What changed in this filing

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Item 1. Financial Statements

2023-11-03 compared with 2023-08-04 · 193 added, 180 removed, 1319 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, 2023 and 2022 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, 2023 and 2022 and for the three-month and nine-month 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 4, 2023

November 3, 2023

Consolidated Balance Sheets (Unaudited) The First Bancorp, Inc.

and Subsidiary

June 30, 2023 December 31, 2022 June 30, 2022

September 30, 2023 December 31, 2022 September 30, 2022

Cash and cash equivalents $ 29,894,000 $ 22,728,000 $ 27,408,000

1 unchanged sentence

Securities available for sale 284,972,000 284,509,000 283,268,000

Securities held-to-maturity, net of allowance for credit losses of $ 428,000 at June 30, 2023 1 (fair value of $ 336,007,000 at June 30, 2023, $ 339,011,000 at December 31, 2022 and $ 335,950,000 at June 30, 2022)

Securities held-to-maturity, net of allowance for credit losses of $ 432,000 at September 30, 2023 1 (fair value of $ 311,864,000 at September 30, 2023, $ 339,011,000 at December 31, 2022 and $ 313,796,000 at September 30, 2022)

387,374,000 393,896,000 381,906,000

6 unchanged sentences

Premises and equipment, net 28,868,000 28,277,000 28,548,000

Other real estate owned 64,000 — 51,000

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

19 unchanged sentences

Net unrealized loss on securities transferred from available-for-sale to held-to-maturity ( 58,000 ) ( 64,000 ) ( 67,000 )

Net unrealized gain on hedging derivative instruments 680,000 544,000 146,000

Net unrealized gain on cash flow hedging derivative instruments 1,410,000 544,000 500,000

Net unrealized gain on postretirement costs 273,000 273,000 105,000

5 unchanged sentences

Tangible book value per common share $ 17.66 $ 17.93 $ 17.13

1 December 31, 2022 and June 30, 2022 had no allowance for credit losses

1 December 31, 2022 and September 30, 2022 had no allowance for credit losses

See Report of Independent Registered Public Accounting Firm.

3 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,

2023 2022 2023 2022

Interest income

Interest and fees on loans (includes YTD tax-exempt income of $ 801,000 for June 30, 2023 and $ 582,000 for June 30, 2022)

Interest and fees on loans (includes YTD tax-exempt income of $ 1,362,000 for September 30, 2023 and $ 879,000 for September 30, 2022)

$ 78,860,000 $ 53,463,000 $ 28,329,000 $ 19,564,000

Interest on deposits with other banks 300,000 163,000 211,000 92,000

Interest and dividends on investments (includes YTD tax-exempt income of $ 4,016,000 for June 30, 2023 and $ 3,657,000 for June 30, 2022)

Interest and dividends on investments (includes YTD tax-exempt income of $ 6,030,000 for September 30, 2023 and $ 5,588,000 for September 30, 2022)

14,192,000 12,329,000 4,714,000 4,335,000

5 unchanged sentences

Net interest income 49,354,000 56,682,000 15,954,000 19,364,000

Provision for credit losses - loans 580,000 900,000 30,000 450,000

Reduction in provision for credit losses - debt securities held to maturity ( 10,000 ) — ( 10,000 ) —

Provision for credit losses - off-balance sheet credit exposures 131,000 — 131,000 —

Provision (reduction) for credit losses - loans 419,000 1,300,000 ( 161,000 ) 400,000

Provision (reduction) for credit losses - debt securities HTM ( 7,000 ) — 3,000 —

Provision (reduction) for credit losses - off-balance sheet credit exposures 89,000 — ( 42,000 ) —

Total provision for credit losses 501,000 1,300,000 ( 200,000 ) 400,000

3 unchanged sentences

Service charges on deposit accounts 1,399,000 1,358,000 465,000 454,000

Net securities gains (losses) — 1,000 — ( 1,000 )

Net securities gains — 7,000 — 6,000

Mortgage origination and servicing income, net of amortization 611,000 1,234,000 224,000 356,000

16 unchanged sentences

Other comprehensive income (loss) net of tax

Net unrealized gain (loss) on securities available for sale, net of taxes $ 937,000 $ ( 31,077,000 ) $ ( 3,244,000 ) $ ( 12,734,000 )

Net unrealized loss on securities available for sale, net of taxes $ ( 9,134,000 ) $ ( 45,943,000 ) $ ( 10,071,000 ) $ ( 14,866,000 )

Net unrealized gain on transferred securities, net of taxes 6,000 20,000 1,000 6,000

Net unrealized gain on hedging derivative instruments 866,000 500,000 730,000 354,000

Other comprehensive income (loss) 1,078,000 ( 30,917,000 ) ( 371,000 ) ( 12,583,000 )

Other comprehensive loss ( 8,262,000 ) ( 45,423,000 ) ( 9,340,000 ) ( 14,506,000 )

Comprehensive income (loss) $ 14,577,000 $ ( 15,630,000 ) $ ( 1,866,000 ) $ ( 4,415,000 )

4 unchanged sentences

and Subsidiary

Six Month Period Ended June 30, 2023 and 2022

Nine Month Period Ended September 30, 2023 and 2022

Common stock and

17 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

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

Balance at December 31, 2022 11,045,186 $ 68,545,000 $ 204,343,000 $ ( 43,965,000 ) $ 228,923,000

Net income — — 22,839,000 — 22,839,000

Net unrealized gain on securities available for sale, net of tax — — — 937,000 937,000

Net unrealized loss on securities available for sale, net of tax — — — ( 9,134,000 ) ( 9,134,000 )

Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 6,000 6,000

Net unrealized gain on hedging derivative instruments, net of tax — — — 866,000 866,000

Comprehensive income — — 15,365,000 1,078,000 16,443,000

Comprehensive income (loss) — — 22,839,000 ( 8,262,000 ) 14,577,000

Cash dividends declared ($ 1.04 per share)

6 unchanged sentences

2016-13 — — ( 6,277,000 ) — ( 6,277,000 )

Balance at June 30, 2023 11,081,800 $ 69,351,000 $ 205,539,000 $ ( 42,887,000 ) $ 232,003,000

Three Month Period Ended June 30, 2023 and 2022

Balance at September 30, 2023 11,089,290 $ 69,760,000 $ 209,132,000 $ ( 52,227,000 ) $ 226,665,000

Three Month Period Ended September 30, 2023 and 2022

Common stock and

4 unchanged sentences

Shares Amount

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

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

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

6 unchanged sentences

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

Payment to repurchase common stock ( 199 ) — ( 6,000 ) — ( 6,000 )

Issuance of restricted stock 1,250 — — — —

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

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

Balance at June 30, 2023 11,081,800 $ 69,351,000 $ 205,539,000 $ ( 42,887,000 ) $ 232,003,000

Balance at March 31, 2023 11,074,182 $ 68,941,000 $ 202,036,000 $ ( 42,516,000 ) $ 228,461,000

Net income — — 7,474,000 — 7,474,000

1 unchanged sentence

Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 1,000 1,000

Net unrealized gain on cash flow hedging derivative instruments, net of tax — — — 2,872,000 2,872,000

Net unrealized gain on hedging derivative instruments, net of tax — — — 730,000 730,000

Comprehensive income (loss) — — 7,474,000 ( 9,340,000 ) ( 1,866,000 )

4 unchanged sentences

Proceeds from sale of common stock 7,740 199,000 — — 199,000

Balance at June 30, 2023 11,081,800 $ 69,351,000 $ 205,539,000 $ ( 42,887,000 ) $ 232,003,000

Balance at September 30, 2023 11,089,290 $ 69,760,000 $ 209,132,000 $ ( 52,227,000 ) $ 226,665,000

See Report of Independent Registered Public Accounting Firm.

3 unchanged sentences

and Subsi diary

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 423,000 763,000

Net (gain) loss on sale of other real estate owned ( 42,000 ) 1,000

Equity compensation expense 607,000 610,000

Net increase in other assets and accrued interest ( 6,858,000 ) ( 11,362,000 )

Net (decrease) increase in other liabilities ( 226,000 ) 2,103,000

Net increase in other liabilities 8,156,000 8,720,000

Net (gain) loss on disposal of premises and equipment 33,000 ( 15,000 )

4 unchanged sentences

(Increase) decrease in interest-bearing deposits in other banks ( 34,673,000 ) 892,000

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

Proceeds from maturities, payments and calls of securities available for sale 17,037,000 35,633,000

Proceeds from maturities, payments, calls and sales of securities to be held to maturity 6,023,000 15,073,000

Proceeds from sales of other real estate owned 106,000 50,000

Purchases of securities available for sale ( 29,409,000 ) ( 58,324,000 )

Purchases of securities to be held to maturity — ( 27,138,000 )

Change in restricted equity securities ( 1,344,000 ) —

Redemption of restricted equity securities 23,000 851,000

4 unchanged sentences

Cash flows from financing activities

Net decrease in demand, savings, and money market accounts ( 60,973,000 ) ( 9,480,000 )

Net increase in demand, savings, and money market accounts 79,565,000 26,681,000

Net increase in certificates of deposit 141,495,000 219,971,000

Net (decrease) increase in short-term borrowings ( 20,490,000 ) 37,006,000

Advances on long-term borrowings 25,000,000 —

Repayment on long-term borrowings — ( 55,005,000 )

6 unchanged sentences

Cash and cash equivalents at end of period $ 29,894,000 $ 27,408,000

For the six months ended June 30,

For the nine months ended September 30,

Interest paid $ 43,643,000 $ 9,061,000

2 unchanged sentences

Change in net unrealized loss on available for sale securities, net of tax $ 9,134,000 $ 45,943,000

Net transfer from loans to other real estate owned 64,000 51,000

See Report of Independent Registered Public Accounting Firm.

39 unchanged sentences

Risks and Uncertainties

The ongoing conflict between Russia and Ukraine has added to economic uncertainty and geopolitical instability.

Concern is developing nationally about the commercial real estate market and the impact a downturn in this sector could have on the banking industry.

The ongoing conflict between Russia and Ukraine coupled with new tensions in the Middle East have increased economic uncertainty and geopolitical instability.

Concern continues to be expressed nationally about the commercial real estate market and the impact a downturn in this sector could have on the banking industry.

The failures in 2023 of several regional banks in the U.S.

caused further disruption in markets and could have a lingering impact.

caused disruption in markets in the first half of 2023, and could have a lingering impact.

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, 2023, have been evaluated as to their potential impact to the financial statements.

Events occurring subsequent to September 30, 2023, 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, 2023:

The following table summarizes the amortized cost and estimated fair value of investment securities at September 30, 2023:

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

Securities available for sale

Government-sponsored agencies $ 26,029,000 $ — $ ( 6,668,000 ) $ 19,361,000

Treasury & Agency securities $ 45,851,000 $ — $ ( 7,599,000 ) $ 38,252,000

Mortgage-backed securities 263,775,000 1,000 ( 50,930,000 ) 212,846,000

3 unchanged sentences

Securities to be held to maturity

Government-sponsored agencies $ 40,100,000 $ — $ ( 10,150,000 ) $ 29,950,000

Treasury & Agency securities $ 40,100,000 $ — $ ( 11,996,000 ) $ 28,104,000

Mortgage-backed securities 57,224,000 4,000 ( 13,336,000 ) 43,892,000

17 unchanged sentences

Similarly, the agency and mortgage-backed securities in the HTM portfolio have been determined to all be investment grade with no ACL required.

Municipal securities within HTM include two private activity bonds issued by well-known customers of the Bank with total balances of $ 19,877,000 as of June 30, 2023.

Municipal securities within HTM include two private activity bonds issued by well-known customers of the Bank with total balances of $ 19,734,000 as of September 30, 2023.

These bonds carry similar risk characteristics to the commercial real estate - owner occupied segment of the Bank's loan portfolio described in Note 3;

management has elected to apply a loss rate matching the loan segment to the balance of these bonds for purposes of establishing an ACL.

Corporate securities in HTM consist of thirteen individual companies in the banking industry.

Corporate securities in HTM consist of fourteen individual companies in the banking industry.

Management reviewed the collectability of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, and other performance factors.

Aggregate credit risk of the corporate securities is considered very low and a small ACL has been established.

The total ACL for HTM securities was $ 428,000 as of June 30, 2023;

there was no reserve as of December 31, 2022 and June 30, 2022.

Aggregate credit risk of the corporate securities is considered very low and an immaterial ACL has been established.

The total ACL for HTM securities was $ 432,000 as of September 30, 2023;

there was no reserve as of December 31, 2022 and September 30, 2022.

Changes in the allowance for credit losses are recorded as credit loss expense, or reversal.

3 unchanged sentences

Securities available for sale

Government-sponsored agencies

$ 26,025,000 $ — $ ( 6,878,000 ) $ 19,147,000

Treasury & Agency securities $ 26,025,000 $ — $ ( 6,878,000 ) $ 19,147,000

Mortgage-backed securities 271,068,000 55,000 ( 42,447,000 ) 228,676,000

3 unchanged sentences

Securities to be held to maturity

Government-sponsored agencies $ 40,100,000 $ 4,000 $ ( 10,477,000 ) $ 29,627,000

Treasury & Agency securities $ 40,100,000 $ 4,000 $ ( 10,477,000 ) $ 29,627,000

Mortgage-backed securities 60,497,000 42,000 ( 11,392,000 ) 49,147,000

6 unchanged sentences

$ 3,883,000 $ — $ — $ 3,883,000

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)

Securities available for sale

Government-sponsored agencies $ 26,021,000 $ — $ ( 4,954,000 ) $ 21,067,000

Treasury & Agency securities $ 26,023,000 $ — $ ( 6,879,000 ) $ 19,144,000

Mortgage-backed securities 273,215,000 4,000 ( 44,041,000 ) 229,178,000

3 unchanged sentences

Securities to be held to maturity

Government-sponsored agencies $ 38,100,000 $ — $ ( 7,390,000 ) $ 30,710,000

Treasury & Agency securities $ 38,100,000 $ — $ ( 10,428,000 ) $ 27,672,000

Mortgage-backed securities 56,423,000 48,000 ( 11,784,000 ) 44,687,000

6 unchanged sentences

$ 4,514,000 $ — $ — $ 4,514,000

The following table summarizes the contractual maturities of investment securities at June 30, 2023:

The following table summarizes the contractual maturities of investment securities at September 30, 2023:

Securities available for sale Securities to be held to maturity

15 unchanged sentences

$ 341,113,000 $ 284,509,000 $ 393,896,000 $ 339,011,000

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

6 unchanged sentences

$ 343,599,000 $ 283,268,000 $ 381,906,000 $ 313,796,000

At June 30, 2023, securities with a carrying value of $ 329,615,000 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 $ 350,411,000 as of December 31, 2022 and $ 318,833,000 at June 30, 2022, pledged for the same purposes.

At September 30, 2023, securities with a carrying value of $ 383,946,000 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 $ 350,411,000 as of December 31, 2022 and $ 343,677,000 at September 30, 2022, 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, 2023 and 2022:

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, 2023 and 2022:

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

2023 2022 2023 2022

4 unchanged sentences

Related income taxes $ — $ 1,000 $ — $ 1,000

As of June 30, 2023, there were 869 securities with unrealized losses held in the Company's portfolio.

As of September 30, 2023, there were 941 securities with unrealized losses held in the Company's portfolio.

The Company has the ability and intent to hold its securities which are in an unrealized loss position until a recovery of their amortized cost, which may be at maturity.

The following table summarizes debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded at June 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position:

The following table summarizes debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded at September 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position:

Less than 12 months 12 months or more Total

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

Government-sponsored agencies $ 1,981,000 $ ( 19,000 ) $ 47,330,000 $ ( 16,799,000 ) $ 49,311,000 $ ( 16,818,000 )

Treasury & Agency securities $ 11,842,000 $ ( 40,000 ) $ 44,577,000 $ ( 19,555,000 ) $ 56,419,000 $ ( 19,595,000 )

Mortgage-backed securities 18,017,000 ( 441,000 ) 238,150,000 ( 63,825,000 ) 256,167,000 ( 64,266,000 )

8 unchanged sentences

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

Government-sponsored agencies $ 4,804,000 $ ( 675,000 ) $ 41,965,000 $ ( 16,680,000 ) $ 46,769,000 $ ( 17,355,000 )

Treasury & Agency securities $ 4,804,000 $ ( 675,000 ) $ 41,965,000 $ ( 16,680,000 ) $ 46,769,000 $ ( 17,355,000 )

Mortgage-backed securities 73,509,000 ( 6,486,000 ) 197,102,000 ( 47,353,000 ) 270,611,000 ( 53,839,000 )

3 unchanged sentences

$ 251,182,000 $ ( 23,126,000 ) $ 310,159,000 $ ( 88,620,000 ) $ 561,341,000 $ ( 111,746,000 )

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.

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

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

Government-sponsored agencies $ 7,996,000 $ ( 631,000 ) $ 43,782,000 $ ( 11,713,000 ) $ 51,778,000 $ ( 12,344,000 )

Treasury & Agency securities $ 7,364,000 $ ( 1,264,000 ) $ 39,452,000 $ ( 16,043,000 ) $ 46,816,000 $ ( 17,307,000 )

Mortgage-backed securities 109,041,000 ( 13,868,000 ) 162,979,000 ( 41,957,000 ) 272,020,000 ( 55,825,000 )

6 unchanged sentences

The principal and interest payments on agency-guaranteed debt is backed by the U.S.

Government-sponsored enterprises similarly guarantee principal and interest payments and carry an implicit guarantee from the U.S.

Government-sponsored enterprises similarly guarantee principal and interest payments and carry an implicit

guarantee from the U.S.

Department of the Treasury.

4 unchanged sentences

These securities are regularly monitored as part of an overall credit relationship with the issuers;

both issuers were in good standing as of June 30, 2023.

HTM corporate debt holdings consist of thirteen individual companies in the banking industry.

both issuers were in good standing as of September 30, 2023.

HTM corporate debt holdings consist of 14 individual companies in the banking industry.

Management conducts periodic reviews of the collectability of these securities taking into consideration such factors as the financial condition of the issuers;

each were in good standing as of June 30, 2023.

The following table presents the activity in the ACL for held-to-maturity debt securities by major security type for the six months ended June 30, 2023:

each were in good standing as of September 30, 2023.

The following table presents the activity in the ACL for held-to-maturity debt securities by major security type for the nine months ended September 30, 2023:

State and Political Subdivisions Corporate Securities Total

3 unchanged sentences

Credit loss expense (reduction) 1

( 17,000 ) 11,000 ( 6,000 )

Securities charged-off — — —

1 unchanged sentence

Total ending allowance balance $ 212,000 $ 220,000 $ 432,000

1 Difference between total and amount reported on the Consolidated Statements of Income is due to rounding.

There was no ACL on U.S.

Government-sponsored enterprise and agency securities as of June 30, 2023 .

Government-sponsored enterprise and agency securities as of September 30, 2023 .

A security is considered to be past due once it is 30 days contractually past due under the terms of the agreement.

As of June 30, 2023, none of the Company’s HTM debt securities were past due or on non-accrual status.

As of September 30, 2023, none of the Company’s HTM debt securities were past due or on non-accrual status.

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

2 unchanged sentences

The amortization of the net unrealized loss reported in AOCI 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 $ 59,000 , net of taxes, at June 30, 2023.

This compares to $ 64,000 and $ 73,000 , net of taxes, at December 31, 2022 and June 30, 2022, respectively.

The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $ 58,000 , net of taxes, at September 30, 2023.

This compares to $ 64,000 and $ 67,000 , net of taxes, at December 31, 2022 and September 30, 2022, 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 FHLBB for a portion of its wholesale funding needs.

As of June 30, 2023 and 2022, and December 31, 2022, the Bank's investment in FHLBB stock totaled $ 4,190,000 , $ 3,683,000 and $ 2,846,000 , respectively.

As of September 30, 2023 and 2022, and December 31, 2022, the Bank's investment in FHLBB stock totaled $ 2,823,000 , $ 3,477,000 and $ 2,846,000 , respectively.

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

2 unchanged sentences

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

The Bank's investment in FRBB stock totaled $ 1,037,000 at June 30, 2023 and 2022 and December 31, 2022.

The Bank's investment in FRBB stock totaled $ 1,037,000 at September 30, 2023 and 2022, and December 31, 2022.

The Company periodically evaluates its investment in FHLBB and FRBB 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, 2023.

No impairment losses have been recorded through September 30, 2023.

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

3 unchanged sentences

In addition home equity installment loans which had previously been included in the residential term class are now included in the home equity revolving and term class.

Loan data as of June 30, 2023 is reported herein with the new class structure while certain prior period data retains the prior class structure.

Loan data as of September 30, 2023 is reported herein with the new class structure while certain prior period data retains the prior class structure.

Loan Portfolio by Class:

The following table shows the composition of the Company's loan portfolio by class of financing receivable as of June 30, 2023 and 2022 and at December 31, 2022:

June 30, 2023 December 31, 2022 June 30, 2022

The following table shows the composition of the Company's loan portfolio by class of financing receivable as of September 30, 2023 and 2022 and at December 31, 2022:

September 30, 2023 December 31, 2022 September 30, 2022

Real estate owner occupied $ 299,943,000 14.4 % $ 256,623,000 13.4 % $ 251,410,000 13.6 %

9 unchanged sentences

Total $ 2,079,860,000 100.0 % $ 1,914,674,000 100.0 % $ 1,857,975,000 100.0 %

Loan balances include net deferred loan costs of $ 10,824,000 as of June 30, 2023, $ 10,132,000 as of December 31, 2022, and $ 9,738,000 as of June 30, 2022.

Loan balances include net deferred loan costs of $ 11,213,000 as of September 30, 2023, $ 10,132,000 as of December 31, 2022, and $ 9,978,000 as of September 30, 2022.

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

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 541,345,000 at June 30, 2023, were used to collateralize borrowings from the FHLB.

This compares to qualifying loans which totaled $ 475,233,000 at December 31, 2022, and $ 461,756,000 at June 30, 2022.

In addition, commercial, residential construction and home equity loans totaling $ 331,836,000 at June 30, 2023, $ 338,636,000 at December 31, 2022, and $ 345,798,000 at June 30, 2022, were used to collateralize a standby line of credit at the FRB.

Loan balances in the Residential Term segment also include a valuation adjustment for fair value swaps hedged by certain loans in the portfolio.

This adjustment subtracted $ 705,000 from the loan balances as of September 30, 2023;

there was no such adjustment as of December 31, 2022 or September 30, 2022.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 525,904,000 at September 30, 2023, were used to collateralize borrowings from the FHLBB.

This compares to qualifying loans which totaled $ 475,233,000 at December 31, 2022, and $ 464,069,000 at September 30, 2022.

In addition, commercial, residential construction and home equity loans totaling $ 332,657,000 at September 30, 2023, $ 338,636,000 at December 31, 2022, and $ 327,551,000 at September 30, 2022, were used to collateralize a standby line of credit at the FRBB.

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 TDR loans.

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

Past Due Loans:

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, 2023, is presented in the following table:

Information on the past-due status of loans by class of financing receivable as of September 30, 2023, is presented in the following table:

Past Due 60-89 Days

25 unchanged sentences

Total $ 625,000 $ 121,000 $ 713,000 $ 1,459,000 $ 1,913,215,000 $ 1,914,674,000 $ 241,000

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

16 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.

The following table presents the amortized costs basis of loans on nonaccrual status as of June 30, 2023, December 31, 2022 and June 30, 2022:

June 30, 2023 December 31, 2022 June 30, 2022

The following table presents the amortized costs basis of loans on nonaccrual status as of September 30, 2023, December 31, 2022 and September 30, 2022:

September 30, 2023 December 31, 2022 September 30, 2022

Nonaccrual with Allowance for Credit Loss Nonaccrual with no Allowance for Credit Loss Total Nonaccrual Total Nonaccrual Total Nonaccrual

14 unchanged sentences

If the measure of an individually analyzed 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 individually analyzed loan is lower than the recorded investment in the loan and estimated selling costs, the difference is written off.

The following table presents the amortized cost basis of collateral-dependent loans as of June 30, 2023 by collateral type:

The following table presents the amortized cost basis of collateral-dependent loans as of September 30, 2023 by collateral type:

Collateral Type

3 unchanged sentences

Construction — — —

Multifamily — — —

Municipal — — —

Term — 687,000 687,000

Construction — — —

Revolving and term — — —

Consumer — — —

Total $ — $ 687,000 $ 687,000

Collateral-dependent loans are loans for which the repayment is expected to be provided substantially by the underlying collateral and there are no other available and reliable sources of repayment.

A breakdown of individually analyzed loans by class of financing receivable as of and for the period ended June 30, 2023 is presented in the following table:

For the six months ended June 30, 2023 For the quarter ended June 30, 2023

A breakdown of individually analyzed loans by class of financing receivable as of and for the period ended September 30, 2023 is presented in the following table:

For the nine months ended September 30, 2023 For the quarter ended September 30, 2023

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

66 unchanged sentences

$ 6,160,000 $ 6,848,000 $ 398,000 $ 9,536,000 $ 204,000

A breakdown of individually analyzed 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 individually analyzed 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

33 unchanged sentences

It is the intent to minimize future losses while providing borrowers with financial relief.

The following table represents loan modifications made to borrowers experiencing financial difficulty by modification type and class of financing receivable, during the three months ended June 30, 2023:

Term Extension

Amortized Cost Basis at June 30, 2023

% of Total Class of Financing Receivable

Payment Deferral

Amortized Cost Basis at September 30, 2023 % of Total Class of Financing Receivable

Real estate owner occupied $ 504,000 0.17 %

C&I 19,000 0.01 %

Total $ 4,000

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months ended June 30, 2023:

Term Extension

$ 523,000 0.03 %

The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months ended September 30, 2023:

Payment Deferral

Financial Effect

C&I Extended Term 90 days

Real estate owner occupied Temporary payment accommodation, payments deferred to end of loan.

C&I Temporary payment accommodation, payments deferred to end of loan.

The Company monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table depicts the performance of loans that have been modified during the six months ended June 30, 2023:

The following table depicts the performance of loans that have been modified during the nine months ended September 30, 2023:

Payment Status (Amortized Cost Basis)

2 unchanged sentences

Past Due 90+ Days

Real estate owner occupied $ 503,000 $ — $ — $ —

C&I 220,000 40,000 — —

49 unchanged sentences

Residential Mortgage Loans in Process of Foreclosure

As of June 30, 2023, there were no mortgage loans collateralized by residential real estate in the process of foreclosure.

This compares to two mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 166,000 as of December 31, 2022, and five mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 537,000 as of June 30, 2022.

As of September 30, 2023, there were four mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 459,000 .

This compares to two mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 166,000 as of December 31, 2022 and September 30, 2022.

Allowance for Credit Losses

Upon adoption of ASC 326, the CECL standard, in the first quarter of 2023, the Company replaced the incurred loss model that recognized losses when it became probable that a credit loss would be incurred, with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased.

Upon adoption of ASC 326, in the first quarter of 2023, the Company replaced the incurred loss model that recognized losses when it became probable that a credit loss would be incurred, with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased.

The ACL is a valuation amount that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans.

64 unchanged sentences

Construction, land, and land development :

CLLD loans, both commercial and residential, represented 35.5 % of total Bank capital as of June 30, 2023 and remain below the regulatory guidance of 100.0 % of total Bank capital.

Construction loans and non-owner-occupied commercial real estate loans represented 217.0 % of total Bank capital at June 30, 2023, below the regulatory guidance of 300.0 % of total Bank capital.

CLLD loans, both commercial and residential, represented 37.3 % of total Bank capital as of September 30, 2023 and remain below the regulatory guidance of 100.0 % of total Bank capital.

Construction loans and non-owner-occupied commercial real estate loans represented 215.5 % of total Bank capital at September 30, 2023, below the regulatory guidance of 300.0 % of total Bank capital.

Composition of the ACL:

A breakdown of the allowance for credit losses as of June 30, 2023, by class of financing receivable and allowance element, is presented in the following table:

As of June 30, 2023 Specific Reserves on Loans Evaluated Individually General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Total Reserves

A breakdown of the allowance for credit losses as of September 30, 2023, by class of financing receivable and allowance element, is presented in the following table:

As of September 30, 2023 Specific Reserves on Loans Evaluated Individually General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Total Reserves

Real estate owner occupied $ — $ 3,731,000 $ 780,000 $ 4,511,000

22 unchanged sentences

$ 398,000 $ 2,028,000 $ 12,619,000 $ 1,678,000 $ 16,723,000

A breakdown of the allowance for loan losses as of June 30, 2022 under the incurred loss method, by class of financing receivable and allowance element, is presented in the following table:

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 under the incurred loss method, by class of financing receivable and allowance element, is presented in the following table:

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

9 unchanged sentences

$ 420,000 $ 1,891,000 $ 12,139,000 $ 1,937,000 $ 16,387,000

The allowance for credit losses as a percent of total loans stood at 1.14 % as of June 30, 2023, 0.87 % at December 31, 2022 and 0.91 % as of June 30, 2022.

The allowance for credit losses as a percent of total loans stood at 1.12 % as of September 30, 2023, 0.87 % at December 31, 2022 and 0.88 % as of September 30, 2022.

Off-Balance Sheet Credit Exposures:

8 unchanged sentences

The Company’s allowance for credit losses on unfunded commitments is recognized as a liability, included within other liabilities on the consolidated balance sheet.

The following table presents the activity in the ACL for off-balance sheet credit exposures for the six months ended June 30, 2023 :

The following table presents the activity in the ACL for off-balance sheet credit exposures for the nine months ended September 30, 2023 :

Allowance for credit losses:

33 unchanged sentences

Dollars in thousands 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

As of June 30, 2023

As of September 30, 2023

Real estate owner occupied

38 unchanged sentences

Dollars in thousands 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

As of June 30, 2023

As of September 30, 2023

Performing 47,019 149,470 143,048 97,350 40,621 179,788 1,301 132 658,729

23 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.

The following table presents allowance for credit losses activity by class for the six months and quarter ended June 30, 2023:

The following table presents allowance for credit losses activity by class for the nine months and quarter ended September 30, 2023:

Dollars in thousands Commercial Municipal Residential Home Equity Consumer Unallocated Total

Real Estate Owner Occupied Real Estate Non-Owner Occupied Construction C&I Multifamily Term Construction Revolving and term

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Beginning balance, prior to adoption of ASC 326 $ 6,116 $ — $ 821 $ 3,097 $ — $ 162 $ 2,559 $ 199 $ 1,029 $ 1,062 $ 1,678 $ 16,723

4 unchanged sentences

Ending balance $ 4,511 $ 4,429 $ 1,602 $ 4,797 $ 1,277 $ 376 $ 4,886 $ 576 $ 617 $ 251 $ — $ 23,322

For the three months ended June 30, 2023

For the three months ended September 30, 2023

Beginning balance $ 4,719 $ 4,492 $ 1,469 $ 4,721 $ 1,312 $ 399 $ 4,831 $ 609 $ 635 $ 278 $ — $ 23,465

3 unchanged sentences

Ending balance $ 4,511 $ 4,429 $ 1,602 $ 4,797 $ 1,277 $ 376 $ 4,886 $ 576 $ 617 $ 251 $ — $ 23,322

As of June 30, 2023, the significant model inputs and assumptions used within the discounted cash flow model for purposes of estimating the ACL on loans were:

As of September 30, 2023, the significant model inputs and assumptions used within the discounted cash flow model for purposes of estimating the ACL on loans were:

Macroeconomic (loss) drivers :

35 unchanged sentences

Ending balance $ 6,116 $ 821 $ 3,097 $ 162 $ 2,559 $ 199 $ 1,029 $ 1,062 $ 1,678 $ 16,723

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

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

Dollars in thousands 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 $ 746 $ 2,830 $ 157 $ 2,733 $ 148 $ 925 $ 833 $ 1,782 $ 15,521

3 unchanged sentences

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

For the three months ended June 30, 2022

For the three months ended September 30, 2022

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

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, 2023, 98,810 shares of restricted stock had been granted under the 2020 Plan, of which 83,377 shares remain restricted as of June 30, 2023 as detailed in the following table:

As of September 30, 2023, 98,810 shares of restricted stock had been granted under the 2020 Plan, of which 83,127 shares remain restricted as of September 30, 2023 as detailed in the following table:

Granted Vesting Term

7 unchanged sentences

The compensation cost related to these non-vested restricted stock grants is $ 2,402,000 and is recognized over the vesting terms of each grant.

In the six months ended June 30, 2023, $ 398,000 of expense was recognized for these restricted shares, leaving $ 1,287,000 in unrecognized expense as of June 30, 2023.

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

In the nine months ended September 30, 2023, $ 607,000 of expense was recognized for these restricted shares, leaving $ 1,069,000 in unrecognized expense as of September 30, 2023.

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

Note 6 – Common Stock

Proceeds from sale of common stock totaled $ 408,000 and $ 385,000 for the six months ended June 30, 2023 and 2022, respectively.

Proceeds from sale of common stock totaled $ 608,000 and $ 588,000 for the nine months ended September 30, 2023 and 2022, respectively.

Note 7 – Earnings Per Share

The following table sets forth the computation of basic and diluted EPS for the six months ended June 30, 2023 and 2022:

The following table sets forth the computation of basic and diluted EPS for the nine months ended September 30, 2023 and 2022:

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

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

Net income as reported $ 22,839,000

3 unchanged sentences

Income available to common shareholders plus assumed conversions $ 22,839,000 11,077,495 $ 2.06

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

The following table sets forth the computation of basic and diluted EPS for the quarters ended June 30, 2023 and 2022:

The following table sets forth the computation of basic and diluted EPS for the quarters ended September 30, 2023 and 2022:

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

For the quarter ended June 30, 2023

For the quarter ended September 30, 2023

Net income as reported $ 7,474,000

3 unchanged sentences

Income available to common shareholders plus assumed conversions $ 7,474,000 11,087,133 $ 0.67

For the quarter ended June 30, 2022

For the quarter ended September 30, 2022

Net income as reported $ 10,091,000

7 unchanged sentences

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 $ 584,000 and $ 550,000 for the six months ended June 30, 2023 and 2022, respectively.

The expense related to the 401(k) plan was $ 826,000 and $ 752,000 for the nine months ended September 30, 2023 and 2022, 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 FASB ASC Topic 712 "Compensation – Nonretirement Postemployment Benefits".

The expense of these supplemental retirement benefits was $ 57,000 and $ 154,000 for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, the associated accrued liability included in other liabilities in the balance sheet was $ 2,807,000 compared to $ 2,893,000 and $ 2,882,000 at December 31, 2022 and June 30, 2022, respectively.

The expense of these supplemental retirement benefits was $ 57,000 and $ 231,000 for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, the associated accrued liability included in other liabilities in the balance sheet was $ 2,735,000 compared to $ 2,893,000 and $ 2,888,000 at December 31, 2022 and September 30, 2022, 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,

2023 2022 2023 2022

3 unchanged sentences

Amounts not yet reflected in net periodic benefit cost and included in AOCI are as follows:

June 30, 2023 December 31, 2022 June 30, 2022

September 30, 2023 December 31, 2022 September 30, 2022

Unamortized net actuarial gain $ 345,000 $ 345,000 $ 133,000

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 OCI for the six months and quarters ended June 30, 2023 and 2022.

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 OCI for the nine months and quarters ended September 30, 2023 and 2022.

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

2023 2022 2023 2022

Balance at beginning of period $ ( 44,718,000 ) $ ( 1,718,000 ) $ ( 43,781,000 ) $ ( 32,795,000 )

Unrealized gains (losses) arising during the period 1,186,000 ( 39,337,000 ) ( 4,106,000 ) ( 16,120,000 )

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

Unrealized losses arising during the period ( 11,562,000 ) ( 58,149,000 ) ( 12,748,000 ) ( 18,812,000 )

Reclassification of net realized gains during the period — ( 7,000 ) — ( 6,000 )

Related deferred taxes 2,428,000 12,213,000 2,677,000 3,952,000

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 OCI for the six months and quarters ended June 30, 2023 and 2022.

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 OCI for the nine months and quarters ended September 30, 2023 and 2022.

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

2023 2022 2023 2022

4 unchanged sentences

Balance at end of period $ ( 58,000 ) $ ( 67,000 ) $ ( 58,000 ) $ ( 67,000 )

The following table presents the effect of the Company's derivative financial instruments included in OCI for the six months and quarters ended June 30, 2023 and 2022.

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 OCI for the nine months and quarters ended September 30, 2023 and 2022.

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

2023 2022 2023 2022

4 unchanged sentences

Balance at end of period $ 1,410,000 $ 500,000 $ 1,410,000 $ 500,000

There was no activity in the unrealized gain or loss on postretirement benefits included in OCI for the six months and quarters ended June 30, 2023 and 2022.

There was no activity in the unrealized gain or loss on postretirement benefits included in OCI for the nine months and quarters ended September 30, 2023 and 2022.

Note 10 - Financial Derivative Instruments

11 unchanged sentences

The Bank discontinues hedge accounting when it is determined that the derivative is no longer highly effective in offsetting changes of the hedged risk on the hedged item, or management determines that the designation of the derivative as a hedging instrument is no longer appropriate.

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

June 30, 2023 December 31, 2022 June 30, 2022

The details of the Bank's swap agreements are as follows:

September 30, 2023 December 31, 2022 September 30, 2022

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

1 unchanged sentence

Notional Amount Fair Value

Cash Flow Hedges

04/27/2022 10/27/2023 USD-SOFR-COMPOUND 2.498 % Other Assets $ 10,000,000 $ 20,000 $ 10,000,000 $ 187,000 $ 10,000,000 $ 179,000

2 unchanged sentences

01/10/2023 01/01/2026 USD-SOFR-OIS COMPOUND 3.836 % Other Assets 75,000,000 1,513,000 — — — —

03/08/2023 03/01/2026 USD-SOFR-OIS COMPOUND 4.712 % Other Liabilities 40,000,000 ( 231,000 ) — — — —

03/08/2023 03/01/2027 USD-SOFR-OIS COMPOUND 4.402 % Other Liabilities 30,000,000 ( 239,000 ) — — — —

03/08/2023 03/01/2028 USD-SOFR-OIS COMPOUND 4.189 % Other Liabilities 30,000,000 ( 289,000 ) — — — —

$ 105,000,000 $ 1,784,000 $ 30,000,000 $ 689,000 $ 30,000,000 $ 633,000

Fair Value Hedges

03/08/2023 03/01/2026 USD-SOFR-OIS COMPOUND 4.712 % Other Assets $ 40,000,000 $ 63,000 $ — $ — $ — $ —

03/08/2023 03/01/2027 USD-SOFR-OIS COMPOUND 4.402 % Other Assets 30,000,000 120,000 — — — —

03/08/2023 03/01/2028 USD-SOFR-OIS COMPOUND 4.189 % Other Assets 30,000,000 250,000 — — — —

07/12/2023 08/01/2025 USD-SOFR-OIS COMPOUND 4.703 % Other Assets 50,000,000 272,000 — — — —

$ 150,000,000 $ 705,000 $ — $ — $ — $ —

Total swap agreements $ 255,000,000 $ 2,489,000 $ 30,000,000 $ 689,000 $ 30,000,000 $ 633,000

The Company would reclassify unrealized gains or losses accounted for within AOCI into earnings if the interest rate swaps were to become ineffective or the swaps were to terminate for cash flow hedges, or would amortize the gain or loss over the remaining life of the hedged instrument for fair value hedges.

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 sheets.

At June 30, 2023 and 2022, and December 31, 2022, there were six customer loan swap arrangements in place, detailed below:

June 30, 2023 December 31, 2022 June 30, 2022

At September 30, 2023 and 2022, and December 31, 2022, there were six customer loan swap arrangements in place, detailed below:

September 30, 2023 December 31, 2022 September 30, 2022

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

7 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, 2023, the Bank posted to the counterparty $ 750,000 of cash as collateral on its swap contracts.

There was no required amount to be pledged.

At September 30, 2023, there was no collateral posted on its swap contracts or required amount to be pledged.

Cessation of LIBOR

1 unchanged sentence

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.

The necessary actions to amend these legacy contracts to incorporate the new replacement reference rate index were undertaken during the second quarter 2023.

The necessary actions to amend these legacy contracts to incorporate the new replacement reference rate index were completed in the second quarter 2023.

Note 11 – Mortgage Servicing Rights

3 unchanged sentences

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

As of June 30, 2023, the prepayment assumption using the PSA model was 106, which translates into an anticipated prepayment rate of 5.09 %.

As of September 30, 2023, the prepayment assumption using the PSA model was 93, which translates into an anticipated prepayment rate of 4.46 %.

The discount rate is 10.00 %.

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, 2023 and 2022, servicing rights capitalized totaled $ 17,000 and $ 237,000 , respectively.

Servicing rights amortized for the six-month periods ended June 30, 2023 and 2022 were $ 197,000 and $ 291,000 , respectively.

The fair value of servicing rights was $ 3,639,000 , $ 3,734,000 , and $ 3,751,000 at June 30, 2023, December 31, 2022 and June 30, 2022, respectively.

The Bank serviced loans for others totaling $ 332,993,000 , $ 342,870,000 , and $ 354,308,000 at June 30, 2023, December 31, 2022, and June 30, 2022, respectively.

For the nine months ended September 30, 2023 and 2022, servicing rights capitalized totaled $ 34,000 and $ 299,000 , respectively.

Servicing rights amortized for the nine-month periods ended September 30, 2023 and 2022 were $ 280,000 and $ 402,000 , respectively.

The fair value of servicing rights was $ 3,673,000 , $ 3,734,000 , and $ 3,789,000 at September 30, 2023, December 31, 2022 and September 30, 2022, respectively.

The Bank serviced loans for others totaling $ 327,428,000 , $ 342,870,000 , and $ 348,589,000 at September 30, 2023, December 31, 2022, and September 30, 2022, respectively.

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

June 30, 2023 December 31, 2022 June 30, 2022

September 30, 2023 December 31, 2022 September 30, 2022

Mortgage servicing rights $ 8,687,000 $ 8,654,000 $ 8,640,000

6 unchanged sentences

Note 13 - Certificates of Deposit

The following table represents the breakdown of certificates of deposit at June 30, 2023 and 2022, and at December 31, 2022:

June 30, 2023 December 31, 2022 June 30, 2022

The following table represents the breakdown of certificates of deposit at September 30, 2023 and 2022, and at December 31, 2022:

September 30, 2023 December 31, 2022 September 30, 2022

Certificates of deposit < $100,000 $ 641,429,000 $ 489,793,000 $ 407,344,000

56 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, 2023 and 2022, and December 31, 2022, 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, 2023 and 2022, and December 31, 2022, 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, 2023, December 31, 2022 and June 30, 2022.

At June 30, 2023

The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2023, December 31, 2022 and September 30, 2022.

At September 30, 2023

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total assets $ — $ 293,492,000 $ — $ 293,492,000

At June 30, 2023

At September 30, 2023

Level 1 Level 2 Level 3 Total

18 unchanged sentences

Total liabilities $ — $ 4,910,000 $ — $ 4,910,000

At June 30, 2022

At September 30, 2022

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total assets $ — $ 289,266,000 $ — $ 289,266,000

At June 30, 2022

At September 30, 2022

Level 1 Level 2 Level 3 Total

4 unchanged sentences

Mortgage servicing rights are presented at fair value with no impairment reserve for each of the periods presented.

OREO is presented net of no allowance at June 30, 2023 and 2022.

There was no OREO or related allowance at December 31, 2022.

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

Individually analyzed loans below are presented net of specific allowances of $ 157,000 , $ 135,000 and $ 335,000 at June 30, 2023, December 31, 2022, and June 30, 2022, respectively.

At June 30, 2023

Individually analyzed loans below are presented net of specific allowances of $ 19,000 , $ 135,000 and $ 151,000 at September 30, 2023, December 31, 2022, and September 30, 2022, respectively.

At September 30, 2023

Level 1 Level 2 Level 3 Total

Mortgage servicing rights $ — $ 3,673,000 $ — $ 3,673,000

OREO — 64,000 — 64,000

Individually analyzed loans — 285,000 — 285,000

5 unchanged sentences

Total assets $ — $ 3,754,000 $ — $ 3,754,000

At June 30, 2022

At September 30, 2022

Level 1 Level 2 Level 3 Total

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

OREO — 51,000 — 51,000

Individually analyzed loans — 5,000 — 5,000

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, 2023 were as follows:

The carrying amount and estimated fair values for financial instruments as of September 30, 2023 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

41 unchanged sentences

Total borrowed funds 103,483,000 103,353,000 — 103,353,000 —

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

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