What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-05 · 220 added, 292 removed, 1140 unchanged (31% of the section changed)

3 unchanged sentences

The First Bancorp, Inc.

Results of Review of Interim Financial Information

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

and Subsidiary as of September 30, 2021 and 2020 and for the three-month and nine-months periods then ended.

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

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States).

A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters.

It is substantially less in scope than an audit in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is to express an opinion regarding the financial statements taken as a whole.

and Subsidiary as of March 31, 2022 and 2021 and for the three-months periods then ended, and the related notes (collectively referred to as the "interim financial information").

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for them to be in conformity with accounting principles generally accepted in the United States of America.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company's management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB").

A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.

It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.

Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

/s/ Berry Dunn McNeil & Parker, LLC

Portland, Maine

November 5, 2021

Consolidated Balance Sheets (Unaudited)

1 unchanged sentence

and Subsidiary

September 30,

2021 December 31, 2020 September 30,

2022 December 31, 2021 March 31,

Cash and cash equivalents $ 22,051,000 $ 20,634,000 $ 20,029,000

1 unchanged sentence

Securities available for sale 313,015,000 320,566,000 294,537,000

Securities to be held to maturity (fair value of $ 379,797,000 at September 30, 2021, $ 377,134,000 at December 31, 2020 and $ 342,062,000 at September 30, 2020)

Securities to be held to maturity (fair value of $ 353,191,000 at March 31, 2022, $ 375,327,000 at December 31, 2021 and $ 388,836,000 at March 31, 2021)

377,183,000 370,040,000 385,352,000

41 unchanged sentences

and Subsidiary

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

2021 2020 2021 2020

For the quarter ended

March 31, 2022 December 31, 2021 March 31, 2021

Interest income

Interest and fees on loans (includes tax-exempt income of $ 832,000 YTD September 30, 2021 and $ 899,000 YTD September 30, 2020)

Interest and fees on loans (includes tax-exempt income of $ 291,000 for March 31, 2022, $ 271,000 for December 31, 2021 and $ 290,000 for March 31, 2021)

$ 16,613,000 $ 16,331,000 $ 15,119,000

Interest on deposits with other banks 9,000 27,000 12,000

Interest and dividends on investments (includes tax-exempt income of $ 5,798,000 YTD September 30, 2021 and $ 5,649,000 YTD September 30, 2020)

Interest and dividends on investments (includes tax-exempt income of $ 1,803,000 for March 31, 2022, $ 1,846,000 for December 31, 2021 and $ 1,956,000 for March 31, 2021)

3,911,000 3,641,000 3,822,000

5 unchanged sentences

Net interest income 18,620,000 17,696,000 15,873,000

Provision for loan losses 1,575,000 4,550,000 525,000 1,800,000

Provision (credit) for loan losses 450,000 ( 1,950,000 ) 525,000

Net interest income after provision for loan losses 18,170,000 19,646,000 15,348,000

2 unchanged sentences

Service charges on deposit accounts 437,000 436,000 337,000

Net securities gains (losses) 22,000 1,179,000 ( 142,000 ) —

Net securities gains 2,000 1,000 119,000

Mortgage origination and servicing income, net of amortization 498,000 885,000 1,967,000

16 unchanged sentences

Other comprehensive income (loss) net of tax

Net unrealized gain (loss) on securities available for sale, net of taxes $ ( 5,636,000 ) $ 1,863,000 $ ( 1,817,000 ) $ ( 1,580,000 )

Net unrealized loss on securities available for sale, net of taxes $ ( 18,343,000 ) $ ( 1,091,000 ) $ ( 4,790,000 )

Net unrealized gain on transferred securities, net of taxes 9,000 12,000 9,000

Net unrealized gain (loss) on cash flow hedging derivative instruments, net of taxes 3,395,000 ( 5,897,000 ) 546,000 387,000

Other comprehensive loss ( 2,207,000 ) ( 3,991,000 ) ( 1,257,000 ) ( 1,186,000 )

Comprehensive income $ 24,516,000 $ 16,168,000 $ 7,757,000 $ 5,909,000

Net unrealized gain on cash flow hedging derivative instruments — 1,537,000 3,469,000

Unrecognized transition obligation for postretirement benefits, net of taxes — 77,000 —

Other comprehensive income (loss) ( 18,334,000 ) 535,000 ( 1,312,000 )

Comprehensive income (loss) $ ( 8,629,000 ) $ 10,081,000 $ 7,610,000

See Report of Independent Registered Public Accounting Firm.

12 unchanged sentences

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

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

Balance at December 31, 2021 10,998,765 $ 66,940,000 $ 180,417,000 $ ( 1,700,000 ) $ 245,657,000

2 unchanged sentences

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 — — — 3,395,000 3,395,000

Comprehensive income (loss) — — 9,705,000 ( 18,334,000 ) ( 8,629,000 )

5 unchanged sentences

Proceeds from sale of common stock 6,270 199,000 — — 199,000

Balance at September 30, 2021 10,992,950 $ 66,581,000 $ 174,391,000 $ ( 2,235,000 ) $ 238,737,000

Balance at March 31, 2022 11,024,086 $ 67,356,000 $ 186,324,000 $ ( 20,034,000 ) $ 233,646,000

See Report of Independent Registered Public Accounting Firm.

3 unchanged sentences

and Subsidiary

For the nine months ended

September 30, 2021 September 30, 2020

For the three months ended

March 31, 2022 March 31, 2021

Cash flows from operating activities

9 unchanged sentences

Net amortization of premiums on investments 245,000 662,000

Net (gain) loss on sale of other real estate owned ( 91,000 ) 5,000

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

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

Equity compensation expense 217,000 288,000

1 unchanged sentence

Net increase (decrease) in other liabilities 5,658,000 ( 5,669,000 )

Net (gain) loss on disposal of premises and equipment 2,000 ( 3,000 )

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

Amortization of investment in limited partnership 76,000 77,000

2 unchanged sentences

Cash flows from investing activities

Increase in interest-bearing deposits in other banks ( 37,628,000 ) ( 36,801,000 )

(Increase) decrease in interest-bearing deposits in other banks 48,251,000 ( 48,451,000 )

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

8 unchanged sentences

Capital expenditures ( 703,000 ) ( 3,257,000 )

Proceeds from disposal of premises and equipment — 3,000

Net cash used by investing activities ( 35,436,000 ) ( 98,353,000 )

Cash flows from financing activities

Net increase in demand, savings, and money market accounts 279,620,000 212,641,000

Net decrease in certificates of deposit ( 91,018,000 ) ( 100,048,000 )

Net increase (decrease) in short-term borrowings ( 28,831,000 ) 53,837,000

Advances on long-term borrowings — 55,000,000

Net increase (decrease) in demand, savings, and money market accounts ( 8,500,000 ) 80,201,000

Net increase in certificates of deposit 43,742,000 28,745,000

Net decrease in short-term borrowings ( 2,628,000 ) ( 32,388,000 )

Repayment on long-term borrowings ( 2,000 ) ( 2,000 )

3 unchanged sentences

Net cash provided by financing activities 29,021,000 73,126,000

Net increase in cash and cash equivalents 914,000 8,309,000

Net increase (decrease) in cash and cash equivalents 1,417,000 ( 6,183,000 )

Cash and cash equivalents at beginning of period 20,634,000 26,212,000

Cash and cash equivalents at end of period $ 22,051,000 $ 20,029,000

For the nine months ended

September 30, 2021 September 30, 2020

For the three months ended

March 31, 2022 March 31, 2021

Interest paid $ 1,901,000 $ 3,447,000

Income taxes paid 4,573,000 3,917,000

Non-cash transactions

Net transfer from loans to other real estate owned $ — $ 827,000

Right of use lease asset $ 319,000 $ —

Operating lease liability ( 319,000 ) —

Change in net unrealized gain on available for sale securities, net of tax 18,343,000 4,790,000

See Report of Independent Registered Public Accounting Firm.

20 unchanged sentences

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

early data and anecdotal evidence suggest a strong rebound in tourism in 2021, limited in some cases by available labor.

The highly transmissible Delta variant of COVID-19 has become the dominant strain with regional outbreaks occurring resulting in varying levels of disruption.

The severity of these outbreaks or potential future outbreaks could have an impact on the Company's operating results, though the degree is indeterminable at this time.

in 2021 the tourism industry rebounded and by all accounts businesses in the sector generally enjoyed a strong year.

The milder Omicron variants of COVID-19 have become the dominant strains with outbreaks resulting in modest levels of disruption.

The severity of any potential future outbreaks could have an impact on the Company's operating results, though the degree is indeterminable at this time.

The conflict between Russia and Ukraine has exacerbated pandemic-related supply chain issues, upset numerous global markets including energy and certain raw materials, and generally added to economic uncertainty and geopolitical instability.

Any or all could have negative downstream effects on the Company's operating results, the extent of which is indeterminable at this time.

Subsequent Events

Events occurring subsequent to September 30, 2021, have been evaluated as to their potential impact to the financial statements.

Events occurring subsequent to March 31, 2022, 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, 2021:

The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2022:

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

34 unchanged sentences

$ 5,365,000 $ — $ — $ 5,365,000

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

9 unchanged sentences

$ 10,105,000 $ — $ — $ 10,105,000

The following table summarizes the contractual maturities of investment securities at September 30, 2021:

The following table summarizes the contractual maturities of investment securities at March 31, 2022:

Securities available for sale Securities to be held to maturity

15 unchanged sentences

$ 322,741,000 $ 320,566,000 $ 370,040,000 $ 375,327,000

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

6 unchanged sentences

$ 294,260,000 $ 294,537,000 $ 385,352,000 $ 388,836,000

At September 30, 2021, securities with a fair value of $ 349,978,000 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 $ 285,253,000 at September 30, 2020, pledged for the same purposes.

At March 31, 2022, securities with a fair value of $ 288,761,000 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 $ 297,456,000 as of December 31, 2021 and $ 241,990,000 at March 31, 2021, 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, 2021 and 2020:

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

2021 2020 2021 2020

The following table shows securities gains and losses for the three months ended March 31, 2022 and 2021:

For the three months ended March 31,

Proceeds from sales of securities $ — $ 1,214,000

1 unchanged sentence

Gross realized losses — —

Net gain (loss) $ 22,000 $ 1,179,000 $ ( 142,000 ) $ —

Net gain $ 2,000 $ 119,000

Related income taxes $ — $ 25,000

Prior year sales included 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 $ 8,332,000 resulting in a net realized gain of $ 268,000 .

The potential economic impact of COVID-19 was 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, 2021, there were 184 securities with unrealized losses held in the Company's portfolio.

As of March 31, 2022, there were 548 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 72 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, 2021 is summarized below:

Information regarding securities temporarily impaired as of March 31, 2022 is summarized below:

Less than 12 months 12 months or more Total

3 unchanged sentences

State and political subdivisions 141,305,000 ( 17,850,000 ) 3,405,000 ( 1,029,000 ) 144,710,000 ( 18,879,000 )

Asset-backed securities 4,340,000 ( 18,000 ) — — 4,340,000 ( 18,000 )

Corporate securities 11,151,000 ( 349,000 ) — — 11,151,000 ( 349,000 )

10 unchanged sentences

$ 273,453,000 $ ( 6,144,000 ) $ 55,942,000 $ ( 2,297,000 ) $ 329,395,000 $ ( 8,441,000 )

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.

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 )

4 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 $ 99,000 , net of taxes, at September 30, 2021.

This compares to $ 133,000 and $ 139,000 , net of taxes, at December 31, 2020 and September 30, 2020, respectively.

The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $ 78,000 , net of taxes, at March 31, 2022.

This compares to $ 87,000 and $ 124,000 , net of taxes, at December 31, 2021 and March 31, 2021, 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, 2021 and 2020, and December 31, 2020, the Bank's investment in FHLB stock totaled $ 7,802,000 , $ 9,508,000 and $ 9,508,000 , respectively.

As of March 31, 2022 and 2021, and December 31, 2021, the Bank's investment in FHLB stock totaled $ 4,365,000 , $ 9,068,000 and $ 4,328,000 , 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, 2021.

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

The Bank is also a member of the Federal Reserve Bank ("FRB") of Boston.

As a requirement for membership in the FRB, the Bank must own a minimum required amount of FRB stock.

The Bank uses FRB for certain correspondent banking services and maintains borrowing capacity at its discount window.

The Bank's investment in FRB stock totaled $ 1,037,000 at March 31, 2022 and 2021 and December 31, 2021, respectively.

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

No impairment losses have been recorded through March 31, 2022.

The Bank will continue to monitor its investment in these restricted equity securities.

Note 3 – Loans

The following table shows the composition of the Company's loan portfolio as of September 30, 2021 and 2020 and at December 31, 2020:

September 30, 2021 December 31, 2020 September 30, 2020

The following table shows the composition of the Company's loan portfolio by class of financing receivable as of March 31, 2022 and 2021 and at December 31, 2021:

March 31, 2022 December 31, 2021 March 31, 2021

Real estate $ 588,301,000 34.5 % $ 576,198,000 35.0 % $ 469,974,000 31.0 %

7 unchanged sentences

Total $ 1,707,348,000 100.0 % $ 1,647,649,000 100.0 % $ 1,516,772,000 100.0 %

Loan balances include net deferred loan costs of $ 6,597,000 as of September 30, 2021, $ 6,931,000 as of December 31, 2020, and $ 5,323,000 as of September 30, 2020.

Net deferred loan costs have increased from a year ago and decreased year-to-date largely due to unearned fees and deferred costs associated with US Small Business Administration ("SBA") Payroll Protection Program ("PPP") loans originated in 2020 and during the first and second quarters of 2021.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 356,517,000 at September 30, 2021, were used to collateralize borrowings from the FHLB.

This compares to qualifying loans which totaled $ 378,183,000 at December 31, 2020, and $ 379,387,000 at September 30, 2020.

In addition, commercial, construction and home equity loans totaling $ 291,188,000 at September 30, 2021, $ 259,599,000 at December 31, 2020, and $ 271,905,000 at September 30, 2020, were used to collateralize a standby line of credit at the Federal Reserve Bank of Boston.

Loan balances include net deferred loan costs of $ 9,299,000 as of March 31, 2022, $ 7,890,000 as of December 31, 2021, and $ 5,328,000 as of March 31, 2021.

Net deferred loan costs have increased from a year ago and year-to-date due to loan origination unit volume over the period and wind-down of unearned fees and deferred costs associated with US Small Business Administration ("SBA") Payroll Protection Program ("PPP") loans originated in 2020 and during the first and second quarters of 2021.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 455,229,000 at March 31, 2022, were used to collateralize borrowings from the FHLB.

This compares to qualifying loans which totaled $ 364,968,000 at December 31, 2021, and $ 362,271,000 at March 31, 2021.

In addition, commercial, residential construction and home equity loans totaling $ 338,463,000 at March 31, 2022, $ 295,090,000 at December 31, 2021, and $ 275,993,000 at March 31, 2021, were used to collateralize a standby line of credit at the FRB.

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, 2021, is presented in the following table:

Information on the past-due status of loans by class of financing receivable as of March 31, 2022, is presented in the following table:

Past Due 60-89 Days

13 unchanged sentences

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 September 30, 2021, a total of 1,051 loan modification requests for interest-only payments or deferred payments had been completed in conformance with the Interagency Statement or CARES Act, representing $ 287,922,000 in loan balances, or approximately 18.3 % of the loan portfolio excluding PPP balances.

One of these modifications of de minimis amount has been classified as a TDR 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, 2021, loans totaling $ 6,609,000 , or 0.41 % of all loans, remained in either their original modification or a subsequent modification.

Modification statuses by portfolio segment are summarized below:

Commercial/Municipal Loan Modifications

Units Percentage Balance Percentage

Paid Off 156 26 % $ 35,130,000 15 %

Charged Off 1 — % 66,000 — %

Subsequent Modification 2 — % 1,014,000 — %

Still in Original Modification 1 — % 125,000 — %

Out of Modification 445 74 % 197,999,000 85 %

Total 605 100 % $ 234,334,000 100 %

Residential Real Estate Modifications

Units Percentage Balance Percentage

Paid Off 73 20 % $ 12,694,000 24 %

Subsequent Modification 53 14 % 5,405,000 10 %

Still in Original Modification 1 — % 22,000 — %

Out of Modification 250 66 % 34,457,000 66 %

Total 377 100 % $ 52,578,000 100 %

Consumer Loan Modifications

Units Percentage Balance Percentage

Paid Off 23 34 % $ 209,000 21 %

Charged Off 1 1 % 10,000 1 %

Subsequent Modification 2 3 % 43,000 4 %

Out of Modification 43 62 % 748,000 74 %

Total 69 100 % $ 1,010,000 100 %

As of March 31, 2022, COVID-19 related loan modifications have nearly all been resolved, with $ 1,100,000 in retail loan balances remaining in modification status at the end of the first quarter, representing just 0.07 % of the loan portfolio.

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

11 unchanged sentences

Total $ 1,548,000 $ 543,000 $ 2,254,000 $ 4,345,000 $ 1,643,304,000 $ 1,647,649,000 $ 32,000

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

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, 2021 and 2020 and at December 31, 2020 is presented in the following table:

September 30, 2021 December 31, 2020 September 30, 2020

Information on nonaccrual loans as of March 31, 2022 and 2021 and at December 31, 2021 is presented in the following table:

March 31, 2022 December 31, 2021 March 31, 2021

Real estate $ 604,000 $ 242,000 $ 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 period ended September 30, 2021 is presented in the following table:

For the nine months ended September 30, 2021 For the quarter ended September 30, 2021

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, 2022 is presented in the following table:

For the three months ended March 31, 2022

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

With No Related Allowance

59 unchanged sentences

$ 12,052,000 $ 13,760,000 $ 576,000 $ 13,121,000 $ 242,000

A breakdown of impaired loans by class of financing receivable as of and for the period 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

31 unchanged sentences

• The borrower demonstrates financial difficulty;

common indicators include past due status with bank obligations, substandard credit bureau reports, or an inability to refinance with another lender, and

common indicators include past due status with bank obligations, substandard credit bureau reports, or an inability to refinance with another lender;

• The Company has granted a concession;

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

As of September 30, 2021, the Company had 64 loans with a balance of $ 10,051,000 that have been classified as TDRs.

This compares to 74 loans with a balance of $ 11,534,000 and 78 loans with a balance of $ 13,390,000 classified as TDRs as of December 31, 2020 and September 30, 2020, respectively.

As of March 31, 2022, the Company had 56 loans with a balance of $ 7,790,000 that have been classified as TDRs.

This compares to 60 loans with a balance of $ 8,341,000 and 73 loans with a balance of $ 11,306,000 classified as TDRs as of December 31, 2021 and March 31, 2021, 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, 2021:

The following table shows TDRs by class and the specific reserve as of March 31, 2022:

Number of Loans Balance Specific Reserves

19 unchanged sentences

60 $ 8,341,000 $ 532,000

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

8 unchanged sentences

73 $ 11,306,000 $ 695,000

As of September 30, 2021, 12 of the loans classified as TDRs with a total balance of $ 1,095,000 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, 2021:

As of March 31, 2022, five of the loans classified as TDRs with a total balance of $ 380,000 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, 2022:

Number of Loans Balance Specific Reserves

8 unchanged sentences

5 $ 380,000 $ —

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

For the nine months ended September 30, 2021, 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, 2021:

Number of Loans Pre-Modification

Recorded Investment Post-Modification Outstanding

Investment Specific Reserves

Real estate — $ — $ — $ —

Construction 1 80,000 80,000 —

Other 1 261,000 261,000 261,000

Municipal — — — —

Term 1 9,000 4,000 —

Construction — — — —

Home equity line of credit — — — —

Consumer — — — —

3 $ 350,000 $ 345,000 $ 261,000

For the nine months ended September 30, 2020, three loans were placed on TDR status.

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

For the three months ended March 31, 2022, no loans were placed on TDR status.

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

The following table shows this TDR by class and associated specific reserves 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 quarter ended September 30, 2021, no loans were placed on TDR status.

For the quarter ended September 30, 2020, 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 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

As of September 30, 2021, Management is aware of eight loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 961,000 .

As of March 31, 2022, Management is aware of eight loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 938,000 .

There were also 17 loans with an outstanding balance of $ 1,586,000 that were classified as TDRs and on non-accrual status, of which no loans were in the process of foreclosure.

Residential Mortgage Loans in Process of Foreclosure

As of September 30, 2021, there were 10 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 839,000 .

This compares to 17 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 2,083,000 as of September 30, 2020.

As of March 31, 2022, there were six mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 714,000 .

This compares to 14 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 1,067,000 as of March 31, 2021.

Allowance for Loan Losses

23 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, 2021, December 31, 2020, and September 30, 2020, by class of financing receivable and allowance element, is presented in the following tables:

As of September 30, 2021 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, 2022, December 31, 2021, and March 31, 2021, by class of financing receivable and allowance element, is presented in the following tables:

As of March 31, 2022 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

$ 576,000 $ 1,856,000 $ 11,307,000 $ 1,782,000 $ 15,521,000

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

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

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 0.82 % of related loans as of September 30, 2021, compared to 0.80 % of related loans as of December 31, 2020.

The qualitative portion increased $ 1,539,000 between December 31, 2020 and September 30, 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 $ 1,487,000 at September 30, 2021, or 8.5 % of the total reserve.

The qualitative portion of the allowance for loan losses was 0.67 % of related loans as of March 31, 2022, compared to 0.69 % of related loans as of December 31, 2021.

The qualitative portion increased $ 137,000 between December 31, 2021 and March 31, 2022 due to a mix of factors.

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

The unallocated component of the allowance totaled $ 1,732,000 at March 31, 2022, or 11.0 % of the total reserve.

This compares to $ 1,782,000 or 11.5 % as of December 31, 2021.

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 1.08 % as of September 30, 2021, 1.10 % at December 31, 2020 and 1.07 % as of September 30, 2020.

The allowance for loan losses as a percent of total loans stood at 0.92 % as of March 31, 2022, 0.94 % at December 31, 2021 and 1.09 % as of March 31, 2021.

Commercial loans are comprised of three major classes;

16 unchanged sentences

Commercial loans may be secured or unsecured.

commercial loans also include loans made under the SBA PPP.

Other 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.

Municipal loans are considered either general obligations of the issuer backed by the taxing ability of the municipality for repayment of debt, or revenue obligations backed by a pledge of the issuer's revenue, such as water & sewer usage fees.

All municipal loans are considered either general obligations of the municipality and are collateralized by the taxing ability of the municipality for repayment of debt.

Residential loans are comprised of two classes:

20 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 45.4 % of Bank capital are below the regulatory guidance limit of 100.0 % of capital at September 30, 2021.

Construction loans and non-owner-occupied commercial real estate loans are at 191.7 % of Bank total capital, below the regulatory limit of 300.0 % of capital at September 30, 2021.

Construction, land, and land development loans, both commercial and residential, comprise a small portion of the portfolio, and at 58.7 % of Bank capital are below the regulatory guidance limit of 100.0 % of capital at March 31, 2022.

Construction loans and non-owner-occupied commercial real estate loans are at 211.8 % of total Bank capital, below the regulatory limit of 300.0 % of capital at March 31, 2022.

The process of establishing the allowance with respect to the commercial loan portfolio begins when a Loan Officer or Senior Officer (or designee) 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, 2021:

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, 2022:

Real Estate Commercial

25 unchanged sentences

Total $ 576,198,000 $ 79,365,000 $ 264,570,000 $ 48,362,000 $ 968,495,000

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, 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

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, 2021.

The following table presents allowance for loan losses activity by class for the nine months and quarter ended September 30, 2021, and allowance for loan loss balances by class and related loan balances by class as of September 30, 2021:

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, 2022.

The following table presents allowance for loan losses activity by class for the three months ended March 31, 2022, and allowance for loan loss balances by class and related loan balances by class as of March 31, 2022:

Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the nine months ended September 30, 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

Charge offs 71,000 — 286,000 — 41,000 — — 239,000 — 637,000

Recoveries 95,000 — 83,000 — 12,000 — 60,000 66,000 — 316,000

Provision (credit) 1,297,000 217,000 492,000 18,000 211,000 40,000 ( 315,000 ) 262,000 ( 647,000 ) 1,575,000

Ending balance $ 6,499,000 $ 879,000 $ 3,727,000 $ 189,000 $ 2,761,000 $ 142,000 $ 956,000 $ 867,000 $ 1,487,000 $ 17,507,000

For the three months ended September 30, 2021

For the three months ended March 31, 2022

Beginning balance $ 5,367,000 $ 746,000 $ 2,830,000 $ 157,000 $ 2,733,000 $ 148,000 $ 925,000 $ 833,000 $ 1,782,000 $ 15,521,000

3 unchanged sentences

Ending balance $ 5,369,000 $ 939,000 $ 2,956,000 $ 156,000 $ 2,648,000 $ 161,000 $ 939,000 $ 866,000 $ 1,732,000 $ 15,766,000

Allowance for loan losses as of September 30, 2021

Allowance for loan losses as of March 31, 2022

Ending balance specifically evaluated for impairment $ 42,000 $ 13,000 $ 532,000 $ — $ 118,000 $ — $ 7,000 $ — $ — $ 712,000

Ending balance collectively evaluated for impairment $ 5,327,000 $ 926,000 $ 2,424,000 $ 156,000 $ 2,530,000 $ 161,000 $ 932,000 $ 866,000 $ 1,732,000 $ 15,054,000

Related loan balances as of September 30, 2021

Related loan balances as of March 31, 2022

Ending balance $ 588,301,000 $ 102,982,000 $ 267,666,000 $ 50,867,000 $ 566,320,000 $ 36,272,000 $ 72,863,000 $ 22,077,000 $ — $ 1,707,348,000

8 unchanged sentences

Recoveries 95,000 — 84,000 — 66,000 — 61,000 85,000 — 391,000

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

Provision (credit) 200,000 84,000 ( 404,000 ) ( 14,000 ) 130,000 46,000 ( 347,000 ) 282,000 ( 352,000 ) ( 375,000 )

Ending balance $ 5,367,000 $ 746,000 $ 2,830,000 $ 157,000 $ 2,733,000 $ 148,000 $ 925,000 $ 833,000 $ 1,782,000 $ 15,521,000

6 unchanged sentences

Ending balance collectively evaluated for impairment $ 574,770,000 $ 78,676,000 $ 263,267,000 $ 48,362,000 $ 542,610,000 $ 31,763,000 $ 73,175,000 $ 22,974,000 $ — $ 1,635,597,000

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:

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

9 unchanged sentences

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

As of September 30, 2021, 184,487 shares of restricted stock had been granted under the 2010 Plan and 40,189 shares under the 2020 Plan, of which 81,240 shares remain restricted as of September 30, 2021 as detailed in the following table:

As of March 31, 2022, 184,487 shares of restricted stock had been granted under the 2010 Plan and 67,684 shares under the 2020 Plan, of which 80,527 shares remain restricted as of March 31, 2022 as detailed in the following table:

Granted Vesting Term

5 unchanged sentences

2022 3.0 24,829 2.8

2020 3.0 20,342 1.3

2021 1.0 4,114 0.3

2021 3.0 27,172 2.3

The compensation cost related to these non-vested restricted stock grants is $ 2,281,000 and is recognized over the vesting terms of each grant.

In the nine months ended September 30, 2021, $ 672,000 of expense was recognized for these restricted shares, leaving $ 855,000 in unrecognized expense as of September 30, 2021.

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

In the three months ended March 31, 2022, $ 217,000 of expense was recognized for these restricted shares, leaving $ 1,350,000 in unrecognized expense as of March 31, 2022.

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

Note 6 – Common Stock

Proceeds from sale of common stock totaled $ 514,000 and $ 497,000 for the nine months ended September 30, 2021 and 2020, respectively.

Proceeds from sale of common stock totaled $ 199,000 and $ 182,000 for the three months ended March 31, 2022 and 2021, 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, 2021 and 2020:

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

For the nine months ended September 30, 2021

Net income as reported $ 26,723,000

Income available to common shareholders 26,723,000 10,901,793 $ 2.45

Effect of dilutive securities:

restricted stock 82,157

Income available to common shareholders plus assumed conversions $ 26,723,000 10,983,950 $ 2.43

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

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the quarters ended September 30, 2021 and 2020:

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the three months ended March 31, 2022 and 2021:

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

For the quarter ended September 30, 2021

For the three months ended March 31, 2022

Net income as reported $ 9,705,000

3 unchanged sentences

Income available to common shareholders plus assumed conversions $ 9,705,000 11,026,707 $ 0.88

For the quarter ended September 30, 2020

For the three months ended March 31, 2021

Net income as reported $ 8,922,000

6 unchanged sentences

Employees may contribute up to Internal Revenue Service ("IRS") determined limits and the Bank may match employee contributions not to exceed 3.0 % of compensation depending on contribution level.

Subject to a vote of the Board of Directors, the Bank may also make a profit-sharing contribution to the Plan.

Such contribution equaled 3.0 % of each eligible employee's compensation in 2020.

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

The expense related to the 401(k) plan was $ 593,000 and $ 653,000 for the nine months ended September 30, 2021 and 2020, respectively.

Prior to 2020 and subject to a vote of the Board of Directors, the Bank could also make a discretionary contribution to the Plan.

The Company adopted the safe harbor form of 401(k) plan in 2020 and made a 3.0 % safe harbor contribution to the plan in 2021 and 2020.

The expense related to the 401(k) plan was $ 324,000 and $ 217,000 for the three months ended March 31, 2022 and 2021, respectively.

Deferred Compensation and Supplemental Retirement Benefits

1 unchanged sentence

The agreements consist of individual contracts with differing characteristics that, when taken together, do not constitute a postretirement plan.

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

The expense of these supplemental retirement benefits was $ 126,000 and $ 119,000 for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, the associated accrued liability included in other liabilities in the balance sheet was $ 2,902,000 compared to $ 2,991,000 and $ 2,708,000 at December 31, 2020 and September 30, 2020, respectively.

There are no active officers eligible for these benefits.

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 $ 77,000 and $ 42,000 for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, the associated accrued liability included in other liabilities in the balance sheet was $ 2,877,000 compared to $ 2,872,000 and $ 2,961,000 at December 31, 2021 and March 31, 2021, respectively.

Postretirement 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,

2021 2020 2021 2020

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,

2021 December 31, 2020 September 30,

2022 December 31, 2021 March 31,

Unamortized net actuarial gain $ 133,000 $ 133,000 $ 35,000

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, 2021 and 2020.

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

2021 2020 2021 2020

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, 2022 and 2021.

For the three months ended March 31,

Balance at beginning of period $ ( 1,718,000 ) $ 5,009,000

Unrealized gains (losses) arising during the period ( 7,112,000 ) 3,537,000 ( 2,442,000 ) ( 2,000,000 )

Reclassification of net realized (gains) losses during the period ( 22,000 ) ( 1,179,000 ) 142,000 —

Unrealized losses arising during the period ( 23,217,000 ) ( 5,945,000 )

Reclassification of net realized gains during the period ( 2,000 ) ( 119,000 )

Related deferred taxes 4,876,000 1,274,000

2 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, 2021 and 2020.

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

2021 2020 2021 2020

For the three months ended March 31,

Balance at beginning of period $ ( 87,000 ) $ ( 133,000 )

3 unchanged sentences

Balance at end of period $ ( 78,000 ) $ ( 124,000 )

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, 2021 and 2020.

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

2021 2020 2021 2020

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, 2022 and 2021.

For the three months ended March 31,

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

Unrealized gains (losses) on cash flow hedging derivatives arising during the period 4,297,000 ( 7,465,000 ) 691,000 490,000

Unrealized gains on cash flow hedging derivatives arising during the period — 4,390,000

Related deferred taxes — ( 921,000 )

1 unchanged sentence

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

There was no 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, 2021 and 2020.

There was no activity in the unrealized gain or loss on postretirement benefits included in other comprehensive income (loss) for the three months ended March 31, 2022 and 2021.

Note 10 - Financial Derivative Instruments

7 unchanged sentences

The Bank also assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting the changes in cash flows or fair values of hedged items.

Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in other comprehensive income or (loss).

Changes in fair value of derivative instruments that are highly effective and qualify as cash flow hedges are recorded in other comprehensive income (loss).

Any ineffective portion is recorded in earnings.

1 unchanged sentence

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

September 30, 2021 December 31, 2020 September 30, 2020

March 31, 2022 December 31, 2021 March 31, 2021

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

9 unchanged sentences

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

03/13/2020 03/13/2030 3-Month USD Libor 1.029 % Other (Liabilities) Assets 20,000,000 644,000 20,000,000 ( 339,000 ) 20,000,000 ( 690,000 )

03/13/2020 03/13/2030 3-Month USD Libor 1.029 % Other Assets — — — — 20,000,000 1,071,000

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

1 unchanged sentence

$ — $ — $ — $ — $ 260,000,000 $( 1,852,000 )

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 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.

In the fourth quarter 2021, the Bank took advantage of market opportunities to terminate its interest rate swap position in order to de-lever the balance sheet and reset wholesale funding costs.

A one-time gain of $ 336,000 was recognized in non-interest income.

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.

3 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, 2021, there were six customer loan swap arrangements in place, detailed below:

September 30, 2021 December 31, 2020 September 30, 2020

At March 31, 2022, there were six customer loan swap arrangements in place, detailed below:

March 31, 2022 December 31, 2021 March 31, 2021

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

9 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, 2021, the Bank posted to the counterparty $ 6,600,000 of cash as collateral on its swap contracts.

The required amount to be pledged was $ 3,243,000 .

At March 31, 2022, there was no collateral posted on its swap contracts or required amount to be pledged.

Cessation of LIBOR

3 unchanged sentences

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 has issued a voluntary fallback protocol for market participants.

The Company formed a working group to address LIBOR cessation, which continues to monitor developments from ARRC and ISDA, along with guidance from US banking regulators.

A replacement reference rate index for new transactions will be selected prior to year-end 2021 as required.

Each of the interest rate swap contracts the Company has in place as of September 30, 2021 is tied to a LIBOR tenor expected to be published until June 2023.

Two contracts with a total notional value of $ 45 million mature prior to June 30, 2023, while 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 1, 2031, July 1, 2035,

October 1, 2035 and October 1, 2039.

The Company has adopted SOFR as its replacement reference rate index for new transactions.

Each of the interest rate swap contracts the Company has in place as of March 31, 2022 is tied to a LIBOR tenor expected to be published until June 2023.

The six customer loan swap contracts shown in the table immediately above have maturity dates of December 19, 2029, August 21, 2030, April 1, 2031, July 1, 2035, October 1, 2035 and October 1, 2039.

It is anticipated that necessary actions to amend these legacy contracts and designate a replacement reference rate index will be undertaken in late 2022.

4 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, 2021, the prepayment assumption using the PSA model was 260, which translates into an anticipated prepayment rate of 12.48 %.

As of March 31, 2022, the prepayment assumption using the PSA model was 169, which translates into an anticipated prepayment rate of 8.11 %.

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, 2021 and 2020, servicing rights capitalized totaled $ 859,000 and $ 926,000 , respectively.

Servicing rights amortized for the nine-month periods ended September 30, 2021 and 2020 were $ 485,000 and 252,000 , respectively.

The fair value of servicing rights was $ 2,757,000 , $ 1,985,000 , and $ 2,013,000 at September 30, 2021, December 31, 2020 and September 30, 2020, respectively.

The Bank serviced loans for others totaling $ 353,633,000 , $ 318,459,000 , and $ 315,426,000 at September 30, 2021, December 31, 2020, and September 30, 2020, respectively.

The Bank recorded an impairment reserve as of September 30, 2021, 2020 and December 31, 2020 for strata with a fair value lower than cost.

For the three months ended March 31, 2022 and 2021, servicing rights capitalized totaled $ 169,000 and $ 328,000 , respectively.

Servicing rights amortized for the three-month periods ended March 31, 2022 and 2021 were $ 183,000 and $ 151,000 , respectively.

The fair value of servicing rights was $ 3,435,000 , $ 3,041,000 , and $ 2,608,000 at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

The Bank serviced loans for others totaling $ 357,494,000 , $ 356,522,000 , and $ 335,938,000 at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

The Bank recorded an impairment reserve as of March 31, 2022, 2021 and December 31, 2021 for strata with a fair value lower than cost.

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

September 30,

2022 December 31,

2020 September 30,

2021 March 31,

Mortgage servicing rights $ 8,511,000 $ 8,341,000 $ 7,627,000

8 unchanged sentences

Note 13 - Certificates of Deposit

The following table represents the breakdown of certificates of deposit at September 30, 2021 and 2020, and at December 31, 2020:

September 30, 2021 December 31, 2020 September 30, 2020

The following table represents the breakdown of certificates of deposit at March 31, 2022 and 2021, and at December 31, 2021:

March 31, 2022 December 31, 2021 March 31, 2021

Certificates of deposit < $100,000 $ 225,304,000 $ 252,568,000 $ 230,290,000

25 unchanged sentences

If these considerations had been incorporated into the fair value estimates, the aggregate fair value could have been changed.

Fair values are estimated for portfolios of loans based on exit pricing notion.

The carrying values of restricted equity securities approximate fair values.

As such, the Company classifies investment securities as Level 2.

Fair values are estimated for portfolios of loans are based on an exit pricing notion.

The fair values of performing loans are calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest risk inherent in the loan.

26 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, 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.

As of March 31, 2022 and 2021, and December 31, 2021, 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, 2021, December 31, 2020 and September 30, 2020.

At September 30, 2021

The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2022, December 31, 2021 and March 31, 2021.

At March 31, 2022

Level 1 Level 2 Level 3 Total

5 unchanged sentences

Total securities available for sale — 313,015,000 — 313,015,000

Interest rate swap agreements — 644,000 — 644,000

Customer loan interest swap agreements — 2,665,000 — 2,665,000

Total interest rate swap agreements — 3,307,000 — 3,307,000

Total assets $ — $ 315,680,000 $ — $ 315,680,000

At September 30, 2021

At March 31, 2022

Level 1 Level 2 Level 3 Total

Interest rate swap agreements $ — $ 2,589,000 $ — $ 2,589,000

Customer loan interest swap agreements $ — $ 2,665,000 $ — $ 2,665,000

12 unchanged sentences

Level 1 Level 2 Level 3 Total

Interest rate swap agreements $ — $ 6,242,000 $ — $ 6,242,000

Customer loan interest swap agreements $ — $ 2,591,000 $ — $ 2,591,000

Total liabilities $ — $ 2,591,000 $ — $ 2,591,000

At September 30, 2020

At March 31, 2021

Level 1 Level 2 Level 3 Total

Securities available for sale

Treasury and agency $ — $ 27,497,000 $ — $ 27,497,000

Government-sponsored agencies $ — $ 21,485,000 $ — $ 21,485,000

Mortgage-backed securities — 227,914,000 — 227,914,000

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

Total interest swap agreements — 3,677,000 — 3,677,000

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

At September 30, 2020

At March 31, 2021

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 $ 91,000 at September 30, 2021, $ 358,000 at December 31, 2020 and $ 258,000 at September 30, 2020.

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

The Company had no other real estate owned or related allowance at September 30, 2021.

Mortgage servicing rights are presented net of an impairment reserve of $ 8,000 at March 31, 2022, $ 26,000 at December 31, 2021 and $ 92,000 at March 31, 2021.

Other real estate owned is presented net of an allowance of 45,000 at March 31, 2021.

The Company had no other real estate owned or related allowance at March 31, 2022 and December 31, 2021.

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 $ 457,000 , $ 304,000 and $ 633,000 at September 30, 2021, December 31, 2020, and September 30, 2020, respectively.

At September 30, 2021

Impaired loans below are presented net of specific allowances of $ 417,000 , $ 441,000 and $ 641,000 at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

At March 31, 2022

Level 1 Level 2 Level 3 Total

5 unchanged sentences

Mortgage servicing rights $ — $ 3,041,000 $ — $ 3,041,000

Other real estate owned — 908,000 — 908,000

Impaired loans — 224,000 — 224,000

Total assets $ — $ 3,265,000 $ — $ 3,265,000

At September 30, 2020

At March 31, 2021

Level 1 Level 2 Level 3 Total

16 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, 2021 were as follows:

The carrying amount and estimated fair values for financial instruments as of March 31, 2022 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

17 unchanged sentences

Repurchase agreements 78,623,000 72,990,000 — 72,990,000 —

Federal Home Loan Bank and Federal Reserve Bank borrowings 145,092,000 146,411,000 — 146,411,000 —

Federal Home Loan Bank advances 55,089,000 55,399,000 — 55,399,000 —

Total borrowed funds 133,712,000 128,389,000 — 128,389,000 —

21 unchanged sentences

Total borrowed funds 136,342,000 135,063,000 — 135,063,000 —

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

21 unchanged sentences

In June 2016, the FASB issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

2016-13, Financial Instruments-Credit Losse s (Topic 326):

Measurement of Credit Losses on Financial Instruments .

11 unchanged sentences

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.

2016-13 on January 1, 2023.

In March 2022, the FASB issued ASU No.

2022-01 Derivatives and Hedging (Topic 815):

Fair Value Hedging – Portfolio Layer Method .

This ASU expands upon hedge accounting concepts introduced in ASU 2017-12 by allowing multiple hedged layers to be designated for a single closed portfolio of financial assets which may allow a greater proportion of interest rate risk inherent in the assets to be hedged.

The last of layer method outlined in ASU 2017-12 is renamed the portfolio layer method in ASU 2022-01.

ASU 2022-01 also allows, upon adoption, the reclassification of debt securities classified as held to maturity to the available for sale category provided the reclassification takes place within thirty days of adoption and the same debt securities are included in a portfolio layer method hedge within the thirty day period.

ASU 2022-01 is effective for fiscal years beginning after December 15, 2022.

Early adoption is permitted for entities, such as the Company, that have adopted ASU 2017-12.

This ASU is not expected to have a material impact on the consolidated financial statements of the Company.

Also in March 2022, the FASB issued ASU No.

2022-02 Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings (TDRs) and Vintage Disclosures .

The ASU eliminates the current guidance in ASC Subtopic 310-40 regarding troubled debt restructures in its entirety.

After adoption, loan modifications will be determined to be a new loan or a continuation of an existing loan in accordance with current ASC guidance.

Disclosure will consist of information on modifications to debtors experiencing financial difficulty that were in the form of principal forgiveness, an interest rate reduction, an other than insignificant payment delay, a term extension, or any combination of the foregoing.

The ASU will also require disclosure of current-period gross write-offs by year of origination.

ASU 2022-02 is effective for fiscal years beginning after December 15, 2022.

This ASU is not expected to have a material impact on the consolidated financial statements of the Company.

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