in the Commercial Real Estate portfiolio segment, the long-term effects of which are still very unclear, as there is still economic uncertainty related to the COVID-19 pandemic, especially in relation to this segment of the Company’s loan portfolio.
GGLs do not require an associated allowance for loan losses due to the underlying irrevocable and unconditional guarantee, which is supported by the full faith and credit of the U.S.
Should a GGL default, the loan will be repurchased by the originating bank or the appropriate government agency that has provided the guarantee for the loan.
−Removed: Although PPP loans do not require an associated allowance for loan losses due to the program’s call for a full guarantee by the SBA, the Company has taken the conservative approach and has calculated a qualitative allocation for the PPP loans under the general component of the allowance for the Commercial and Industrial portfolio.
+Added: Although PPP loans do not require an associated allowance for loan losses due to the program’s call for a full guarantee by the SBA, the Company has calculated a qualitative allocation for the PPP loans under the general component of the allowance for the Commercial and Industrial portfolio.
The unallocated component of the allowance is maintained to cover uncertainties that could affect management’s estimate of probable losses.
2 unchanged sentences
The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and, if necessary, is recorded in other liabilities on the consolidated balance sheets.
−Removed: September 30, 2021 and December 31, 2020, the amount of the reserve for unfunded lending commitments was $ 92,000 and $ 129,000 , respectively.
+Added: As of March 31, 2022 and December 31, 2021, the amount of the reserve for unfunded lending commitments was $ 121,000 and $ 177,000 , respectively.
The Company is subject to periodic examination by its federal and state examiners, and may be required by such regulators to recognize additions to the allowance for loan losses based on their assessment of credit information available to them at the time of their examinations.
7 unchanged sentences
The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower were a concession not granted.
−Removed: Similarly, the determination of whether a concession has been granted is very subjective in nature.
+Added: Similarly, the determination of whether a concession has been granted is subjective in nature.
For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender.
40 unchanged sentences
Loans are graded doubtful if they contain weaknesses so serious that collection or liquidation in full is questionable.
−Removed: The following table presents the classes of the loan portfolio summarized by risk rating as of September 30, 2021 and December 31, 2020:
+Added: The following table presents the classes of the loan portfolio summarized by risk rating as of March 31, 2022 and December 31, 2021:
Commercial and
1 unchanged sentence
Commercial Real Estate
−Removed: September 30,
−Removed: September 30,
7 Special Mention
5 unchanged sentences
Including Home Equity
−Removed: September 30,
−Removed: September 30,
7 Special Mention
3 unchanged sentences
Net deferred loan fees and costs
−Removed: September 30,
7 Special Mention
3 unchanged sentences
Net deferred loan fees and costs
−Removed: Commercial and Industrial and Commercial Real Estate include loans categorized as tax-free in the amounts of $ 25,483,000 and $ 1,715,000 at September 30, 2021 and $ 9,337,000 and $ 1,843,000 at December 31, 2020.
−Removed: Commercial and Industrial loans also included $ 4,897,000 and $ 5,128,000 of Government Guaranteed Loans and $ 12,648,000 and $ 22,976,000 of Paycheck Protection Program loans as of September 30, 2021 and December 31, 2020, respectively.
−Removed: Loans held for sale amounted to $ 18,220,000 at September 30, 2021 and $ 17,300,000 at December 31, 2020.
+Added: Commercial and Industrial and Commercial Real Estate include loans categorized as tax-free in the amounts of $ 24,793,000 and $ 1,627,000 at March 31, 2022 and $ 24,647,000 and $ 1,671,000 at December 31, 2021.
+Added: Commercial and Industrial loans also included $ 5,326,000 and $ 3,829,000 of Government Guaranteed Loans and $ 1,244,000 and $ 4,894,000 of Paycheck Protection Program loans as of March 31, 2022 and December 31, 2021, respectively.
+Added: Loans held for sale amounted to $ 4,706,000 at March 31, 2022 and $ 6,006,000 at December 31, 2021.
The activity in the allowance for loan losses, by loan class, is summarized below for the periods indicated.
1 unchanged sentence
and Industrial
−Removed: As of and for the three months ended September 30, 2021:
−Removed: Allowance for Loan Losses:
−Removed: Beginning balance
−Removed: Provision (credit)
−Removed: Ending Balance
−Removed: (Dollars in thousands)
−Removed: and Industrial
−Removed: As of and for the nine months ended September 30, 2021:
+Added: As of and for the three months ended March 31, 2022:
Allowance for Loan Losses:
Beginning balance
−Removed: Provision (credit)
+Added: Credit (provision)
Ending Balance
11 unchanged sentences
and Industrial
−Removed: As of and for the three months ended September 30, 2020:
−Removed: Allowance for Loan Losses:
−Removed: Beginning balance
−Removed: Provision (credit)
−Removed: Ending Balance
−Removed: (Dollars in thousands)
−Removed: and Industrial
−Removed: As of and for the nine months ended September 30, 2020:
+Added: As of and for the three months ended March 31, 2021:
Allowance for Loan Losses:
29 unchanged sentences
evaluated for impairment
−Removed: The outstanding recorded investment of TDRs as of September 30, 2021 and December 31, 2020 was $ 8,414,000 and $ 9,563,000 , respectively.
−Removed: The decrease in TDRs at September 30, 2021 as compared to December 31, 2020 is mainly attributable to the payoff of a Commercial Real Estate TDR to a real estate holding company which was completed during the third quarter of 2021 in the amount of $ 1,010,000 , as well as regular principal payments made on existing TDRs during the nine months ended September 30, 2021.
−Removed: There were no unfunded commitments on TDRs at September 30, 2021 and December 31, 2020.
−Removed: During the three months ended September 30, 2021, one loan with a post modification balance of $ 59,000 was modified as a TDR, compared to the three months ended September 30, 2020 when four loans with a combined post modification balance of $ 366,000 were modified as TDRs.
−Removed: During the nine months ended September 30, 2021, four
−Removed: loans with a combined post modification balance of $ 360,000 were modified as TDRs, compared to the nine months ended September 30, 2020 when seven loans with a combined post modification balance of $ 525,000 were modified as TDRs.
−Removed: The loan modifications for the nine months ended September 30, 2021 consisted of two term modifications and two payment modifications, compared to the loan modifications for the nine months ended September 30, 2020 which consisted of one term modification and six payment modifications.
+Added: The outstanding recorded investment of TDRs as of March 31, 2022 and December 31, 2021 was $ 7,736,000 and $ 8,020,000 , respectively.
+Added: The decrease in TDRs at March 31, 2022 as compared to December 31, 2021 is mainly attributable to regular principal payments and paydowns on existing TDRs that were completed during the three months ended March 31, 2022.
+Added: There were no unfunded commitments on TDRs at March 31, 2022 and December 31, 2021.
+Added: No loans were modified as TDRs during the three months ended March 31, 2022, compared to the three months ended March 31, 2021 when three loans with a combined post modification balance of $ 301,000 were modified as TDRs.
+Added: The loan modifications for the three months ended March 31, 2021 consisted of two term modifications and one payment modification.
The following table presents the outstanding recorded investment of TDRs at the dates indicated:
(Dollars in thousands)
−Removed: September 30,
Non-accrual TDRs
Accruing TDRs
−Removed: At September 30, 2021, eight Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 541,000 , three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $ 724,000 , and one Residential Real Estate loan classified as a TDR with a recorded investment of $ 15,000 were not in compliance with the terms of their restructure, compared to September 30, 2020 when nine Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 1,288,000 and three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $ 751,000 were not in compliance with the terms of their restructure.
−Removed: Three Commercial Real Estate loans totaling $ 291,000 that were modified as a TDRs within the twelve months preceding September 30, 2021 experienced payment defaults during the nine months ended September 30, 2021.
−Removed: No loans that were modified as TDRs during the twelve months preceding September 30, 2021 experienced payment defaults during the three months ended September 30, 2021.
−Removed: Of the loans that were modified as TDRs during the twelve months preceding September 30, 2020, two Commercial Real Estate loans totaling $ 62,000 experienced payment defaults during the nine months ended September 30, 2020.
−Removed: No loans that were modified as TDRs during the twelve months preceding September 30, 2020 experienced payment defaults during the three months ended September 30, 2020.
−Removed: The following table presents information regarding the loan modifications categorized as TDRs during the three and nine months ended September 30, 2021 and 2020.
−Removed: (Dollars in thousands)
−Removed: For the Three Months Ended September 30, 2021
−Removed: Pre-Modification
−Removed: Post-Modification
−Removed: Commercial Real Estate
−Removed: (Dollars in thousands)
−Removed: For the Nine Months Ended September 30, 2021
−Removed: Pre-Modification
−Removed: Post-Modification
−Removed: Commercial Real Estate
−Removed: (Dollars in thousands)
−Removed: For the Three Months Ended September 30, 2020
−Removed: Pre-Modification
−Removed: Post-Modification
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
+Added: At March 31, 2022, three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $ 696,000 , six Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 431,000 , and one Residential Real Estate loan classified as a TDR with a balance of $ 13,000 were not in compliance with the terms of their restructure, compared to March 31, 2021 when three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $ 737,000 , six Commercial Real Estate loans classified as TDRs with a combined recorded investment of $ 299,000 , and one Residential Real Estate loan classified as a TDR with a recorded investment of $ 17,000 were not in compliance with the terms of their restructure.
+Added: One Commercial Real Estate loan that was modified as a TDR within the twelve months preceding March 31, 2022 experienced a payment default during the three months ended March 31, 2022, but the loan was subsequently paid off prior to the end of the quarter.
+Added: Of the loans that were modified as TDRs during the twelve months preceding March 31, 2021, one Commercial Real Estate loan in the amount of $ 92,000 experienced a payment default during the three months ended March 31, 2021.
+Added: The following table presents information regarding the loan modifications categorized as TDRs during the three months ended March 31, 2021.
+Added: No loans were modified as TDRs during the three months ended March 31, 2022.
(Dollars in thousands)
−Removed: For the Nine Months Ended September 30, 2020
+Added: For the Three Months Ended March 31, 2021
Pre-Modification
Post-Modification
−Removed: Commercial and Industrial
Commercial Real Estate
−Removed: The following table provides detail regarding the types of loan modifications made for loans categorized as TDRs during the three and nine months ended September 30, 2021 and 2020 with the total number of each type of modification performed.
−Removed: For the Three Months Ended September 30, 2021
−Removed: Commercial Real Estate
−Removed: For the Nine Months Ended September 30, 2021
−Removed: Commercial Real Estate
−Removed: For the Three Months Ended September 30, 2020
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: For the Nine Months Ended September 30, 2020
−Removed: Commercial and Industrial
+Added: The following table provides detail regarding the types of loan modifications made for loans categorized as TDRs during the three months ended March 31, 2021 with the total number of each type of modification performed.
+Added: No loans were modified as TDRs during the three months ended March 31, 2022.
+Added: For the Three Months Ended March 31, 2021
Commercial Real Estate
1 unchanged sentence
These loans are not classified as TDRs according to Section 4013 of the CARES Act, as long as the specific criteria set forth in the Act are met.
−Removed: The table below presents information related to loan modifications made in compliance with Section 4013 of the CARES Act for the nine months ended September 30, 2021.
+Added: The table below presents information related to loan modifications made in compliance with Section 4013 of the CARES Act for the three months ended March 31, 2022:
(Dollars in thousands)
5 unchanged sentences
Balance at March 31, 2022
−Removed: Additional modifications granted for the three months ended June 30, 2021
−Removed: Section 4013 CARES Act modifications returned to normal payment status during the three months ended June 30, 2021 (a)
−Removed: Principal payments net of draws on active deferred loans for the three months ended June 30, 2021 (b)
−Removed: Balance at June 30, 2021
−Removed: Additional modifications granted for the three months ended September 30, 2021
−Removed: Section 4013 CARES Act modifications returned to normal payment status during the three months ended September 30, 2021 (a)
−Removed: Principal payments net of draws on active deferred loans for the three months ended Setpember 30, 2021 (b)
−Removed: Balance at September 30, 2021
−Removed: Percent of Total Section 4013 CARES Act Modifications as of September 30, 2021
−Removed: Percent of Total Section 4013 CARES Act Modifications to Total Loans as of September 30, 2021
−Removed: Subsequent modifications granted during the three months ended September 30, 2021 for active deferred loans outstanding as of September 30, 2021
+Added: Percent of Total Section 4013 CARES Act Modifications as of March 31, 2022
+Added: Percent of Total Section 4013 CARES Act Modifications to Total Loans as of March 31, 2022
+Added: Subsequent modifications granted during the three months ended March 31, 2022 for active deferred loans outstanding as of March 31, 2022
(a) Includes payments made prior to return to normal payment status during the three month period
1 unchanged sentence
No construction loans have experienced a Section 4013 CARES Act modification at the dates indicated.
−Removed: The recorded investment, unpaid principal balance, and the related allowance of the Company’s impaired loans are summarized below at September 30, 2021 and December 31, 2020.
+Added: The recorded investment, unpaid principal balance, and the related allowance of the Company’s impaired loans are summarized below at March 31, 2022 and December 31, 2021.
(Dollars in thousands)
−Removed: September 30, 2021
+Added: March 31, 2022
December 31, 2021
11 unchanged sentences
Residential Real Estate
−Removed: At September 30, 2021 and December 31, 2020, $ 8,414,000 and $ 9,563,000 of loans classified as TDRs were included in impaired loans with a total allocated allowance of $ 0 at both September 30, 2021 and December 31, 2020.
+Added: At March 31, 2022 and December 31, 2021, $ 7,736,000 and $ 8,020,000 of loans classified as TDRs were included in impaired loans with a total allocated allowance of $ 0 at both March 31, 2022 and December 31, 2021.
The recorded investment represents the loan balance reflected on the consolidated balance sheets net of any charge-offs.
The unpaid balance is equal to the gross amount due on the loan.
−Removed: The average recorded investment and interest income recognized for the Company’s impaired loans are summarized below for the three and nine months ended September 30, 2021 and 2020.
+Added: The average recorded investment and interest income recognized for the Company’s impaired loans are summarized below for the three months ended March 31, 2022 and 2021.
(Dollars in thousands)
1 unchanged sentence
For the Three Months Ended
−Removed: September 30, 2021
−Removed: September 30, 2020
−Removed: With no related allowance recorded:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: With an allowance recorded:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: Total consists of:
−Removed: Commercial and Industrial
−Removed: Commercial Real Estate
−Removed: Residential Real Estate
−Removed: Of the $ 84,000 and $ 97,000 in interest income recognized on impaired loans for the three months ended September 30, 2021 and 2020 respectively, $ 0 in interest income was recognized with respect to non-accrual loans for each respective period.
−Removed: (Dollars in thousands)
−Removed: For the Nine Months Ended
−Removed: For the Nine Months Ended
−Removed: September 30, 2021
−Removed: September 30, 2020
+Added: March 31, 2022
+Added: March 31, 2021
With no related allowance recorded:
10 unchanged sentences
Residential Real Estate
−Removed: Of the $ 278,000 and $ 262,000 in interest income recognized on impaired loans for the nine months ended September 30, 2021 and 2020 respectively, $ 3,000 and $ 5,000 in interest income was recognized with respect to non-accrual loans for each respective period.
−Removed: Total non-performing assets (which includes loans receivable on non-accrual status, foreclosed assets held for resale and loans past-due 90 days or more and still accruing interest) as of September 30, 2021 and December 31, 2020 were as follows:
+Added: Of the $ 74,000 and $ 96,000 in interest income recognized on impaired loans for the three months ended March 31, 2022 and 2021 respectively, $ 0 in interest income was recognized with respect to non-accrual loans for each respective period.
+Added: Total non-performing assets (which includes loans receivable on non-accrual status, foreclosed assets held for resale and loans past-due 90 days or more and still accruing interest) as of March 31, 2022 and December 31, 2021 were as follows:
(Dollars in thousands)
−Removed: September 30,
Commercial and Industrial
5 unchanged sentences
Total non-performing assets
−Removed: There were no foreclosed assets held for resale at September 30, 2021.
−Removed: The $ 28,000 in foreclosed assets held for resale at December 31, 2020 was represented by land.
−Removed: At December 31, 2020, all foreclosed assets were held as the result of obtaining physical possession.
−Removed: Consumer mortgage loans secured by residential real estate for which the Company has entered into formal foreclosure proceedings but for which physical possession has yet to be obtained amounted to $ 41,000 at both September 30, 2021 and December 31, 2020.
−Removed: These balances were not included in foreclosed assets held for resale at September 30, 2021 or December 31, 2020.
−Removed: The following tables present the classes of the loan portfolio, including non-accrual loans and TDRs, summarized by past-due status at September 30, 2021 and December 31, 2020:
+Added: There were no foreclosed assets held for resale at March 31, 2022 or December 31, 2021.
+Added: Consumer mortgage loans secured by residential real estate for which the Company has entered into formal foreclosure proceedings but for which physical possession has yet to be obtained amounted to $ 41,000 at both March 31, 2022 and December 31, 2021.
+Added: These balances were not included in foreclosed assets held for resale at March 31, 2022 or December 31, 2021.
+Added: The following tables present the classes of the loan portfolio, including non-accrual loans and TDRs, summarized by past-due status at March 31, 2022 and December 31, 2021:
(Dollars in thousands)
−Removed: September 30, 2021:
+Added: March 31, 2022:
Commercial and Industrial
7 unchanged sentences
At this time, there have been no material fluctuations in past-due loans as a result of the COVID-19 pandemic.
−Removed: At September 30, 2021 and December 31, 2020, commitments to lend additional funds with respect to impaired loans consisted of one irrevocable letter of credit totaling $ 1,249,000 that was associated with a loan to a developer of a residential sub-division.
+Added: At March 31, 2022 and December 31, 2021, commitments to lend additional funds with respect to impaired loans consisted of one irrevocable letter of credit totaling $ 1,249,000 that was associated with a loan to a developer of a residential sub-division.
NOTE 5 — DEPOSITS
−Removed: Major classifications of deposits at September 30, 2021 and December 31, 2020 consisted of:
+Added: Major classifications of deposits at March 31, 2022 and December 31, 2021 consisted of:
(Dollars in thousands)
−Removed: September 30,
Non-interest bearing demand
3 unchanged sentences
Total deposits
−Removed: Total deposits increased $ 208,016,000 to $ 1,145,504,000 as of September 30, 2021 due to increases in non-interest bearing, interest bearing demand and savings deposits.
−Removed: The increase in deposits was the result of government stimulus funds, PPP loan proceeds, a $ 128,271,000 increase in highly rate sensitive deposits and other normal fluctuations in deposits during the nine months ended September 30, 2021.
+Added: Total deposits decreased $ 32,492,000 to $ 1,045,477,000 as of March 31, 2022 due to decreases in non-interest bearing, interest bearing demand and time deposits.
+Added: The decrease in deposits was mainly the result of a $ 42,476,000 decrease in highly rate sensitive deposits and other normal fluctuations in deposits during the three months ended March 31, 2022.
NOTE 6 — BORROWINGS
1 unchanged sentence
Short-term borrowings include federal funds purchased, securities sold under agreements to repurchase, the Federal Discount Window, and Federal Home Loan Bank of Pittsburgh (“FHLB”) advances, which generally represent overnight or less than 30-day borrowings.
−Removed: Short-term borrowings and weighted–average interest rates at September 30, 2021 and December 31, 2020 are as follows:
+Added: Short-term borrowings and weighted–average interest rates at March 31, 2022 and December 31, 2021 are as follows:
(Dollars in thousands)
−Removed: September 30, 2021
+Added: March 31, 2022
December 31, 2021
13 unchanged sentences
The counterparty has the right to sell or repledge the investment securities.
−Removed: The following table presents the short-term borrowings subject to an enforceable master netting arrangement or repurchase agreements as of September 30, 2021 and December 31, 2020.
+Added: The following table presents the short-term borrowings subject to an enforceable master netting arrangement or repurchase agreements as of March 31, 2022 and December 31, 2021.
(Dollars in thousands)
of Liabilities
−Removed: September 30, 2021
+Added: March 31, 2022
Repurchase agreements (a)
1 unchanged sentence
Repurchase agreements (a)
−Removed: (a) As of September 30, 2021 and December 31, 2020, the fair value of securities pledged in connection with repurchase agreements was $ 34,552,000 and $ 23,695,000 , respectively.
−Removed: The following table presents the remaining contractual maturity of the master netting arrangement or repurchase agreements as of September 30, 2021:
+Added: (a) As of March 31, 2022 and December 31, 2021, the fair value of securities pledged in connection with repurchase agreements was $ 33,762,000 and $ 37,735,000 , respectively.
+Added: The following table presents the remaining contractual maturity of the master netting arrangement or repurchase agreements as of March 31, 2022:
(Dollars in thousands)
Remaining Contractual Maturity of the Agreements
−Removed: September 30, 2021:
+Added: March 31, 2022:
Repurchase agreements and repurchase-to-maturity transactions:
5 unchanged sentences
The Company began utilizing this service offered by the FHLB during the second quarter of 2021.
−Removed: FHLB has issued active irrevocable standby letters of credit for $ 51,400,000 which could be drawn on through FHLB’s close of business on September 30, 2021 and will be renewed as necessary in an amount appropriate to secure specific public/municipal unit deposits.
+Added: There were no irrevocable standby letters of credit which could be drawn on through FHLB’s close of business on March 31, 2022.
+Added: Any irrevocable standby letters of credit are issued as necessary in an amount appropriate to secure specific public/municipal unit deposits.
Under terms of a blanket agreement, collateral for the FHLB loans and letters of credit consists of certain qualifying assets of the Corporation’s banking subsidiary.
Principal qualifying assets are certain real estate mortgages and investment securities.
−Removed: As of September 30, 2021, loans of $ 582,085,000 were pledged to FHLB which resulted in a FHLB maximum borrowing capacity of $ 416,371,000 .
−Removed: As of September 30, 2021, no investment securities were pledged as collateral to FHLB to secure FHLB loans and letters of credit.
+Added: As of March 31, 2022, loans of $ 615,523,000 were pledged to FHLB which resulted in a FHLB maximum borrowing capacity of $ 440,392,000 .
+Added: As of March 31, 2022, no securities were pledged as collateral to FHLB to secure FHLB loans and letters of credit.
NOTE 7 — SUBORDINATED DEBT
11 unchanged sentences
The Bank currently leases three branch banking facilities and one parcel of land under operating leases.
−Removed: At September 30, 2021, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $ 1,050,000 and $ 1,518,000 , respectively.
+Added: At March 31, 2022, right-of-use assets and lease liabilities were recorded related to these operating leases totaling $ 1,035,000 and $ 1,513,000 , respectively.
At December 31, 2021, right-of-use assets and lease liabilities stood at $ 1,025,000 and $ 1,499,000 , respectively.
3 unchanged sentences
therefore, our incremental borrowing rate was used for each of the leases.
−Removed: The Bank recognized total operating lease costs for the nine months ended September 30, 2021 and 2020 of $ 133,000 and $ 332,000 , respectively.
−Removed: Cash payments totaled $ 116,000 for the nine months ended September 30, 2021 and 2020.
+Added: The Bank recognized total operating lease costs for the three months ended March 31, 2022 and 2021 of $ 45,000 and $ 44,000 , respectively.
+Added: Operating lease costs are included in occupancy, net in the accompanying statements of income.
+Added: Cash payments totaled $ 41,000 and $ 39,000 , respectively, for the three months ended March 31, 2022 and 2021.
The Bank currently has one finance lease for equipment.
−Removed: At September 30, 2021, right-of-use assets and lease liabilities were recorded related to the finance lease totaling $ 34,000 and $ 19,000 , respectively.
+Added: At March 31, 2022, right-of-use assets and lease liabilities were recorded related to the finance lease totaling $ 34,000 and $ 14,000 , respectively.
At December 31, 2021, right-of-use assets and lease liabilities stood at $ 34,000 and $ 16,000 , respectively.
4 unchanged sentences
therefore, our incremental borrowing rate was used.
−Removed: Total finance lease costs that were recognized by the Bank for the nine months ended September 30, 2021 were immaterial.
−Removed: Cash payments as of September 30, 2021 totaled $ 7,000 .
−Removed: The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of September 30, 2021 and December 31, 2020.
−Removed: September 30,
−Removed: September 30,
+Added: Total finance lease costs that were recognized by the Bank for the three months ended March 31, 2022 and 2021 were immaterial.
+Added: Cash payments totaled $ 2,000 for the three months ended March 31, 2022 and 2021.
+Added: The following table displays the weighted-average term and discount rates for operating and finance leases outstanding as of March 31, 2022 and December 31, 2021.
Weighted-average term (years)
2 unchanged sentences
(Dollars in thousands)
−Removed: September 30,
−Removed: September 30,
Minimum Lease Payments due:
18 unchanged sentences
The Company may require collateral or other security to support financial instruments with off-balance sheet credit risk.
−Removed: The contract or notional amounts at September 30, 2021 and December 31, 2020 were as follows:
+Added: The contract or notional amounts at March 31, 2022 and December 31, 2021 were as follows:
(Dollars in thousands)
−Removed: September 30, 2021
+Added: March 31, 2022
December 31, 2021
15 unchanged sentences
The ability of the majority of the Company’s customers to honor their contractual loan obligations is dependent on the economy and real estate market in this area.
−Removed: At September 30, 2021, the Company had $ 656,748,000 in loans secured by real estate, which represented 86.8 % of total loans.
+Added: At March 31, 2022, the Company had $ 691,911,000 in loans secured by real estate, which represented 88.8 % of total loans.
The real estate loan portfolio is largely secured by lessors of residential buildings and dwellings, lessors of non-residential buildings, and lessors of hotels/motels.
−Removed: September 30, 2021 and December 31, 2020, management is of the opinion that there were no concentrations exceeding 10% of total loans with regard to loans to borrowers who were engaged in similar activities that were similarly impacted by economic or other conditions.
+Added: As of March 31, 2022 and December 31, 2021, management is of the opinion that there were no concentrations exceeding 10% of total loans with regard to loans to borrowers who were engaged in similar activities that were similarly impacted by economic or other conditions.
As all financial instruments are subject to some level of credit risk, the Company requires collateral and/or guarantees for all loans.
7 unchanged sentences
Fair value measurement and disclosure guidance provides a list of factors that a reporting entity should evaluate to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability in relation to normal market activity for the asset or liability.
−Removed: When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.
+Added: When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from
+Added: that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with the fair value measurement and disclosure guidance.
This guidance clarifies that when there has been a significant decrease in the volume and level of activity for the asset or liability, some transactions may not be orderly.
15 unchanged sentences
Financial Assets Measured at Fair Value on a Recurring Basis
−Removed: At September 30, 2021 and December 31, 2020, securities measured at fair value on a recurring basis and the valuation methods used are as follows:
+Added: At March 31, 2022 and December 31, 2021, securities measured at fair value on a recurring basis and the valuation methods used are as follows:
(Dollars in thousands)
−Removed: September 30, 2021
+Added: March 31, 2022
Debt Securities Available-for-Sale:
24 unchanged sentences
Total recurring fair value measurements
−Removed: The estimated fair values of equity securities classified as Level 1 are derived from quoted market prices in active markets;
−Removed: these assets consist mainly of stocks held in other banks.
+Added: The estimated fair values of equity securities and US Treasury debt securities classified as Level 1 are derived from quoted market prices in active markets;
+Added: the equity securities consist mainly of stocks held in other banks.
The estimated fair values of all debt securities classified as Level 2 are obtained from nationally-recognized third-party pricing agencies.
4 unchanged sentences
Financial Assets Measured at Fair Value on a Nonrecurring Basis
−Removed: At September 30, 2021 and December 31, 2020, impaired loans measured at fair value on a nonrecurring basis are as follows:
+Added: At March 31, 2022 and December 31, 2021, impaired loans measured at fair value on a nonrecurring basis are as follows:
(Dollars in thousands)
−Removed: Assets at September 30, 2021
+Added: Assets at March 31, 2022
Impaired loans:
10 unchanged sentences
A quarterly collateral evaluation is performed which may include a site visit, property pictures and discussions with realtors and other similar business professionals to ascertain current values.
−Removed: For impaired loans less than $ 250,000 upon classification and annually at year end, the Company completes a Certificate of Inspection, which includes an onsite inspection, and considers value indicators such as insured values, tax assessed values, recent sales comparisons and a review of the previous evaluations.These assets are included as Level 3 fair values, based upon the lowest level that is significant to the fair value measurements.
+Added: For impaired loans less than $ 250,000 upon classification and annually at year end, the Company completes a Certificate of Inspection, which includes an onsite inspection, and considers value indicators such as insured values, tax assessed values, recent sales comparisons and a review of the previous evaluations.These assets are included as Level 3 fair values, based upon the lowest level that is
+Added: significant to the fair value measurements.
The fair value consists of the impaired loan balances less the valuation allowance and/or charge-offs.
1 unchanged sentence
Nonfinancial Assets Measured at Fair Value on a Nonrecurring Basis
−Removed: At September 30, 2021 and December 31, 2020, foreclosed assets held for resale measured at fair value on a nonrecurring basis are as follows:
−Removed: (Dollars in thousands)
−Removed: Assets at September 30, 2021
−Removed: Foreclosed assets held for resale:
−Removed: Commercial Real Estate
−Removed: Total foreclosed assets held for resale
−Removed: (Dollars in thousands)
−Removed: Assets at December 31, 2020
−Removed: Foreclosed assets held for resale:
−Removed: Commercial Real Estate
−Removed: Total foreclosed assets held for resale
+Added: There were no foreclosed assets held for resale measured at fair value on a nonrecurring basis at March 31, 2022 and December 31, 2021.
The Company’s foreclosed asset valuation procedure requires an appraisal or a Certificate of Inspection, which considers the sales prices of similar properties in the proximate vicinity, to be completed periodically with the exception of those cases in which the Bank has obtained a sales agreement.
4 unchanged sentences
Quantitative Information about Level 3 Fair Value Measurements
−Removed: September 30, 2021
+Added: March 31, 2022
Valuation Technique
10 unchanged sentences
( 7 % ) – ( 7 % )
−Removed: Foreclosed assets held for resale
−Removed: Appraisal of collateral 1,3
−Removed: Certificate of Inspection 1,3
−Removed: Appraisal adjustments 2
−Removed: Qualitative Adjustments 4
−Removed: ( 0 % ) –( 0 % )
December 31, 2021
9 unchanged sentences
( 7 % ) – ( 7 % )
−Removed: Foreclosed assets held for resale
−Removed: Appraisal of collateral 1,3
−Removed: Certificate of Inspection 1,3
−Removed: Appraisal adjustments 2
−Removed: Qualitative Adjustments 4
−Removed: ( 28 % ) – ( 28 % )
Fair value is generally determined through independent appraisals or Certificates of Inspection of the underlying collateral, as defined by Bank regulators.
5 unchanged sentences
(Dollars in thousands)
−Removed: Fair Value Measurements at September 30, 2021
+Added: Fair Value Measurements at March 31, 2022
FINANCIAL ASSETS:
45 unchanged sentences
Wealth management fees are included within non-interest income in the consolidated statements of income.
−Removed: As of September 30, 2021 and December 31, 2020, the fair value of
−Removed: trust assets under management was $ 105,733,000 and $ 107,336,000 , respectively.
+Added: As of March 31, 2022 and December 31, 2021, the fair value of trust assets under management was $ 109,713,000 and $ 108,339,000 , respectively.
The costs of acquiring asset management customers are incremental and recognized within non-interest expense in the consolidated statements of income.
9 unchanged sentences
Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.
−Removed: At September 30, 2021 and 2020, there were no potential common shares outstanding.
+Added: At March 31, 2022 and 2021, there were no potential common shares outstanding.
The following table sets forth the computation of basic and diluted earnings per share.
1 unchanged sentence
Three Months Ended
−Removed: September 30,
Weighted-average common shares outstanding
Basic and diluted earnings per share
−Removed: (In thousands, except earnings per share)
−Removed: Nine Months Ended
−Removed: September 30,
−Removed: Weighted-average common shares outstanding
−Removed: Basic and diluted earnings per share
NOTE 13 — GOODWILL
2 unchanged sentences
In accordance with current accounting standards, goodwill is not amortized.
−Removed: Goodwill totaled $ 19,133,000 at September 30, 2021 and December 31, 2020.
+Added: Goodwill totaled $ 19,133,000 at March 31, 2022 and December 31, 2021.
Impairment testing is performed on an annual basis, using either a qualitative or quantitative approach.
1 unchanged sentence
Any change in the assumptions utilized to determine the carrying value of goodwill could adversely affect our results of operations.
−Removed: Management notes that the emergence of COVID-19 as a global pandemic in 2020 resulted in significant deterioration in general economic conditions and the environment in which the Company operates.
−Removed: This uncertainty in 2020 resulted in significant decreases in the market prices for the stock of institutions in the financial services industry, including the Company, however, many stock prices recovered through the end of 2020 and into 2021.
Goodwill was evaluated for impairment at December 31, 2021, and it was determined that goodwill was not impaired.
−Removed: Management evaluated the need for an interim goodwill impairment analysis and determined that there were no triggering events or negative factors affecting goodwill since the previous test that would indicate goodwill was impaired as of September 30, 2021.
+Added: Management evaluated the need for an interim goodwill impairment analysis and determined that there were no triggering events or negative factors affecting goodwill since the previous test that would indicate goodwill was impaired as of March 31, 2022.
First Keystone Corporation Management’s Discussion and Analysis of Financial Condition and Results of Operation
8 unchanged sentences
RESULTS OF OPERATIONS
−Removed: Quarter ended September 30, 2021 compared to quarter ended September 30, 2020
−Removed: First Keystone Corporation realized earnings for the third quarter of 2021 of $4,023,000, an increase of $886,000, or 28.2% from the third quarter of 2020.
−Removed: The increase in net income for the three months ended September 30, 2021 was primarily due to increases in net interest income, ATM and debit card fees, and service charges and fees, offset by a decrease in salaries and employee benefits.
−Removed: On a per share basis, for the three months ended September 30, 2021, net income was $0.68 versus $0.54 for the same three month period of 2020.
−Removed: Cash dividends amounted to $0.28 and $0.27 per share for the three months ended September 30, 2021 and 2020, respectively.
+Added: Quarter ended March 31, 2022 compared to quarter ended March 31, 2021
+Added: First Keystone Corporation realized earnings for the first quarter of 2022 of $3,543,000, a decrease of $335,000, or 8.6% from the first quarter of 2021.
+Added: The decrease in net income for the three months ended March 31, 2022 was primarily due to a decrease in non-interest income, mainly due to losses on sales of mortgage loans and net securities losses, as compared to gains on sales of mortgage loans and net securities gains realized during the same period in 2021.
+Added: On a per share basis, for the three months ended March 31, 2022, net income was $0.60 versus $0.66 for the same three month period of 2021.
+Added: Cash dividends amounted to $0.28 per share for the three months ended March 31, 2022 and 2021.
NET INTEREST INCOME
The major source of operating income for the Company is net interest income, defined as interest income less interest expense.
−Removed: In the three months ended September 30, 2021, interest income amounted to $10,716,000, an increase of $864,000 or 8.8% from the three months ended September 30, 2020, while interest expense amounted to $1,283,000 in the three months ended September 30, 2021, an increase of $52,000 or 4.2% from the three months ended September 30, 2020.
+Added: In the three months ended March 31, 2022, interest income amounted to $10,629,000, an increase of $354,000 or 3.4% from the three months ended March 31, 2021.
+Added: The increase in interest income was mainly the result of a $331,000 increase in interest earned on taxable securities and a $228,000 increase in interest earned on loans, offset by a $246,000 decrease in SBA PPP lender fees.
+Added: Interest expense amounted to $1,173,000 in the three months ended March 31, 2022, a decrease of $132,000 or 10.1% from the three months ended March 31, 2021, mainly due to a $110,000 decrease in interest paid on deposits.
As a result, net interest income increased $486,000 or 5.4% to $9,456,000 from $8,970,000 for the same period in 2021.
−Removed: The Company’s net interest margin for the three months ended September 30, 2021 was 3.18% compared to 3.59% for same period in 2020.
−Removed: The decrease in net interest margin was primarily a result of decreases in yields earned on loans and securities.
+Added: The Company’s net interest margin for the three months ended March 31, 2022 was 3.19% compared to 3.37% for same period in 2021.
+Added: The decrease in net interest margin was primarily a result of a decrease in yields on loans.
PROVISION FOR LOAN LOSSES
−Removed: The provision for loan losses for the three months ended September 30, 2021 and 2020 was $185,000 and $294,000, respectively.
−Removed: The decrease in the provision for loan losses resulted from the Company’s analysis of the current loan portfolio, including historic losses, past-due trends, current economic conditions, loan portfolio growth, and other relevant factors.
−Removed: The provision for loan losses for the three months ended September 30, 2021 is also reflective of management’s assessment of the continued credit risk associated with the economic uncertainty surrounding the COVID-19 pandemic.
−Removed: Charge-off and recovery activity in the allowance for loan losses resulted in net charge-offs of
−Removed: $21,000 and $49,000 for the the three months ended September 30, 2021 and 2020, respectively.
+Added: The provision for loan losses for the three months ended March 31, 2022 and 2021 was $219,000 and $135,000, respectively.
+Added: The increase in the provision for loan losses resulted from the Company’s analysis of the current loan portfolio, including historic losses, past-due trends, current economic conditions, loan portfolio growth, and other relevant factors.
+Added: The provision for loan losses for the three months ended March 31, 2022 is also reflective of
+Added: management’s assessment of the continued credit risk associated with the economic uncertainty surrounding the COVID-19 pandemic.
+Added: Charge-off and recovery activity in the allowance for loan losses resulted in net recoveries of $38,000 and net charge-offs of $21,000 for the the three months ended March 31, 2022 and 2021, respectively.
See Allowance for Loan Losses on page 40 for further discussion.
NON-INTEREST INCOME
−Removed: Total non-interest income was $1,697,000 for the three months ended September 30, 2021, as compared to $1,515,000 for the same period in 2020, an increase of $182,000, or 12.0%.
−Removed: The increase was due to increased service charges and fee income, increased ATM fees and debit card income and an increase in gains on held equity securities.
−Removed: Net securities gains increased $31,000 to $22,000 for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.
−Removed: This increase was due to the Company taking $18,000 in gains on held equity securities in the third quarter of 2021 as compared to taking $70,000 in losses on held equity securities and $61,000 in net gains on the sale of debt securities in the third quarter of 2020.
−Removed: Trust department income increased $21,000 or 9.5% to $243,000 for the three months ended September 30, 2021 as compared to the same period in 2020 due to increased income on IRA accounts.
+Added: Total non-interest income was $1,389,000 for the three months ended March 31, 2022, as compared to $1,875,000 for the same period in 2021, a decrease of $486,000, or 25.9%.
+Added: The decrease was due to recognizing losses on the sales of mortgage loans and net securities losses on held equity securities during the first quarter of 2022 as compared to recognizing gains on both during the same period of 2021.
+Added: Net securities (losses) gains decreased $178,000 to ($63,000) for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.
+Added: This decrease was due to the Company recognizing $63,000 in losses on held equity securities in the first quarter of 2022 as compared to recognizing $115,000 in gains on held equity securities in the first quarter of 2021.
+Added: Trust department income decreased $3,000 or 1.2% to $250,000 for the three months ended March 31, 2022 as compared to the same period in 2021.
Service charges and fee income increased $134,000 or 35.7%.
−Removed: The increase was mainly due to an increase in overdraft fees as compared to the same period in 2020.
−Removed: ATM fees and debit card income increased $54,000 or 10.8% to $555,000 for the three months ended September 30, 2021 due to increased debit card interchange fees as the result of increased transaction volume in the second quarter of 2021.
−Removed: Gains on sales of mortgage loans decreased $35,000 or 20.1% to $139,000 due to lower average gains on individual sold loans in the third quarter of 2021 as compared to the third quarter of 2020.
−Removed: NON-INTEREST EXPENSE
−Removed: Total non-interest expense was $6,267,000 for the three months ended September 30, 2021, as compared to $6,256,000 for the three months ended September 30, 2020.
−Removed: Expenses associated with employees (salaries and employee benefits) continue to be the largest category of non-interest expense.
−Removed: Salaries and benefits amounted to $3,303,000 or 52.7% of total non-interest expense for the three months ended September 30, 2021, as compared to $3,554,000 or 56.8% for the three months ended September 30, 2020.
−Removed: The decrease was due to lower expense associated with health insurance.
−Removed: Net occupancy, furniture and equipment, and computer expense amounted to $913,000 for the three months ended September 30, 2021, an increase of $6,000 or 0.7% which was due to the implementation of several new software programs offset by a decrease in rent expense.
−Removed: Professional services increased $24,000 or 10.9% to $244,000 as of September 30, 2021.
−Removed: The increase was mainly the result of an increase in consulting expense due to broker fees resulting from the Company’s subordinated debt issuance.
−Removed: Pennsylvania shares tax expense amounted to $309,000 for the three months ended September 30, 2021, an increase of $78,000 or 33.8% as compared to the three months ended September 30, 2020.
−Removed: The increase was the result of increases in total equity.
−Removed: Federal Deposit Insurance Corporation (“FDIC”) insurance expense increased $30,000 for the three months ended September 30, 2021.
−Removed: FDIC insurance expense varies with changes in net asset size, risk ratings, and FDIC derived assessment rates.
−Removed: ATM and debit card fees expense amounted to $281,000 for the three months ended September 30, 2021, an increase of $28,000 or 11.1% as compared to the three months ended September 30, 2020.
−Removed: The increase was due to increased electronic funds transfer fees as the result of increased customer transaction volume.
−Removed: Data processing expenses amounted to $295,000 for the three months ended September 30, 2020 as compared to $283,000 for the same period of 2020, an increase of $12,000 or 4.2%.
−Removed: Foreclosed assets held for resale expense decreased $30,000 for the three months ended September 30, 2021.
−Removed: As of September 30, 2021 the Company did not own any foreclosed properties.
−Removed: Advertising expense increased $19,000 or 23.2% during the three months ended September 30, 2021.
−Removed: This increase was mainly due to an increase in digital and
−Removed: social media and civic advertising as compared to the same period in 2020.
−Removed: In 2020, civic advertising was affected by the COVID-19 pandemic as many events that the Bank would normally sponsor were canceled.
−Removed: In addition, newspaper advertising is down due to utilizing more digitally focused advertising mediums.
−Removed: Other non-interest expense amounted to $718,000 for the three months ended September 30, 2021, an increase of $95,000 or 15.2% as compared to the three months ended September 30, 2020.
−Removed: This increase was mainly due to an increase in the provision for unfunded commitments due to an increase in commercial real estate commitments in the third quarter of 2021 as compared to the same period in 2020.
−Removed: Income tax expense amounted to $655,000 for the three months ended September 30, 2021, as compared to $449,000 for the three months ended September 30, 2020, an increase of $206,000.
−Removed: The effective total income tax rate was 14.0% for the three months ended September 30, 2021 as compared to 12.5% for the three months ended September 30, 2020.
−Removed: The increase in the effective tax rate was mainly due to higher overall operating income.
−Removed: The Company recognized $101,000 of tax credits from low-income housing partnerships in the three months ended September 30, 2021.
−Removed: Nine months ended September 30, 2021 compared to nine months ended September 30, 2020
−Removed: First Keystone Corporation realized earnings for the nine months ended September 30, 2021 of $11,506,000, an increase of $2,935,000, or 34.2% from the same period in 2020.
−Removed: The increase in net income for the nine months ended September 30, 2021 was primarily due to an increase in net interest income, net securities gains, and gains on sales of mortgage loans.
−Removed: On a per share basis, net income was $1.95 for the nine months ended September 30, 2021 versus $1.47 for the same period in 2020.
−Removed: Cash dividends amounted to $0.81 and $0.83 per share for the nine months ended September 30, 2021 and 2020, respectively.
−Removed: NET INTEREST INCOME
−Removed: The major source of operating income for the Company is net interest income, defined as interest income less interest expense.
−Removed: For the nine months ended September 30, 2021, interest income amounted to $31,250,000, an increase of $1,999,000 or 6.8% from the nine months ended September 30, 2020, while interest expense amounted to $3,876,000 in the nine months ended September 30, 2021, a decrease of $1,260,000 or 24.5% from the nine months ended September 30, 2020.
−Removed: As a result, net interest income increased $3,259,000 or 13.5% to $27,374,000 from $24,115,000 for the same period in 2020.
−Removed: The Company’s net interest margin for the nine months ended September 30, 2021 was 3.25% compared to 3.45% for same period in 2020.
−Removed: The decrease in net interest margin was a result of decreases in yields earned on loans and securities.
−Removed: PROVISION FOR LOAN LOSSES
−Removed: The provision for loan losses for the nine months ended September 30, 2021 and 2020 was $455,000 and $682,000, respectively.
−Removed: The decrease in the provision for loan losses resulted from the Company’s analysis of the current loan portfolio, including historic losses, past-due trends, current economic conditions, loan portfolio growth, and other relevant factors.
−Removed: The provision for loan losses for the nine months ended September 30, 2021 is also reflective of management’s assessment of the continued credit risk associated with the economic uncertainty surrounding the COVID-19 pandemic.
−Removed: Charge-off and recovery activity in the allowance for loan losses resulted in net charge-offs of $100,000 and $108,000 for the nine months ended September 30, 2021 and 2020, respectively.
−Removed: See Allowance for Loan Losses on page 46 for further discussion.
−Removed: NON-INTEREST INCOME
−Removed: Total non-interest income was $5,437,000 for the nine months ended September 30, 2021, as compared to $4,119,000 for the same period in 2020, an increase of $1,318,000, or 32.0%.
−Removed: The increase was due to an increase in net gains on securities, an increase in gains on sold loans and an increase in ATM fees and debit card income during the nine months ended September 30, 2021.
−Removed: ATM fees and debit card income increased $275,000 or 20.2% to $1,639,000 for the nine months ended September 30, 2021 due to increased debit card interchange fees as the result of increased transaction volume in 2021.
−Removed: Service charges and fee income increased $102,000 for the nine months ended September 30, 2021.
−Removed: The increase was due to increased prepayment penalties earned on commercial loan payoffs and an increase in service charges and overdraft fees on DDA accounts.
−Removed: In the prior year, there were lower fees earned on deposit accounts as overdraft fees and several other deposit account service charges were waived due to the COVID-19 pandemic.
−Removed: Gains on sales of mortgage loans increased $330,000 or 70.1% due to a higher volume of sold loans in 2021 as compared to 2020.
−Removed: Trust department income increased $84,000 or 12.4% to $761,000 for the nine months ended September 30, 2021 as compared to the same period in 2020.
−Removed: The increase was the result of higher income earned from estate fees and IRA accounts during the nine months ended September 30, 2021.
−Removed: Net securities gains increased $477,000 or 152.9% to $165,000 for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.
−Removed: The increase was due to the Company recognizing $540,000 in net losses on held equity securities offset by $228,000 in net gains on sold debt securities during the nine months ended September 30, 2020 as compared to realizing $161,000 in net gains on held equity securities in the same period in 2021.
+Added: The increase was mainly due to increases in overdraft fees and prepayment penalties earned on commercial loan payoffs as compared to the same period in 2021.
+Added: ATM fees and debit card income decreased $7,000 or 1.4% to $509,000 for the three months ended March 31, 2022.
+Added: (Losses) gains on sales of mortgage loans decreased $388,000 or 109.6% to ($34,000) due to a lower number of individual sold loans in the first quarter of 2022 as compared to the first quarter of 2021.
+Added: Many of the loans sold in the first quarter of 2022 were sold at a loss.
+Added: Other non-interest income decreased $43,000 or 38.1% to $70,000 for the three months ended March 31, 2022.
+Added: The decrease was due to lower retail investment income as income from annuities was lower in the first quarter of 2022 as compared to the same period in 2021.
NON-INTEREST EXPENSE
−Removed: Total non-interest expense was $19,011,000 for the nine months ended September 30, 2021, as compared to $17,826,000 for the nine months ended September 30, 2020.
−Removed: Non-interest expense increased $1,185,000 or 6.6%.
+Added: Total non-interest expense was $6,516,000 for the three months ended March 31, 2022, as compared to $6,197,000 for the three months ended March 31, 2021.
Expenses associated with employees (salaries and employee benefits) continue to be the largest category of non-interest expense.
−Removed: Salaries and benefits amounted to $10,064,000 or 52.9% of total non-interest expense for the nine months ended September 30, 2021, as compared to $9,732,000 or 54.6% for the nine months ended September 30, 2020.
−Removed: The increase was due to normal merit increases, new position hires, the filling of vacant positions and an increase in profit sharing expense.
−Removed: Net occupancy, furniture and equipment, and computer expense amounted to $2,758,000 for the nine months ended September 30, 2021, an increase of $36,000 or 1.3%.
−Removed: The increase is the result of the implementation of several new software programs offset by a decrease in rent expense.
−Removed: Professional services increased $91,000 or 13.3% to $776,000 for the nine months ended September 30, 2021.
−Removed: This increase was mainly due to an increase in consulting expense due to goodwill impairment testing and broker fees resulting from the Company’s subordinated debt issuance.
−Removed: Pennsylvania shares tax expense amounted to $935,000 for the nine months ended September 30, 2021, an increase of $255,000 or 37.5% as compared to the nine months ended September 30, 2020.
+Added: Salaries and benefits amounted to $3,554,000 or 54.5% of total non-interest expense for the three months ended March 31, 2022, as compared to $3,300,000 or 53.3% for the three months ended March 31, 2021.
+Added: The increase was mainly due to normal merit increases and new hires along with an increase in medical insurance costs since the first quarter of 2021.
+Added: Net occupancy, furniture and equipment, and computer expense amounted to $1,017,000 for the three months ended March 31, 2022, an increase of $112,000 or 12.4% which was due to the implementation of several new software programs throughout 2021.
+Added: Professional services increased $39,000 or 15.1% to $298,000 as of March 31, 2022.
+Added: The increase was mainly the result of an increase in consulting expense as the result of strategic planning and consulting services associated with implementing new internal systems contracts.
+Added: Pennsylvania shares tax expense amounted to $324,000 for the three months ended March 31, 2022, an increase of $11,000 or 3.5% as compared to the three months ended March 31, 2021.
The increase was the result of an increase in total equity.
−Removed: FDIC insurance expense increased $216,000 or 229.8% for the nine months ended September 30, 2021.
−Removed: This increase was mainly due to small bank assessment credits received from the FDIC effectively reducing the expense in 2020, coupled with growth in total assets in 2021.
+Added: Federal Deposit Insurance Corporation (“FDIC”) insurance expense increased $50,000 for the three months ended March 31, 2022.
FDIC insurance expense varies with changes in net asset size, risk ratings, and FDIC derived assessment rates.
−Removed: ATM and debit card fees expense amounted to $764,000 for the nine months ended September 30, 2021, an increase of $88,000 or 13.0% as compared to the nine months ended September 30, 2020.
−Removed: The increase was due to increased electronic funds transfer fees as the result of increased customer transaction volume.
−Removed: Data processing expenses amounted to $912,000 for the nine months ended September 30, 2021, an increase of $28,000 or 3.2% as compared to the nine months ended September 30, 2020.
−Removed: Foreclosed assets held for resale expense decreased $41,000 for the nine months ended September 30, 2021.
−Removed: As of September 30, 2021, the Company did not own any foreclosed properties.
−Removed: Advertising expense increased $37,000 or 15.1% during the nine months ended September 30, 2021.
−Removed: The increase was mainly due to an increase in digital and social media, business development, radio, billboard and television advertising as compared to 2020.
−Removed: In addition, newspaper advertising is down due to utilizing more digitally focused advertising mediums.
−Removed: Other non-interest expense amounted to $2,207,000 for the nine months ended September 30, 2021, an increase of $143,000 or 6.9% as compared to the nine months ended September 30, 2020.
−Removed: This increase was due to the Company pledging a $50,000 donation to a local community organization along with fraud losses due to an isolated incident.
−Removed: Income tax expense amounted to $1,839,000 for the nine months ended September 30, 2021, as compared to $1,155,000 for the nine months ended September 30, 2020, an increase of $684,000.
−Removed: The effective total income tax rate was 13.8% for the nine months ended September 30, 2021 as compared to 11.9% for the nine months ended September 30, 2020.
−Removed: The increase in the effective tax rate was mainly due to higher overall operating income.
−Removed: The Company recognized $303,000 of tax credits from low-income housing partnerships in the nine months ended September 30, 2021.
+Added: ATM and debit card fees expense amounted to $128,000 for the three months ended March 31, 2022, a decrease of $72,000 or 36.0% as compared to the three months ended March 31, 2021.
+Added: The decrease was the result of negotiations on new internal systems contracts resulting in relationship credits that were applied to the expenses related to those
+Added: Data processing expenses amounted to $258,000 for the three months ended March 31, 2021 as compared to $294,000 for the same period of 2020, a decrease of $36,000 or 12.2%.
+Added: This decrease was also the result of the negotiations on new internal systems contracts.
+Added: Foreclosed assets held for resale expense decreased $3,000 for the three months ended March 31, 2022.
+Added: As of March 31, 2022 the Company did not own any foreclosed properties.
+Added: Advertising expense amounted to $72,000 in the first quarter of 2022 and 2021.
+Added: Other non-interest expense amounted to $728,000 for the three months ended March 31, 2022, a decrease of $36,000 or 4.7% as compared to the three months ended March 31, 2021.
+Added: This decrease was mainly due to a decrease in the provision for unfunded commitments due to a decrease in commercial real estate commitments in the first quarter of 2022 as compared to the same period in 2021.
+Added: Income tax expense amounted to $567,000 for the three months ended March 31, 2022, as compared to $635,000 for the three months ended March 31, 2021, a decrease of $68,000.
+Added: The effective total income tax rate was 13.8% for the three months ended March 31, 2022 as compared to 14.1% for the three months ended March 31, 2021.
+Added: The decrease in the effective tax rate was mainly due to lower overall operating income.
+Added: The Company recognized $74,000 and $101,000 of tax credits from low-income housing partnerships in the three months ended March 31, 2022 and 2021, respectively.
FINANCIAL CONDITION
−Removed: Total assets increased to $1,389,939,000 as of September 30, 2021, an increase of $210,892,000 from year-end 2020.
+Added: Total assets decreased to $1,297,087,000 as of March 31, 2022, a decrease of $23,263,000 from year-end 2021.
Total assets as of December 31, 2021 amounted to $1,320,350,000.
−Removed: Total debt securities available-for-sale increased $66,123,000 or 18.0% to $432,834,000 as of September 30, 2021 from December 31, 2020.
−Removed: Total loans increased $36,175,000 or 5.0% to $756,785,000 as of September 30, 2021 from December 31, 2020.
−Removed: Loan demand grew in the nine months ended September 30, 2021 as the Bank has realized an increase in loan originations, primarily in the commercial real estate portfolio.
−Removed: Total deposits increased $208,016,000 or 22.2% to $1,145,504,000 as of September 30, 2021 from December 31, 2020.
−Removed: The increase was mainly due to the deposit of government stimulus funds, PPP loan proceeds, a $128,271,000 increase in highly rate sensitive deposits and other normal fluctuations.
+Added: Total debt securities available-for-sale decreased $3,035,000 or 0.7% to $434,881,000 as of March 31, 2022 from December 31, 2021.
+Added: Total loans increased $26,187,000 or 3.5% to $779,028,000 as of March 31, 2022 from December 31, 2021.
+Added: Loan demand grew in the three months ended March 31, 2022 as the Bank has realized an increase in loan originations, primarily in the commercial real estate portfolio.
+Added: Total deposits decreased $32,492,000 or 3.0% to $1,045,477,000 as of March 31, 2022 from December 31, 2021.
+Added: The decrease was mainly due to a decrease in highly rate sensitive deposits and other normal fluctuations.
The Company continues to maintain and manage its asset growth.
The Company’s strong equity capital position provides an opportunity to further leverage its asset growth.
−Removed: Total borrowings increased in the nine months ended September 30, 2021 by $359,000 to $64,853,000 from $64,494,000 as of December 31, 2020.
−Removed: Borrowings increased mainly due to an increase in the balance of repurchase agreements offset by the maturity of two long-term notes.
−Removed: Total stockholders’ equity increased to $147,788,000 at September 30, 2021, an increase of $3,546,000 or 2.5% from December 31, 2020 due to an increase in retained earnings offset by a decrease in accumulated other comprehensive income.
+Added: Total borrowings increased in the three months ended March 31, 2022 by $24,954,000 to $87,331,000 from $62,377,000 as of December 31, 2021.
+Added: Borrowings increased mainly due to decreased deposit balances and growth in the loan portfolio.
+Added: Total stockholders’ equity decreased to $133,555,000 at March 31, 2022, a decrease of $15,000,000 or 10.1% from December 31, 2021 due to a decrease in the market value of the securities portfolio resulting in an accumulated other comprehensive loss position.
SEGMENT REPORTING
3 unchanged sentences
By maintaining a healthy asset utilization rate, i.e., the volume of earning assets as a percentage of total assets, the Company maximizes income.
−Removed: The earning asset ratio (average interest earning assets divided by average total assets) equaled 94.1% at September 30, 2021 and 93.0% at September 30, 2020.
+Added: The earning asset ratio (average interest earning assets divided by average total assets) equaled 94.4% at March 31, 2022 and 93.9% at March 31, 2021.
This indicates that the management of earning assets is a priority and non-earning assets, primarily cash and due from banks, fixed assets and other assets, are maintained at minimal levels.
The primary earning assets are loans and securities.
−Removed: Our primary earning asset, total loans, increased to $756,785,000 as of September 30, 2021, up $36,175,000, or 5.0% since year-end 2020.
+Added: Our primary earning asset, total loans, increased to $779,028,000 as of March 31, 2022, up $26,187,000, or 3.5% since year-end 2021.
The loan portfolio continues to be well diversified.
−Removed: Non-performing assets increased since year-end 2020, but overall asset quality has remained consistent.
−Removed: Total non-performing assets were $7,998,000 as of September 30, 2021, an increase of $879,000, or 12.3% from $7,119,000 reported in non-performing assets as of December 31, 2020.
−Removed: The increase in non-performing assets during the nine months ended September 30, 2021 was mainly due to one loan that was moved to non-accrual status during the quarter ended June 30, 2021.
−Removed: Total allowance for loan losses to total non-performing assets was 103.63% as of September 30, 2021 and 111.43% at December 31, 2020.
+Added: Non-performing assets decreased since year-end 2021, but overall asset quality has remained consistent.
+Added: Total non-performing assets were $7,018,000 as of March 31, 2022, a decrease of $48,000, or 0.7% from $7,066,000 reported in non-performing assets as of December 31, 2021.
+Added: Total allowance for loan losses to total non-performing assets was 127.34% as of March 31, 2022 and 122.84% at December 31, 2021.
See the Non-Performing Assets section on page 42 for more information.
−Removed: In addition to loans, another primary earning asset is our overall securities portfolio, which increased in size from December 31, 2020 to September 30, 2021.
−Removed: Debt securities available-for-sale amounted to $432,834,000 as of September 30, 2021, an increase of $66,123,000 from year-end 2020.
−Removed: Interest-bearing deposits in other banks increased as of September 30, 2021, to $121,705,000 from $15,347,000 at year-end 2020 due to increased cash held at the Federal Reserve Bank.
−Removed: Time deposits with other banks were $247,000 at September 30, 2021 and December 31, 2020.
−Removed: Total loans increased to $756,785,000 as of September 30, 2021 as compared to $720,610,000 as of December 31, 2020.
+Added: In addition to loans, another primary earning asset is our overall securities portfolio, which decreased in size from December 31, 2021 to March 31, 2022.
+Added: Debt securities available-for-sale amounted to $434,881,000 as of March 31, 2022, a decrease of $3,035,000 from year-end 2021.
+Added: The decrease in debt securities available-for-sale is mainly due to a $21,876,000 decrease in the market value of the portfolio as a result of the current interest rate environment, offset by the deployment of $34,314,000 in cash to purchase debt securities, along with other portfolio activity.
+Added: Interest-bearing deposits in other banks decreased as of March 31, 2022, to $1,068,000 from $51,738,000 at year-end 2021 due to decreased cash held at the Federal Reserve Bank.
+Added: Time deposits with other banks were $0 at March 31, 2022 and $247,000 at December 31, 2021 due to the maturity of the one remaining time deposit.
+Added: Total loans increased to $779,028,000 as of March 31, 2022 as compared to $752,841,000 as of December 31, 2021.
The table on page 19 provides data relating to the composition of the Company’s loan portfolio on the dates indicated.
Total loans increased by $26,187,000 or 3.5%.
−Removed: Steady demand for borrowing by businesses accounted for the 5.0% increase in the loan portfolio from December 31, 2020 to September 30, 2021.
−Removed: Overall, the Commercial and Industrial portfolio (which includes tax-free Commercial and Industrial loans) increased $2,916,000 or 3.2% to $94,791,000 at September 30, 2021 compared to $91,875,000 at December 31, 2020.
−Removed: The increase in the Commercial and Industrial portfolio during the nine months ended September 30, 2021 was mainly attributable to a $17,388,000 increase in the portion of the Commercial and Industrial portfolio excluding Paycheck Protection Program loans.
−Removed: The increase was mainly attributable to $21,176,000 in new loan originations and an increase in utilization of existing Commercial and Industrial lines of credit of $860,000, offset with loan payoffs of $4,648,000, as well as regular principal payments and other typical fluctuations in the Commercial and Industrial portfolio.
−Removed: The portion of the Commercial and Industrial portfolio attributable to the PPP loans decreased by $10,328,000 during the nine months ended September 30, 2021 as a result of $12,483,000 in new PPP loans originated during the nine months ended September 30, 2021 which were offset by $22,811,000 in PPP loans paid off/forgiven during the same nine-month period.
−Removed: The Commercial Real Estate portfolio (which includes tax-free Commercial Real Estate loans) increased $46,273,000 or 9.9% to $513,001,000 at September 30, 2021 compared to $466,728,000 at December 31, 2020.
−Removed: The increase was mainly the result of $100,528,000 in new loan originations and a $9,360,000 increase in utilization of existing Commercial Real Estate lines of credit, offset by $41,394,000 in loan payoffs, in addition to regular principal payments and other typical amortization in the Commercial Real Estate portfolio.
−Removed: Residential Real Estate loans decreased $13,236,000 or 8.4% to $143,747,000 at September 30, 2021 compared to $156,983,000 at December 31, 2020.
−Removed: The decrease was the result of $22,653,000 in new loan originations and an increase in utilization of existing Residential Real Estate (Home Equity) lines of credit of $170,000, offset by loan payoffs of $23,775,000, net loans sold of $11,529,000, and regular principal payments and other typical amortization in the Residential Real Estate portfolio.
−Removed: Net loans sold for the nine months ended September 30, 2021 consisted of total loans sold during the nine months ended September 30, 2021 of $24,019,000, offset with loans opened
−Removed: and sold in the same quarter during the first three quarters of 2021 which amounted to $12,490,000.
+Added: Steady demand for borrowing by businesses accounted for the 3.5% increase in the loan portfolio from December 31, 2021 to March 31, 2022.
+Added: Overall, the Commercial and Industrial portfolio (which includes tax-free Commercial and Industrial loans) decreased $695,000 or 0.8% from $82,526,000 at December 31, 2021 to $81,831,000 at March 31, 2022.
+Added: The decrease in the Commercial and Industrial portfolio during the three months ended March 31, 2022 was mainly attributable to a reduction of $3,650,000 in the portion of the Commercial and Industrial portfolio attributable to SBA PPP loans, the balance of which decreased from $4,894,000 at December 31, 2021 to $1,244,000 at March 31, 2022, as a result of loan forgiveness.
+Added: The portion of the Commercial and Industrial portfolio excluding SBA PPP loans increased $2,955,000 during the three months ended March 31, 2022, mainly resulting from $3,246,000 in new loan originations for the three months ended March 31, 2022 and an increase in utilization of existing Commercial and Industrial lines of credit of $2,013,000, offset by loan payoffs of $808,000 and regular principal payments and other typical fluctuations in the Commercial and Industrial portfolio during the three months ended March 31, 2022.
+Added: The Commercial Real Estate portfolio (which includes tax-free Commercial Real Estate loans) increased $28,267,000 or 5.4% from $521,654,000 at December 31, 2021 to $549,921,000 at March 31, 2022.
+Added: The increase is mainly attributable to new loan originations of $53,605,000 for the three months ended March 31, 2022, offset by loan payoffs of $23,289,000 and a decrease in utilization of existing Commercial Real Estate lines of credit of $1,002,000, as well as regular principal payments and other typical amortization in the Commercial Real Estate portfolio during the three months ended March 31, 2022.
+Added: Residential Real Estate loans decreased $1,393,000 or 1.0% from $143,383,000 at December 31, 2021 to $141,990,000 at March 31, 2022.
+Added: The decrease was mainly the result of $7,180,000 in new loan originations and an increase in utilization of existing Residential Real Estate (Home Equity) lines of credit of $1,018,000, offset by net loans sold of $2,719,000, loan payoffs of $6,294,000 (of which $1,872,000 was refinanced with the Bank during the three months ended March 31,2022 with the new refinanced loan balances included in the new
+Added: loan origination total), and regular principal payments and other typical amortization in the Residential Real Estate portfolio during the three months ended March 31, 2022.
+Added: Net loans sold for the three months ended March 31, 2022 consisted of total loans sold during the three months ended March 31, 2022 of 4,463,000, offset with loans opened and sold in the same quarter during the first quarter of 2022 which amounted to $1,744,000.
The Company continues to originate and sell certain long-term fixed rate residential mortgage loans which conform to secondary market requirements.
2 unchanged sentences
Management believes that the loan portfolio is well diversified.
−Removed: The total commercial portfolio was $607,792,000 at September 30, 2021.
+Added: The total commercial portfolio was $631,752,000 at March 31, 2022.
Of total loans, $549,921,000 or 70.6% were secured by commercial real estate, primarily lessors of residential buildings and dwellings and lessors of non-residential buildings.
1 unchanged sentence
Overall, the portfolio risk profile as measured by loan grade is considered low risk, as $753,796,000 or 96.9% of gross loans are graded Pass;
−Removed: $1,329,000 are graded Special Mention;
+Added: $2,319,000 or 0.3% are graded Special Mention;
$21,772,000 or 2.8% are graded Substandard;
2 unchanged sentences
See Note 4 — Loans and Allowance for Loan Losses for risk grading tables.
−Removed: Overall, non-pass grades increased to $25,295,000 at September 30, 2021, as compared to $24,137,000 at December 31, 2020.
−Removed: Commercial and Industrial non-pass grades decreased to $822,000 as of September 30, 2021 as compared to $919,000 as of December 31, 2020.
−Removed: Commercial Real Estate non-pass grades increased to $22,609,000 as of September 30, 2021 as compared to $21,789,000 as of December 31, 2020.
−Removed: The Residential Real Estate and Consumer loan non-pass grades increased to $1,864,000 as of September 30, 2021 as compared to $1,429,000 as of December 31, 2020.
−Removed: The increase in Commercial Real Estate non-pass grades during the nine months ended September 30, 2021 is mainly due to the downgrade of one loan to a contractor specializing in modular construction in the amount of $1,000,000.
−Removed: The loan was downgraded to substandard and placed on non-accrual status during the second quarter of 2021 as a result of the borrower’s inability to make payments as scheduled, as the business has ceased operations and has entered into bankruptcy proceedings.
+Added: Overall, non-pass grades decreased to $24,091,000 at March 31, 2022, as compared to $24,737,000 at December 31, 2021.
+Added: Commercial and Industrial non-pass grades decreased to $774,000 as of March 31, 2022 as compared to $796,000 as of December 31, 2021.
+Added: Commercial Real Estate non-pass grades decreased to $21,837,000 as of March 31, 2022 as compared to $22,346,000 as of December 31, 2021.
+Added: The Residential Real Estate and Consumer loan non-pass grades decreased to $1,480,000 as of March 31, 2022 as compared to $1,595,000 as of December 31, 2021.
The Company continues to internally underwrite each of its loans to comply with prescribed policies and approval levels established by its Board of Directors.
(Dollars in thousands)
−Removed: September 30,
Commercial and Industrial
3 unchanged sentences
The allowance for loan losses constitutes the amount available to absorb losses within the loan portfolio.
−Removed: As of September 30, 2021, the allowance for loan losses was $8,288,000 as compared to $7,933,000 as of December 31, 2020.
+Added: As of March 31, 2022, the allowance for loan losses was $8,937,000 as compared to $8,680,000 as of December 31, 2021.
The allowance for loan losses is established through a provision for loan losses charged to expenses.
4 unchanged sentences
The methodology in determining adequacy incorporates specific and general allocations together with a risk/loss analysis on various segments of the portfolio according to an internal loan review process.
−Removed: This assessment results in an allocated allowance.
+Added: This assessment results in an allocated
Management maintains its loan review and loan classification standards consistent with those of its regulatory supervisory authority.
1 unchanged sentence
However, there can be no assurance that the allowance for loan losses will be adequate to cover significant losses, if any, that might be incurred in the future.
−Removed: In response to the COVID-19 pandemic and its impact on the current economy, the qualitative factors related to the local/regional economy were increased by two basis points across all loan segments during the first quarter of 2020 and increased by an additional basis point across all loan segments during the second quarter of 2020.
−Removed: The qualitative factor relating to the impact of external factors/conditions for the Commercial Real Estate portfolio segment was increased by an additional basis point during the third quarter of 2020.
−Removed: The qualitative factors relating to the impact of external factors/conditions were increased by two additional basis points across all loan segments during the fourth quarter of 2020.
−Removed: Qualitative factors remained unchanged during the first quarter of 2021.
+Added: On a quarterly basis, management evaluates the qualitative factors utilized in the calculation of the Company’s allowance for loan losses and various adjustments are made to these factors as deemed necessary at the time of evaluation.
+Added: The economic impact caused by the COVID-19 pandemic has played a large role in the qualitative factor adjustments that have been implemented throughout 2021 and the first quarter of 2022.
+Added: Qualitative factors remained unchanged during the first quarter of 2021, as the economy and unemployment levels showed marked improvement over the prior quarter.
During the second quarter of 2021, the qualitative factors related to the local/regional economy were decreased by one basis point across all loan segments, as the economy and job growth in the Company’s market areas demonstrated marked improvement over the prior quarter, and the qualitative factor related to collateral values was increased by one basis point for both the Commercial Real Estate and Residential Real Estate portfolio segments due to increasing market values in the real estate sector.
Qualitative factors remained unchanged during the third quarter of 2021.
−Removed: Modifications granted in compliance with Section 4013 of the CARES Act were highest in the Commercial Real Estate portfiolio segment, the long-term effects of which are still very unclear, as there is still economic uncertainty related to the COVID-19 pandemic, especially in relation to this segment of the Company’s loan portfolio.
+Added: During the fourth quarter of 2021, the qualitative factors related to external factors/conditions were increased by one basis point across all loan segments due increased inflation rates, as well as elevated unemployment levels (although improved from 2020 and early 2021) and the uncertainty of how broad the changes implemented by the Federal Reserve would be, and the qualitative factors related to collateral values were increased by one basis point across all loan segments, as collateral values continued to artificially increase as individuals were willing to pay above-average market prices in all sectors.
+Added: During the first quarter of 2022, the qualitative factors related to the local/regional economy were increased by one basis point across all loan segments due to ongoing economic uncertainty resulting from supply chain disruptions caused by the COVID-19 pandemic, conflicts in foreign countries causing inflationary pressures due to reductions/disruptions in the production of the commodities controlled by these countries, increased interest rates, and the overall inflation rate continuing to rise.
+Added: Modifications granted in compliance with Section 4013 of the CARES Act were highest in the Commercial Real Estate portfolio segment, the long-term effects of which are still very unclear, as there is still economic uncertainty related to the COVID-19 pandemic, especially in relation to this segment of the Company’s loan portfolio.
See Allowance for Loan Losses on page 15 for further discussion.
−Removed: The Analysis of Allowance for Loan Losses table contains an analysis of the allowance for loan losses indicating charge-offs and recoveries for the nine months ended September 30, 2021 and 2020.
−Removed: Net charge-offs as a percentage of average loans was 0.01.
−Removed: Net charge-offs amounted to $100,000 the nine months ended September 30, 2021 as compared to $108,000 for the nine months ended September 30, 2020.
−Removed: For the nine months ended September 30, 2021, the provision for loan losses was $455,000 as compared to $682,000 for the nine months ended September 30, 2020.
+Added: The Analysis of Allowance for Loan Losses table contains an analysis of the allowance for loan losses indicating charge-offs and recoveries for the three months ended March 31, 2022 and 2021.
+Added: Net recoveries as a percentage of average loans was 0.005% for the three months ended March 31, 2022 and net charge-offs as a percentage of average loans was 0.003% for the three months ended March 31, 2021.
+Added: Net recoveries amounted to $38,000 the three months ended March 31, 2022 as compared to net charge-offs of $21,000 for the three months ended March 31, 2021.
+Added: For the three months ended March 31, 2022, the provision for loan losses was $219,000 as compared to $135,000 for the three months ended March 31, 2021.
The provision, net of charge-offs and recoveries, resulted in the quarter end allowance for loan losses of $8,937,000 of which 7.5% was attributed to the Commercial and Industrial component;
3 unchanged sentences
and 10.0% being the unallocated component (refer to the activity in Note 4 – Loans and Allowance for Loan Losses on page 15).
−Removed: The Company determined that the provision for loan losses made during the current quarter was sufficient to maintain the allowance for loan losses at a level necessary for the probable losses inherent in the loan portfolio as of September 30, 2021.
+Added: The Company determined that the provision for loan losses made during the current quarter was sufficient to maintain the allowance for loan losses at a level necessary for the probable losses inherent in the loan portfolio as of March 31, 2022.
Analysis of Allowance for Loan Losses
(Dollars in thousands)
−Removed: September 30,
−Removed: September 30,
Balance at beginning of period
5 unchanged sentences
Residential Real Estate
−Removed: Net charge-offs
+Added: Net (recoveries) charge-offs
Additions charged to operations
Balance at end of period
−Removed: Ratio of net charge-offs during the period to average loans outstanding during the period
+Added: Ratio of net (recoveries) charge-offs during the period to average loans outstanding during the period
Allowance for loan losses to average loans outstanding during the period
4 unchanged sentences
A detailed quarterly analysis to determine the adequacy of the Company’s allowance for loan losses is reviewed by the Board of Directors.
−Removed: With the Bank’s manageable level of net charge-offs and the additions to the reserve from the provision out of operations, the allowance for loan losses as a percentage of average loans amounted to 1.13% at September 30, 2021 and 2020, respectively.
+Added: With the Bank’s manageable level of net charge-offs and recoveries along with the additions to the reserve from the provision out of operations, the allowance for loan losses as a percentage of average loans amounted to 1.167% and 1.116% at March 31, 2022 and 2021, respectively.
NON-PERFORMING ASSETS
6 unchanged sentences
While unusual, there may be instances of loan principal forgiveness.
−Removed: Any loan modifications made in response to the COVID-19 pandemic are not considered troubled debt restructurings as long as the criteria set forth in Section 4013 of the CARES Act are
+Added: Any loan modifications made in response to the COVID-19 pandemic
+Added: are not considered TDRs as long as the criteria set forth in Section 4013 of the CARES Act are met.
Foreclosed assets held for resale represent property acquired through foreclosure, or considered to be an in-substance foreclosure.
−Removed: Total non-performing assets amounted to $7,998,000 as of September 30, 2021, as compared to $7,119,000 as of December 31, 2020.
−Removed: The economy is still in flux.
−Removed: Businesses have reopened to find customers wanting to return, but employees, in many cases, wanting to continue to work from home or remain unemployed.
−Removed: The work force has dwindled, inflationary pressures have caused prices to increase, the vaccination debate continues, and political unrest has reached an unprecedented level.
+Added: Total non-performing assets amounted to $7,018,000 as of March 31, 2022, as compared to $7,066,000 as of December 31, 2021.
+Added: The economy is very unstable.
+Added: The unemployment rate has dropped significantly compared to the beginning of the COVID-19 pandemic, but the labor force participation rate has also fallen.
+Added: The need for workers has driven wages up in most sectors.
+Added: Inflation is causing extreme concerns in all areas of the economy.
+Added: The war abroad and its effects on various commodities are pushing inflationary concerns.
+Added: Values of new and used homes and automobiles continue to climb.
+Added: The Federal Reserve has indicated a plan to raise interest rates at an accelerated level throughout the year and there has been a resurgence of the COVID-19 pandemic in some areas of the country and world.
These forces have had a direct effect on the Company’s non-performing assets.
The Company is closely monitoring its Commercial Real Estate portfolio because of the current uncertain economic environment.
−Removed: Non-accrual loans totaled $7,923,000 as of September 30, 2021, as compared to $7,078,000 as of December 31, 2020.
−Removed: The increase in non-accrual loans at September 30, 2021 compared to December 31, 2020 is mainly due to one loan in the amount of $1,000,000 to a contractor specializing in modular construction that was moved to non-accrual status during the second quarter of 2021 due to the borrower’s inability to make payments as scheduled, as the business has ceased operations and has entered into bankruptcy proceedings.
−Removed: There were no foreclosed assets held for resale as of September 30, 2021, compared to $28,000 in foreclosed assets held for resale as of December 31, 2020.
−Removed: There were $75,000 in loans past-due 90 days or more and still accruing interest at September 30, 2021, as compared to $13,000 in loans past-due 90 days or more and still accruing interest as of December 31, 2020
−Removed: Non-performing assets to total loans was 1.06% at September 30, 2021 and 0.99% at December 31, 2020.
−Removed: Non-performing assets to total assets was 0.58% at September 30, 2021 and December 31, 2020.
−Removed: The allowance for loan losses to total non-performing assets was 103.63% as of September 30, 2021 as compared to 111.43% as of December 31, 2020.
+Added: Non-accrual loans totaled $7,018,000 as of March 31, 2022, as compared to $7,066,000 as of December 31, 2021.
+Added: There were no foreclosed assets held for resale as of March 31, 2022 and December 31, 2021.
+Added: There were no loans past-due 90 days or more and still accruing interest at March 31, 2022 and December 31, 2021.
+Added: Non-performing assets to total loans was 0.90% at March 31, 2022 and 0.94% at December 31, 2021.
+Added: Non-performing assets to total assets was 0.54% at March 31, 2022 and December 31, 2021, respectively.
+Added: The allowance for loan losses to total non-performing assets was 127.34% as of March 31, 2022 as compared to 122.84% as of December 31, 2021.
Additional detail can be found on page 45 in the Non-Performing Assets and Impaired Loans table and page 24 in the Non-Performing Assets table.
1 unchanged sentence
Performing substandard loans which are not deemed to be impaired have characteristics that cause management to have doubts regarding the ability of the borrower to perform under present loan repayment terms and which may result in reporting these loans as non-performing loans in the future.
−Removed: Performing substandard loans not deemed to be impaired amounted to $10,291,000 at September 30, 2021, compared to $9,992,000 at December 31, 2020.
−Removed: Impaired loans were $14,889,000 at September 30, 2021 and $15,054,000 at December 31, 2020.
−Removed: The largest impaired loan relationship at September 30, 2021 and December 31, 2020 consisted of a non-performing loan to a student housing holding company which was secured by commercial real estate.
−Removed: At September 30, 2021, the loan carried a balance of $3,090,000, net of $1,989,000 that had been charged off to date, compared to December 31, 2020 when the loan carried a balance of $3,090,000, net of $1,989,000 that had been charged off to date.
−Removed: The second largest impaired loan relationship at September 30, 2021 and December 31, 2020 consisted of one performing loan to a student housing holding company, which was classified as a TDR.
−Removed: The loan was secured by commercial real estate and carried a balance of $2,880,000 as of September 30, 2021, net of $943,000 that had been charged off to date, compared to December 31, 2020 when the loan carried a balance of $2,929,000, net of $943,000 that had been charged off to date.
−Removed: The third largest impaired loan relationship at September 30, 2021 and December 31, 2020 consisted of a substandard performing loan to a developer of a residential sub-division.
−Removed: The loan was secured by commercial real estate and classified as a TDR.
−Removed: The loan carried a balance of $1,232,000 at September 30, 2021 compared to $1,326,000 at December 31, 2020.
+Added: Performing substandard loans not deemed to be impaired amounted to $10,113,000 at March 31, 2022, compared to $10,463,000 at December 31, 2021.
+Added: Impaired loans were $13,373,000 at March 31, 2022 and $13,673,000 at December 31, 2021.
+Added: The largest impaired loan relationship at March 31, 2022 and December 31, 2021 consisted of a non-performing loan to a student housing holding company which was secured by commercial real estate.
+Added: At March 31, 2022, the loan carried a balance of $3,090,000, net of $1,989,000 that had been charged off to date, compared to December 31, 2021 when the loan carried a balance of $3,090,000, net of $1,989,000 that had been charged off to date.
+Added: The second largest impaired loan relationship at March 31, 2022 and December 31, 2021 consisted of one performing loan to a student housing holding company, which was classified as a TDR.
+Added: The loan was secured by commercial real estate and carried a balance of $2,846,000 as of March 31, 2022, net of $943,000 that had been charged off to date, compared to December 31, 2021 when the loan carried a balance of $2,864,000, net of $943,000 that had been charged off to date.
+Added: The third largest impaired loan relationship at March 31, 2022 and December 31, 2021 consisted of five non-performing loans to a plastic processing company focused on non-post-consumer recycling.
+Added: Three loans were classified in the Commercial and Industrial portfolio and modified as TDRs and two loans were secured by commercial real estate.
+Added: The loans carried an aggregate balance of $1,153,000 at March 31, 2022, compared to December 31, 2021 when the loans carried an aggregate balance of $1,176,000.
The Company estimates impairment based on its analysis of the cash flows or collateral estimated at fair value less cost to sell.
For collateral dependent loans, the estimated appraisal or other qualitative adjustments and cost to sell percentages are determined based on the market area in which the real estate securing the loan is located, among other factors, and therefore, can differ from one loan to another.
−Removed: Of the $14,889,000 in impaired loans at September 30, 2021, none were located outside of the Company’s primary market area.
−Removed: The outstanding recorded investment of TDRs as of September 30, 2021 and December 31, 2020 was $8,414,000 and $9,563,000, respectively.
−Removed: The decrease in TDRs at September 30, 2021 as compared to December 31, 2020 is mainly attributable to the payoff of a Commercial Real Estate TDR to a real estate holding company which was completed during the third quarter of 2021 in the amount of $1,010,000, as well as regular principal payments made on
−Removed: existing TDRs during the nine months ended September 30, 2021.
−Removed: Of the thirty-three restructured loans at September 30, 2021, six loans were classified in the Commercial and Industrial portfolio, twenty-six loans were classified in the Commercial Real Estate portfolio, and one loan was classified in the Residential Real Estate portfolio.
−Removed: Troubled debt restructurings at September 30, 2021 consisted of thirteen term modifications beyond the original stated term, three rate modifications, and sixteen payment modifications.
+Added: Of the $13,373,000 in impaired loans at March 31, 2022, none were located outside of the Company’s primary market area.
+Added: The outstanding recorded investment of TDRs as of March 31, 2022 and December 31, 2021 was $7,736,000 and $8,020,000, respectively.
+Added: The decrease in TDRs at March 31, 2022 as compared to December 31, 2021 is mainly attributable to regular principal payments and paydowns on existing TDRs that were completed during the three months ended March 31, 2022.
+Added: Of the twenty-eight restructured loans at March 31, 2022, four loans were classified in the
+Added: Commercial and Industrial portfolio, twenty-three loans were classified in the Commercial Real Estate portfolio, and one loan was classified in the Residential Real Estate portfolio.
+Added: Troubled debt restructurings at March 31, 2022 consisted of ten term modifications beyond the original stated term, three rate modifications, and fourteen payment modifications.
There was also one troubled debt restructuring that experienced all three types of modifications—payment, rate, and term.
TDRs are separately evaluated for payment disclosures, and if necessary, a specific allocation is established.
−Removed: There were no specific allocations attributable to the TDRs at September 30, 2021 or December 31, 2020.
−Removed: There were no unfunded commitments attributable to the TDRs at September 30, 2021 and December 31, 2020.
−Removed: At September 30, 2021, eight Commercial Real Estate loans classified as TDRs with a combined recorded investment of $541,000, three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $724,000, and one Residential Real Estate loan classified as a TDR with a recorded investment of $15,000 were not in compliance with the terms of their restructure, compared to September 30, 2020 when nine Commercial Real Estate loans classified as TDRs with a combined recorded investment of $1,288,000 and three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $751,000 were not in compliance with the terms of their restructure.
−Removed: Three Commercial Real Estate loans totaling $291,000 that were modified as TDRs within the twelve months preceding September 30, 2021 experienced payment defaults during the nine months ended September 30, 2021.
−Removed: No loans that were modified as TDRs during the twelve months preceding September 30, 2021 experienced payment defaults during the three months ended September 30, 2021.
−Removed: Of the loans that were modified as TDRs during the twelve months preceding September 30, 2020, two Commercial Real Estate loans totaling $62,000 experienced payment defaults during the nine months ended September 30, 2020.
−Removed: No loans that were modified as TDRs during the twelve months preceding September 30, 2020 experienced payment defaults during the three months ended September 30, 2020.
−Removed: The Company’s non-accrual loan valuation procedure for any loans greater than $250,000 requires an appraisal to be obtained and reviewed annually at year end, unless the Board of Directors waives such requirement for a specific loan, in favor of obtaining a Certificate of Inspection instead.
+Added: There were no specific allocations attributable to the TDRs at March 31, 2022 or December 31, 2021.
+Added: There were no unfunded commitments attributable to the TDRs at March 31, 2022 and December 31, 2021.
+Added: At March 31, 2022, three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $696,000, six Commercial Real Estate loans classified as TDRs with a combined recorded investment of $431,000, and one Residential Real Estate loan classified as a TDR with a balance of $13,000 were not in compliance with the terms of their restructure, compared to March 31, 2021 when three Commercial and Industrial loans classified as TDRs with a combined recorded investment of $737,000, six Commercial Real Estate loans classified as TDRs with a combined recorded investment of $299,000, and one Residential Real Estate loan classified as a TDR with a recorded investment of $17,000 were not in compliance with the terms of their restructure.
+Added: One Commercial Real Estate loan that was modified as a TDR within the twelve months preceding March 31, 2022 experienced a payment default during the three months ended March 31, 2022, but the loan was subsequently paid off prior to the end of the quarter.
+Added: Of the loans that were modified as TDRs during the twelve months preceding March 31, 2021, one Commercial Real Estate loan in the amount of $92,000 experienced a payment default during the three months ended March 31, 2021.
+Added: The Company’s non-accrual loan valuation procedure for any loans greater than $250,000 requires an appraisal to be obtained and reviewed annually at year end, unless the Board of Directors waives such requirement for a specific loan, in favor of obtaining a Certificate of Inspection instead, defined as an internal evaluation completed by the Company.
A quarterly collateral evaluation is performed which may include a site visit, property pictures and discussions with realtors and other similar business professionals to ascertain current values.
5 unchanged sentences
They may require additions to allowances based upon their judgments about information available to them at the time of examination.
−Removed: The economic climate is in flux at this time.
−Removed: The COVID-19 pandemic has caused much upheaval and uncertainty in the national and state economy.
−Removed: Experts at all levels are attempting to calculate the intermediate or long term affects that may arise.
−Removed: The Company may experience difficulties collecting payments on time from its borrowers, property values may decline, and certain types of loans may need to be modified, which could cause a rise in the level of impaired loans, non-performing assets, charge-offs, and delinquencies.
+Added: The economic climate remains uncertain at this time.
+Added: The COVID-19 pandemic has caused much upheaval and uncertainty in the national and state economy and experts at all levels are attempting to calculate the intermediate or long term affects.
+Added: The Company may experience difficulties collecting payments on time from its borrowers, and certain types of loans may need to be modified, which could cause a rise in the level of impaired loans, non-performing assets, charge-offs, and delinquencies.
Should such metrics increase, additions to the balance of the Company’s allowance for loan losses could be required.
−Removed: The extent of the impact of the COVID-19
−Removed: pandemic on the Company’s operational and financial performance will depend on certain developments including inflationary pressures, the labor force, and the effectiveness in controlling the spread of the outbreak, etc.
+Added: The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on certain developments including inflationary pressures, the labor force, supply bottlenecks, the government’s ability to respond to foreign and domestic issues, and the effectiveness in controlling the lingering effects of the outbreak, etc.
+Added: and any after-effects of these factors.
+Added: These factors may not immediately impact the Company’s operational and financial performance, as the effects of these factors may lag into the future.
+Added: The Company is also susceptible to the impact of economic and fiscal policy factors that may evolve in the post-pandemic environment.
A concentration of credit exists when the total amount of loans to borrowers, who are engaged in similar activities that are similarly impacted by economic or other conditions, exceed 10% of total loans.
−Removed: As of September 30, 2021 and December 31, 2020, management is of the opinion that there were no loan concentrations exceeding 10% of total loans.
+Added: As of March 31, 2022 and December 31, 2021, management is of the opinion that there were no loan concentrations exceeding 10% of total loans.
Non-Performing Assets and Impaired Loans
(Dollars in thousands)
−Removed: September 30,
Non-performing assets
18 unchanged sentences
Allowance for loan losses to total non-performing assets
−Removed: Real estate mortgages comprise 86.8% of the loan portfolio as of September 30, 2021, as compared to 86.6% as of December 31, 2020.
+Added: Real estate mortgages comprise 88.8% of the loan portfolio as of March 31, 2022, as compared to 88.3% as of December 31, 2021.
Real estate mortgages consist of both residential and commercial real estate loans.
6 unchanged sentences
The collateral values are determined by recent appraisals or Certificates of Inspection, but are generally discounted by management based on historical dispositions, changes in market conditions since the last valuation and management’s expertise and knowledge of the borrower and the borrower’s business.
−Removed: The Company performs an annual evaluation for impairment.
−Removed: Any impairment of goodwill results in a charge to income.
−Removed: The assumptions used in the impairment test of goodwill are susceptible to change based on changes in
−Removed: economic conditions and other factors, including our stock price.
−Removed: Any change in the assumptions which we utilize to determine the carrying value of goodwill could adversely impact our results of operations.
−Removed: The Company periodically assesses whether events or changes in circumstances indicate that the carrying amount of goodwill may be impaired.
−Removed: Management notes that the emergence of COVID-19 as a global pandemic during 2020 resulted in significant deterioration in general economic conditions and the environment in which the Company operates.
−Removed: This uncertainty in 2020 resulted in significant decreases in the market prices for the stock of institutions in the financial services industry, including the Company, however, many stock prices recovered through the end of 2020 and into 2021, and t he Company’s core income has remained strong due to SBA lender fees, lending activity and steady net interest income.
−Removed: Goodwill was evaluated for impairment at December 31, 2020, and it was determined that goodwill was not impaired.
−Removed: Management evaluated the need for an interim goodwill impairment analysis and determined that there were no triggering events or negative factors affecting goodwill since the previous test that would indicate goodwill was impaired as of September 30, 2021.
DEPOSITS, OTHER BORROWED FUNDS AND SUBORDINATED DEBT
2 unchanged sentences
The Bank regularly reviews competing financial institutions’ interest rates, especially when establishing interest rates on certificates of deposit.
−Removed: Total deposits increased $208,016,000 to $1,145,504,000 as of September 30, 2021 as non-interest bearing deposits increased by $46,103,000 and interest bearing deposits increased by $161,913,000 from year-end 2020.
−Removed: The increase in deposits was the result of government stimulus funds, PPP loan proceeds, a $128,271,000 increase in highly rate sensitive deposits and other normal fluctuations.
−Removed: Total short-term and long-term borrowings increased to $64,853,000 as of September 30, 2021, from $64,494,000 at year-end 2020, an increase of $359,000 or 0.6%.
−Removed: The increase in total borrowings was mainly the result of an increase in the balance of repurchase agreements offset by the maturity of two long-term notes.
+Added: Total deposits decreased $32,492,000 to $1,045,477,000 as of March 31, 2022 as non-interest bearing deposits decreased by $7,440,000 and interest bearing deposits decreased by $25,052,000 from year-end 2021.
+Added: The decrease in deposits was the result of a $42,476,000 decrease in highly rate sensitive deposits and other normal fluctuations.
+Added: short-term and long-term borrowings increased to $87,331,000 as of March 31, 2022, from $62,377,000 at year-end 2021, an increase of $24,954,000 or 40.0%.
+Added: The increase in total borrowings was mainly the result of increased short-term borrowings as deposits decreased and cash balances were deployed into earning assets.
On December 10, 2020, the Corporation issued $25,000,000 aggregate principal amount of Subordinated Notes due December 31, 2030 (the “2020 Notes”).
3 unchanged sentences
Normal increases in capital are generated by net income, less dividends paid out.
−Removed: During the nine months ended September 30, 2021, net income less dividends paid increased capital by $6,609,000.
−Removed: Accumulated other comprehensive income (loss) derived from net unrealized gains on debt securities available-for-sale also impacts capital.
+Added: During the three months ended March 31, 2022, net income less dividends paid increased capital by $1,878,000.
+Added: Accumulated other comprehensive (loss) income derived from net unrealized gains on debt securities available-for-sale also impacts capital.
At December 31, 2021 accumulated other comprehensive income was $7,588,000.
−Removed: Accumulated other comprehensive income stood at $8,682,000 at September 30, 2021, a decrease of $4,188,000.
+Added: Accumulated other comprehensive loss stood at ($9,694,000) at March 31, 2022, a decrease of $17,282,000.
Fluctuations in interest rates have regularly impacted the gain/loss position in the Bank’s securities portfolio, as well as its decision to sell securities at a gain or loss.
The fluctuations from net unrealized gains on debt securities available-for-sale do not affect regulatory capital, as the Bank elected to opt-out of the inclusion of this item with the filing of the March 31, 2015 Call Report.
−Removed: The Company held 231,612 shares of common stock as treasury stock at September 30, 2021 and December 31, 2020.
−Removed: This had an effect of reducing our total stockholders’ equity by $5,709,000 as of September 30, 2021 and December 31, 2020.
−Removed: Total stockholders’ equity was $147,788,000 as of September 30, 2021, and $144,242,000 as of December 31, 2020.
−Removed: At September 30, 2021 the Bank met the definition of a “well-capitalized” institution under the regulatory framework for prompt corrective action and the minimum capital requirements under Basel III.
−Removed: The following table presents the Bank’s capital ratios as of September 30, 2021 and December 31, 2020:
−Removed: September 30,
+Added: The Company held 231,611 shares of common stock as treasury stock at March 31, 2022 and December 31, 2021.
+Added: This had an effect of reducing our total stockholders’ equity by $5,709,000 as of March 31, 2022 and December 31, 2021.
+Added: Total stockholders’ equity was $133,555,000 as of March 31, 2022, and $148,555,000 as of December 31, 2021.
+Added: At March 31, 2022 the Bank met the definition of a “well-capitalized” institution under the regulatory framework for prompt corrective action and the minimum capital requirements under Basel III.
+Added: The following table presents the Bank’s capital ratios as of March 31, 2022 and December 31, 2021:
Corrective Action
7 unchanged sentences
The capital buffer requirement effectively raises the minimum required common equity Tier 1 capital ratio to 7.0%, the Tier 1 capital ratio to 8.5%, and the total capital ratio to 10.5% on a fully phased-in basis as of January 1, 2019.
−Removed: As of September 30, 2021, the Bank meets all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis.
+Added: As of March 31, 2022, the Bank meets all capital adequacy requirements under the Basel III Capital Rules on a fully phased-in basis.
The Corporation’s capital ratios are not materially different than those of the Bank.
8 unchanged sentences
● Brokered CDs.
−Removed: At September 30, 2021, the Company had $416,371,000 in maximum borrowing capacity at FHLB (inclusive of the outstanding balances of FHLB long-term notes, FHLB short-term borrowings, and irrevocable standby letters of credit issued by FHLB);
+Added: At March 31, 2022 the Company had $440,392,000 in maximum borrowing capacity at FHLB (inclusive of the outstanding balances of FHLB long-term notes, FHLB short-term borrowings, and irrevocable standby letters of credit issued by FHLB);
the maximum borrowing capacity at ACBB was $15,000,000 and the maximum borrowing capacity of the Federal Discount Window was $2,912,000.
2 unchanged sentences
As a result, the repurchase agreements are accounted for as collateralized financing agreements (secured borrowings) and act as an additional source of liquidity.
−Removed: Securities sold under agreements to repurchase were $29,853,000 at September 30, 2021.
+Added: Securities sold under agreements to repurchase were $24,082,000 at March 31, 2022.
Asset liquidity is provided by securities maturing in one year or less, other short-term investments, federal funds sold, and cash and due from banks.
2 unchanged sentences
Also, short-term borrowings provide funds to meet liquidity needs.
−Removed: Net cash flows provided by operating activities were $11,261,000 as of September 30, 2021, compared to cash used in operating activities of $1,468,000 as of September 30, 2020.
−Removed: Net income amounted to $11,506,000 for the nine months ended September 30, 2021 and $8,571,000 for the nine months ended September 30, 2020.
−Removed: During the nine months ended September 30, 2021 and 2020, net premium amortization on investment securities amounted to $2,124,000 and $1,484,000, respectively.
−Removed: Gains on sales of mortgage loans were $801,000 as of September 30, 2021, compared to $471,000 as of September 30, 2020.
−Removed: Originations of mortgage loans originated for resale exceeded proceeds (including gains) from sales of mortgage loans originated for resale by $1,383,000 and $9,714,000 for the nine months ended September 30, 2021 and 2020.
−Removed: Net securities gains were $165,000 for the nine months ended September 30, 2021, compared to net securities losses of $312,000 for the nine months ended September 30, 2020.
−Removed: Accrued interest receivable decreased by $261,000 for the nine months ended September 30, 2021 and increased by $1,325,000 for the nine months ended September 30, 2020.
−Removed: Other assets increased by $1,422,000 during the nine months ended September 30, 2021 and decreased by $388,000 during the nine months ended September 30, 2020.
−Removed: Other liabilities increased by $44,000 during the nine months ended September 30, 2021 and decreased by $1,310,000 during the nine months ended September 30, 2020.
−Removed: Investing activities used cash of $107,970,000 and $75,567,000 during the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Net activity in the available-for-sale securities portfolio (including proceeds from sale, maturities, and redemptions net against purchases) used cash of $73,542,000 during the nine months ended September 30, 2021, compared to $31,122,000 during the nine months ended September 30, 2020.
−Removed: Net cash used to originate loans amounted to $34,091,000 and $46,218,000 during the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Financing activities provided cash of $204,577,000 and $112,287,000 during the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Deposits increased by $208,016,000 and $157,591,000 during the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Short-term borrowings increased by $10,359,000 during the nine months ended September 30, 2021 and decreased by $31,540,000 during the nine months ended September 30, 2020.
−Removed: Repayment of long-term borrowings amounted to $10,000,000 for both the nine months ended September 30, 2021 and 2020, respectively.
−Removed: Dividends paid amounted to $4,897,000 and $4,724,000 for the nine months ended September 30, 2021 and 2020, respectively.
+Added: Net cash flows provided by operating activities were $5,448,000 and $2,233,000 as of March 31, 2022 and 2021, respectively.
+Added: Net income amounted to $3,543,000 for the three months ended March 31, 2022 and $3,878,000 for the three months ended March 31, 2021.
+Added: During the three months ended March 31, 2022 and 2021, net premium amortization on securities amounted to $838,000 and $658,000, respectively.
+Added: Net losses on sales of mortgage loans amounted to $34,000 for the three months ended March 31, 2022, compared to gains on sales of mortgage loans of $354,000 for the three months ended March 31, 2021.
+Added: Proceeds (net of gains/losses) from sales of mortgage loans originated for resale exceeded originations of mortgage loans originated for resale by $1,228,000 for the three months ended March 31, 2022, and originations of mortgage loans originated for resale exceeded proceeds (net of gains/losses) from sales of mortgage loans originated for resale by $1,984,000 for the three months ended March 31, 2021.
+Added: Net securities losses amounted to $63,000 for the three months ended March 31, 2022, compared to net securities gains of $115,000 for the three months ended March 31, 2021.
+Added: Accrued interest receivable decreased by $40,000 and $186,000 during the three months ended March 31, 2022 and 2021, respectively.
+Added: Other assets increased by $655,000 and $889,000 during the three months ended March 31, 2022 and 2021, respectively.
+Added: Other liabilities decreased by $347,000 during the three months ended March 31, 2022 and increased by $433,000 during the three months ended March 31, 2021.
+Added: Investing activities used cash of $48,070,000 and $26,534,000 during the three months ended March 31, 2022 and 2021, respectively.
+Added: Net activity in the available-for-sale securities portfolio (including proceeds from maturities and redemptions, net against purchases) used cash of $19,679,000 during the three months ended March 31, 2022, compared to $26,687,000 for the three months ended March 31, 2021.
+Added: Changes in restricted investment in bank stocks used cash of
+Added: $1,130,000 during the three months ended March 31, 2022 and provided cash of $200,000 during the three months ended March 31, 2021.
+Added: Net cash used to originate loans amounted to $27,411,000 for the three months ended March 31, 2022, compared to $62,000 for the three months ended March 31, 2021.
+Added: Financing activities used cash of $8,817,000 during the three months ended March 31, 2022 and provided cash of $37,015,000 during the three months ended March 31, 2021.
+Added: Deposits decreased by $32,492,000 during the three months ended March 31, 2022, compared to an increase of $40,369,000 during the three months ended March 31, 2021.
+Added: Short-term borrowings increased by $24,954,000 and $2,929,000 during the three months ended March 31, 2022 and 2021, respectively.
+Added: No repayment of long-term borrowings transpired during the three months ended March 31, 2022, compared to the three months ended March 31, 2021 when repayment of long-term borrowings used cash of $5,000,000.
+Added: Dividends paid amounted to $1,665,000 for the three months ended March 31, 2022, compared to $1,647,000 for the three months ended March 31, 2021.
Managing liquidity remains an important segment of asset/liability management.
4 unchanged sentences
Other than the trends of continued competitive pressures and volatile interest rates, there are no known demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, liquidity increasing or decreasing in any material way.
−Removed: Given our financial strength, we expect to be able to maintain adequate liquidity as we manage through the current environment, utilizing current funding options and possibly utilizing new options, such as the Federal Reserve’s Paycheck Protection Program Liquidity Facility (“PPPLF”).
+Added: Given our financial strength, we expect to be able to maintain adequate liquidity as we manage through the current environment, utilizing current funding options and possibly utilizing new options.
Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates and equity prices.
15 unchanged sentences
This position would contribute positively to net interest income in a falling rate environment.
−Removed: The Company’s cumulative gap at one year indicates the Company is liability sensitive at September 30, 2021.
+Added: The Company’s cumulative gap at one year indicates the Company is liability sensitive at March 31, 2022.
Earnings at Risk
9 unchanged sentences
Net income is also subject to changes in the shape of the yield curve.
−Removed: For example, a flattening of the yield curve would result in a decline in earnings due to the compression of earning asset yields and increased liability rates, while a steepening would result in increased earnings as earning asset yields widen.
+Added: For example, a flattening of the yield curve would result in a decline in earnings due to the compression of earning asset yields and increased liability rates, while a steepening would result in increased earnings as earning asset and interest-bearing liability yields widen.
Earnings simulation modeling is the primary mechanism used in assessing the impact of changes in interest rates on net interest income.
5 unchanged sentences
The earnings simulation model projects net interest income would decrease 7.63%, 14.22% and 20.45% in the 100, 200 and 300 basis point increasing rate scenarios presented.
−Removed: In addition, the earnings simulation model projects net interest
−Removed: income would decrease 2.09% and 7.95% in the 100 and 200 basis point decreasing rate scenarios presented.
+Added: In addition, the earnings simulation model projects net interest income would decrease 0.05% and 4.99% in the 100 and 200 basis point decreasing rate scenarios presented.
All of these forecasts are within the Company’s one year policy guidelines.
2 unchanged sentences
However, the Company’s interest-sensitive assets are able to decline by these amounts.
−Removed: For the nine months ended September 30, 2021, the cost of interest-bearing liabilities averaged 0.59%, and the yield on interest-earning assets, on a fully taxable equivalent basis, averaged 3.68%.
+Added: For the three months ended March 31, 2022, the cost of interest-bearing liabilities averaged 0.51%, and the yield on interest-earning assets, on a fully taxable equivalent basis, averaged 3.57%.
Net Present Value Estimation
1 unchanged sentence
The net present value of the balance sheet is defined as the discounted present value of asset cash flows minus the discounted present value of liability cash flows.
−Removed: At September 30, 2021, the 100 and 200 basis point immediate decreases in rates are estimated to affect net present value with decreases of 33.18% and 91.91%, respectively.
−Removed: Additionally, net present value is projected to increase 15.61%, 21.47%, and 20.45% in the 100, 200, and 300 basis point immediate increase scenarios, respectively.
+Added: At March 31, 2022, net present value is projected to increase 4.52%, 1.23%, and 5.67% in the 100, 200, and 300 basis point immediate increase scenarios, respectively.
+Added: Additionally, the 100 and 200 basis point immediate decrease scenarios are estimated to affect net present value with a decrease of 16.75% and 51.31%, respectively.
These scenarios presented are within the Company’s policy limits, aside from the 200 basis point immediate decrease scenario at (51.31)% vs.
−Removed: a policy limit of (20)% and the 200 basis point immediate decrease scenario at (91.91)% vs.
a policy limit of (30.0)%.
20 unchanged sentences
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.