What changed in this filing

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Item 1. Financial Statements

2020-08-07 compared with 2020-05-08 · 641 added, 367 removed, 785 unchanged (56% of the section changed)

4 unchanged sentences

We have reviewed the accompanying interim consolidated financial information of The First Bancorp, Inc.

and Subsidiary as of March 31, 2020 and 2019 and for the three-month periods then ended.

and Subsidiary as of June 30, 2020 and 2019 and for the three-month and six-month periods then ended.

These financial statements are the responsibility of the Company's management.

6 unchanged sentences

Portland, Maine

August 7, 2020

Consolidated Balance Sheets (Unaudited)

1 unchanged sentence

and Subsidiary

December 31, 2019

2020 December 31, 2019 June 30,

Cash and cash equivalents $ 22,143,000 $ 14,433,000 $ 16,918,000

1 unchanged sentence

Securities available for sale 311,500,000 360,520,000 322,570,000

Securities to be held to maturity (fair value of $349,248,000 at March 31, 2020, $287,045,000 at December 31, 2019 and $282,568,000 at March 31, 2019)

Securities to be held to maturity (fair value of $ 352,225,000 at June 30, 2020, $ 287,045,000 at December 31, 2019 and $ 308,075,000 at June 30, 2019)

341,962,000 281,606,000 302,527,000

Restricted equity securities, at cost 10,545,000 8,982,000 8,982,000

Loans held for sale 4,950,000 154,000 —

1,344,208,000

1,297,075,000

1,264,639,000

Loans 1,451,623,000 1,297,075,000 1,249,132,000

Less allowance for loan losses 14,110,000 11,639,000 11,471,000

1,332,350,000

1,285,436,000

1,253,149,000

Net loans 1,437,513,000 1,285,436,000 1,237,661,000

Accrued interest receivable 11,055,000 7,167,000 9,966,000

1 unchanged sentence

Other real estate owned 851,000 279,000 289,000

2,136,396,000

2,068,796,000

1,991,402,000

Goodwill 29,805,000 29,805,000 29,805,000

Other assets 54,181,000 47,799,000 48,019,000

Total assets $ 2,267,124,000 $ 2,068,796,000 $ 1,998,699,000

Demand deposits $ 217,377,000 $ 169,777,000 $ 147,771,000

NOW deposits 432,407,000 393,569,000 363,092,000

Money market deposits 169,984,000 161,000,000 128,180,000

2 unchanged sentences

Total deposits 1,740,121,000 1,650,466,000 1,592,956,000

1,644,612,000

1,650,466,000

1,606,875,000

Borrowed funds – short term 223,703,000 174,850,000 171,749,000

2 unchanged sentences

Total liabilities 2,050,540,000 1,856,288,000 1,794,106,000

1,921,139,000

1,856,288,000

1,793,615,000

Shareholders' equity

Common stock, one cent par value per share

109,000 109,000 109,000

Additional paid-in capital 64,601,000 63,964,000 63,319,000

1 unchanged sentence

Accumulated other comprehensive income (loss)

Net unrealized gain (loss) on securities available for sale

Net unrealized gain on securities available for sale 7,100,000 3,657,000 2,750,000

Net unrealized loss on securities transferred from available for sale to held to maturity ( 146,000 ) ( 182,000 ) ( 190,000 )

Net unrealized (loss) gain on cash flow hedging derivative instruments

Net unrealized gain (loss) on cash flow hedging derivative instruments ( 6,187,000 ) 97,000 75,000

Net unrealized gain on postretirement costs 24,000 24,000 37,000

1 unchanged sentence

Total liabilities & shareholders' equity $ 2,267,124,000 $ 2,068,796,000 $ 1,998,699,000

2,136,396,000

2,068,796,000

1,991,402,000

Number of shares authorized 18,000,000 18,000,000 18,000,000

7 unchanged sentences

and Subsidiary

For the three months ended March 31,

For the six months ended June 30, For the quarter ended June 30,

2020 2019 2020 2019

Interest income

Interest and fees on loans (includes tax-exempt income of $310,000 as of March 31, 2020 and $358,000 as of March 31, 2019)

Interest and fees on loans (includes tax-exempt income of $ 608,000 YTD June 30, 2020 and $ 705,000 YTD June 30, 2019)

$ 30,015,000 $ 29,457,000 $ 14,159,000 $ 14,900,000

Interest on deposits with other banks 79,000 97,000 5,000 29,000

Interest and dividends on investments (includes tax-exempt income of $1,841,000 as of March 31, 2020 and $1,755,000 as of March 31, 2019)

Interest and dividends on investments (includes tax-exempt income of $ 3,733,000 YTD June 30, 2020 and $ 3,625,000 YTD June 30, 2019)

9,386,000 9,536,000 4,622,000 4,893,000

Total interest income 39,480,000 39,090,000 18,786,000 19,822,000

23 unchanged sentences

Income tax expense 2,457,000 2,294,000 1,256,000 1,180,000

NET INCOME $ 13,064,000 $ 12,551,000 $ 6,569,000 $ 6,395,000

Basic earnings per common share $ 1.20 $ 1.16 $ 0.61 $ 0.59

1 unchanged sentence

Other comprehensive income (loss) net of tax

Net unrealized gain on securities available for sale

Net unrealized gain (loss) on securities available for sale $ 3,443,000 $ 7,801,000 $ ( 790,000 ) $ 4,289,000

Net unrealized gain on securities transferred from available for sale to held to maturity, net of amortization 36,000 7,000 28,000 4,000

Net unrealized loss on cash flow hedging derivative instruments ( 6,284,000 ) ( 1,363,000 ) ( 1,414,000 ) ( 898,000 )

Other comprehensive income (loss)

Other comprehensive gain (loss) ( 2,805,000 ) 6,445,000 ( 2,176,000 ) 3,395,000

Comprehensive income $ 10,259,000 $ 18,996,000 $ 4,393,000 $ 9,790,000

5 unchanged sentences

Common stock and

additional paid-in capital

additional paid-in capital Retained

earnings Accumulated

comprehensive

income (loss)

income (loss) Total

shareholders'

Shares Amount

Balance at December 31, 2018 10,862,651 $ 62,855,000 $ 132,460,000 $ ( 3,773,000 ) $ 191,542,000

Net income — — 12,551,000 — 12,551,000

Net unrealized gain on securities available for sale, net of tax — — — 7,801,000 7,801,000

3 unchanged sentences

Cash dividends declared ($ 0.59 per share)

— — ( 6,424,000 ) — ( 6,424,000 )

Equity compensation expense — 244,000 — — 244,000

2 unchanged sentences

Proceeds from sale of common stock 12,602 329,000 — — 329,000

Balance at March 31, 2019

Balance at June 30, 2019 10,890,236 $ 63,428,000 $ 138,493,000 $ 2,672,000 $ 204,593,000

Balance at December 31, 2019 10,899,210 $ 64,073,000 $ 144,839,000 $ 3,596,000 $ 212,508,000

Net income — — 13,064,000 — 13,064,000

Net unrealized gain on securities available for sale, net of tax — — — 3,443,000 3,443,000

3 unchanged sentences

Cash dividends declared ($ 0.61 per share)

— — ( 6,666,000 ) — ( 6,666,000 )

Equity compensation expense — 312,000 — — 312,000

2 unchanged sentences

Proceeds from sale of common stock 13,670 325,000 — — 325,000

Balance at March 31, 2020

Balance at June 30, 2020 10,933,428 $ 64,710,000 $ 151,083,000 $ 791,000 $ 216,584,000

See Report of Independent Registered Public Accounting Firm.

3 unchanged sentences

and Subsidiary

For the three months ended

March 31, 2020

March 31, 2019

For the six months ended

June 30, 2020 June 30, 2019

Cash flows from operating activities

Net income $ 13,064,000 $ 12,551,000

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation 1,071,000 898,000

Change in deferred taxes ( 412,000 ) 151,000

5 unchanged sentences

Net amortization of premiums on investments 831,000 506,000

Net gain on sale of other real estate owned 29,000 ( 107,000 )

Equity compensation expense 312,000 244,000

Net increase in other assets and accrued interest ( 17,880,000 ) ( 10,606,000 )

Net increase (decrease) in other liabilities

Net loss on disposal of premises and equipment

Net increase in other liabilities 11,264,000 1,599,000

Net (gain) loss on disposal of premises and equipment ( 3,000 ) 333,000

Amortization of investment in limited partnership 156,000 154,000

2 unchanged sentences

Cash flows from investing activities

Increase in interest-bearing deposits in other banks

(Increase) decrease in interest-bearing deposits in other banks ( 10,597,000 ) 11,162,000

Proceeds from sales of securities available for sale 70,869,000 —

1 unchanged sentence

Proceeds from maturities, payments, calls and sales of securities to be held to maturity 47,754,000 6,534,000

Proceeds from sales of other real estate owned 193,000 402,000

Purchases of securities available for sale ( 66,660,000 ) ( 21,646,000 )

6 unchanged sentences

Cash flows from financing activities

Net decrease in demand, savings, and money market accounts

Net increase in certificates of deposit

Net increase (decrease) in demand, savings, and money market accounts 123,001,000 ( 59,718,000 )

Net increase (decrease) in certificates of deposit ( 33,346,000 ) 125,589,000

Net increase in short-term borrowings 48,853,000 —

5 unchanged sentences

Net cash provided by financing activities 177,129,000 31,341,000

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents 7,710,000 ( 2,216,000 )

Cash and cash equivalents at beginning of period 14,433,000 19,134,000

19 unchanged sentences

Risks and Uncertainties

Local, U.S., and world governments have encouraged self–isolation to curtail the spread of the global pandemic, coronavirus disease (COVID–19) by mandating the temporary shut–down of business in many sectors and imposing limitations on travel and size and duration of group meetings.

Most industries are experiencing disruption to business operations and the impact of reduced consumer spending.

There is unprecedented uncertainty surrounding the duration of the pandemic, its potential economic ramifications, and any government actions to mitigate them.

The impact of the coronavirus disease (COVID-19) continues to cause disruption and uncertainty in the local, national, and world economies.

To curtail spread of the virus, governments at all levels have encouraged social distancing and many have imposed restrictions on travel and group meetings, and/or mandated shut-downs of all but essential businesses.

The pace of re-opening varies across the United States, and certain locations have reimposed restrictions after experiencing increases in infection rates.

Much of the unprecedented uncertainty surrounding the duration of the pandemic, its potential economic ramifications, and any government actions to mitigate them initially experienced in the first quarter of 2020 has continued in the second quarter and early stages of the the third quarter.

The Company’s business, financial condition and results of operations generally rely upon the ability of the Bank’s borrowers to repay their loans, the value of collateral underlying the Bank’s secured loans, and demand for loans and other products and services the Bank offers, which are highly dependent on the business environment in the Bank’s primary markets where it operates and in the United States as a whole.

The Bank's primary market is the State of Maine, which relies upon tourism for a significant percentage of its economic activity.

COVID-19 is expected to adversely impact the tourism industry to a greater degree than other industries, however, an overall impact of COVID-19 on the Maine economy cannot be assessed with any degree of certainty at this time.

COVID-19 is expected to adversely impact the tourism industry to a greater degree than other industries, however, it remains the case that an assessment of the impact cannot be completed with a high degree of certainty at this time.

In addition to loans, demand for other products and services could be impacted by COVID-19.

Depositors and other funding sources may be unwilling to renew certificates of deposit or other types of funding, or may only be willing to do so on terms, including higher interest rates, that are materially less favorable than the Bank has experienced in the recent past.

Certain fee based activities such as debit card interchange and wealth management activity, could be impacted due to lower activity or market declines.

Accordingly, while management expects this matter is likely to have a negative financial impact on the Company's financial position and results of future operations, such potential impact cannot be reasonably estimated as of the date of this report, May 8, 2020.

Certain fee based activities such as service charges, interchange revenues, and wealth management activity, could be impacted due to lower activity or market declines.

Accordingly, while management expects this matter to likely have a negative financial impact on the Company's financial position and results of future operations, such potential impact cannot be reasonably estimated as of the date of this report, August 7, 2020.

Subsequent Events

Events occurring subsequent to March 31, 2020 , have been evaluated as to their potential impact to the financial statements.

Events occurring subsequent to June 30, 2020, have been evaluated as to their potential impact to the financial statements.

Note 2 – Investment Securities

The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2020 :

Unrealized Gains

Unrealized Losses

Fair Value (Estimated)

The following table summarizes the amortized cost and estimated fair value of investment securities at June 30, 2020:

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

Securities available for sale

2 unchanged sentences

State and political subdivisions 19,208,000 1,245,000 — 20,453,000

$ 302,513,000 $ 9,250,000 $ ( 263,000 ) $ 311,500,000

Securities to be held to maturity

3 unchanged sentences

Corporate securities 14,750,000 589,000 — 15,339,000

$ 341,962,000 $ 10,347,000 $ ( 84,000 ) $ 352,225,000

Restricted equity securities

1 unchanged sentence

Federal Reserve Bank Stock 1,037,000 — — 1,037,000

$ 10,545,000 $ — $ — $ 10,545,000

The following table summarizes the amortized cost and estimated fair value of investment securities at December 31, 2019:

Unrealized Gains

Unrealized Losses

Fair Value (Estimated)

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

Securities available for sale

Government-sponsored agencies

$ 7,500,000 $ — $ ( 102,000 ) $ 7,398,000

Mortgage-backed securities 323,277,000 4,173,000 ( 833,000 ) 326,617,000

State and political subdivisions 25,113,000 1,392,000 — 26,505,000

$ 355,890,000 $ 5,565,000 $ ( 935,000 ) $ 360,520,000

Securities to be held to maturity

3 unchanged sentences

Corporate securities 14,750,000 157,000 — 14,907,000

$ 281,606,000 $ 5,590,000 $ ( 151,000 ) $ 287,045,000

Restricted equity securities

1 unchanged sentence

Federal Reserve Bank Stock 1,037,000 — — 1,037,000

The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2019 :

Unrealized Gains

Unrealized Losses

Fair Value (Estimated)

$ 8,982,000 $ — $ — $ 8,982,000

The following table summarizes the amortized cost and estimated fair value of investment securities at June 30, 2019:

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

Securities available for sale

2 unchanged sentences

State and political subdivisions 4,955,000 14,000 ( 36,000 ) 4,933,000

$ 319,088,000 $ 4,275,000 $ ( 793,000 ) $ 322,570,000

Securities to be held to maturity

3 unchanged sentences

Corporate securities 13,750,000 122,000 — 13,872,000

$ 302,527,000 $ 6,041,000 $ ( 493,000 ) $ 308,075,000

Restricted equity securities

1 unchanged sentence

Federal Reserve Bank Stock 1,037,000 — — 1,037,000

The following table summarizes the contractual maturities of investment securities at March 31, 2020 :

Securities available for sale

Securities to be held to maturity

Fair Value (Estimated)

$ 8,982,000 $ — $ — $ 8,982,000

The following table summarizes the contractual maturities of investment securities at June 30, 2020:

Securities available for sale Securities to be held to maturity

Cost Fair Value (Estimated) Amortized

Cost Fair Value (Estimated)

Due in 1 year or less $ 584,000 $ 573,000 $ 1,860,000 $ 1,863,000

2 unchanged sentences

Due after 10 years 211,771,000 218,042,000 127,922,000 131,001,000

$ 302,513,000 $ 311,500,000 $ 341,962,000 $ 352,225,000

The following table summarizes the contractual maturities of investment securities at December 31, 2019:

Securities available for sale

Securities to be held to maturity

Fair Value (Estimated)

Securities available for sale Securities to be held to maturity

Cost Fair Value (Estimated) Amortized

Cost Fair Value (Estimated)

Due in 1 year or less $ 127,000 $ 127,000 $ 1,334,000 $ 1,338,000

2 unchanged sentences

Due after 10 years 226,095,000 228,601,000 75,279,000 76,550,000

The following table summarizes the contractual maturities of investment securities at March 31, 2019 :

Securities available for sale

Securities to be held to maturity

Fair Value (Estimated)

$ 355,890,000 $ 360,520,000 $ 281,606,000 $ 287,045,000

The following table summarizes the contractual maturities of investment securities at June 30, 2019:

Securities available for sale Securities to be held to maturity

Cost Fair Value (Estimated) Amortized

Cost Fair Value (Estimated)

Due in 1 year or less $ 268,000 $ 269,000 $ 1,337,000 $ 1,339,000

2 unchanged sentences

Due after 10 years 194,932,000 196,087,000 92,924,000 94,726,000

At March 31, 2020 , securities with a fair value of $ 208,376,000 were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law.

This compares to securities with a fair value of $ 214,173,000 as of December 31, 2019 and $ 189,711,000 at March 31, 2019 , pledged for the same purposes.

$ 319,088,000 $ 322,570,000 $ 302,527,000 $ 308,075,000

At June 30, 2020, securities with a fair value of $ 245,917,000 were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law.

This compares to securities with a fair value of $ 214,173,000 as of December 31, 2019 and $ 190,725,000 at June 30, 2019, pledged for the same purposes.

Gains and losses on the sale of securities are computed by subtracting the amortized cost at the time of sale from the security's selling price, net of accrued interest to be received.

The following table shows securities gains and losses for the three months ended March 31, 2020 and 2019 :

For the three months ended March 31,

The following table shows securities gains and losses for the six months ended June 30, 2020 and 2019:

For the six months ended June 30, For the quarter ended June 30,

2020 2019 2020 2019

Proceeds from sales of securities $ 79,469,000 $ — $ 10,849,000 $ —

1 unchanged sentence

Gross realized losses ( 347,000 ) — ( 1,000 ) —

Net gain $ 1,179,000 $ — $ 427,000 $ —

Related income taxes $ 248,000 $ — $ 90,000 $ —

Sales include 28 municipal securities sold in the second quarter of 2020 that had been designated as Held to Maturity.

Proceeds from these sales totaled $ 8,600,000 against a cumulative book value of $ 8,313,000 resulting in a net realized gain of $ 268,000 .

The economic potential impact of COVID-19 is considered to be an isolated and unusual event that could not be reasonably anticipated as outlined in Accounting Standards Codification (ASC) Section 320-10-25.

Management conducted a review of its municipal bond portfolio in conjunction with risk mitigation efforts related to the onset of the COVID-19 virus;

the intent of the review was to identify investment exposures with lower relative credit ratings, locales with perceived above average economic risk, municipal entities with reliance upon sales tax or income tax revenue, or any combination of these factors.

Each of the sold positions met one or more of the criteria.

Management reviews securities with unrealized losses for other than temporary impairment.

As of March 31, 2020 , there were 70 securities with unrealized losses held in the Company's portfolio.

As of June 30, 2020, there were 52 securities with unrealized losses held in the Company's portfolio.

These securities were temporarily impaired as a result of changes in interest rates reducing their fair value, of which 11 had been temporarily impaired for 12 months or more.

The Company has the ability and intent to hold its impaired securities until a recovery of their amortized cost, which may be at maturity.

Information regarding securities temporarily impaired as of March 31, 2020 is summarized below:

Less than 12 months

12 months or more

Fair Value (Estimated)

Unrealized Losses

Fair Value (Estimated)

Unrealized Losses

Fair Value (Estimated)

Unrealized Losses

Information regarding securities temporarily impaired as of June 30, 2020 is summarized below:

Less than 12 months 12 months or more Total

Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses

Government-sponsored agencies $ 7,988,000 $ ( 12,000 ) $ — $ — $ 7,988,000 $ ( 12,000 )

Mortgage-backed securities 28,116,000 ( 160,000 ) 4,771,000 ( 143,000 ) 32,887,000 ( 303,000 )

State and political subdivisions 7,623,000 ( 32,000 ) — — 7,623,000 ( 32,000 )

$ 43,727,000 $ ( 204,000 ) $ 4,771,000 $ ( 143,000 ) $ 48,498,000 $ ( 347,000 )

As of December 31, 2019, there were 86 securities with unrealized losses held in the Company's portfolio.

1 unchanged sentence

Information regarding securities temporarily impaired as of December 31, 2019 is summarized below:

Less than 12 months

12 months or more

Fair Value (Estimated)

Unrealized Losses

Fair Value (Estimated)

Unrealized Losses

Fair Value (Estimated)

Unrealized Losses

Less than 12 months 12 months or more Total

Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses

Government-sponsored agencies $ 12,372,000 $ ( 128,000 ) $ — $ — $ 12,372,000 $ ( 128,000 )

1 unchanged sentence

State and political subdivisions 10,532,000 ( 101,000 ) 304,000 ( 8,000 ) 10,836,000 ( 109,000 )

As of March 31, 2019 , there were 291 securities with unrealized losses held in the Company's portfolio.

$ 77,148,000 $ ( 588,000 ) $ 19,000,000 $ ( 498,000 ) $ 96,148,000 $ ( 1,086,000 )

As of June 30, 2019, there were 133 securities with unrealized losses held in the Company's portfolio.

These securities were temporarily impaired as a result of changes in interest rates reducing their fair value, of which 127 had been temporarily impaired for 12 months or more.

1 unchanged sentence

These securities totaled approximately 0.06 % of overall state and municipal security holdings and were subsequently sold during the third quarter 2019.

Information regarding securities temporarily impaired as of March 31, 2019 is summarized below:

Less than 12 months

12 months or more

Fair Value (Estimated)

Unrealized Losses

Fair Value (Estimated)

Unrealized Losses

Fair Value (Estimated)

Unrealized Losses

Government-sponsored agencies

Information regarding securities temporarily impaired as of June 30, 2019 is summarized below:

Less than 12 months 12 months or more Total

Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses Fair Value (Estimated) Unrealized Losses

Mortgage-backed securities $ 4,150,000 $ — $ 49,270,000 $ ( 790,000 ) $ 53,420,000 $ ( 790,000 )

State and political subdivisions 998,000 ( 9,000 ) 30,325,000 ( 487,000 ) 31,323,000 ( 496,000 )

Corporate securities

$ 5,148,000 $ ( 9,000 ) $ 79,595,000 $ ( 1,277,000 ) $ 84,743,000 $ ( 1,286,000 )

During the third quarter of 2014, the Company transferred securities with a total amortized cost of $ 89,780,000 with a corresponding fair value of $ 89,757,000 from available for sale to held to maturity.

3 unchanged sentences

The amortization of the net unrealized loss reported in accumulated other comprehensive income (loss) will offset the effect on interest income of the discount for the transferred securities.

The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $ 174,000 , net of tax, at March 31, 2020 .

This compares to $ 182,000 and $ 194,000 , net of taxes, at December 31, 2019 and March 31, 2019, respectively.

The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $ 146,000 , net of tax, at June 30, 2020.

This compares to $ 182,000 and $ 190,000 , net of taxes, at December 31, 2019 and June 30, 2019, respectively.

These securities were transferred as a part of the Company's overall investment and balance sheet strategies.

2 unchanged sentences

The Bank uses the FHLB for a portion of its wholesale funding needs.

As of March 31, 2020 and 2019 , and December 31, 2019 , the Bank's investment in FHLB stock totaled $ 8,957,000 , $ 7,945,000 and $ 7,945,000 , respectively.

As of June 30, 2020 and 2019, and December 31, 2019, the Bank's investment in FHLB stock totaled $ 9,508,000 , $ 7,945,000 and $ 7,945,000 , respectively.

FHLB stock is a non-marketable equity security and therefore is reported at cost, which equals par value.

The Company periodically evaluates its investment in FHLB stock for impairment based on, among other factors, the capital adequacy of the FHLB and its overall financial condition.

No impairment losses have been recorded through March 31, 2020 .

No impairment losses have been recorded through June 30, 2020.

The Company will continue to monitor its investment in FHLB stock.

Note 3 – Loans

The following table shows the composition of the Company's loan portfolio as of March 31, 2020 and 2019 and at December 31, 2019 :

March 31, 2020

December 31, 2019

March 31, 2019

The following table shows the composition of the Company's loan portfolio as of June 30, 2020 and 2019 and at December 31, 2019:

June 30, 2020 December 31, 2019 June 30, 2019

Real estate $ 397,155,000 27.4 % $ 372,810,000 28.7 % $ 359,581,000 28.8 %

Construction 47,169,000 3.2 % 38,084,000 3.0 % 32,785,000 2.6 %

Other 327,967,000 22.6 % 218,773,000 16.9 % 205,910,000 16.5 %

Municipal 49,644,000 3.4 % 41,288,000 3.2 % 36,113,000 2.9 %

Term 499,693,000 34.4 % 492,455,000 37.9 % 481,349,000 38.5 %

Construction 14,707,000 1.1 % 14,813,000 1.2 % 13,239,000 1.1 %

Home equity line of credit 87,019,000 6.0 % 92,349,000 7.1 % 94,763,000 7.6 %

1,344,208,000

1,297,075,000

1,264,639,000

Loan balances include net deferred loan costs of $ 7,551,000 as of March 31, 2020 , $ 7,419,000 as of December 31, 2019 , and $ 6,878,000 as of March 31, 2019 .

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 401,555,000 at March 31, 2020 , were used to collateralize borrowings from the FHLB.

This compares to qualifying loans which totaled $ 296,871,000 at December 31, 2019 , and $ 321,290,000 at March 31, 2019 .

In addition, commercial, construction and home equity loans totaling $ 260,703,000 at March 31, 2020 , $ 240,133,000 at December 31, 2019 , and $ 251,591,000 at March 31, 2019 , were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston that is currently unused.

Consumer 28,269,000 1.9 % 26,503,000 2.0 % 25,392,000 2.0 %

Total $ 1,451,623,000 100.0 % $ 1,297,075,000 100.0 % $ 1,249,132,000 100.0 %

Loan balances include net deferred loan costs of $ 4,866,000 as of June 30, 2020, $ 7,419,000 as of December 31, 2019, and $ 7,124,000 as of June 30, 2019.

The decrease in net deferred loan costs year-over-year and year-to-date is attributable to PPP loans originated during the second quarter of 2020.

These loans generated gross origination fee income of $ 3,730,000 and deferred loan costs of $ 283,000 ;

during the quarter a net of $ 356,000 was recognized in interest income.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 399,525,000 at June 30, 2020, were used to collateralize borrowings from the FHLB.

This compares to qualifying loans which totaled $ 296,871,000 at December 31, 2019, and $ 312,568,000 at June 30, 2019.

In addition, commercial, construction and home equity loans totaling $ 264,343,000 at June 30, 2020, $ 240,133,000 at December 31, 2019, and $ 239,481,000 at June 30, 2019, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston.

For all loan classes, loans over 30 days past due are considered delinquent.

Information on the past-due status of loans by class of financing receivable as of March 31, 2020 , is presented in the following table:

Information on the past-due status of loans by class of financing receivable as of June 30, 2020, is presented in the following table:

Past Due 60-89 Days

Past Due 90+ Days

Past Due Current Total 90+ Days

Real estate $ 134,000 $ 76,000 $ 1,048,000 $ 1,258,000 $ 395,897,000 $ 397,155,000 $ —

Construction — — — — 47,169,000 47,169,000 —

Other 172,000 11,000 1,741,000 1,924,000 326,043,000 327,967,000 1,464,000

Municipal — — — — 49,644,000 49,644,000 —

Term 270,000 1,413,000 1,850,000 3,533,000 496,160,000 499,693,000 —

Construction — — — — 14,707,000 14,707,000 —

Home equity line of credit 896,000 145,000 1,540,000 2,581,000 84,438,000 87,019,000 —

1,322,379,000

1,344,208,000

Consumer 146,000 106,000 9,000 261,000 28,008,000 28,269,000 4,000

Total $ 1,618,000 $ 1,751,000 $ 6,188,000 $ 9,557,000 $ 1,442,066,000 $ 1,451,623,000 $ 1,468,000

On March 22, 2020, banking regulators issued an Interagency Statement on Loan Modifications and Reporting in response to the onset of COVID-19;

shortly thereafter, on March 30, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed.

Both the Interagency Statement and the CARES Act provided an exemption for qualified modifications from Troubled Debt Restructure (TDR) designation.

The Company actively worked with borrowers impacted by the COVID-19 outbreak and as of June 30, 2020 a total of 867 loan modification requests had been completed in conformance with the Interagency Statement issued in March, representing $ 239,484,000 in loan balances, or approximately 16.5 % of the overall loan portfolio.

These loans have not been classified as TDRs and are not included as past due in any loan delinquency data so long as the modified terms are met.

Information on the past-due status of loans by class of financing receivable as of December 31, 2019, is presented in the following table:

Past Due 60-89 Days

Past Due 90+ Days

Past Due Current Total 90+ Days

Real estate $ 786,000 $ 377,000 $ 611,000 $ 1,774,000 $ 371,036,000 $ 372,810,000 $ —

Construction — 14,000 257,000 271,000 37,813,000 38,084,000 —

Other 2,764,000 465,000 1,799,000 5,028,000 213,745,000 218,773,000 1,464,000

Municipal — — — — 41,288,000 41,288,000 —

Term 1,129,000 1,132,000 2,379,000 4,640,000 487,815,000 492,455,000 86,000

Construction — — — — 14,813,000 14,813,000 —

Home equity line of credit 1,169,000 58,000 1,730,000 2,957,000 89,392,000 92,349,000 —

1,282,058,000

1,297,075,000

Information on the past-due status of loans by class of financing receivable as of March 31, 2019 , is presented in the following table:

Consumer 291,000 46,000 10,000 347,000 26,156,000 26,503,000 10,000

Total $ 6,139,000 $ 2,092,000 $ 6,786,000 $ 15,017,000 $ 1,282,058,000 $ 1,297,075,000 $ 1,560,000

Information on the past-due status of loans by class of financing receivable as of June 30, 2019, is presented in the following table:

Past Due 60-89 Days

Past Due 90+ Days

Past Due Current Total 90+ Days

Real estate $ 240,000 $ — $ 828,000 $ 1,068,000 $ 358,513,000 $ 359,581,000 $ —

Construction 15,000 — — 15,000 32,770,000 32,785,000 —

Other 2,031,000 — 264,000 2,295,000 203,615,000 205,910,000 —

Municipal — — — — 36,113,000 36,113,000 —

Term 1,079,000 2,302,000 3,898,000 7,279,000 474,070,000 481,349,000 664,000

Construction — — — — 13,239,000 13,239,000 —

Home equity line of credit 698,000 197,000 347,000 1,242,000 93,521,000 94,763,000 —

1,253,359,000

1,264,639,000

Consumer 336,000 30,000 9,000 375,000 25,017,000 25,392,000 8,000

Total $ 4,399,000 $ 2,529,000 $ 5,346,000 $ 12,274,000 $ 1,236,858,000 $ 1,249,132,000 $ 672,000

For all classes, loans are placed on non-accrual status when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or when principal and interest is 90 days or more past due unless the loan is both well secured and in the process of collection (in which case the loan may continue to accrue interest in spite of its past due status).

3 unchanged sentences

As a general rule, a loan may be restored to accrual status when payments are current for a substantial period of time, generally six months, and repayment of the remaining contractual amounts is expected, or when it otherwise becomes well secured and in the process of collection.

Information on nonaccrual loans as of March 31, 2020 and 2019 and at December 31, 2019 is presented in the following table:

March 31, 2020

December 31, 2019

March 31, 2019

Information on nonaccrual loans as of June 30, 2020 and 2019 and at December 31, 2019 is presented in the following table:

June 30, 2020 December 31, 2019 June 30, 2019

Real estate $ 1,245,000 $ 1,784,000 $ 1,532,000

Construction 232,000 256,000 261,000

Other 323,000 6,534,000 7,014,000

Municipal — — —

Term 4,685,000 5,899,000 5,892,000

Construction — — —

Home equity line of credit 1,854,000 2,171,000 694,000

Consumer 5,000 5,000 —

Total $ 8,344,000 $ 16,649,000 $ 15,393,000

Impaired loans include troubled debt restructured ("TDR") and loans placed on non-accrual.

1 unchanged sentence

If the measure of an impaired loan is lower than the recorded investment in the loan and estimated selling costs, a specific reserve is established for the difference, or, in certain situations, if the measure of an impaired loan is lower than the recorded investment in the loan and estimated selling costs, the difference is written off.

A breakdown of impaired loans by class of financing receivable as of and for the period ended March 31, 2020 is presented in the following table:

For the three months ended March 31, 2020

Recorded Investment

Unpaid Principal Balance

Related Allowance

Average Recorded Investment

Recognized Interest Income

A breakdown of impaired loans by class of financing receivable as of and for the period ended June 30, 2020 is presented in the following table:

For the six months ended June 30, 2020 For the quarter ended June 30, 2020

Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Recognized Interest Income Average Recorded Investment Recognized Interest Income

With No Related Allowance

Real estate $ 4,757,000 $ 5,013,000 $ — $ 4,975,000 $ 84,000 $ 4,794,000 $ 37,000

Construction 233,000 257,000 — 475,000 — 234,000 —

Other 713,000 737,000 — 787,000 13,000 781,000 10,000

Municipal — — — — — — —

Term 8,293,000 9,620,000 — 9,746,000 92,000 9,478,000 25,000

Construction — — — — — — —

Home equity line of credit 1,299,000 1,362,000 — 1,207,000 8,000 1,228,000 4,000

Consumer — — — — — — —

$ 15,295,000 $ 16,989,000 $ — $ 17,190,000 $ 197,000 $ 16,515,000 $ 76,000

With an Allowance Recorded

Real estate $ 992,000 $ 1,015,000 $ 199,000 $ 1,034,000 $ 21,000 $ 1,004,000 $ 13,000

Construction 701,000 701,000 20,000 468,000 17,000 701,000 7,000

Other 140,000 159,000 132,000 2,213,000 — 157,000 —

Municipal — — — — — — —

Term 2,018,000 2,047,000 269,000 1,900,000 36,000 1,800,000 23,000

Construction — — — — — — —

Home equity line of credit 862,000 862,000 292,000 1,038,000 — 951,000 —

Consumer 5,000 5,000 5,000 15,000 — 5,000 —

$ 4,718,000 $ 4,789,000 $ 917,000 $ 6,668,000 $ 74,000 $ 4,618,000 $ 43,000

Real estate $ 5,749,000 $ 6,028,000 $ 199,000 $ 6,009,000 $ 105,000 $ 5,798,000 $ 50,000

Construction 934,000 958,000 20,000 943,000 17,000 935,000 7,000

Other 853,000 896,000 132,000 3,000,000 13,000 938,000 10,000

Municipal — — — — — — —

Term 10,311,000 11,667,000 269,000 11,646,000 128,000 11,278,000 48,000

Construction — — — — — — —

Home equity line of credit 2,161,000 2,224,000 292,000 2,245,000 8,000 2,179,000 4,000

Consumer 5,000 5,000 5,000 15,000 — 5,000 —

$ 20,013,000 $ 21,778,000 $ 917,000 $ 23,858,000 $ 271,000 $ 21,133,000 $ 119,000

Substantially all interest income recognized on impaired loans for all classes of financing receivables was recognized on a cash basis as received.

A breakdown of impaired loans by class of financing receivable as of and for the year ended December 31, 2019 is presented in the following table:

Recorded Investment

Unpaid Principal Balance

Related Allowance

Average Recorded Investment

Recognized Interest Income

Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Recognized Interest Income

With No Related Allowance

Real estate $ 5,235,000 $ 5,492,000 $ — $ 7,611,000 $ 228,000

Construction 958,000 970,000 — 936,000 47,000

Other 756,000 786,000 — 965,000 29,000

Municipal — — — — —

Term 10,176,000 11,931,000 — 10,033,000 269,000

Construction — — — — —

Home equity line of credit 1,087,000 1,151,000 — 997,000 20,000

Consumer — — — — —

$ 18,212,000 $ 20,330,000 $ — $ 20,542,000 $ 593,000

With an Allowance Recorded

Real estate $ 1,074,000 $ 1,093,000 $ 251,000 $ 1,528,000 $ 60,000

Construction — — — — —

Other 6,319,000 6,925,000 1,273,000 6,778,000 —

Municipal — — — — —

Term 2,263,000 2,412,000 237,000 2,424,000 82,000

Construction — — — — —

Home equity line of credit 1,401,000 1,412,000 447,000 283,000 —

Consumer 5,000 6,000 5,000 2,000 —

$ 11,062,000 $ 11,848,000 $ 2,213,000 $ 11,015,000 $ 142,000

Real estate $ 6,309,000 $ 6,585,000 $ 251,000 $ 9,139,000 $ 288,000

Construction 958,000 970,000 — 936,000 47,000

Other 7,075,000 7,711,000 1,273,000 7,743,000 29,000

Municipal — — — — —

Term 12,439,000 14,343,000 237,000 12,457,000 351,000

Construction — — — — —

Home equity line of credit 2,488,000 2,563,000 447,000 1,280,000 20,000

A breakdown of impaired loans by class of financing receivable as of and for the period ended March 31, 2019 is presented in the following table:

For the three months ended March 31, 2019

Recorded Investment

Unpaid Principal Balance

Related Allowance

Average Recorded Investment

Recognized Interest Income

Consumer 5,000 6,000 5,000 2,000 —

$ 29,274,000 $ 32,178,000 $ 2,213,000 $ 31,557,000 $ 735,000

A breakdown of impaired loans by class of financing receivable as of and for the period ended June 30, 2019 is presented in the following table:

For the six months ended June 30, 2019 For the quarter ended June 30, 2019

Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Recognized Interest Income Average Recorded Investment Recognized Interest Income

With No Related Allowance

Real estate $ 7,230,000 $ 7,510,000 $ — $ 8,273,000 $ 183,000 $ 7,805,000 $ 93,000

Construction 982,000 990,000 — 903,000 23,000 990,000 11,000

Other 949,000 978,000 — 1,034,000 14,000 862,000 8,000

Municipal — — — — — — —

Term 10,004,000 11,689,000 — 9,571,000 139,000 10,136,000 71,000

Construction — — — — — — —

Home equity line of credit 1,000,000 1,065,000 — 989,000 10,000 1,002,000 5,000

Consumer — — — — — — —

$ 20,165,000 $ 22,232,000 $ — $ 20,770,000 $ 369,000 $ 20,795,000 $ 188,000

With an Allowance Recorded

Real estate $ 1,731,000 $ 1,742,000 $ 196,000 $ 1,446,000 $ 49,000 $ 1,677,000 $ 23,000

Construction — — — — — — —

Other 6,633,000 7,022,000 1,320,000 7,144,000 — 6,778,000 —

Municipal — — — — — — —

Term 2,632,000 2,813,000 305,000 2,031,000 36,000 2,217,000 19,000

Construction — — — — — — —

Home equity line of credit 19,000 24,000 9,000 24,000 — 20,000 —

Consumer — — — 1,000 — 1,000 —

$ 11,015,000 $ 11,601,000 $ 1,830,000 $ 10,646,000 $ 85,000 $ 10,693,000 $ 42,000

Real estate $ 8,961,000 $ 9,252,000 $ 196,000 $ 9,719,000 $ 232,000 $ 9,482,000 $ 116,000

Construction 982,000 990,000 — 903,000 23,000 990,000 11,000

Other 7,582,000 8,000,000 1,320,000 8,178,000 14,000 7,640,000 8,000

Municipal — — — — — — —

Term 12,636,000 14,502,000 305,000 11,602,000 175,000 12,353,000 90,000

Construction — — — — — — —

Home equity line of credit 1,019,000 1,089,000 9,000 1,013,000 10,000 1,022,000 5,000

Consumer — — — 1,000 — 1,000 —

$ 31,180,000 $ 33,833,000 $ 1,830,000 $ 31,416,000 $ 454,000 $ 31,488,000 $ 230,000

Troubled Debt Restructured

5 unchanged sentences

common concession types include maturity date extension, interest rate adjustments to below market pricing, and deferment of payments.

As of March 31, 2020 , the Company had 81 loans with a balance of $ 14,968,000 that have been classified as TDRs.

This compares to 81 loans with a balance of $ 21,424,000 and 80 loans with a balance of $ 25,386,000 classified as TDRs as of December 31, 2019 and March 31, 2019 , respectively.

As of June 30, 2020, the Company had 78 loans with a balance of $ 14,013,000 that have been classified as TDRs.

This compares to 81 loans with a balance of $ 21,424,000 and 83 loans with a balance of $ 24,454,000 classified as TDRs as of December 31, 2019 and June 30, 2019, respectively.

The impairment carried as a specific reserve in the allowance for loan losses is calculated by present valuing the expected cash flows on the loan at the original interest rate, or, for collateral-dependent loans, using the fair value of the collateral less costs to sell.

The following table shows TDRs by class and the specific reserve as of March 31, 2020 :

Number of Loans

Specific Reserves

The following table shows TDRs by class and the specific reserve as of June 30, 2020:

Number of Loans Balance Specific Reserves

Real estate 16 $ 4,585,000 $ 194,000

Construction 1 701,000 20,000

Other 7 777,000 131,000

Municipal — — —

Term 51 7,477,000 198,000

Construction — — —

Home equity line of credit 3 473,000 —

Consumer — — —

78 $ 14,013,000 $ 543,000

The following table shows TDRs by class and the specific reserve as of December 31, 2019:

Number of Loans

Specific Reserves

Number of Loans Balance Specific Reserves

Real estate 17 $ 4,836,000 $ 246,000

Construction 1 701,000 —

Other 8 6,932,000 1,231,000

Municipal — — —

Term 52 8,472,000 200,000

Construction — — —

Home equity line of credit 3 483,000 —

The following table shows TDRs by class and the specific reserve as of March 31, 2019 :

Number of Loans

Specific Reserves

Consumer — — —

81 $ 21,424,000 $ 1,677,000

The following table shows TDRs by class and the specific reserve as of June 30, 2019:

Number of Loans Balance Specific Reserves

Real estate 19 $ 7,624,000 $ 192,000

Construction 1 721,000 —

Other 9 7,185,000 1,275,000

Municipal — — —

Term 51 8,433,000 224,000

Construction — — —

Home equity line of credit 3 491,000 —

As of March 31, 2020 , 22 of the loans classified as TDRs with a total balance of $ 3,622,000 were more than 30 days past due.

Consumer — — —

83 $ 24,454,000 $ 1,691,000

As of June 30, 2020, 11 of the loans classified as TDRs with a total balance of $ 1,479,000 were more than 30 days past due.

Of these loans, one had been placed on TDR status in the previous 12 months.

The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of March 31, 2020 :

Number of Loans

Specific Reserves

The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of June 30, 2020:

Number of Loans Balance Specific Reserves

Real estate — $ — $ —

Construction — — —

Other 3 247,000 131,000

Municipal — — —

Term 7 1,066,000 —

Construction — — —

Home equity line of credit 1 166,000 —

As of March 31, 2019 , 10 of the loans classified as TDRs with a total balance of $ 1,129,000 were more than 30 days past due.

Consumer — — —

11 $ 1,479,000 $ 131,000

As of June 30, 2019, 15 of the loans classified as TDRs with a total balance of $ 1,681,000 were more than 30 days past due.

Of these loans, three had been placed on TDR status in the previous 12 months.

The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of March 31, 2019 :

Number of Loans

Specific Reserves

The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of June 30, 2019:

Number of Loans Balance Specific Reserves

Real estate — $ — $ —

Construction — — —

Other 4 392,000 134,000

Municipal — — —

Term 9 1,094,000 39,000

Construction — — —

Home equity line of credit 2 195,000 —

For the three months ended March 31, 2020 , two loans were placed on TDR status.

The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of March 31, 2020 :

Number of Loans

Pre-Modification

Recorded Investment

Post-Modification Outstanding

Specific Reserves

Consumer — — —

15 $ 1,681,000 $ 173,000

For the six months ended June 30, 2020, two loans were placed on TDR status.

The following table shows these TDRs, net of principle deductions of $ 2,000 , by class and the associated specific reserves included in the allowance for loan losses as of June 30, 2020:

Number of Loans Pre-Modification

Recorded Investment Post-Modification Outstanding

Investment Specific Reserves

Real estate — $ — $ — $ —

Construction — — — —

Other — — — —

Municipal — — — —

Term 2 235,000 188,000 —

Construction — — — —

Home equity line of credit — — — —

For the three months ended March 31, 2019 , five loans were placed on TDR status.

The following table shows these TDRs by class and associated specific reserves included in the allowance for loan losses as of March 31, 2019 :

Number of Loans

Pre-Modification

Recorded Investment

Post-Modification Outstanding

Specific Reserves

Consumer — — — —

2 $ 235,000 $ 188,000 $ —

For the six months ended June 30, 2019, nine loans were placed on TDR status.

The following table shows these TDRs by class and associated specific reserves included in the allowance for loan losses as of June 30, 2019:

Number of Loans Pre-Modification

Recorded Investment Post-Modification Outstanding

Investment Specific Reserves

Real estate 2 $ 111,000 $ 100,000 $ 100,000

Construction — — — —

Other — — — —

Municipal — — — —

Term 7 805,000 710,000 74,000

Construction — — — —

Home equity line of credit — — — —

As of March 31, 2020 , Management is aware of nine loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 978,000 .

Consumer — — — —

9 $ 916,000 $ 810,000 $ 174,000

For the quarter ended June 30, 2020, no loans were place on TDR status.

For the quarter ended June 30, 2019, four loans were place on TDR status.

The following table shows these TDRs by class and the associated specific reserves included in the allowance for loan losses as of June 30, 2019:

Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Specific Reserves

Real estate 2 $ 111,000 $ 100,000 $ 100,000

Construction — — — —

Other — — — —

Municipal — — — —

Term 2 234,000 161,000 —

Construction — — — —

Home equity line of credit — — — —

Consumer — — — —

4 $ 345,000 $ 261,000 $ 100,000

As of June 30, 2020, Management is aware of nine loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 965,000 .

There were also 23 loans with an outstanding balance of $ 2,345,000 that were classified as TDRs and on non-accrual status, of which two loans with an outstanding balance of $ 431,000 were in the process of foreclosure.

Residential Mortgage Loans in Process of Foreclosure

As of March 31, 2020 , there were 15 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 2,284,000 .

This compares to 10 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 1,101,000 as of March 31, 2019 .

As of June 30, 2020, there were 15 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 2,028,000 .

This compares to 11 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 1,231,000 as of June 30, 2019.

Allowance for Loan Losses

10 unchanged sentences

Residential Real Estate Term - The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment.

Residential Real Estate Construction - Residential construction are impacted by factors similar to those for residential real estate term in addition to risks related to contractor financial capacity and ability to complete a project within acceptable time frames and within budget.

Residential Real Estate Construction - Residential construction loans are impacted by factors similar to those for residential real estate term loans in addition to risks related to contractor financial capacity and ability to complete a project within acceptable time frames and within budget.

Home Equity Line of Credit - The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment.

9 unchanged sentences

All outstanding loans are considered in evaluating the appropriateness of the allowance.

A breakdown of the allowance for loan losses as of March 31, 2020 , December 31, 2019 , and March 31, 2019 , by class of financing receivable and allowance element, is presented in the following tables:

As of March 31, 2020

Specific Reserves on Loans Evaluated Individually for Impairment

General Reserves on Loans Based on Historical Loss Experience

Reserves for Qualitative Factors

Total Reserves

A breakdown of the allowance for loan losses as of June 30, 2020, December 31, 2019, and June 30, 2019, by class of financing receivable and allowance element, is presented in the following tables:

As of June 30, 2020 Specific Reserves on Loans Evaluated Individually for Impairment General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Unallocated

Reserves Total Reserves

Real estate $ 199,000 $ 631,000 $ 3,681,000 $ — $ 4,511,000

Construction 20,000 74,000 430,000 — 524,000

Other 132,000 521,000 3,036,000 — 3,689,000

Municipal — — 110,000 — 110,000

Term 269,000 285,000 1,707,000 — 2,261,000

Construction — 9,000 55,000 — 64,000

Home equity line of credit 292,000 99,000 893,000 — 1,284,000

As of December 31, 2019

Specific Reserves on Loans Evaluated Individually for Impairment

General Reserves on Loans Based on Historical Loss Experience

Reserves for Qualitative Factors

Total Reserves

Consumer 5,000 195,000 458,000 — 658,000

Unallocated — — — 1,009,000 1,009,000

$ 917,000 $ 1,814,000 $ 10,370,000 $ 1,009,000 $ 14,110,000

As of December 31, 2019 Specific Reserves on Loans Evaluated Individually for Impairment General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Unallocated

Reserves Total Reserves

Real estate $ 251,000 $ 729,000 $ 2,762,000 $ — $ 3,742,000

Construction — 76,000 289,000 — 365,000

Other 1,273,000 430,000 1,626,000 — 3,329,000

Municipal — — 27,000 — 27,000

Term 237,000 153,000 634,000 — 1,024,000

Construction — 5,000 20,000 — 25,000

Home equity line of credit 447,000 130,000 501,000 — 1,078,000

As of March 31, 2019

Specific Reserves on Loans Evaluated Individually for Impairment

General Reserves on Loans Based on Historical Loss Experience

Reserves for Qualitative Factors

Total Reserves

Consumer 5,000 460,000 402,000 — 867,000

Unallocated — — — 1,182,000 1,182,000

$ 2,213,000 $ 1,983,000 $ 6,261,000 $ 1,182,000 $ 11,639,000

As of June 30, 2019 Specific Reserves on Loans Evaluated Individually for Impairment General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Unallocated

Reserves Total Reserves

Real estate $ 196,000 $ 789,000 $ 2,624,000 $ — $ 3,609,000

Construction — 72,000 237,000 — 309,000

Other 1,320,000 457,000 1,504,000 — 3,281,000

Municipal — — 25,000 — 25,000

Term 305,000 197,000 604,000 — 1,106,000

Construction — 6,000 17,000 — 23,000

Home equity line of credit 9,000 156,000 468,000 — 633,000

Consumer — 279,000 370,000 — 649,000

Unallocated — — — 1,836,000 1,836,000

$ 1,830,000 $ 1,956,000 $ 5,849,000 $ 1,836,000 $ 11,471,000

Qualitative adjustment factors are taken into consideration when determining reserve estimates.

10 unchanged sentences

these qualitative factors are also considered in connection with the unallocated portion of our allowance for loan losses.

The qualitative portion of the allowance for loan losses was 0.51 % of related loans as of March 31, 2020 , compared to 0.48 % of related loans as of December 31, 2019 .

The qualitative portion increased $ 585,000 between December 31, 2019 and March 31, 2020 due to a mix of factors, including initial macroeconomic impacts of the COVID-19 pandemic.

The unallocated component of the allowance totaled $ 2,121,000 at March 31, 2020 , or 17.9 % of the total reserve.

The qualitative portion of the allowance for loan losses was 0.71 % of related loans as of June 30, 2020, compared to 0.48 % of related loans as of December 31, 2019.

The qualitative portion increased $ 4,109,000 between December 31, 2019 and June 30, 2020 due to a mix of factors.

These included initial impacts of the COVID-19 pandemic on various macroeconomic measures used

in the qualitative model, as well as top down and unit level analysis of the loan portfolio for factors such as COVID-19 related modifications and industry segments particularly vulnerable to social distancing.

The unallocated component of the allowance totaled $ 1,009,000 at June 30, 2020, or 7.2 % of the total reserve.

This compares to $ 1,182,000 or 10.2 % as of December 31, 2019.

The change supports general imprecision related to portfolio growth and supports general economic uncertainty resulting from the COVID-19 pandemic.

The beginnings of COVID-19's impact upon the economy are captured in several factors considered in the qualitative portion of the reserve, however the depth and duration of the economic impact is unknown.

Consequently, it is likely that there are underlying credit risks that have not yet surfaced in the loan specific or qualitative metrics the Company uses to estimate its allowance for loan losses, supporting an increase in the unallocated component.

The allowance for loan losses as a percent of total loans stood at 0.88 % as of March 31, 2020 , 0.90 % at December 31, 2019 and 0.91 % as of March 31, 2019 .

While year to date growth in the qualitative portion of the reserve directionally reflects potential impacts of COVID-19 on the loan portfolio, it remains likely that there are other underlying credit risks not yet captured in loan specific or qualitative metrics the Company uses to estimate its allowance.

This uncertainty along with general imprecision related to portfolio growth supports the continued inclusion of an unallocated component.

The allowance for loan losses as a percent of total loans stood at 0.97 % as of June 30, 2020, 0.90 % at December 31, 2019 and 0.92 % as of June 30, 2019.

Commercial loans are comprised of three major classes, commercial real estate loans, commercial construction loans and other commercial loans.

6 unchanged sentences

Commercial construction loans typically have maturities of less than two years.

Payment structures during the construction period are typically on an interest only basis, although principal payments may be established

depending on the type of construction project being financed.

Payment structures during the construction period are typically on an interest only basis, although principal payments may be established depending on the type of construction project being financed.

During the construction phase, commercial construction loans are primarily paid by cash flow generated from the construction project or other operating cash flows from the borrower or guarantors, if applicable.

29 unchanged sentences

Consumer loans may be secured or unsecured.

Construction, land and land development loans, both commercial and residential, comprise a small portion of the portfolio, and at 30.6 % of capital are below the regulatory guidance limit of 100.0 % of capital at March 31, 2020 .

Construction loans and non-owner-occupied commercial real estate loans are at 126.5 % of total capital, below the regulatory limit of 300.0 % of capital at March 31, 2020 .

Construction, land and land development loans, both commercial and residential, comprise a small portion of the portfolio, and at 31.1 % of capital are below the regulatory guidance limit of 100.0 % of capital at June 30, 2020.

Construction loans and non-owner-occupied commercial real estate loans are at 125.8 % of total capital, below the regulatory limit of 300.0 % of capital at June 30, 2020.

The process of establishing the allowance with respect to the commercial loan portfolio begins when a Loan Officer or Senior Officer (or designate) initially assigns each loan a risk rating, using established credit criteria.

22 unchanged sentences

The possibility of loss is high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.

The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of March 31, 2020 :

The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of June 30, 2020:

Real Estate Commercial

Construction Commercial

Other Municipal

Loans All Risk-

1 Strong $ — $ — $ 3,893,000 $ 27,000 $ 3,920,000

2 Above Average 9,390,000 1,288,000 4,213,000 46,371,000 61,262,000

3 Satisfactory 85,033,000 1,972,000 140,125,000 369,000 227,499,000

4 Average 218,270,000 25,716,000 123,909,000 2,877,000 370,772,000

5 Watch 67,527,000 17,748,000 46,855,000 — 132,130,000

6 OAEM 2,714,000 — 2,692,000 — 5,406,000

7 Substandard 14,221,000 445,000 6,280,000 — 20,946,000

8 Doubtful — — — — —

Total $ 397,155,000 $ 47,169,000 $ 327,967,000 $ 49,644,000 $ 821,935,000

The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of December 31, 2019:

Real Estate Commercial

Construction Commercial

Other Municipal

Loans All Risk-

1 Strong $ — $ — $ 4,258,000 $ 32,000 $ 4,290,000

2 Above Average 12,393,000 794,000 6,187,000 38,290,000 57,664,000

3 Satisfactory 74,709,000 2,305,000 41,527,000 379,000 118,920,000

4 Average 205,510,000 19,017,000 107,389,000 2,587,000 334,503,000

5 Watch 63,582,000 15,488,000 47,152,000 — 126,222,000

6 OAEM 1,160,000 — 1,988,000 — 3,148,000

7 Substandard 15,456,000 480,000 10,272,000 — 26,208,000

The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of March 31, 2019 :

8 Doubtful — — — — —

Total $ 372,810,000 $ 38,084,000 $ 218,773,000 $ 41,288,000 $ 670,955,000

The following table summarizes the risk ratings for the Company's commercial real estate, commercial construction, commercial other, and municipal loans as of June 30, 2019:

Real Estate Commercial

Construction Commercial

Other Municipal

Loans All Risk-

1 Strong $ — $ — $ 3,683,000 $ 39,000 $ 3,722,000

2 Above Average 12,912,000 36,000 4,813,000 33,549,000 51,310,000

3 Satisfactory 81,155,000 2,380,000 43,635,000 398,000 127,568,000

4 Average 183,012,000 20,854,000 90,772,000 2,127,000 296,765,000

5 Watch 61,807,000 9,254,000 50,417,000 — 121,478,000

6 OAEM 1,461,000 — 1,906,000 — 3,367,000

7 Substandard 19,234,000 261,000 10,684,000 — 30,179,000

8 Doubtful — — — — —

Total $ 359,581,000 $ 32,785,000 $ 205,910,000 $ 36,113,000 $ 634,389,000

Commercial loans are generally charged off when all or a portion of the principal amount is determined to be uncollectible.

15 unchanged sentences

This is subject to completion of a current assessment of the value of the collateral with any outstanding loan balance in excess of the fair value of the property, less costs to sell, written down or charged-off.

There were no changes to the Company's accounting policies or methodology used to estimate the allowance for loan losses during the three months ended March 31, 2020 .

The following table presents allowance for loan losses activity by class for the three months ended March 31, 2020 , and allowance for loan loss balances by class and related loan balances by class as of March 31, 2020 :

Home Equity Line of Credit

For the three months ended March 31, 2020

There were no changes to the Company's accounting policies or methodology used to estimate the allowance for loan losses during the six months ended June 30, 2020.

The following table presents allowance for loan losses activity by class for the six months and quarter ended June 30, 2020, and allowance for loan loss balances by class and related loan balances by class as of June 30, 2020:

Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the six months ended June 30, 2020

Beginning balance $ 3,742,000 $ 365,000 $ 3,329,000 $ 27,000 $ 1,024,000 $ 25,000 $ 1,078,000 $ 867,000 $ 1,182,000 $ 11,639,000

Charge offs — — 17,000 — 46,000 — 153,000 201,000 — 417,000

Recoveries — — 20,000 — 26,000 — 19,000 73,000 — 138,000

Provision (credit) 769,000 159,000 357,000 83,000 1,257,000 39,000 340,000 ( 81,000 ) ( 173,000 ) 2,750,000

Ending balance $ 4,511,000 $ 524,000 $ 3,689,000 $ 110,000 $ 2,261,000 $ 64,000 $ 1,284,000 $ 658,000 $ 1,009,000 $ 14,110,000

Allowance for loan losses as of March 31, 2020

For the three months ended June 30, 2020

Beginning balance $ 3,862,000 $ 424,000 $ 2,427,000 $ 29,000 $ 1,226,000 $ 32,000 $ 1,012,000 $ 725,000 $ 2,121,000 $ 11,858,000

Charge offs — — 17,000 — 44,000 — — 101,000 — 162,000

Recoveries — — — — 16,000 — 18,000 30,000 — 64,000

Provision (credit) 649,000 100,000 1,279,000 81,000 1,063,000 32,000 254,000 4,000 ( 1,112,000 ) 2,350,000

Ending balance $ 4,511,000 $ 524,000 $ 3,689,000 $ 110,000 $ 2,261,000 $ 64,000 $ 1,284,000 $ 658,000 $ 1,009,000 $ 14,110,000

Allowance for loan losses as of June 30, 2020

Ending balance specifically evaluated for impairment $ 199,000 $ 20,000 $ 132,000 $ — $ 269,000 $ — $ 292,000 $ 5,000 $ — $ 917,000

Ending balance collectively evaluated for impairment $ 4,312,000 $ 504,000 $ 3,557,000 $ 110,000 $ 1,992,000 $ 64,000 $ 992,000 $ 653,000 $ 1,009,000 $ 13,193,000

Related loan balances as of March 31, 2020

Related loan balances as of June 30, 2020

Ending balance $ 397,155,000 $ 47,169,000 $ 327,967,000 $ 49,644,000 $ 499,693,000 $ 14,707,000 $ 87,019,000 $ 28,269,000 $ — $ 1,451,623,000

1,344,208,000

Ending balance specifically evaluated for impairment $ 5,749,000 $ 934,000 $ 853,000 $ — $ 10,311,000 $ — $ 2,161,000 $ 5,000 $ — $ 20,013,000

Ending balance collectively evaluated for impairment $ 391,406,000 $ 46,235,000 $ 327,114,000 $ 49,644,000 $ 489,382,000 $ 14,707,000 $ 84,858,000 $ 28,264,000 $ — $ 1,431,610,000

1,321,715,000

The following table presents allowance for loan losses activity by class for the year ended December 31, 2019 and allowance for loan loss balances by class and related loan balances by class as of December 31, 2019:

Home Equity Line of Credit

Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the year ended December 31, 2019

Beginning balance $ 3,567,000 $ 255,000 $ 3,541,000 $ 24,000 $ 1,235,000 $ 34,000 $ 730,000 $ 630,000 $ 1,216,000 $ 11,232,000

Charge offs 89,000 — 179,000 — 445,000 — 69,000 338,000 — 1,120,000

Recoveries 15,000 — 73,000 — 57,000 — 4,000 128,000 — 277,000

Provision (credit) 249,000 110,000 ( 106,000 ) 3,000 177,000 ( 9,000 ) 413,000 447,000 ( 34,000 ) 1,250,000

5 unchanged sentences

Ending balance $ 372,810,000 $ 38,084,000 $ 218,773,000 $ 41,288,000 $ 492,455,000 $ 14,813,000 $ 92,349,000 $ 26,503,000 $ — $ 1,297,075,000

1,297,075,000

Ending balance specifically evaluated for impairment $ 6,309,000 $ 958,000 $ 7,075,000 $ — $ 12,439,000 $ — $ 2,488,000 $ 5,000 $ — $ 29,274,000

Ending balance collectively evaluated for impairment $ 366,501,000 $ 37,126,000 $ 211,698,000 $ 41,288,000 $ 480,016,000 $ 14,813,000 $ 89,861,000 $ 26,498,000 $ — $ 1,267,801,000

1,267,801,000

The following table presents allowance for loan losses activity by class for the three months ended March 31, 2019 , and allowance for loan loss balances by class and related loan balances by class as of March 31, 2019 :

Home Equity Line of Credit

For the three months ended March 31, 2019

The following table presents allowance for loan losses activity by class for the six months and quarter ended June 30, 2019, and allowance for loan loss balances by class and related loan balances by class as of June 30, 2019:

Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the six months ended June 30, 2019

Beginning balance $ 3,567,000 $ 255,000 $ 3,541,000 $ 24,000 $ 1,235,000 $ 34,000 $ 730,000 $ 630,000 $ 1,216,000 $ 11,232,000

Charge offs 53,000 — 109,000 — 93,000 — 38,000 187,000 — 480,000

Recoveries 13,000 — 2,000 — 6,000 — 2,000 71,000 — 94,000

Provision (credit) 82,000 54,000 ( 153,000 ) 1,000 ( 42,000 ) ( 11,000 ) ( 61,000 ) 135,000 620,000 625,000

Ending balance $ 3,609,000 $ 309,000 $ 3,281,000 $ 25,000 $ 1,106,000 $ 23,000 $ 633,000 $ 649,000 $ 1,836,000 $ 11,471,000

Allowance for loan losses as of March 31, 2019

For the three months ended June 30, 2019

Beginning balance $ 3,632,000 $ 325,000 $ 3,430,000 $ 25,000 $ 1,114,000 $ 30,000 $ 630,000 $ 660,000 $ 1,644,000 $ 11,490,000

Charge offs 53,000 — 108,000 — 44,000 — — 124,000 — 329,000

Recoveries 5,000 — 1,000 — 3,000 — 1,000 50,000 — 60,000

Provision (credit) 25,000 ( 16,000 ) ( 42,000 ) — 33,000 ( 7,000 ) 2,000 63,000 192,000 250,000

Ending balance $ 3,609,000 $ 309,000 $ 3,281,000 $ 25,000 $ 1,106,000 $ 23,000 $ 633,000 $ 649,000 $ 1,836,000 $ 11,471,000

Allowance for loan losses as of June 30, 2019

Ending balance specifically evaluated for impairment $ 196,000 $ — $ 1,320,000 $ — $ 305,000 $ — $ 9,000 $ — $ — $ 1,830,000

Ending balance collectively evaluated for impairment $ 3,413,000 $ 309,000 $ 1,961,000 $ 25,000 $ 801,000 $ 23,000 $ 624,000 $ 649,000 $ 1,836,000 $ 9,641,000

Related loan balances as of March 31, 2019

Related loan balances as of June 30, 2019

Ending balance $ 359,581,000 $ 32,785,000 $ 205,910,000 $ 36,113,000 $ 481,349,000 $ 13,239,000 $ 94,763,000 $ 25,392,000 $ — $ 1,249,132,000

1,264,639,000

Ending balance specifically evaluated for impairment $ 8,961,000 $ 982,000 $ 7,582,000 $ — $ 12,636,000 $ — $ 1,019,000 $ — $ — $ 31,180,000

Ending balance collectively evaluated for impairment $ 350,620,000 $ 31,803,000 $ 198,328,000 $ 36,113,000 $ 468,713,000 $ 13,239,000 $ 93,744,000 $ 25,392,000 $ — $ 1,217,952,000

1,234,071,000

Note 5 – Stock-Based Compensation

At the 2010 Annual Meeting, shareholders approved the 2010 Equity Incentive Plan (the "2010 Plan").

This reserved 400,000 shares of common stock for issuance in connection with stock options, restricted stock awards and other equity based awards to attract and retain the best available personnel, provide additional incentive to officers, employees and non-employee Directors and promote the success of the Company.

Such grants and awards were structured in a manner that did not encourage the recipients to expose the Company to undue or inappropriate risk.

Options issued under the 2010 Plan qualified for treatment as incentive stock options for purposes of Section 422 of the Internal Revenue Code.

Other compensation under the 2010 Plan qualified as performance-based for purposes of Section 162(m) of the Internal Revenue Code, and satisfied NASDAQ guidelines relating to equity compensation.

The 2010 Plan expired on April 28, 2020, leaving 215,513 shares not issued.

At the 2020 Annual Meeting, shareholders approved the 2020 Equity Incentive Plan (the "2020 Plan").

This reserves 400,000 shares of common stock for issuance in connection with stock options, restricted stock awards and other equity based awards to attract and retain the best available personnel, provide additional incentive to officers, employees and non-employee Directors and promote the success of the Company.

Such grants and awards will be structured in a manner that does not encourage the recipients to expose the Company to undue or inappropriate risk.

Options issued under the 2010 Plan will qualify for treatment as incentive stock options for purposes of Section 422 of the Internal Revenue Code.

Options issued under the 2020 Plan qualify for treatment as incentive stock options for purposes of Section 422 of the Internal Revenue Code.

Other compensation under the 2020 Plan will qualify as performance-based for purposes of Section 162(m) of the Internal Revenue Code, and will satisfy NASDAQ guidelines relating to equity compensation.

As of March 31, 2020 , 184,487 shares of restricted stock had been granted under the 2010 Plan, of which 71,374 shares remain restricted as of March 31, 2020 as detailed in the following table:

Remaining Term

The compensation cost related to these restricted stock grants is $ 1,785,000 and is recognized over the vesting terms of each grant.

In the three months ended March 31, 2020 , $ 150,000 of expense was recognized for these restricted shares, leaving $ 1,087,000 in unrecognized expense as of March 31, 2020 .

In the three months ended March 31, 2019 , $ 123,000 of expense was recognized for restricted shares, leaving $ 1,046,000 in unrecognized expense as of March 31, 2019 .

The 2010 Plan expired on April 28, 2020.

At the 2020 Annual Meeting, shareholders approved the 2020 Equity Incentive Plan (the "2020 Plan").

The 2020 Plan reserves 400,000 shares of common stock of the Company for issuance in connection with stock options, restricted stock awards and other equity based awards for the same purpose and under the same terms as the 2010 Plan.

No awards have been granted to date under the 2020 Plan.

As of June 30, 2020, 184,487 shares of restricted stock had been granted under the 2010 Plan and 4,250 shares under the 2020 Plan, of which 75,624 shares remain restricted as of June 30, 2020 as detailed in the following table:

Granted Vesting Term

(In Years) Shares Remaining Term

2015 5.0 527 0.1

2016 5.0 10,874 0.6

2017 5.0 7,017 1.6

2018 3.0 5,371 0.6

2018 4.0 2,068 1.5

2018 5.0 6,184 2.5

2019 2.0 1,484 0.6

2019 3.0 16,254 1.6

2020 1.0 4,309 0.8

2020 2.0 694 1.6

2020 3.0 20,842 2.6

The compensation cost related to these nonvested restricted stock grants is $ 1,957,000 and is recognized over the vesting terms of each grant.

In the six months ended June 30, 2020, $ 312,000 of expense was recognized for these restricted shares, leaving $ 1,003,000 in unrecognized expense as of June 30, 2020.

In the six months ended June 30, 2019, $ 244,000 of expense was recognized for restricted shares, leaving $ 921,000 in unrecognized expense as of June 30, 2019.

Note 6 – Common Stock

Proceeds from sale of common stock totaled $ 163,000 and $ 168,000 for the three months ended March 31, 2020 and 2019 , respectively.

Proceeds from sale of common stock totaled $ 325,000 and $ 329,000 for the six months ended June 30, 2020 and 2019, respectively.

Note 7 – Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the three months ended March 31, 2020 and 2019 :

Income (Numerator)

Shares (Denominator)

Per-Share Amount

For the three months ended March 31, 2020

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the six months ended June 30, 2020 and 2019:

Income (Numerator) Shares (Denominator) Per-Share Amount

For the six months ended June 30, 2020

Net income as reported $ 13,064,000

3 unchanged sentences

Income available to common shareholders plus assumed conversions $ 13,064,000 10,921,507 $ 1.20

For the three months ended March 31, 2019

For the six months ended June 30, 2019

Net income as reported $ 12,551,000

3 unchanged sentences

Income available to common shareholders plus assumed conversions $ 12,551,000 10,882,348 $ 1.15

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the quarters ended June 30, 2020 and 2019:

Income (Numerator) Shares (Denominator) Per-Share Amount

For the quarter ended June 30, 2020

Net income as reported $ 6,569,000

Less dividends and amortization of premium on preferred stock

Income available to common shareholders 6,569,000 10,855,139 $ 0.61

Effect of dilutive securities:

restricted stock 73,522

Income available to common shareholders plus assumed conversions $ 6,569,000 10,928,661 $ 0.60

For the quarter ended June 30, 2019

Net income as reported $ 6,395,000

Less dividends and amortization of premium on preferred stock —

Income available to common shareholders 6,395,000 10,812,323 $ 0.59

Effect of dilutive securities:

restricted stock 75,577

Income available to common shareholders plus assumed conversions $ 6,395,000 10,887,900 $ 0.59

Note 8 – Employee Benefit Plans

3 unchanged sentences

Such contribution equaled 2.0 % of each eligible employee's compensation in 2019.

The amount for 2020 has not been established.

The expense related to the 401(k) plan was $ 255,000 and $ 185,000 for the three months ended March 31, 2020 and 2019 , respectively.

The Company adopted the safe harbor form of 401(k) plan for 2020 and will follow safe harbor guidelines when determining the level of discretionary contribution.

The expense related to the 401(k) plan was $ 453,000 and $ 322,000 for the six months ended June 30, 2020 and 2019, respectively.

Deferred Compensation and Supplemental Retirement Benefits

2 unchanged sentences

The costs for these benefits are recognized over the service periods of the participating officers in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 712 "Compensation – Nonretirement Postemployment Benefits".

The expense of these supplemental retirement benefits was $ 40,000 for the three months ended March 31, 2020 and 2019 .

As of March 31, 2020 , the associated accrued liability included in other liabilities in the balance sheet was $ 2,772,000 compared to $ 2,828,000 and $ 2,894,000 at December 31, 2019 and March 31, 2019 , respectively.

The expense of these supplemental retirement benefits was $ 79,000 for the six months ended June 30, 2020 and 2019.

As of June 30, 2020, the associated accrued liability included in other liabilities in the balance sheet was $ 2,764,000 compared to $ 2,828,000 and $ 2,887,000 at December 31, 2019 and June 30, 2019, respectively.

Post-Retirement Benefit Plans

6 unchanged sentences

The following table sets forth the accumulated postretirement benefit obligation and funded status:

At or for the three months ended March 31,

At or for the six months ended June 30,

Change in benefit obligation

8 unchanged sentences

The following table sets forth the net periodic pension cost:

For the three months ended March 31,

For the six months ended June 30, For the quarter ended June 30,

2020 2019 2020 2019

Components of net periodic benefit cost

2 unchanged sentences

Amounts not yet reflected in net periodic benefit cost and included in accumulated other comprehensive income are as follows:

December 31, 2019

2020 December 31, 2019 June 30,

Unamortized net actuarial gain $ 31,000 $ 31,000 $ 47,000

8 unchanged sentences

Note 9 - Other Comprehensive Income (Loss)

The following table summarizes activity in the unrealized gain or loss on available for sale securities included in other comprehensive income (loss) for the three months ended March 31, 2020 and 2019 .

For the three months ended March 31,

The following table summarizes activity in the unrealized gain or loss on available for sale securities included in other comprehensive income (loss) for the six months and quarter ended June 30, 2020 and 2019.

For the six months ended June 30, For the quarter ended June 30,

2020 2019 2020 2019

Balance at beginning of period $ 3,657,000 $ ( 5,051,000 ) $ 7,890,000 $ ( 1,539,000 )

Unrealized gains arising during the period

Unrealized gains (losses) arising during the period 5,537,000 9,875,000 ( 572,000 ) 5,429,000

Reclassification of net realized gains during the period ( 1,179,000 ) — ( 427,000 ) —

Related deferred taxes ( 915,000 ) ( 2,074,000 ) 209,000 ( 1,140,000 )

Net change 3,443,000 7,801,000 ( 790,000 ) 4,289,000

Balance at end of period $ 7,100,000 $ 2,750,000 $ 7,100,000 $ 2,750,000

The reclassification of realized gains is included in the net securities gains line of the consolidated statements of income and comprehensive income and the tax effect is included in the income tax expense line of the same statement.

The following table summarizes activity in the unrealized loss on securities transferred from available for sale to held to maturity included in other comprehensive income (loss) for the three months ended March 31, 2020 and 2019 .

For the three months ended March 31,

For the six months ended June 30, For the quarter ended June 30,

2020 2019 2020 2019

Balance at beginning of period $ ( 182,000 ) $ ( 197,000 ) $ ( 174,000 ) $ ( 194,000 )

1 unchanged sentence

Related deferred taxes ( 9,000 ) ( 2,000 ) ( 7,000 ) ( 1,000 )

Net change 36,000 7,000 28,000 4,000

Balance at end of period $ ( 146,000 ) $ ( 190,000 ) $ ( 146,000 ) $ ( 190,000 )

The following table presents the effect of the Company's derivative financial instruments included in other comprehensive income (loss) for the three months ended March 31, 2020 and 2019 .

For the three months ended March 31,

The following table presents the effect of the Company's derivative financial instruments included in other comprehensive income (loss) for the six months and quarter ended June 30, 2020 and 2019.

For the six months ended June 30, For the quarter ended June 30,

2020 2019 2020 2019

Balance at beginning of period $ 97,000 $ 1,438,000 $ ( 4,773,000 ) $ 973,000

1 unchanged sentence

Related deferred taxes 1,671,000 362,000 376,000 238,000

Net change ( 6,284,000 ) ( 1,363,000 ) ( 1,414,000 ) ( 898,000 )

Balance at end of period $ ( 6,187,000 ) $ 75,000 $ ( 6,187,000 ) $ 75,000

The following table summarizes activity in the unrealized gain or loss on postretirement benefits included in other comprehensive income (loss) for the three months ended March 31, 2020 and 2019 .

For the three months ended March 31,

The following table summarizes activity in the unrealized gain or loss on postretirement benefits included in other comprehensive income (loss) for the six months and quarter ended June 30, 2020 and 2019.

For the six months ended June 30, For the quarter ended June 30,

2020 2019 2020 2019

Unrecognized postretirement benefits at beginning of period $ 24,000 $ 37,000 $ 24,000 $ 37,000

15 unchanged sentences

The details of the interest rate swap agreements are as follows:

March 31, 2020

December 31, 2019

March 31, 2019

Effective Date

Maturity Date

Variable Index Received

Fixed Rate Paid

Presentation on Consolidated Balance Sheet

Notional Amount

1-Month USD LIBOR

Other Liabilities

1-Month USD LIBOR

Other (Liabilities) Assets

1-Month USD LIBOR

Other (Liabilities) Assets

1-Month USD LIBOR

Other Liabilities

1-Month USD LIBOR

Other Liabilities

3-Month USD LIBOR

Other Liabilities

1-Month USD LIBOR

Other Liabilities

1-Month USD LIBOR

Other (Liabilities) Assets

3-Month USD LIBOR

Other Liabilities

3-Month USD LIBOR

Other Liabilities

1-Month USD LIBOR

Other Liabilities

3-Month USD LIBOR

Other Liabilities

3-Month USD LIBOR

Other Liabilities

June 30, 2020 December 31, 2019 June 30, 2019

Effective Date Maturity Date Variable Index Received Fixed Rate Paid Presentation on Consolidated Balance Sheet Notional Amount Fair Value

Notional Amount Fair Value

06/05/2018 12/05/2019 1-Month USD LIBOR 2.466 % Other Liabilities $ — $ — $ — $ — $ 25,000,000 $ ( 45,000 )

06/27/2016 06/27/2021 1-Month USD LIBOR 0.893 % Other (Liabilities) Assets 20,000,000 ( 150,000 ) 20,000,000 199,000 20,000,000 300,000

06/28/2016 06/28/2021 1-Month USD LIBOR 0.940 % Other (Liabilities) Assets 30,000,000 ( 238,000 ) 30,000,000 278,000 30,000,000 423,000

06/05/2018 06/05/2020 1-Month USD LIBOR 2.547 % Other Liabilities — — 25,000,000 ( 96,000 ) 25,000,000 ( 160,000 )

06/05/2018 12/05/2020 1-Month USD LIBOR 2.603 % Other Liabilities — — 25,000,000 ( 234,000 ) 25,000,000 ( 313,000 )

12/05/2019 12/05/2022 3-Month USD LIBOR 1.779 % Other Liabilities — — 25,000,000 ( 98,000 ) 25,000,000 ( 110,000 )

08/02/2019 08/02/2024 1-Month USD LIBOR 1.590 % Other Liabilities 12,500,000 ( 736,000 ) 12,500,000 ( 11,000 ) — —

08/05/2019 08/05/2024 1-Month USD LIBOR 1.420 % Other (Liabilities) Assets 12,500,000 ( 649,000 ) 12,500,000 85,000 — —

02/12/2020 02/12/2023 3-Month USD LIBOR 1.486 % Other Liabilities 25,000,000 ( 841,000 ) — — — —

02/12/2020 02/12/2024 3-Month USD LIBOR 1.477 % Other Liabilities 25,000,000 ( 1,124,000 ) — — — —

06/28/2021 06/28/2026 1-Month USD LIBOR 1.158 % Other Liabilities 50,000,000 ( 2,119,000 ) — — — —

03/13/2020 03/13/2025 3-Month USD LIBOR 0.855 % Other Liabilities 25,000,000 ( 659,000 ) — — — —

03/13/2020 03/13/2030 3-Month USD LIBOR 1.029 % Other Liabilities 20,000,000 ( 811,000 ) — — — —

04/07/2020 04/07/2023 3-Month USD Libor 0.599 % Other Liabilities 20,000,000 ( 210,000 ) — — — —

04/07/2020 04/07/2024 3-Month USD Libor 0.643 % Other Liabilities 20,000,000 ( 295,000 ) — — — —

$ 260,000,000 $ ( 7,832,000 ) $ 150,000,000 $ 123,000 $ 150,000,000 $ 95,000

During the first quarter of 2020, the Bank took advantage of market opportunities to restructure several interest rate swap positions and extend funding at favorable interest rates;

one-time charges totaling $ 1.76 million were incurred and expensed in the quarter in connection with the restructuring.

one-time charges totaling $ 1.76 million were incurred and expensed in the first quarter of 2020 in connection with the restructuring.

The Company would reclassify unrealized gains or losses accounted for within accumulated other comprehensive income (loss) into earnings if the interest rate swaps were to become ineffective or the swaps were to terminate.

In the next 12 months, the Company does not believe it will be required to reclassify any unrealized gains or losses accounted for within accumulated other comprehensive income (loss) into earnings as a result of ineffectiveness or swap termination.

Amounts paid or received under the swaps are reported in interest expense in the statement of income, and in interest paid in the statement of cash flows.

Amounts paid or received under the swaps are reported in interest expense in the consolidated statement of income, and in interest paid in the consolidated statement of cash flows.

Customer loan derivatives

2 unchanged sentences

Such loan level arrangements are not designated as hedges for accounting purposes, and are recorded at fair value in the Company’s consolidated balance sheet.

At March 31, 2020 there were two customer loan swap arrangements in place, detailed below:

March 31, 2020

December 31, 2019

March 31, 2019

Presentation on Consolidated Balance Sheet

Number of Positions

Notional Amount

Number of Positions

Notional Amount

Number of Positions

Notional Amount

Pay Fixed, Receive Variable

Other Liabilities

Receive Fixed, Pay Variable

At June 30, 2020 there were three customer loan swap arrangements in place, detailed below:

June 30, 2020 December 31, 2019 June 30, 2019

Presentation on Consolidated Balance Sheet Number of Positions Notional Amount Fair Value Number of Positions Notional Amount Fair Value Number of Positions Notional Amount Fair Value

Pay Fixed, Receive Variable Other Liabilities 3 $ 24,921,000 $ ( 3,613,000 ) 2 $ 16,374,000 $ ( 1,205,000 ) 1 $ 12,914,000 $ 991,000

Receive Fixed, Pay Variable Other Assets 3 24,921,000 3,613,000 2 16,374,000 1,205,000 1 12,904,000 ( 991,000 )

Total 6 $ 49,842,000 $ — 4 $ 32,748,000 $ — 2 $ 25,818,000 $ —

Derivative collateral

1 unchanged sentence

The Bank's arrangement with its institutional counterparty requires it to post cash or other assets as collateral for its various loan swap contracts in a net liability position based on their fair values and the Bank's credit rating or receive cash collateral for contracts in a net asset position as requested.

At March 31, 2020 , the Bank posted to the counterparty $ 3,100,000 of cash and $ 10,000,000 in securities as collateral on its swap contracts.

At June 30, 2020, the Bank posted to the counterparty $ 3,100,000 of cash and $ 10,000,000 in securities as collateral on its swap contracts.

The required amount to be pledged was $ 9,322,000 .

1 unchanged sentence

The Company is aware that LIBOR may no longer be published after December 31, 2021.

The Federal Reserve formed the Alternative Reference Rates Committee (ARRC) to guide the transition process in the United States.

ARRC has issued a number of recommendations including the adoption of the Secured Overnight Financing Rate (SOFR) as a replacement for LIBOR.

The International Swap and Derivatives Association (ISDA), the organization that oversees and guides swap and derivatives markets and participants, continues to work on transitions and replacement rates, including having replacement rates in place before the possible cessation of LIBOR at the end of 2021, and has committed to providing more definitive recommendations later in 2020.

The Bank intends to continue to monitor these developments closely and expects to pursue the steps ultimately recommended by ISDA to provide for an orderly transition to a post-LIBOR environment.

Of the interest rate swap contracts the Bank has in place as of March 31, 2020 , two contracts carrying a total notional amount of $ 50 million are set to mature prior to December 31, 2021;

seven contracts with a total notional amount of $ 170 million have maturity dates beyond December 31, 2021.

The two customer loan swap contracts shown in the table immediately above have maturity dates of December 19, 2029 and October 1, 2039.

The Company has formed a working group to address the change away from LIBOR.

Management intends to continue to monitor developments from ARRC and ISDA closely, and expects to pursue the steps ultimately recommended to provide for an orderly transition to a post-LIBOR environment.

Of the interest rate swap contracts the Bank has in place as of June 30, 2020, two contracts carrying a total notional amount of $ 50 million are set to mature prior to December 31, 2021;

nine contracts with a total notional amount of $ 210 million have maturity dates beyond December 31, 2021.

The three customer loan swap contracts shown in the table immediately above have maturity dates of December 19, 2029, July 1, 2035 and October 1, 2039.

Note 11 – Mortgage Servicing Rights

3 unchanged sentences

The model utilizes several assumptions, the most significant of which is loan prepayments, calculated using a three -months moving average of weekly prepayment data published by the Public Securities Association (PSA) and modeled against the serviced loan portfolio, and the discount rate to discount future cash flows.

As of March 31, 2020 , the prepayment assumption using the PSA model was 209 , which translates into an anticipated prepayment rate of 12.54 % .

As of June 30, 2020, the prepayment assumption using the PSA model was 321, which translates into an anticipated prepayment rate of 19.26 %.

The discount rate is 9.00 %.

2 unchanged sentences

Amortization of mortgage servicing rights, as well as write-offs due to prepayments of the related mortgage loans, are recorded as a charge against mortgage servicing fee income.

For the three months ended March 31, 2020 and 2019 , servicing rights capitalized totaled $ 129,000 and $ 58,000 , respectively.

Servicing rights amortized for the three-month periods ended March 31, 2020 and 2019 were $ 66,000 and $ 56,000 , respectively.

The fair value of servicing rights was $ 2,126,000 , $ 2,089,000 and $ 2,410,000 at March 31, 2020 , December 31, 2019 and March 31, 2019 , respectively.

The Bank serviced loans for others totaling $ 268,077,000 , $ 266,173,000 and $ 260,553,000 at March 31, 2020 , December 31, 2019 , and March 31, 2019 , respectively.

For the six months ended June 30, 2020 and 2019, servicing rights capitalized totaled $ 464,000 and $ 128,000 , respectively.

Servicing rights amortized for the six-month periods ended June 30, 2020 and 2019 were $ 135,000 and $ 114,000 , respectively.

The fair value of servicing rights was $ 1,777,000 , $ 2,089,000 and $ 2,087,000 at June 30, 2020, December 31, 2019 and June 30, 2019, respectively.

The Bank serviced loans for others totaling $ 287,987,000 , $ 266,173,000 and $ 259,889,000 at June 30, 2020, December 31, 2019, and June 30, 2019, respectively.

Mortgage servicing rights are included in other assets and detailed in the following table:

2020 December 31,

2019 June 30,

Mortgage servicing rights $ 6,603,000 $ 6,140,000 $ 5,846,000

Accumulated amortization ( 4,729,000 ) ( 4,594,000 ) ( 4,478,000 )

$ 1,874,000 $ 1,546,000 $ 1,368,000

Note 12 – Income Taxes

3 unchanged sentences

Note 13 - Certificates of Deposit

The following table represents the breakdown of certificates of deposit at March 31, 2020 and 2019 , and at December 31, 2019 :

March 31, 2020

December 31, 2019

March 31, 2019

The following table represents the breakdown of certificates of deposit at June 30, 2020 and 2019, and at December 31, 2019:

June 30, 2020 December 31, 2019 June 30, 2019

Certificates of deposit < $100,000 $ 269,353,000 $ 277,225,000 $ 377,806,000

1 unchanged sentence

Certificates $250,000 and over 64,667,000 67,513,000 70,896,000

$ 656,633,000 $ 689,979,000 $ 716,998,000

Note 14 – Reclassifications

50 unchanged sentences

The credit value adjustments associated with derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties.

As of March 31, 2020 and 2019 , and December 31, 2019 , the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives due to collateral postings.

As of June 30, 2020 and 2019, and December 31, 2019, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives due to collateral postings.

Customer Loan Derivatives

12 unchanged sentences

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2020 , December 31, 2019 and March 31, 2019 .

At March 31, 2020

The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2020, December 31, 2019 and June 30, 2019.

At June 30, 2020

Level 1 Level 2 Level 3 Total

Securities available for sale

5 unchanged sentences

Total interest rate swap agreements — 3,613,000 — 3,613,000

At March 31, 2020

Total assets $ — $ 315,113,000 $ — $ 315,113,000

At June 30, 2020

Level 1 Level 2 Level 3 Total

Interest rate swap agreements $ — $ 7,832,000 $ — $ 7,832,000

Customer loan interest swap agreements — 3,613,000 — 3,613,000

Total liabilities $ — $ 11,445,000 $ — $ 11,445,000

At December 31, 2019

Level 1 Level 2 Level 3 Total

Securities available for sale

6 unchanged sentences

Total interest rate swap agreements — 1,767,000 — 1,767,000

Total assets $ — $ 362,287,000 $ — $ 362,287,000

At December 31, 2019

Level 1 Level 2 Level 3 Total

Interest rate swap agreements $ — $ 439,000 $ — $ 439,000

1 unchanged sentence

Total liabilities $ — $ 1,644,000 $ — $ 1,644,000

At March 31, 2019

At June 30, 2019

Level 1 Level 2 Level 3 Total

Securities available for sale

4 unchanged sentences

Interest rate swap agreements — 723,000 — 723,000

At March 31, 2019

Customer loan interest swap agreements — 991,000 — 991,000

Total interest swap agreements — 1,714,000 — 1,714,000

Total assets $ — $ 324,284,000 $ — $ 324,284,000

At June 30, 2019

Level 1 Level 2 Level 3 Total

Interest rate swap agreements $ — $ 628,000 $ — $ 628,000

Customer loan interest swap agreements — 991,000 — 991,000

Total liabilities $ — $ 1,619,000 $ — $ 1,619,000

1 unchanged sentence

The following tables include assets measured at fair value on a nonrecurring basis that have had a fair value adjustment since their initial recognition.

Other real estate owned is presented net of an allowance of $ 0 at March 31, 2020 , 2019

Other real estate owned is presented net of an allowance of $ 0 at June 30, 2020, 2019

and December 31, 2019.

Only collateral-dependent impaired loans with a related specific allowance for loan losses or a partial charge off are included in impaired loans for purposes of fair value disclosures.

Impaired loans below are presented net of specific allowances of $ 706,000 , $ 1,916,000 and $ 1,822,000 at March 31, 2020 , December 31, 2019 , and March 31, 2019 , respectively.

At March 31, 2020

Impaired loans below are presented net of specific allowances of $ 623,000 , $ 1,916,000 and $ 1,893,000 at June 30, 2020, December 31, 2019, and June 30, 2019, respectively.

At June 30, 2020

Level 1 Level 2 Level 3 Total

Other real estate owned $ — $ 851,000 $ — $ 851,000

Impaired loans — 753,000 — 753,000

Total assets $ — $ 1,604,000 $ — $ 1,604,000

At December 31, 2019

Level 1 Level 2 Level 3 Total

Other real estate owned $ — $ 279,000 $ — $ 279,000

Impaired loans — 6,579,000 — 6,579,000

At March 31, 2019

Total assets $ — $ 6,858,000 $ — $ 6,858,000

At June 30, 2019

Level 1 Level 2 Level 3 Total

Other real estate owned $ — $ 289,000 $ — $ 289,000

Impaired loans — 6,693,000 — 6,693,000

Total assets $ — $ 6,982,000 $ — $ 6,982,000

Fair Value of Financial Instruments

11 unchanged sentences

Carrying value is used because the accounts have no stated maturity and the customer has the ability to withdraw funds immediately.

The carrying amount and estimated fair values for financial instruments as of March 31, 2020 were as follows:

Carrying value

Estimated fair value

The carrying amount and estimated fair values for financial instruments as of June 30, 2020 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

Financial assets

1 unchanged sentence

Loans (net of allowance for loan losses)

Real estate 392,296,000 389,956,000 — 12,000 389,944,000

Construction 46,605,000 46,327,000 — — 46,327,000

Other 323,994,000 321,575,000 — 8,000 321,567,000

Municipal 49,526,000 48,791,000 — — 48,791,000

Term 497,258,000 503,574,000 — 163,000 503,411,000

Construction 14,638,000 14,709,000 — — 14,709,000

Home equity line of credit 85,636,000 85,635,000 — 570,000 85,065,000

1,332,350,000

1,324,671,000

1,323,620,000

Consumer 27,560,000 25,512,000 — — 25,512,000

Total loans 1,437,513,000 1,436,079,000 — 753,000 1,435,326,000

Mortgage servicing rights 1,874,000 1,777,000 — 1,777,000 —

4 unchanged sentences

Repurchase agreements 61,103,000 61,399,000 — 61,399,000 —

Federal Home Loan Bank advances

Federal Home Loan Bank and Federal Reserve Bank borrowings 217,702,000 218,644,000 — 218,644,000 —

Total borrowed funds 278,805,000 280,043,000 — 280,043,000 —

The carrying amounts and estimated fair values for financial instruments as of December 31, 2019 were as follows:

Carrying value

Estimated fair value

Carrying value Estimated fair value Level 1 Level 2 Level 3

Financial assets

1 unchanged sentence

Loans (net of allowance for loan losses)

Real estate 368,645,000 364,626,000 — 2,000 364,624,000

Construction 37,678,000 37,366,000 — — 37,366,000

Other 215,068,000 212,548,000 — 5,046,000 207,502,000

Municipal 41,258,000 40,552,000 — — 40,552,000

Term 491,315,000 491,359,000 — 577,000 490,782,000

Construction 14,785,000 14,786,000 — — 14,786,000

Home equity line of credit 91,149,000 90,959,000 — 954,000 90,005,000

1,285,436,000

1,275,685,000

1,269,106,000

Consumer 25,538,000 23,489,000 — — 23,489,000

Total loans 1,285,436,000 1,275,685,000 — 6,579,000 1,269,106,000

Mortgage servicing rights 1,546,000 2,089,000 — 2,089,000 —

6 unchanged sentences

Total borrowed funds 184,955,000 177,513,000 — 177,513,000 —

The carrying amount and estimated fair values for financial instruments as of March 31, 2019 were as follows:

Carrying value

Estimated fair value

The carrying amount and estimated fair values for financial instruments as of June 30, 2019 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

Financial assets

1 unchanged sentence

Loans (net of allowance for loan losses)

Real estate 355,285,000 350,390,000 — 622,000 349,768,000

Construction 32,417,000 31,970,000 — — 31,970,000

Other 202,004,000 200,804,000 — 5,315,000 195,489,000

Municipal 36,083,000 35,825,000 — — 35,825,000

Term 480,032,000 475,560,000 — 745,000 474,815,000

Construction 13,212,000 13,089,000 — — 13,089,000

Home equity line of credit 94,009,000 93,260,000 — 11,000 93,249,000

1,253,149,000

1,229,685,000

1,223,166,000

Consumer 24,619,000 22,917,000 — — 22,917,000

Total loans 1,237,661,000 1,223,815,000 — 6,693,000 1,217,122,000

Mortgage servicing rights 1,368,000 2,087,000 — 2,087,000 —

17 unchanged sentences

The Company qualifies as a Smaller Reporting Company.

It continues to evaluate the impact of the adoption of the ASU on its consolidated financial statements, and continues to anticipates that it may have a material impact upon adoption.

It continues to evaluate the impact of the adoption of the ASU on its consolidated financial statements, and continues to anticipate that it may have a material impact upon adoption.

The Bank has formed an implementation committee for ASU No.

13 unchanged sentences

This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements.

Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and

Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements.

2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019;

9 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.

What changed 10-Q

Item 1. Financial Statements