What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 189 added, 275 removed, 1204 unchanged (28% 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 September 30, 2020 and 2019 and for the three-month and nine-month periods then ended.

and Subsidiary as of March 31, 2021 and 2020 and for the three-month periods then ended.

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

6 unchanged sentences

Portland, Maine

November 6, 2020

Consolidated Balance Sheets (Unaudited)

1 unchanged sentence

and Subsidiary

September 30,

2020 December 31, 2019 September 30,

2021 December 31, 2020 March 31,

Cash and cash equivalents $ 20,029,000 $ 26,212,000 $ 21,117,000

1 unchanged sentence

Securities available for sale 294,537,000 313,376,000 312,928,000

Securities to be held to maturity (fair value of $ 342,062,000 at September 30, 2020, $ 287,045,000 at December 31, 2019 and $ 306,647,000 at September 30, 2019)

Securities to be held to maturity (fair value of $ 388,836,000 at March 31, 2021, $ 377,134,000 at December 31, 2020 and $ 349,248,000 at March 31, 2020)

385,352,000 365,613,000 341,592,000

28 unchanged sentences

Net unrealized loss on securities transferred from available for sale to held to maturity ( 124,000 ) ( 133,000 ) ( 174,000 )

Net unrealized gain (loss) on cash flow hedging derivative instruments ( 5,800,000 ) 97,000 ( 265,000 )

Net unrealized loss on cash flow hedging derivative instruments ( 1,463,000 ) ( 4,932,000 ) ( 4,773,000 )

Net unrealized gain on postretirement costs 28,000 28,000 24,000

10 unchanged sentences

and Subsidiary

For the nine months ended September 30, For the quarter ended September 30,

2020 2019 2020 2019

For the three months ended March 31,

Interest income

Interest and fees on loans (includes tax-exempt income of $ 899,000 YTD September 30, 2020 and $ 1,001,000 YTD September 30, 2019)

Interest and fees on loans (includes tax-exempt income of $ 290,000 YTD March 31, 2021 and $ 310,000 YTD March 31, 2020)

$ 15,119,000 $ 15,856,000

Interest on deposits with other banks 12,000 74,000

Interest and dividends on investments (includes tax-exempt income of $ 5,649,000 YTD September 30, 2020 and $ 5,480,000 YTD September 30, 2019)

Interest and dividends on investments (includes tax-exempt income of $ 1,956,000 YTD March 31, 2021 and $ 1,841,000 YTD March 31, 2020)

3,822,000 4,764,000

31 unchanged sentences

Net unrealized gain (loss) on cash flow hedging derivative instruments 3,469,000 ( 4,870,000 )

Other comprehensive gain (loss) ( 3,991,000 ) 7,042,000 ( 1,186,000 ) 597,000

Other comprehensive loss ( 1,312,000 ) ( 629,000 )

Comprehensive income $ 7,610,000 $ 5,866,000

14 unchanged sentences

Net unrealized gain on securities available for sale, net of tax — — — 4,233,000 4,233,000

Net unrealized loss on cash flow hedging derivative instruments, net of tax — — — ( 1,703,000 ) ( 1,703,000 )

Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 8,000 8,000

Comprehensive income — — 18,839,000 7,042,000 25,881,000

Net unrealized loss on cash flow hedging derivative instruments, net of tax — — — ( 4,870,000 ) ( 4,870,000 )

Comprehensive income (loss) — — 6,495,000 ( 629,000 ) 5,866,000

Cash dividends declared ($ 0.30 per share)

4 unchanged sentences

Proceeds from sale of common stock 5,698 163,000 — — 163,000

Balance at September 30, 2019 10,896,331 $ 63,711,000 $ 141,509,000 $ 3,269,000 $ 208,489,000

Balance at March 31, 2020 10,921,206 $ 64,386,000 $ 147,904,000 $ 2,967,000 $ 215,257,000

Balance at December 31, 2020 10,950,289 $ 65,395,000 $ 158,359,000 $ ( 28,000 ) $ 223,726,000

Net income — — 8,922,000 — 8,922,000

Net unrealized gain on securities available for sale, net of tax — — — 1,863,000 1,863,000

Net unrealized loss on cash flow hedging derivative instruments, net of tax — — ( 5,897,000 ) ( 5,897,000 )

Net unrealized loss on securities available for sale, net of tax — — — ( 4,790,000 ) ( 4,790,000 )

Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 9,000 9,000

Net unrealized gain on cash flow hedging derivative instruments, net of tax — — — 3,469,000 3,469,000

Comprehensive income (loss) — — 8,922,000 ( 1,312,000 ) 7,610,000

5 unchanged sentences

Proceeds from sale of common stock 6,837 182,000 — — 182,000

Balance at September 30, 2020 10,942,959 $ 65,052,000 $ 154,783,000 $ ( 395,000 ) $ 219,440,000

Balance at March 31, 2021 10,983,258 $ 65,865,000 $ 163,659,000 $ ( 1,340,000 ) $ 228,184,000

See Report of Independent Registered Public Accounting Firm.

3 unchanged sentences

and Subsidiary

For the nine months ended

September 30, 2020 September 30, 2019

For the three months ended

March 31, 2021 March 31, 2020

Cash flows from operating activities

9 unchanged sentences

Net amortization of premiums on investments 662,000 369,000

Net (gain) loss on sale of other real estate owned 5,000 ( 113,000 )

Provision for losses on other real estate owned 45,000 —

Net gain on sale of other real estate owned ( 98,000 ) —

Equity compensation expense 288,000 150,000

Net increase in other assets and accrued interest ( 9,757,000 ) ( 9,743,000 )

Net increase in other liabilities 9,579,000 2,036,000

Net (gain) loss on disposal of premises and equipment ( 3,000 ) 386,000

Net (increase) decrease in other assets and accrued interest 10,917,000 ( 11,811,000 )

Net increase (decrease) in other liabilities ( 5,669,000 ) 7,729,000

Net loss on disposal of premises and equipment 1,000 —

Amortization of investment in limited partnership 77,000 78,000

2 unchanged sentences

Cash flows from investing activities

Increase in interest-bearing deposits in other banks ( 36,801,000 ) ( 4,635,000 )

(Increase) decrease in interest-bearing deposits in other banks ( 48,451,000 ) 5,263,000

Proceeds from sales of securities available for sale 1,214,000 68,620,000

8 unchanged sentences

Capital expenditures ( 3,257,000 ) ( 389,000 )

Proceeds from disposal of premises and equipment 3,000 —

Net cash used by investing activities ( 98,353,000 ) ( 50,132,000 )

Cash flows from financing activities

Net increase in demand, savings, and money market accounts 212,641,000 25,821,000

Net increase (decrease) in certificates of deposit ( 100,048,000 ) 70,384,000

Net increase in short-term borrowings 53,837,000 —

Net increase (decrease) in demand, savings, and money market accounts 80,201,000 ( 26,813,000 )

Net increase in certificates of deposit 28,745,000 20,959,000

Net increase (decrease) in short-term borrowings ( 32,388,000 ) 18,087,000

Advances on long-term borrowings — 44,998,000

4 unchanged sentences

Net cash provided by financing activities 73,126,000 53,964,000

Net increase in cash and cash equivalents 8,309,000 2,284,000

Net increase (decrease) in cash and cash equivalents ( 6,183,000 ) 6,684,000

Cash and cash equivalents at beginning of period 26,212,000 14,433,000

Cash and cash equivalents at end of period $ 20,029,000 $ 21,117,000

For the nine months ended

September 30, 2020 September 30, 2019

For the three months ended

March 31, 2021 March 31, 2020

Interest paid $ 3,447,000 $ 5,777,000

18 unchanged sentences

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 some locations have considered or proceeded with 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 two quarters of 2020 has continued in the third quarter and early stages of the the fourth quarter.

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

The introduction of vaccines has led to a gradual re-opening to date and planned future re-openings.

The pace of re-opening is at least partially dependent upon the distribution of vaccines, and varies across the United States.

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 has adversely impacted 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 2020, COVID-19 adversely impacted the tourism industry to a greater degree than other industries;

however, a forward-looking assessment of the continued 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 service charges, interchange revenues, and wealth management activity, could be impacted due to lower activity or market declines.

Accordingly, while management expects this matter may have a negative impact on the Company's financial position and results of future operations, the materiality of such potential impact cannot be reasonably estimated as of the date of this report, November 6, 2020.

Certain fee based activities such as service charges, interchange revenues, and wealth management were negatively impacted initially and have since largely rebounded, but could once again be negatively impacted due to lower activity or market declines related to COVID-19.

Subsequent Events

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

Events occurring subsequent to March 31, 2021, 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 September 30, 2020:

The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2021:

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

3 unchanged sentences

State and political subdivisions 36,663,000 1,178,000 ( 283,000 ) 37,558,000

Asset-backed securities 7,463,000 117,000 — 7,580,000

$ 294,260,000 $ 5,404,000 $ ( 5,127,000 ) $ 294,537,000

16 unchanged sentences

State and political subdivisions 37,752,000 1,722,000 — 39,474,000

Asset-backed securities 7,723,000 43,000 — 7,766,000

$ 307,036,000 $ 7,272,000 $ ( 932,000 ) $ 313,376,000

9 unchanged sentences

$ 10,545,000 $ — $ — $ 10,545,000

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

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

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

Securities available for sale

Government-sponsored agencies $ 7,500,000 $ 52,000 $ — $ 7,552,000

Mortgage-backed securities 276,235,000 9,106,000 ( 189,000 ) 285,152,000

11 unchanged sentences

$ 9,994,000 $ — $ — $ 9,994,000

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

The following table summarizes the contractual maturities of investment securities at March 31, 2021:

Securities available for sale Securities to be held to maturity

15 unchanged sentences

$ 307,036,000 $ 313,376,000 $ 365,613,000 $ 377,134,000

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

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

Securities available for sale Securities to be held to maturity

6 unchanged sentences

$ 302,941,000 $ 312,928,000 $ 341,592,000 $ 349,248,000

At September 30, 2020, securities with a fair value of $ 285,253,000 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 $ 216,903,000 at September 30, 2019, pledged for the same purposes.

At March 31, 2021, securities with a fair value of $ 291,990,000 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 $ 297,326,000 as of December 31, 2020 and $ 208,376,000 at March 31, 2020, 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 nine months and quarters ended September 30, 2020 and 2019:

For the nine months ended September 30, For the quarter ended September 30,

2020 2019 2020 2019

The following table shows securities gains and losses for the three months ended March 31, 2021 and 2020:

For the three months ended March 31,

Proceeds from sales of securities $ 1,214,000 $ 68,620,000

3 unchanged sentences

Related income taxes $ 25,000 $ 158,000

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 September 30, 2020, there were 75 securities with unrealized losses held in the Company's portfolio.

As of March 31, 2021, there were 140 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 10 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 September 30, 2020 is summarized below:

Information regarding securities temporarily impaired as of March 31, 2021 is summarized below:

Less than 12 months 12 months or more Total

3 unchanged sentences

State and political subdivisions 28,783,000 ( 808,000 ) — — 28,783,000 ( 808,000 )

Corporate securities 3,414,000 ( 86,000 ) — — 3,414,000 ( 86,000 )

$ 264,229,000 $ ( 9,830,000 ) $ 3,744,000 $ ( 130,000 ) $ 267,973,000 $ ( 9,960,000 )

7 unchanged sentences

State and political subdivisions 855,000 ( 3,000 ) — — 855,000 ( 3,000 )

Corporate securities 2,498,000 ( 2,000 ) — — 2,498,000 ( 2,000 )

$ 99,070,000 $ ( 1,062,000 ) $ 3,878,000 $ ( 88,000 ) $ 102,948,000 $ ( 1,150,000 )

As of September 30, 2019, there were 60 securities with unrealized losses held in the Company's portfolio.

As of March 31, 2020, there were 70 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 14 had been temporarily impaired for 12 months or more.

In the first quarter of 2019, one issuer of securities held in the portfolio was downgraded by a rating agency to less than investment grade.

These securities totaled approximately 0.13 % of overall state and municipal security holdings and were subsequently sold during the third quarter 2019.

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

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

Less than 12 months 12 months or more Total

8 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 $ 139,000 , net of tax, at September 30, 2020.

This compares to $ 182,000 and $ 189,000 , net of taxes, at December 31, 2019 and September 30, 2019, respectively.

The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $ 124,000 , net of taxes, at March 31, 2021.

This compares to $ 133,000 and $ 174,000 , net of taxes, at December 31, 2020 and March 31, 2020, 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 September 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.

As of March 31, 2021 and 2020, and December 31, 2020, the Bank's investment in FHLB stock totaled $ 9,068,000 , $ 8,957,000 and $ 9,508,000 , 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 September 30, 2020.

No impairment losses have been recorded through March 31, 2021.

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 September 30, 2020 and 2019 and at December 31, 2019:

September 30, 2020 December 31, 2019 September 30, 2019

The following table shows the composition of the Company's loan portfolio as of March 31, 2021 and 2020 and at December 31, 2020:

March 31, 2021 December 31, 2020 March 31, 2020

Real estate $ 469,974,000 31.0 % $ 442,121,000 29.9 % $ 382,753,000 28.5 %

7 unchanged sentences

Total $ 1,516,772,000 100.0 % $ 1,476,761,000 100.0 % $ 1,344,208,000 100.0 %

Loan balances include net deferred loan costs of $ 5,323,000 as of September 30, 2020, $ 7,419,000 as of December 31, 2019, and $ 7,181,000 as of September 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 and third quarters of 2020.

These loans generated gross origination fee income of $ 3,797,000 and deferred loan costs of $ 299,000 ;

year-to-date a net of $ 788,000 in PPP fees was recognized in interest income.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 379,387,000 at September 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 $ 308,163,000 at September 30, 2019.

In addition, commercial, construction and home equity loans totaling $ 271,905,000 at September 30, 2020, $ 240,133,000 at December 31, 2019, and $ 254,076,000 at September 30, 2019, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston.

Loan balances include net deferred loan costs of $ 5,328,000 as of March 31, 2021, $ 6,931,000 as of December 31, 2020, and $ 7,551,000 as of March 31, 2020.

The decrease in net deferred loan costs year-over-year and year-to-date is attributable to unearned fees and deferred costs associated with PPP loans originated during 2020 and the first quarter 2021.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 362,271,000 at March 31, 2021, were used to collateralize borrowings from the FHLB.

This compares to qualifying loans which totaled $ 378,183,000 at December 31, 2020, and $ 401,555,000 at March 31, 2020.

In addition, commercial, construction and home equity loans totaling $ 275,993,000 at March 31, 2021, $ 259,599,000 at December 31, 2020, and $ 260,703,000 at March 31, 2020, 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 September 30, 2020, is presented in the following table:

Information on the past-due status of loans by class of financing receivable as of March 31, 2021, is presented in the following table:

Past Due 60-89 Days

12 unchanged sentences

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 September 30, 2020, a total of 996 loan modification requests for interest-only payments or deferred payments had been completed in conformance with the Interagency Statement or CARES Act, representing $ 279,700,000 in loan balances, or approximately 20.8 % of the loan portfolio excluding PPP balances.

Both the Interagency Statement and the CARES Act provided an exemption for qualified modifications from Troubled Debt Restructure (TDR) designation, which was extended by the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020.

The Company actively worked with borrowers impacted by the COVID-19 outbreak and as of March 31, 2021, a total of 1037 loan modification requests for interest-only payments or deferred payments had been completed in conformance with the Interagency Statement or CARES Act, representing $ 292,003,000 in loan balances, or approximately 20.0 % of the loan portfolio excluding PPP balances.

One of these modifications of de minimis amount has been classified as a Troubled Debt Restructure since being modified.

So long as modified terms are met, loans in an active modification are not included in past due loan totals and continue to accrue interest.

As of September 30, 2020, loans totaling $ 81.0 million, or 6.0 % of all loans, remained in either their original modification or a subsequent modification.

As of March 31, 2021, loans totaling $ 50.6 million, or 3.3 % of all loans, remained in either their original modification or a subsequent modification.

Modification statuses by portfolio segment are summarized below:

33 unchanged sentences

Total $ 2,916,000 $ 2,417,000 $ 4,389,000 $ 9,722,000 $ 1,467,039,000 $ 1,476,761,000 $ 1,505,000

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

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

Past Due 60-89 Days

15 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 September 30, 2020 and 2019 and at December 31, 2019 is presented in the following table:

September 30, 2020 December 31, 2019 September 30, 2019

Information on nonaccrual loans as of March 31, 2021 and 2020 and at December 31, 2020 is presented in the following table:

March 31, 2021 December 31, 2020 March 31, 2020

Real estate $ 748,000 $ 543,000 $ 1,748,000

10 unchanged sentences

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 periods ended September 30, 2020 is presented in the following table:

For the nine months ended September 30, 2020 For the quarter ended September 30, 2020

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

A breakdown of impaired loans by class of financing receivable as of and for the period ended March 31, 2021 is presented in the following table:

For the three months ended March 31, 2021

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

With No Related Allowance

59 unchanged sentences

$ 16,039,000 $ 17,842,000 $ 462,000 $ 21,088,000 $ 478,000

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

For the nine months ended September 30, 2019 For the quarter ended September 30, 2019

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

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

With No Related Allowance

34 unchanged sentences

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

As of September 30, 2020, the Company had 78 loans with a balance of $ 13,390,000 that have been classified as TDRs.

This compares to 81 loans with a balance of $ 21,424,000 and 82 loans with a balance of $ 24,281,000 classified as TDRs as of December 31, 2019 and September 30, 2019, respectively.

As of March 31, 2021, the Company had 73 loans with a balance of $ 11,306,000 that have been classified as TDRs.

This compares to 74 loans with a balance of $ 11,534,000 and 81 loans with a balance of $ 14,968,000 classified as TDRs as of December 31, 2020 and March 31, 2020, 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 September 30, 2020:

The following table shows TDRs by class and the specific reserve as of March 31, 2021:

Number of Loans Balance Specific Reserves

19 unchanged sentences

74 $ 11,534,000 $ 369,000

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

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

Number of Loans Balance Specific Reserves

8 unchanged sentences

81 $ 14,968,000 $ 556,000

As of September 30, 2020, 15 of the loans classified as TDRs with a total balance of $ 2,814,000 were more than 30 days past due.

Of these loans, two 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 September 30, 2020:

As of March 31, 2021, 11 of the loans classified as TDRs with a total balance of $ 1,017,000 were more than 30 days past due.

Of these loans, none 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, 2021:

Number of Loans Balance Specific Reserves

8 unchanged sentences

11 $ 1,017,000 $ 164,000

As of September 30, 2019, nine of the loans classified as TDRs with a total balance of $ 1,084,000 were more than 30 days past due.

Of these loans, four 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 September 30, 2019:

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.

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 Balance Specific Reserves

8 unchanged sentences

22 $ 3,622,000 $ 155,000

For the nine months ended September 30, 2020, three 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 September 30, 2020:

For the three months ended March 31, 2021, one loan was placed on TDR status.

The following table shows this TDR, by class and the associated specific reserve included in the allowance for loan losses as of March 31, 2021:

Number of Loans Pre-Modification

5 unchanged sentences

Municipal — — — —

Term 2 235,000 187,000 23,000

Construction — — — —

2 unchanged sentences

1 $ 262,000 $ 262,000 $ 262,000

For the nine months ended September 30, 2019, 10 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 September 30, 2019:

For the three months ended March 31, 2020, two 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, 2020:

Number of Loans Pre-Modification

10 unchanged sentences

2 $ 235,000 $ 190,000 $ —

For the quarter ended September 30, 2020, one loan was 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 September 30, 2020:

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

Real estate — $ — $ — $ —

Construction — — — —

Other — — — —

Municipal — — — —

Construction — — — —

Home equity line of credit — — — —

Consumer 1 10,000 10,000 1,000

1 $ 10,000 $ 10,000 $ 1,000

For the quarter ended September 30, 2019, 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 September 30, 2019:

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

Real estate — $ — $ — $ —

Construction — — — —

Other — — — —

Municipal — — — —

Term 2 317,000 276,000 —

Construction — — — —

Home equity line of credit — — — —

Consumer — — — —

2 $ 317,000 $ 276,000 $ —

As of September 30, 2020, Management is aware of eight loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 911,000 .

There were also 22 loans with an outstanding balance of $ 3,159,000 that were classified as TDRs and on non-accrual status, of which two loans with an outstanding balance of $ 430,000 were in the process of foreclosure.

As of March 31, 2021, Management is aware of six loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 708,000 .

There were also 21 loans with an outstanding balance of $ 1,908,000 that were classified as TDRs and on non-accrual status, of which one loan with an outstanding balance of $ 92,000 was in the process of foreclosure.

Residential Mortgage Loans in Process of Foreclosure

As of September 30, 2020, there were 17 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 2,083,000 .

This compares to 15 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 1,649,000 as of September 30, 2019.

As of March 31, 2021, there were 14 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 1,067,000 .

This compares to 15 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 2,284,000 as of March 31, 2020.

Allowance for Loan Losses

22 unchanged sentences

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

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

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

A breakdown of the allowance for loan losses as of March 31, 2021, December 31, 2020, and March 31, 2020, by class of financing receivable and allowance element, is presented in the following tables:

As of March 31, 2021 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

21 unchanged sentences

$ 462,000 $ 1,862,000 $ 11,795,000 $ 2,134,000 $ 16,253,000

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

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 Unallocated

Reserves Total Reserves

21 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 0.77 % of related loans as of September 30, 2020, compared to 0.48 % of related loans as of December 31, 2019.

The qualitative portion increased $ 4,818,000 between December 31, 2019 and September 30, 2020 due to a mix of factors.

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

measures used in the qualitative model, as well as analysis of the loan portfolio conducted under both top down and unit level approaches for factors such as levels of credit extended to industry segments particularly vulnerable to social distancing, and performance of COVID-19 related modifications .

The unallocated component of the allowance totaled $ 1,576,000 at September 30, 2020, or 10.3 % of the total reserve.

The qualitative portion of the allowance for loan losses was 0.83 % of related loans as of March 31, 2021, compared to 0.80 % of related loans as of December 31, 2020.

The qualitative portion increased $ 796,000 between December 31, 2020 and March 31, 2021 due to a mix of factors.

These factors included changes in various macroeconomic measures used in the qualitative model, updated analysis of the loan portfolio in multiple stress scenarios, and performance of COVID-19 related loan modifications.

The unallocated component of the allowance totaled $ 1,027,000 at March 31, 2021, or 6.2 % of the total reserve.

This compares to $ 2,134,000 or 13.1 % as of December 31, 2020.

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 experienced year-to-date supports the continued inclusion of an unallocated component.

The allowance for loan losses as a percent of total loans stood at 1.07 % as of September 30, 2020, 0.90 % at December 31, 2019 and 0.93 % as of September 30, 2019.

Maintenance of an unallocated component reflects general imprecision related to portfolio growth along with lingering uncertainty regarding the potential impacts of COVID-19 on the loan portfolio.

The allowance for loan losses as a percent of total loans stood at 1.09 % as of March 31, 2021, 1.10 % at December 31, 2020 and 0.88 % as of March 31, 2020.

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

8 unchanged sentences

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.

At the end of the construction period, loan repayment typically comes from a third party source in the event that the Company will not be providing permanent term financing.

At the end of the construction period, loan repayment typically comes from a third party source in the event that the

Company will not be providing permanent term financing.

Collateral valuation and loan-to-value guidelines follow those for commercial real estate loans.

3 unchanged sentences

Commercial loans may be secured or unsecured.

commercial loans also include loans made under the SBA PPP.

These loans are unsecured and carry a 100% guarantee from the SBA.

Municipal loans are comprised of loans to municipalities in Maine for capitalized expenditures, construction projects or tax anticipation notes.

20 unchanged sentences

Consumer loan products including personal lines of credit and amortizing loans made to qualified individuals for various purposes such as auto, recreational vehicles, debt consolidation, personal expenses or overdraft protection.

Borrower qualifications

include favorable credit history combined with supportive income and collateral requirements within established policy guidelines.

Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines.

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 33.4 % of capital are below the regulatory guidance limit of 100.0 % of capital at September 30, 2020.

Construction loans and non-owner-occupied commercial real estate loans are at 129.4 % of total capital, below the regulatory limit of 300.0 % of capital at September 30, 2020.

Construction, land and land development loans, both commercial and residential, comprise a small portion of the portfolio, and at 36.6 % of capital are below the regulatory guidance limit of 100.0 % of capital at March 31, 2021.

Construction loans and non-owner-occupied commercial real estate loans are at 155.2 % of total capital, below the regulatory limit of 300.0 % of capital at March 31, 2021.

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 September 30, 2020:

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, 2021:

Real Estate Commercial

25 unchanged sentences

Total $ 442,121,000 $ 56,565,000 $ 285,015,000 $ 43,783,000 $ 827,484,000

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

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:

Real Estate Commercial

28 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 nine months ended September 30, 2020.

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

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, 2021.

The following table presents allowance for loan losses activity by class for the three months ended March 31, 2021, and allowance for loan loss balances by class and related loan balances by class as of March 31, 2021:

Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the nine months ended September 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 532,000 — 24,000 — 46,000 — 153,000 238,000 — 993,000

Recoveries — — 24,000 — 31,000 — 20,000 100,000 — 175,000

Provision (credit) 1,551,000 242,000 313,000 112,000 1,507,000 56,000 512,000 ( 137,000 ) 394,000 4,550,000

Ending balance $ 4,761,000 $ 607,000 $ 3,642,000 $ 139,000 $ 2,516,000 $ 81,000 $ 1,457,000 $ 592,000 $ 1,576,000 $ 15,371,000

For the three months ended September 30, 2020

For the three months ended March 31, 2021

Beginning balance $ 5,178,000 $ 662,000 $ 3,438,000 $ 171,000 $ 2,579,000 $ 102,000 $ 1,211,000 $ 778,000 $ 2,134,000 $ 16,253,000

3 unchanged sentences

Ending balance $ 5,741,000 $ 649,000 $ 4,080,000 $ 185,000 $ 2,962,000 $ 131,000 $ 947,000 $ 872,000 $ 1,027,000 $ 16,594,000

Allowance for loan losses as of September 30, 2020

Allowance for loan losses as of March 31, 2021

Ending balance specifically evaluated for impairment $ 174,000 $ 21,000 $ 563,000 $ — $ 142,000 $ — $ — $ — $ — $ 900,000

Ending balance collectively evaluated for impairment $ 5,567,000 $ 628,000 $ 3,517,000 $ 185,000 $ 2,820,000 $ 131,000 $ 947,000 $ 872,000 $ 1,027,000 $ 15,694,000

Related loan balances as of September 30, 2020

Related loan balances as of March 31, 2021

Ending balance $ 469,974,000 $ 53,394,000 $ 297,488,000 $ 49,476,000 $ 520,317,000 $ 24,796,000 $ 77,210,000 $ 24,117,000 $ — $ 1,516,772,000

8 unchanged sentences

Recoveries — — 37,000 — 34,000 — 22,000 132,000 — 225,000

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

Provision 2,524,000 297,000 99,000 144,000 1,587,000 77,000 264,000 106,000 952,000 6,050,000

Ending balance $ 5,178,000 $ 662,000 $ 3,438,000 $ 171,000 $ 2,579,000 $ 102,000 $ 1,211,000 $ 778,000 $ 2,134,000 $ 16,253,000

6 unchanged sentences

Ending balance collectively evaluated for impairment $ 439,092,000 $ 55,795,000 $ 283,236,000 $ 43,783,000 $ 512,656,000 $ 21,600,000 $ 78,711,000 $ 25,849,000 $ — $ 1,460,722,000

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

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:

Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the nine months ended September 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 — 123,000 — 93,000 — 38,000 235,000 — 542,000

Recoveries 15,000 — 70,000 — 10,000 — 3,000 102,000 — 200,000

Provision (credit) 266,000 98,000 ( 268,000 ) 2,000 ( 15,000 ) ( 11,000 ) 129,000 183,000 491,000 875,000

Ending balance $ 3,795,000 $ 353,000 $ 3,220,000 $ 26,000 $ 1,137,000 $ 23,000 $ 824,000 $ 680,000 $ 1,707,000 $ 11,765,000

For the three months ended September 30, 2019

For the three months ended March 31, 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

3 unchanged sentences

Ending 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

Allowance for loan losses as of September 30, 2019

Allowance for loan losses as of March 31, 2020

Ending balance specifically evaluated for impairment $ 230,000 $ 3,000 $ 172,000 $ — $ 233,000 $ — $ 296,000 $ 58,000 $ — $ 992,000

Ending balance collectively evaluated for impairment $ 3,632,000 $ 421,000 $ 2,255,000 $ 29,000 $ 993,000 $ 32,000 $ 716,000 $ 667,000 $ 2,121,000 $ 10,866,000

Related loan balances as of September 30, 2019

Related loan balances as of March 31, 2020

Ending balance $ 382,753,000 $ 43,913,000 $ 237,896,000 $ 43,537,000 $ 500,971,000 $ 15,202,000 $ 90,674,000 $ 29,262,000 $ — $ 1,344,208,000

3 unchanged sentences

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.

The 2020 Plan 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.

1 unchanged sentence

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 September 30, 2020, 184,487 shares of restricted stock had been granted under the 2010 Plan and 5,750 shares under the 2020 Plan, of which 76,597 shares remain restricted as of September 30, 2020 as detailed in the following table:

As of March 31, 2021, 184,487 shares of restricted stock had been granted under the 2010 Plan and 40,439 shares under the 2020 Plan, of which 85,740 shares remain restricted as of March 31, 2021 as detailed in the following table:

Granted Vesting Term

11 unchanged sentences

The compensation cost related to these nonvested restricted stock grants is $ 2,230,000 and is recognized over the vesting terms of each grant.

In the nine months ended September 30, 2020, $ 482,000 of expense was recognized for these restricted shares, leaving $ 864,000 in unrecognized expense as of September 30, 2020.

In the nine months ended September 30, 2019, $ 368,000 of expense was recognized for restricted shares, leaving $ 797,000 in unrecognized expense as of September 30, 2019.

In the three months ended March 31, 2021, $ 288,000 of expense was recognized for these restricted shares, leaving $ 1,252,000 in unrecognized expense as of March 31, 2021.

In the three months ended March 31, 2020, $ 150,000 of expense was recognized for restricted shares, leaving $ 797,000 in unrecognized expense as of March 31, 2020.

Note 6 – Common Stock

Proceeds from sale of common stock totaled $ 497,000 and $ 488,000 for the nine months ended September 30, 2020 and 2019, respectively.

Proceeds from sale of common stock totaled $ 182,000 and $ 163,000 for the three months ended March 31, 2021 and 2020, respectively.

Note 7 – Earnings Per Share

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

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

For the nine months ended September 30, 2020

Net income as reported $ 20,159,000

Income available to common shareholders 20,159,000 10,854,384 $ 1.86

Effect of dilutive securities:

restricted stock 73,285

Income available to common shareholders plus assumed conversions $ 20,159,000 10,927,669 $ 1.84

For the nine months ended September 30, 2019

Net income as reported $ 18,839,000

Income available to common shareholders 18,839,000 10,811,233 $ 1.74

Effect of dilutive securities:

restricted stock 75,013

Income available to common shareholders plus assumed conversions $ 18,839,000 10,886,246 $ 1.73

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

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the three months ended March 31, 2021 and 2020:

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

For the quarter ended September 30, 2020

For the three months ended March 31, 2021

Net income as reported $ 8,922,000

Less dividends and amortization of premium on preferred stock

Income available to common shareholders 8,922,000 10,888,133 $ 0.82

2 unchanged sentences

Income available to common shareholders plus assumed conversions $ 8,922,000 10,973,812 $ 0.81

For the quarter ended September 30, 2019

For the three months ended March 31, 2020

Net income as reported $ 6,495,000

Less dividends and amortization of premium on preferred stock —

Income available to common shareholders 6,495,000 10,844,600 $ 0.60

8 unchanged sentences

The Company adopted the safe harbor form of 401(k) plan for 2021 and will follow safe harbor guidelines when determining the level of discretionary contribution.

The expense related to the 401(k) plan was $ 653,000 and $ 464,000 for the nine months ended September 30, 2020 and 2019, respectively.

The expense related to the 401(k) plan was $ 217,000 and $ 255,000 for the three months ended March 31, 2021 and 2020, 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 $ 119,000 for the nine months ended September 30, 2020 and 2019.

As of September 30, 2020, the associated accrued liability included in other liabilities in the balance sheet was $ 2,708,000 compared to $ 2,828,000 and $ 2,831,000 at December 31, 2019 and September 30, 2019, respectively.

The expense of these supplemental retirement benefits was $ 42,000 and $ 40,000 for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, the associated accrued liability included in other liabilities in the balance sheet was $ 2,961,000 compared to $ 2,991,000 and $ 2,772,000 at December 31, 2020 and March 31, 2020, 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 nine months ended September 30,

At or for the three months ended March 31,

Change in benefit obligation

8 unchanged sentences

The following table sets forth the net periodic pension cost:

For the nine months ended September 30, For the quarter ended September 30,

2020 2019 2020 2019

For the three months ended March 31,

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:

September 30,

2020 December 31, 2019 September 30,

2021 December 31, 2020 March 31,

Unamortized net actuarial gain $ 35,000 $ 35,000 $ 31,000

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 nine months and quarter ended September 30, 2020 and 2019.

For the nine months ended September 30, For the quarter ended September 30,

2020 2019 2020 2019

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, 2021 and 2020.

For the three months ended March 31,

Balance at beginning of period $ 5,009,000 $ 3,657,000

5 unchanged sentences

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 nine months and quarter ended September 30, 2020 and 2019.

For the nine months ended September 30, For the quarter ended September 30,

2020 2019 2020 2019

For the three months ended March 31,

Balance at beginning of period $ ( 133,000 ) $ ( 182,000 )

3 unchanged sentences

Balance at end of period $ ( 124,000 ) $ ( 174,000 )

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

For the nine months ended September 30, For the quarter ended September 30,

2020 2019 2020 2019

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, 2021 and 2020.

For the three months ended March 31,

Balance at beginning of period $ ( 4,932,000 ) $ 97,000

3 unchanged sentences

Balance at end of period $ ( 1,463,000 ) $ ( 4,773,000 )

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

For the nine months ended September 30, For the quarter ended September 30,

2020 2019 2020 2019

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, 2021 and 2020.

For the three months ended March 31,

Unrecognized postretirement benefits at beginning of period $ 28,000 $ 24,000

15 unchanged sentences

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

September 30, 2020 December 31, 2019 September 30, 2019

March 31, 2021 December 31, 2020 March 31, 2020

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

2 unchanged sentences

06/28/2016 06/28/2021 1-Month USD Libor 0.940 % Other Liabilities $ 30,000,000 $ ( 61,000 ) $ 30,000,000 $ ( 121,000 ) $ 30,000,000 $ ( 244,000 )

06/27/2016 06/27/2021 1-Month USD LIBOR 0.893 % Other (Liabilities) Assets 20,000,000 ( 112,000 ) 20,000,000 199,000 20,000,000 214,000

06/28/2016 06/28/2021 1-Month USD LIBOR 0.940 % Other (Liabilities) Assets 30,000,000 ( 179,000 ) 30,000,000 278,000 30,000,000 296,000

06/27/2016 06/27/2021 1-Month USD Libor 0.893 % Other Liabilities 20,000,000 ( 38,000 ) 20,000,000 ( 76,000 ) 20,000,000 ( 151,000 )

2 unchanged sentences

02/12/2020 02/12/2023 3-Month USD Libor 1.486 % Other Liabilities 25,000,000 ( 580,000 ) 25,000,000 ( 695,000 ) 25,000,000 ( 748,000 )

08/05/2019 08/05/2024 1-Month USD LIBOR 1.420 % Other (Liabilities) Assets 12,500,000 ( 611,000 ) 12,500,000 85,000 12,500,000 ( 32,000 )

02/12/2020 02/12/2024 3-Month USD Libor 1.477 % Other Liabilities 25,000,000 ( 735,000 ) 25,000,000 ( 972,000 ) 25,000,000 ( 972,000 )

1 unchanged sentence

03/13/2020 03/13/2025 3-Month USD Libor 0.855 % Other Liabilities 25,000,000 ( 99,000 ) 25,000,000 ( 551,000 ) 25,000,000 ( 463,000 )

03/13/2020 03/13/2025 3-Month USD LIBOR 0.855 % Other Liabilities 25,000,000 ( 621,000 ) — — — —

03/13/2020 03/13/2030 3-Month USD LIBOR 1.029 % Other Liabilities 20,000,000 ( 690,000 ) — — — —

03/13/2020 03/13/2030 3-Month USD Libor 1.029 % Other (Liabilities) Assets 20,000,000 1,071,000 20,000,000 ( 339,000 ) 20,000,000 ( 661,000 )

04/07/2020 04/07/2023 3-Month USD Libor 0.599 % Other Liabilities 20,000,000 ( 129,000 ) 20,000,000 ( 185,000 ) — —

10 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 September 30, 2020, there were four customer loan swap arrangements in place, detailed below:

September 30, 2020 December 31, 2019 September 30, 2019

At March 31, 2021, there were six customer loan swap arrangements in place, detailed below:

March 31, 2021 December 31, 2020 March 31, 2020

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 Assets 3 $ 16,797,000 $ 1,272,000 3 $ 16,922,000 $ 37,000 — $ — $ —

Pay Fixed, Receive Variable Other Liabilities 3 25,059,000 ( 1,334,000 ) 2 16,065,000 ( 2,603,000 ) 2 16,294,000 ( 3,280,000 )

6 41,856,000 ( 62,000 ) 5 32,987,000 ( 2,566,000 ) 2 16,294,000 ( 3,280,000 )

Receive Fixed, Pay Variable Other Assets 3 25,059,000 1,334,000 2 16,065,000 2,603,000 2 16,294,000 3,280,000

Receive Fixed, Pay Variable Other Liabilities 3 16,797,000 ( 1,272,000 ) 3 16,922,000 ( 37,000 ) — — —

6 41,856,000 62,000 5 32,987,000 2,566,000 2 16,294,000 3,280,000

Total 12 $ 83,712,000 $ — 10 $ 65,974,000 $ — 4 $ 32,588,000 $ —

2 unchanged sentences

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 September 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.

At March 31, 2021, the Bank posted to the counterparty $ 4,850,000 of cash as collateral on its swap contracts.

The required amount to be pledged was $ 2,119,000 .

Cessation of LIBOR

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

The Company is aware that certain tenors of USD LIBOR may no longer be published after December 31, 2021, while other tenors are expected to continue being published until June 30, 2023.

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 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 September 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 four customer loan swap contracts shown in the table immediately above have maturity dates of December 19, 2029, August 21, 2030, July 1, 2035 and October 1, 2039.

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

Each of the interest rate swap contracts the Company has in place as of March 31, 2021 is tied to a LIBOR tenor expected to be published until June 2023.

Two contracts carrying a total notional value of $ 50 million are set to mature in 2021;

two additional contracts with a total notional value of $ 45 million mature prior to June 30, 2023, and an additional seven contracts with a total notional amount of $ 165 million have maturity dates beyond June 30, 2023.

The six customer loan swap contracts shown in the table immediately above have maturity dates of December 19, 2029, August 21, 2030, April 30, 2031, July 1, 2035, October 1, 2035 and April 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 September 30, 2020, the prepayment assumption using the PSA model was 323, which translates into an anticipated prepayment rate of 19.38 %.

As of March 31, 2021, the prepayment assumption using the PSA model was 254, which translates into an anticipated prepayment rate of 15.24 %.

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 nine months ended September 30, 2020 and 2019, servicing rights capitalized totaled $ 926,000 and $ 267,000 , respectively.

Servicing rights amortized for the nine-months periods ended September 30, 2020 and 2019 were $ 252,000 and $ 170,000 , respectively.

The fair value of servicing rights was $ 2,013,000 , $ 2,089,000 and $ 2,083,000 at September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

The Bank serviced loans for others totaling $ 321,813,000 , $ 266,173,000 and $ 261,685,000 at September 30, 2020, December 31, 2019, and September 30, 2019, respectively.

The Bank recorded an impairment reserve as of September 30, 2020 for strata with a fair value lower than cost.

For the three months ended March 31, 2021 and 2020, servicing rights capitalized totaled $ 328,000 and $ 129,000 , respectively.

Servicing rights amortized for the three-month periods ended March 31, 2021 and 2020 were $ 151,000 and $ 66,000 , respectively.

The fair value of servicing rights was $ 2,608,000 , $ 1,985,000 and $ 2,126,000 at March 31, 2021, December 31, 2020 and March 31, 2020, respectively.

The Bank serviced loans for others totaling $ 335,938,000 , $ 318,459,000 and $ 268,077,000 at March 31, 2021, December 31, 2020, and March 31, 2020, respectively.

The Bank recorded an impairment reserve as of March 31, 2021 and December 31, 2020 for strata with a fair value lower than cost.

There was no impairment reserve as of March 31, 2020.

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

September 30,

2021 December 31,

2019 September 30,

2020 March 31,

Mortgage servicing rights $ 7,627,000 $ 7,299,000 $ 6,269,000

8 unchanged sentences

Note 13 - Certificates of Deposit

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

September 30, 2020 December 31, 2019 September 30, 2019

The following table represents the breakdown of certificates of deposit at March 31, 2021 and 2020, and at December 31, 2020:

March 31, 2021 December 31, 2020 March 31, 2020

Certificates of deposit < $100,000 $ 230,290,000 $ 246,875,000 $ 274,621,000

54 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 September 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.

As of March 31, 2021 and 2020, and December 31, 2020, 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 September 30, 2020, December 31, 2019 and September 30, 2019.

At September 30, 2020

The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2021, December 31, 2020 and March 31, 2020.

At March 31, 2021

Level 1 Level 2 Level 3 Total

3 unchanged sentences

State and political subdivisions — 37,558,000 — 37,558,000

Asset-backed securities — 7,580,000 — 7,580,000

Total securities available for sale — 294,537,000 — 294,537,000

Interest rate swap agreements — 1,071,000 — 1,071,000

Customer loan interest swap agreements — 2,606,000 — 2,606,000

1 unchanged sentence

Total assets $ — $ 298,214,000 $ — $ 298,214,000

At September 30, 2020

At March 31, 2021

Level 1 Level 2 Level 3 Total

8 unchanged sentences

State and political subdivisions — 39,474,000 — 39,474,000

Asset-backed securities — 7,766,000 — 7,766,000

Total securities available for sale — 313,376,000 — 313,376,000

Interest rate swap agreements — 562,000 — 562,000

Customer loan interest swap agreements — 2,640,000 — 2,640,000

6 unchanged sentences

Total liabilities $ — $ 8,882,000 $ — $ 8,882,000

At September 30, 2019

At March 31, 2020

Level 1 Level 2 Level 3 Total

Securities available for sale

Treasury and agency $ — $ 7,552,000 $ — $ 7,552,000

Mortgage-backed securities — 285,152,000 — 285,152,000

1 unchanged sentence

Total securities available for sale — 312,928,000 — 312,928,000

Interest rate swap agreements — 510,000 — 510,000

Customer loan interest swap agreements — 3,280,000 — 3,280,000

1 unchanged sentence

Total assets $ — $ 316,208,000 $ — $ 316,208,000

At September 30, 2019

At March 31, 2020

Level 1 Level 2 Level 3 Total

4 unchanged sentences

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

Mortgage servicing rights are presented net of an impairment reserve of $ 258,000 at September 30,

2020 and $ 0 at December 31, 2019 and September 30, 2019.

Other real estate owned is presented net of an allowance of $ 45,000 at September 30, 2020 and $ 0 at December 31, 2019 and September 30, 2019.

Mortgage servicing rights are presented net of an impairment reserve of $ 92,000 at March 31, 2021 and $ 358,000 at December 31, 2020.

Other real estate owned is presented net of an allowance of $ 45,000 at both March 31, 2021 and December 31, 2020.

There was no allowance for other real estate owned at March 31, 2020.

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 $ 633,000 , $ 1,916,000 and $ 1,763,000 at September 30, 2020, December 31, 2019, and September 30, 2019, respectively.

At September 30, 2020

Impaired loans below are presented net of specific allowances of $ 641,000 , $ 304,000 and $ 706,000 at March 31, 2021, December 31, 2020, and March 31, 2020, respectively.

At March 31, 2021

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total assets $ — $ 3,687,000 $ — $ 3,687,000

At September 30, 2019

At March 31, 2020

Level 1 Level 2 Level 3 Total

Mortgage servicing rights $ — $ 2,083,000 $ — $ 2,083,000

Other real estate owned $ — $ 316,000 $ — $ 316,000

14 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 September 30, 2020 were as follows:

The carrying amount and estimated fair values for financial instruments as of March 31, 2021 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

41 unchanged sentences

Total borrowed funds 262,038,000 263,966,000 — 263,966,000 —

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

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

Carrying value Estimated fair value Level 1 Level 2 Level 3

34 unchanged sentences

2016-13 modeling and calculation.

The Bank is in the late stages of implementing this software and plans to run incurred loss and current expected credit models in parallel until adoption of ASU No.

The Bank is in the late stages of implementing this software and plans to run incurred loss and current expected credit loss models in parallel until adoption of ASU No.

In January 2017, the FASB issued ASU No.

7 unchanged sentences

In August 2018, the FASB issued ASU No.

2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

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.

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

early adoption is permitted.

Entities are also allowed to elect early adoption for the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date.

2018-13 only revises disclosure requirements, it did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-14, Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans .

2 unchanged sentences

early adoption is permitted.

As ASU 2018-14 only revises disclosure requirements, it will not have a material impact on the Company’s consolidated financial statements.

Note 17 – Commitment

On September 3, 2020, the Bank entered into a Branch Purchase & Assumption Agreement with Bangor Savings Bank (BSB) to acquire a branch location in Belfast, ME currently owned and operated by Damariscotta Bank & Trust (DB&T);

BSB has an agreement in place to purchase DB&T.

The acquisition will be the Bank's first branch location in Waldo County, and is expected to add $ 16.5 million in deposits and $ 23.5 million in loans to its balance sheet.

The final value of the transaction is estimated to be $ 24.8 million which includes the loans, an assignment of a ground lease, leasehold improvements, furniture and equipment, and the premium paid for the deposits.

The Bank has received regulatory approval for the purchase, and the transaction is expected to be closed in the fourth quarter.

A copy of the Agreement is included as Exhibit 10.4.

As ASU 2018-14 only revises disclosure requirements, it did not have a material impact on the Company’s consolidated financial statements.

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