What changed in this filing

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Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 190 added, 178 removed, 1273 unchanged (22% of the section changed)

5 unchanged sentences

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

and Subsidiary as of June 30, 2022 and 2021 and for the three-month and six-month periods then ended, and the related notes (collectively referred to as the "interim financial information").

and Subsidiary as of September 30, 2022 and 2021 and for the three-month and nine-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.

7 unchanged sentences

Portland, Maine

August 5, 2022

November 4, 2022

Consolidated Balance Sheets (Unaudited)

1 unchanged sentence

and Subsidiary

2022 December 31, 2021 June 30,

September 30,

2022 December 31,

2021 September 30,

Cash and cash equivalents $ 27,408,000 $ 20,634,000 $ 27,126,000

1 unchanged sentence

Securities available for sale 283,268,000 320,566,000 309,224,000

Securities to be held to maturity (fair value of $ 335,950,000 at June 30, 2022, $ 375,327,000 at December 31, 2021 and $ 383,454,000 at June 30, 2021)

Securities to be held to maturity (fair value of $ 313,796,000 at September 30, 2022, $ 375,327,000 at December 31, 2021 and $ 379,797,000 at September 30, 2021)

381,906,000 370,040,000 375,699,000

6 unchanged sentences

Premises and equipment, net 28,548,000 28,949,000 29,106,000

Other real estate owned 51,000 — 224,000

Goodwill 30,646,000 30,646,000 30,646,000

17 unchanged sentences

Accumulated other comprehensive income (loss)

Net unrealized gain (loss) on securities available for sale ( 32,795,000 ) ( 1,718,000 ) 1,190,000

Net unrealized loss on securities available for sale ( 47,661,000 ) ( 1,718,000 ) ( 627,000 )

Net unrealized loss on securities transferred from available for sale to held to maturity ( 67,000 ) ( 87,000 ) ( 99,000 )

12 unchanged sentences

and Subsidiary

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

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

2022 2021 2022 2021

Interest income

Interest and fees on loans (includes YTD tax-exempt income of $ 582,000 for June 30, 2022 and $ 577,000 for June 30, 2021)

Interest and fees on loans (includes YTD tax-exempt income of $ 879,000 for September 30, 2022 and $ 832,000 for September 30, 2021)

$ 53,463,000 $ 45,864,000 $ 19,564,000 $ 15,905,000

Interest on deposits with other banks 163,000 45,000 92,000 21,000

Interest and dividends on investments (includes YTD tax-exempt income of $ 3,657,000 for June 30, 2022 and $ 3,894,000 for June 30, 2021)

Interest and dividends on investments (includes YTD tax-exempt income of $ 5,588,000 for September 30, 2022 and $ 5,798,000 for September 30, 2021)

12,329,000 11,173,000 4,335,000 3,662,000

29 unchanged sentences

Other comprehensive income (loss) net of tax

Net unrealized gain (loss) on securities available for sale, net of taxes $ ( 31,077,000 ) $ ( 3,819,000 ) $ ( 12,734,000 ) $ 971,000

Net unrealized loss on securities available for sale, net of taxes $ ( 45,943,000 ) $ ( 5,636,000 ) $ ( 14,866,000 ) $ ( 1,817,000 )

Net unrealized gain on transferred securities, net of taxes 20,000 34,000 6,000 14,000

Net unrealized gain (loss) on cash flow hedging derivative instruments 146,000 2,849,000 146,000 ( 620,000 )

Other comprehensive income (loss) ( 30,917,000 ) ( 950,000 ) ( 12,583,000 ) 362,000

Net unrealized gain on cash flow hedging derivative instruments 500,000 3,395,000 354,000 546,000

Other comprehensive loss ( 45,423,000 ) ( 2,207,000 ) ( 14,506,000 ) ( 1,257,000 )

Comprehensive income (loss) $ ( 15,630,000 ) $ 24,516,000 $ ( 4,415,000 ) $ 7,757,000

4 unchanged sentences

and Subsidiary

Six Month Period Ended June 30, 2022 and 2021

Nine Month Period Ended September 30, 2022 and 2021

Common stock and

16 unchanged sentences

Proceeds from sale of common stock 18,224 514,000 — — 514,000

Balance at June 30, 2021 10,987,680 $ 66,225,000 $ 168,908,000 $ ( 978,000 ) $ 234,155,000

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

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

10 unchanged sentences

Proceeds from sale of common stock 19,354 588,000 — — 588,000

Balance at June 30, 2022 11,030,236 $ 67,737,000 $ 192,565,000 $ ( 32,617,000 ) $ 227,685,000

Three Month Period Ended June 30, 2022 and 2021

Balance at September 30, 2022 11,038,224 $ 68,138,000 $ 198,902,000 $ ( 47,123,000 ) $ 219,917,000

Three Month Period Ended September 30, 2022 and 2021

Common stock and

4 unchanged sentences

Shares Amount

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

Balance at June 30, 2021 10,987,680 $ 66,225,000 $ 168,908,000 $ ( 978,000 ) $ 234,155,000

Net income — — 9,014,000 — 9,014,000

Net unrealized gain on securities available for sale, net of tax — — — 971,000 971,000

Net unrealized loss on securities available for sale, net of tax — — — ( 1,817,000 ) ( 1,817,000 )

Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 14,000 14,000

Net unrealized loss on cash flow hedging derivative instruments, net of tax — — — ( 620,000 ) ( 620,000 )

Comprehensive income — — 8,787,000 362,000 9,149,000

Net unrealized gain on cash flow hedging derivative instruments, net of tax — — — 546,000 546,000

Comprehensive income (loss) — — 9,014,000 ( 1,257,000 ) 7,757,000

Cash dividends declared ($ 0.32 per share)

3 unchanged sentences

Proceeds from sale of common stock 5,961 173,000 — — 173,000

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

Balance at June 30, 2022 11,030,236 $ 67,737,000 $ 192,565,000 $ ( 32,617,000 ) $ 227,685,000

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

Net income — — 10,091,000 — 10,091,000

6 unchanged sentences

Equity compensation expense — 198,000 — — 198,000

Amortization of premium for preferred stock issuance — — — — —

Payment to repurchase preferred stock — — — — —

Payment to repurchase common stock — — — — —

Tax benefit from vesting of restricted stock — — — — —

Issuance of restricted stock 1,250 — — — —

Proceeds from sale of common stock 6,738 203,000 — — 203,000

Balance at June 30, 2022 11,030,236 $ 67,737,000 $ 192,565,000 $ ( 32,617,000 ) $ 227,685,000

Balance at September 30, 2022 11,038,224 $ 68,138,000 $ 198,902,000 $ ( 47,123,000 ) $ 219,917,000

See Report of Independent Registered Public Accounting Firm.

3 unchanged sentences

and Subsidiary

For the six months ended June 30,

For the nine months ended September 30,

Cash flows from operating activities

9 unchanged sentences

Net amortization of premiums on investments 763,000 1,801,000

Net gain on sale of other real estate owned — ( 105,000 )

Net (gain) loss on sale of other real estate owned 1,000 ( 91,000 )

Equity compensation expense 610,000 672,000

6 unchanged sentences

Cash flows from investing activities

Decrease in interest-bearing deposits in other banks 43,807,000 13,936,000

(Increase) decrease in interest-bearing deposits in other banks 892,000 ( 37,628,000 )

Proceeds from sales of securities available for sale 1,301,000 19,435,000

10 unchanged sentences

Cash flows from financing activities

Net increase (decrease) in demand, savings, and money market accounts ( 9,480,000 ) 126,093,000

Net increase in demand, savings, and money market accounts 26,681,000 279,620,000

Net increase (decrease) in certificates of deposit 219,971,000 ( 91,018,000 )

8 unchanged sentences

Cash and cash equivalents at end of period $ 27,408,000 $ 27,126,000

For the six months ended June 30,

For the nine months ended September 30,

Interest paid $ 9,061,000 $ 8,887,000

2 unchanged sentences

Change in net unrealized loss on available for sale securities, net of tax 45,943,000 5,636,000

Net transfer from loans to other real estate owned $ 51,000 $ —

See Report of Independent Registered Public Accounting Firm.

14 unchanged sentences

In March 2020, the World Health Organization declared a worldwide pandemic as a result of the outbreak of coronavirus disease 2019 ("COVID-19").

The impact of COVID-19 continues to cause varying levels of disruption and uncertainty in the local, national, and world economies.

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.

3 unchanged sentences

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

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

in 2021, the tourism industry rebounded to enjoy a strong year, and anecdotal evidence points to a good year for the industry in 2022.

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

1 unchanged sentence

Government economic programs intended to backstop and bolster the economy through the pandemic, such as the Payroll Protection Program (PPP) have ended, and the nation's economy has entered an inflationary phase.

The Consumer Price Index has risen at levels not experienced since the 1980s while the labor market remains very tight, contributing additional inflationary pressure.

To address the inflation problem, the Federal Reserve has reversed course on its previously accommodative monetary policies and aggressively increased short-term interest rates.

These actions are intended to slow overall economic activity and risk entering the economy into a recession.

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.

The Consumer Price Index has risen at levels not experienced since the 1980s while the labor market remains very tight, contributing to additional inflationary pressure.

To address the inflation problem, the Federal Reserve has removed accommodative monetary policies and aggressively increased short-term interest rates.

These actions are intended to slow overall economic activity, with a resulting risk of the economy entering into a recession.

The ongoing 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 June 30, 2022, have been evaluated as to their potential impact to the financial statements.

Events occurring subsequent to September 30, 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 June 30, 2022:

The following table summarizes the amortized cost and estimated fair value of investment securities at September 30, 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 June 30, 2021:

The following table summarizes the amortized cost and estimated fair value of investment securities at September 30, 2021:

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

15 unchanged sentences

$ 8,839,000 $ — $ — $ 8,839,000

The following table summarizes the contractual maturities of investment securities at June 30, 2022:

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

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

Securities available for sale Securities to be held to maturity

6 unchanged sentences

$ 310,018,000 $ 309,224,000 $ 375,699,000 $ 379,797,000

At June 30, 2022, securities with a fair value of $ 318,833,000 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 $ 241,913,000 at June 30, 2021, pledged for the same purposes.

At September 30, 2022, securities with a carrying value of $ 343,677,000 were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law.

This compares to securities with a carrying value of $ 297,456,000 as of December 31, 2021 and $ 299,978,000 at September 30, 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 six months and quarters ended June 30, 2022 and 2021:

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

The following table shows securities gains and losses for the nine months and quarters ended September 30, 2022 and 2021:

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

2022 2021 2022 2021

5 unchanged sentences

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

As of June 30, 2022, there were 773 securities with unrealized losses held in the Company's portfolio.

As of September 30, 2022, there were 912 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 138 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 June 30, 2022 is summarized below:

Information regarding securities temporarily impaired as of September 30, 2022 is summarized below:

Less than 12 months 12 months or more Total

16 unchanged sentences

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

As of June 30, 2021, there were 112 securities with unrealized losses held in the Company's portfolio.

As of September 30, 2021, there were 184 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 19 had been temporarily impaired for 12 months or more.

Information regarding securities temporarily impaired as of June 30, 2021 is summarized below:

Information regarding securities temporarily impaired as of September 30, 2021 is summarized below:

Less than 12 months 12 months or more Total

10 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 $ 73,000 , net of taxes, at June 30, 2022.

This compares to $ 87,000 and $ 113,000 , net of taxes, at December 31, 2021 and June 30, 2021, respectively.

The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $ 67,000 , net of taxes, at September 30, 2022.

This compares to $ 87,000 and $ 99,000 , net of taxes, at December 31, 2021 and September 30, 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 June 30, 2022 and 2021, and December 31, 2021, the Bank's investment in FHLB stock totaled $ 3,683,000 , $ 7,802,000 and $ 4,328,000 , respectively.

As of September 30, 2022 and 2021, and December 31, 2021, the Bank's investment in FHLB stock totaled $ 3,477,000 , $ 7,802,000 and $ 4,328,000 , respectively.

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

2 unchanged sentences

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 June 30, 2022 and 2021 and December 31, 2021, respectively.

The Bank's investment in FRB stock totaled $ 1,037,000 at September 30, 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 June 30, 2022.

No impairment losses have been recorded through September 30, 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 by class of financing receivable as of June 30, 2022 and 2021 and at December 31, 2021:

June 30, 2022 December 31, 2021 June 30, 2021

The following table shows the composition of the Company's loan portfolio by class of financing receivable as of September 30, 2022 and 2021 and at December 31, 2021:

September 30, 2022 December 31, 2021 September 30, 2021

Real estate $ 638,708,000 34.5 % $ 576,198,000 35.0 % $ 550,077,000 34.0 %

7 unchanged sentences

Total $ 1,857,975,000 100.0 % $ 1,647,649,000 100.0 % $ 1,617,212,000 100.0 %

Loan balances include net deferred loan costs of $ 9,738,000 as of June 30, 2022, $ 7,890,000 as of December 31, 2021, and $ 5,447,000 as of June 30, 2021.

Loan balances include net deferred loan costs of $ 9,978,000 as of September 30, 2022, $ 7,890,000 as of December 31, 2021, and $ 6,597,000 as of September 30, 2021.

Net deferred loan costs have increased from a year ago and year-to-date due to loan origination unit volume over the period.

Unearned fees and deferred costs associated with US Small Business Administration ("SBA") Payroll Protection Program ("PPP") loans originated in 2020 and 2021 were fully recognized as of June 30, 2022.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 461,756,000 at June 30, 2022, were used to collateralize borrowings from the FHLB.

This compares to qualifying loans which totaled $ 364,968,000 at December 31, 2021, and $ 356,811,000 at June 30, 2021.

In addition, commercial, residential construction and home equity loans totaling $ 345,798,000 at June 30, 2022, $ 295,090,000 at December 31, 2021, and $ 259,312,000 at June 30, 2021, were used to collateralize a standby line of credit at the FRB.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 464,069,000 at September 30, 2022, were used to collateralize borrowings from the FHLB.

This compares to qualifying loans which totaled $ 364,968,000 at December 31, 2021, and $ 356,517,000 at September 30, 2021.

In addition, commercial, residential construction and home equity loans totaling $ 327,551,000 at September 30, 2022, $ 295,090,000 at December 31, 2021, and $ 291,188,000 at September 30, 2021, were used to collateralize a standby line of credit at the FRB.

In September 2022 the Bank sold a block of 41 mixed performing residential mortgage loans.

This block of loans carried general ledger balances that totaled $ 5.2 million and included a number of past-due, non-accrual, and Troubled Debt Restructure ("TDR") loans.

The impact of the sale on the portfolio is included in the information presented herein.

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 June 30, 2022, is presented in the following table:

Information on the past-due status of loans by class of financing receivable as of September 30, 2022, 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, which was extended by the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020.

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 June 30, 2022, COVID-19 related loan modifications have nearly all been resolved, with just four loans remaining in modification status at the end of the second quarter, representing less than $ 400,000 in total balances.

Each of the four are residential mortgage loans and each is scheduled to exit modification within the next two months.

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

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

As of September 30, 2022, COVID-19 related loan modifications have all been resolved.

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 June 30, 2021, is presented in the following table:

Information on the past-due status of loans by class of financing receivable as of September 30, 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 June 30, 2022 and 2021 and at December 31, 2021 is presented in the following table:

June 30, 2022 December 31, 2021 June 30, 2021

Information on nonaccrual loans as of September 30, 2022 and 2021 and at December 31, 2021 is presented in the following table:

September 30, 2022 December 31, 2021 September 30, 2021

Real estate $ 195,000 $ 242,000 $ 604,000

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 June 30, 2022 is presented in the following table:

For the six months ended June 30, 2022 For the quarter ended June 30, 2022

A breakdown of impaired loans by class of financing receivable as of and for the period ended September 30, 2022 is presented in the following table:

For the nine months ended September 30, 2022 For the quarter ended September 30, 2022

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

60 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 June 30, 2021 is presented in the following table:

For the six months ended June 30, 2021 For the quarter ended June 30, 2021

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

35 unchanged sentences

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

As of June 30, 2022, the Company had 53 loans with a balance of $ 7,484,000 that have been classified as TDRs.

This compares to 60 loans with a balance of $ 8,341,000 and 72 loans with a balance of $ 10,782,000 classified as TDRs as of December 31, 2021 and June 30, 2021, respectively.

As of September 30, 2022, the Company had 31 loans with a balance of $ 4,926,000 that have been classified as TDRs.

This compares to 60 loans with a balance of $ 8,341,000 and 64 loans with a balance of $ 10,051,000 classified as TDRs as of December 31, 2021 and September 30, 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 June 30, 2022:

The following table shows TDRs by class and the specific reserve as of September 30, 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 June 30, 2021:

The following table shows TDRs by class and the specific reserve as of September 30, 2021:

Number of Loans Balance Specific Reserves

8 unchanged sentences

64 $ 10,051,000 $ 636,000

As of June 30, 2022, nine of the loans classified as TDRs with a total balance of $ 641,000 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 June 30, 2022:

As of September 30, 2022, one of the loans classified as TDR with a total balance of $ 83,000 was more than 30 days past due.

This loan had not been placed on TDR status in the previous 12 months.

The following table shows this TDR by class and the associated specific reserves included in the allowance for loan losses as of September 30, 2022:

Number of Loans Balance Specific Reserves

3 unchanged sentences

Municipal — — —

Term 6 327,000 —

Construction — — —

2 unchanged sentences

1 $ 83,000 $ —

As of June 30, 2021, 11 of the loans classified as TDRs with a total balance of $ 737,000 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 June 30, 2021:

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:

Number of Loans Balance Specific Reserves

8 unchanged sentences

12 $ 1,095,000 $ 351,000

For the six months ended June 30, 2022, no loans were placed on TDR status.

For the six months ended June 30, 2021, three loans were 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 June 30, 2021:

For the nine months ended September 30, 2022, 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 September 30, 2022:

Number of Loans Pre-Modification

10 unchanged sentences

1 $ 38,000 $ 38,000 $ —

For the quarter ended June 30, 2022, no loans were placed on TDR status.

For the quarter ended June 30, 2021, two loans were 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 June 30, 2021:

For the nine months ended September 30, 2021, 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, 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 quarter ended September 30, 2022, one loan was placed on TDR status.

The following table shows this TDR by class and the associated specific reserves included in the allowance for loan losses as of September 30, 2022:

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

8 unchanged sentences

1 $ 38,000 $ 38,000 $ —

As of June 30, 2022, Management is aware of six loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 885,000 .

There were also 14 loans with an outstanding balance of $ 1,341,000 that were classified as TDRs and on non-accrual status, of which no loans were in the process of foreclosure.

For the quarter ended September 30, 2021, no loans were placed on TDR status.

As of September 30, 2022, Management is aware of four loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 558,000 .

There were also six loans with an outstanding balance of $ 430,000 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 June 30, 2022, there were five mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 537,000 .

This compares to 12 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 912,000 as of June 30, 2021.

As of September 30, 2022, there were two mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 166,000 .

This compares to 10 mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 839,000 as of September 30, 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 June 30, 2022, December 31, 2021, and June 30, 2021, by class of financing receivable and allowance element, is presented in the following tables:

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

As of September 30, 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 June 30, 2021 Specific Reserves on Loans Evaluated Individually for Impairment General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Unallocated

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

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 0.66 % of related loans as of June 30, 2022, compared to 0.69 % of related loans as of December 31, 2021.

The qualitative portion increased $ 465,000 between December 31, 2021 and June 30, 2022 due to a mix of factors.

The qualitative portion of the allowance for loan losses was 0.65 % of related loans as of September 30, 2022, compared to 0.69 % of related loans as of December 31, 2021.

The qualitative portion increased $ 832,000 between December 31, 2021 and September 30, 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 $ 1,850,000 at June 30, 2022, or 11.4 % of the total reserve.

The unallocated component of the allowance totaled $ 1,937,000 at September 30, 2022, or 11.8 % 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 and wind-down of related government stimulus programs on the loan portfolio.

The allowance for loan losses as a percent of total loans stood at 0.91 % as of June 30, 2022, 0.94 % at December 31, 2021 and 1.07 % as of June 30, 2021.

The allowance for loan losses as a percent of total loans stood at 0.88 % as of September 30, 2022, 0.94 % at December 31, 2021 and 1.08 % as of September 30, 2021.

Commercial loans are comprised of three major classes;

43 unchanged sentences

Construction, land, and land development (CLLD) loans, both commercial and residential, comprise a growing portion of the portfolio.

CLLD loans represented 70.7 % of total Bank capital as of June 30, 2022 and remain below the regulatory guidance of 100.0 % of total Bank capital.

Construction loans and non-owner-occupied commercial real estate loans represented 223.8 % of total Bank capital at June 30, 2022 , below the regulatory guidance of 300.0 % of total Bank capital.

CLLD loans represented 67.9 % of total Bank capital as of September 30, 2022 and remain below the regulatory guidance of 100.0 % of total Bank capital.

Construction loans and non-owner-occupied commercial real estate loans represented 221.4 % of total Bank capital at September 30, 2022 , below the regulatory guidance of 300.0 % of total Bank capital.

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 June 30, 2022:

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, 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 June 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 September 30, 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 six months ended June 30, 2022.

The following table presents allowance for loan losses activity by class for the six months and quarter ended June 30, 2022, and allowance for loan loss balances by class and related loan balances by class as of June 30, 2022:

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, 2022.

The following table presents allowance for loan losses activity by class for the nine months and quarter ended September 30, 2022, and allowance for loan loss balances by class and related loan balances by class as of September 30, 2022:

Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the six months ended June 30, 2022

For the nine months ended September 30, 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 $ 5,575,000 $ 1,121,000 $ 3,014,000 $ 160,000 $ 2,547,000 $ 168,000 $ 993,000 $ 872,000 $ 1,937,000 $ 16,387,000

For the three months ended June 30, 2022

For the three months ended September 30, 2022

Beginning balance $ 5,480,000 $ 1,151,000 $ 2,948,000 $ 157,000 $ 2,592,000 $ 191,000 $ 966,000 $ 866,000 $ 1,850,000 $ 16,201,000

3 unchanged sentences

Ending balance $ 5,575,000 $ 1,121,000 $ 3,014,000 $ 160,000 $ 2,547,000 $ 168,000 $ 993,000 $ 872,000 $ 1,937,000 $ 16,387,000

Allowance for loan losses as of June 30, 2022

Allowance for loan losses as of September 30, 2022

Ending balance specifically evaluated for impairment $ — $ 6,000 $ 315,000 $ — $ 99,000 $ — $ — $ — $ — $ 420,000

Ending balance collectively evaluated for impairment $ 5,575,000 $ 1,115,000 $ 2,699,000 $ 160,000 $ 2,448,000 $ 168,000 $ 993,000 $ 872,000 $ 1,937,000 $ 15,967,000

Related loan balances as of June 30, 2022

Related loan balances as of September 30, 2022

Ending balance $ 638,708,000 $ 129,036,000 $ 310,110,000 $ 48,702,000 $ 595,031,000 $ 41,631,000 $ 73,938,000 $ 20,819,000 $ — $ 1,857,975,000

17 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 six months and quarter ended June 30, 2021, and allowance for loan loss balances by class and related loan balances by class as of June 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:

Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the six months ended June 30, 2021

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

3 unchanged sentences

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 June 30, 2021

For the three months ended September 30, 2021

Beginning balance $ 6,088,000 $ 750,000 $ 3,757,000 $ 187,000 $ 2,896,000 $ 160,000 $ 959,000 $ 892,000 $ 1,345,000 $ 17,034,000

3 unchanged sentences

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

Allowance for loan losses as of June 30, 2021

Allowance for loan losses as of September 30, 2021

Ending balance specifically evaluated for impairment $ 138,000 $ 18,000 $ 397,000 $ — $ 129,000 $ — $ — $ — $ — $ 682,000

Ending balance collectively evaluated for impairment $ 6,361,000 $ 861,000 $ 3,330,000 $ 189,000 $ 2,632,000 $ 142,000 $ 956,000 $ 867,000 $ 1,487,000 $ 16,825,000

Related loan balances as of June 30, 2021

Related loan balances as of September 30, 2021

Ending balance $ 550,077,000 $ 73,302,000 $ 288,121,000 $ 40,616,000 $ 537,811,000 $ 29,358,000 $ 74,594,000 $ 23,333,000 $ — $ 1,617,212,000

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 June 30, 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 June 30, 2022 as detailed in the following table:

As of September 30, 2022, 184,487 shares of restricted stock had been granted under the 2010 Plan and 68,934 shares under the 2020 Plan, of which 81,777 shares remain restricted as of September 30, 2022 as detailed in the following table:

Granted Vesting Term

5 unchanged sentences

2022 2.5 1,250 2.3

2022 1.0 2,000 0.3

The compensation cost related to these non-vested restricted stock grants is $ 2,319,000 and is recognized over the vesting terms of each grant.

In the six months ended June 30, 2022, $ 412,000 of expense was recognized for these restricted shares, leaving $ 1,155,000 in unrecognized expense as of June 30, 2022.

In the six months ended June 30, 2021, $ 490,000 of expense was recognized for restricted shares, leaving $ 1,044,000 in unrecognized expense as of June 30, 2021.

In the nine months ended September 30, 2022, $ 610,000 of expense was recognized for these restricted shares, leaving $ 994,000 in unrecognized expense as of September 30, 2022.

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

Note 6 – Common Stock

Proceeds from sale of common stock totaled $ 385,000 and $ 340,000 for the six months ended June 30, 2022 and 2021, respectively.

Proceeds from sale of common stock totaled $ 588,000 and $ 514,000 for the nine months ended September 30, 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 six months ended June 30, 2022 and 2021:

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the nine months ended September 30, 2022 and 2021:

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

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

Net income as reported $ 29,793,000

3 unchanged sentences

Income available to common shareholders plus assumed conversions $ 29,793,000 11,026,571 $ 2.70

For the six months ended June 30, 2021

For the nine months ended September 30, 2021

Net income as reported $ 26,723,000

3 unchanged sentences

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

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the quarters ended June 30, 2022 and 2021:

The following table sets forth the computation of basic and diluted earnings per share (EPS) for the quarters ended September 30, 2022 and 2021:

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

For the quarter ended June 30, 2022

For the quarter ended September 30, 2022

Net income as reported $ 10,091,000

3 unchanged sentences

Income available to common shareholders plus assumed conversions $ 10,091,000 11,035,391 $ 0.91

For the quarter ended June 30, 2021

For the quarter ended September 30, 2021

Net income as reported $ 9,014,000

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.

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 $ 550,000 and $ 405,000 for the six months ended June 30, 2022 and 2021, respectively.

The Plan is a safe harbor plan whereby the Bank also contributes a minimum 3.0 % of annual compensation to the plan for all eligible employees.

The expense related to the 401(k) plan was $ 752,000 and $ 593,000 for the nine months ended September 30, 2022 and 2021, respectively.

Deferred Compensation and Supplemental Retirement Benefits

3 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 $ 154,000 and $ 84,000 for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, the associated accrued liability included in other liabilities in the balance sheet was $ 2,882,000 compared to $ 2,872,000 and $ 2,932,000 at December 31, 2021 and June 30, 2021, respectively.

The expense of these supplemental retirement benefits was $ 231,000 and $ 126,000 for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the associated accrued liability included in other liabilities in the balance sheet was $ 2,888,000 compared to $ 2,872,000 and $ 2,902,000 at December 31, 2021 and September 30, 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 six months ended June 30,

At or for the nine months ended September 30,

Change in benefit obligation

8 unchanged sentences

The following table sets forth the net periodic pension cost:

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

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

2022 2021 2022 2021

3 unchanged sentences

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

2022 December 31, 2021 June 30,

September 30,

2022 December 31, 2021 September 30,

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 six months and quarters ended June 30, 2022 and 2021.

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

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 quarters ended September 30, 2022 and 2021.

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

2022 2021 2022 2021

6 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 six months and quarters ended June 30, 2022 and 2021.

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

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 for the nine months and quarters ended September 30, 2022 and 2021.

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

2022 2021 2022 2021

4 unchanged sentences

Balance at end of period $ ( 67,000 ) $ ( 99,000 ) $ ( 67,000 ) $ ( 99,000 )

The following table presents the effect of the Company's derivative financial instruments included in other comprehensive income (loss) for the six months and quarters ended June 30, 2022 and 2021.

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

The following table presents the effect of the Company's derivative financial instruments included in other comprehensive income (loss) for the nine months and quarters ended September 30, 2022 and 2021.

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

2022 2021 2022 2021

Balance at beginning of period $ — $ ( 4,932,000 ) $ 146,000 $ ( 2,083,000 )

Unrealized gains (losses) on cash flow hedging derivatives arising during the period 185,000 3,606,000 185,000 ( 784,000 )

Unrealized gains on cash flow hedging derivatives arising during the period 633,000 4,297,000 448,000 691,000

Related deferred taxes ( 133,000 ) ( 902,000 ) ( 94,000 ) ( 145,000 )

1 unchanged sentence

Balance at end of period $ 500,000 $ ( 1,537,000 ) $ 500,000 $ ( 1,537,000 )

There was no activity in the unrealized gain or loss on postretirement benefits included in other comprehensive income (loss) for the six months and quarters ended June 30, 2022 and 2021.

There was no activity in the unrealized gain or loss on postretirement benefits included in other comprehensive income (loss) for the nine months and quarters ended September 30, 2022 and 2021.

Note 10 - Financial Derivative Instruments

4 unchanged sentences

The Bank recognizes its derivative instruments in the consolidated balance sheet at fair value.

On the date the derivative instrument is entered into, the Bank designates whether the derivative is part of a hedging relationship (i.e., cash flow or fair

value hedge).

On the date the derivative instrument is entered into, the Bank designates whether the derivative is part of a hedging relationship (i.e., cash flow or fair value hedge).

The Bank formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking hedge transactions.

4 unchanged sentences

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

June 30, 2022 December 31, 2021 June 30, 2021

September 30, 2022 December 31, 2021 September 30, 2021

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

15 unchanged sentences

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

In the fourth quarter 2021, the Bank terminated its then open interest rate swap positions 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 in the fourth quarter 2021.

4 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 June 30, 2022 and 2021, and December 31, 2021, there were six customer loan swap arrangements in place, detailed below:

June 30, 2022 December 31, 2021 June 30, 2021

At September 30, 2022 and 2021, and December 31, 2021, there were six customer loan swap arrangements in place, detailed below:

September 30, 2022 December 31, 2021 September 30, 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 June 30, 2022, there was no collateral posted on its swap contracts or required amount to be pledged.

At September 30, 2022, there was no collateral posted on its swap contracts or required amount to be pledged.

Cessation of LIBOR

4 unchanged sentences

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

Each of the customer loan interest rate swap contracts the Company has in place as of June 30, 2022 is tied to a LIBOR tenor expected to be published until June 2023.

Each of the customer loan interest rate swap contracts the Company has in place as of September 30, 2022 is tied to a LIBOR tenor expected to be published until June 2023.

The six 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.

4 unchanged sentences

In evaluating the carrying values of mortgage servicing rights, the Company obtains third party valuations based on loan level data including note rate, type, and term of the underlying loans.

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 June 30, 2022, the prepayment assumption using the PSA model was 132, which translates into an anticipated prepayment rate of 6.34 %.

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, 2022, the prepayment assumption using the PSA model was 135, which translates into an anticipated prepayment rate of 6.48 %.

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 six months ended June 30, 2022 and 2021, servicing rights capitalized totaled $ 237,000 and $ 646,000 , respectively.

Servicing rights amortized for the six-month periods ended June 30, 2022 and 2021 were $ 291,000 and $ 319,000 , respectively.

The fair value of servicing rights was $ 3,751,000 , $ 3,041,000 , and $ 2,777,000 at June 30, 2022, December 31, 2021 and June 30, 2021, respectively.

The Bank serviced loans for others totaling $ 354,308,000 , $ 356,522,000 , and $ 348,862,000 at June 30, 2022, December 31, 2021, and June 30, 2021, respectively.

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

There was no impairment reserve as of June 30, 2022.

For the nine months ended September 30, 2022 and 2021, servicing rights capitalized totaled $ 299,000 and $ 859,000 , respectively.

Servicing rights amortized for the nine-month periods ended September 30, 2022 and 2021 were $ 402,000 and $ 485,000 , respectively.

The fair value of servicing rights was $ 3,789,000 , $ 3,041,000 , and $ 2,757,000 at September 30, 2022, December 31, 2021 and September 30, 2021, respectively.

The Bank serviced loans for others totaling $ 348,589,000 , $ 356,522,000 , and $ 353,633,000 at September 30, 2022, December 31, 2021, and September 30, 2021, respectively.

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

There was no impairment reserve as of September 30, 2022.

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

2022 December 31,

2021 June 30,

September 30, 2022 December 31, 2021 September 30, 2021

Mortgage servicing rights $ 8,640,000 $ 8,341,000 $ 8,158,000

8 unchanged sentences

Note 13 - Certificates of Deposit

The following table represents the breakdown of certificates of deposit at June 30, 2022 and 2021, and at December 31, 2021:

June 30, 2022 December 31, 2021 June 30, 2021

The following table represents the breakdown of certificates of deposit at September 30, 2022 and 2021, and at December 31, 2021:

September 30, 2022 December 31, 2021 September 30, 2021

Certificates of deposit < $100,000 $ 407,344,000 $ 252,568,000 $ 194,373,000

57 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 June 30, 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.

As of September 30, 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 June 30, 2022, December 31, 2021 and June 30, 2021.

At June 30, 2022

The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2022, December 31, 2021 and September 30, 2021.

At September 30, 2022

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total assets $ — $ 289,265,000 $ — $ 289,265,000

At June 30, 2022

At September 30, 2022

Level 1 Level 2 Level 3 Total

15 unchanged sentences

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

At June 30, 2021

At September 30, 2021

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total assets $ — $ 312,531,000 $ — $ 312,531,000

At June 30, 2021

At September 30, 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 $ 26,000 at December 31, 2021 and $ 93,000 at June 30, 2021.

There was no impairment reserve as of June 30, 2022.

Other real estate owned is presented net of an allowance of $ 0 at June 30, 2022 and 2021.

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

Mortgage servicing rights are presented net of an impairment reserve of $ 26,000 at December 31, 2021 and $ 91,000 at September 30, 2021.

There was no impairment reserve as of September 30, 2022.

The Company had no other real estate owned or related allowance at September 30, 2022, 2021 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 $ 335,000 , $ 441,000 and $ 473,000 at June 30, 2022, December 31, 2021, and June 30, 2021, respectively.

At June 30, 2022

Impaired loans below are presented net of specific allowances of $ 151,000 , $ 441,000 and $ 457,000 at September 30, 2022, December 31, 2021, and September 30, 2021, respectively.

At September 30, 2022

Level 1 Level 2 Level 3 Total

Mortgage servicing rights $ — $ 3,789,000 $ — $ 3,789,000

Other real estate owned — 51,000 — 51,000

Impaired loans — 5,000 — 5,000

5 unchanged sentences

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

At June 30, 2021

At September 30, 2021

Level 1 Level 2 Level 3 Total

Mortgage servicing rights $ — $ 2,757,000 $ — $ 2,757,000

Other real estate owned — 224,000 — 224,000

Impaired loans — 224,000 — 224,000

13 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 June 30, 2022 were as follows:

The carrying amount and estimated fair values for financial instruments as of September 30, 2022 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

41 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 June 30, 2021 were as follows:

The carrying amount and estimated fair values for financial instruments as of September 30, 2021 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

34 unchanged sentences

2016-13 modeling and calculation.

An Allowance for Credit Loss Committee has been formed to guide the late stages of implementing the software and and eventual adoption of the new standard.

An Allowance for Credit Loss Committee has been formed to guide the late stages of implementing the software and eventual adoption of the new standard.

The Bank plans to run incurred loss and current expected credit loss models in parallel until adoption of ASU No.

19 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements