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Item 1. Financial Statements

2024-05-07 compared with 2023-11-03 · 472 added, 502 removed, 1010 unchanged (49% 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 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").

and Subsidiary as of March 31, 2024 and 2023 and for the three-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

November 3, 2023

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

Consolidated Balance Sheets (Unaudited)

The First Bancorp, Inc.

and Subsidiary

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

March 31, 2024 December 31, 2023 March 31, 2023

Cash and cash equivalents $ 23,875,000 $ 31,942,000 $ 27,458,000

1 unchanged sentence

Securities available for sale 274,451,000 282,053,000 288,242,000

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)

Securities held-to-maturity (net of ACL), fair value of $ 327,816,000 at March 31, 2024, $ 338,570,000 at December 31, 2023 and $ 344,053,000 at March 31, 2023)

379,453,000 385,235,000 391,845,000

Restricted equity securities, at cost 5,933,000 3,385,000 3,874,000

Loans held for sale 268,000 275,000 —

Loans 2,173,746,000 2,129,454,000 1,982,847,000

24 unchanged sentences

Net unrealized loss on securities transferred from available-for-sale to held-to-maturity ( 54,000 ) ( 56,000 ) ( 60,000 )

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

Net unrealized gain (loss) on cash flow hedging derivative instruments 735,000 300,000 ( 2,192,000 )

Net unrealized gain on postretirement costs 303,000 303,000 273,000

5 unchanged sentences

Tangible book value per common share $ 19.03 $ 19.12 $ 17.84

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

See Report of Independent Registered Public Accounting Firm.

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Income and Comprehensive Income (Loss) (Unaudited)

Consolidated Statements of Income and Comprehensive Income (Unaudited)

The First Bancorp, Inc.

and Subsidiary

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

2023 2022 2023 2022

For the three months ended March 31,

Interest income

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)

Interest and fees on loans (includes YTD tax-exempt income of $ 521,000 for March 31, 2024 and $ 329,000 for March 31, 2023)

$ 30,204,000 $ 24,125,000

Interest on deposits with other banks 78,000 40,000

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)

Interest and dividends on investments (includes YTD tax-exempt income of $ 1,995,000 for March 31, 2024 and $ 2,002,000 for March 31, 2023)

4,706,000 4,749,000

5 unchanged sentences

Net interest income 14,880,000 17,475,000

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

Provision for credit losses - loans 99,000 550,000

Provision (reduction) for credit losses - debt securities HTM ( 252,000 ) —

Provision (reduction) for credit losses - off-balance sheet credit exposures ( 360,000 ) —

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

Total provision (reduction) for credit losses ( 513,000 ) 550,000

Net interest income after provision for credit losses 15,393,000 16,925,000

2 unchanged sentences

Service charges on deposit accounts 499,000 437,000

Net securities gains — 7,000 — 6,000

Mortgage origination and servicing income, net of amortization 130,000 192,000

16 unchanged sentences

Other comprehensive income (loss) net of tax

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 (loss) gain on securities available for sale, net of taxes $ ( 3,241,000 ) $ 4,181,000

Net unrealized gain on transferred securities, net of taxes 2,000 4,000

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

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 )

Net unrealized gain (loss) on hedging derivative instruments 435,000 ( 2,736,000 )

Other comprehensive (loss) gain ( 2,804,000 ) 1,449,000

Comprehensive income $ 3,217,000 $ 9,420,000

See Report of Independent Registered Public Accounting Firm.

3 unchanged sentences

and Subsidiary

Nine Month Period Ended September 30, 2023 and 2022

Three Month Period Ended March 31, 2024 and 2023

Common stock and

7 unchanged sentences

Net income — — 7,971,000 — 7,971,000

Net unrealized loss on securities available for sale, net of tax — — — ( 45,943,000 ) ( 45,943,000 )

Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 20,000 20,000

Net unrealized gain on cash flow hedging derivative instruments, net of tax — — — 500,000 500,000

Comprehensive income (loss) — — 29,793,000 ( 45,423,000 ) ( 15,630,000 )

Cash dividends declared ($ 1.00 per share)

— — ( 11,032,000 ) — ( 11,032,000 )

Equity compensation expense — 610,000 — — 610,000

Payment to repurchase common stock ( 8,640 ) — ( 276,000 ) — ( 276,000 )

Issuance of restricted stock 28,745 — — — —

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

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

Net unrealized gain on securities available for sale, net of tax — — — 4,181,000 4,181,000

Net unrealized gain on securities transferred from available for sale to held to maturity, net of tax — — — 4,000 4,000

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

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

Net unrealized loss on hedging derivative instruments, net of tax — — — ( 2,736,000 ) ( 2,736,000 )

Comprehensive income — — 7,971,000 1,449,000 9,420,000

Cash dividends declared ($ 0.34 per share)

6 unchanged sentences

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

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

additional paid-in capital Retained

earnings Accumulated

comprehensive income (loss) Total

shareholders'

Shares Amount

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

Net unrealized loss on securities available for sale, net of tax — — — ( 14,866,000 ) ( 14,866,000 )

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 cash flow hedging derivative instruments, net of tax — — — 354,000 354,000

Comprehensive income (loss) — — 10,091,000 ( 14,506,000 ) ( 4,415,000 )

Cash dividends declared ($ 0.34 per share)

— — ( 3,754,000 ) — ( 3,754,000 )

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

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

Balance at December 31, 2023 11,098,057 $ 70,182,000 $ 211,925,000 $ ( 39,028,000 ) $ 243,079,000

Net income — — 6,021,000 — 6,021,000

7 unchanged sentences

Payment to repurchase common stock ( 8,031 ) — ( 211,000 ) — ( 211,000 )

Issuance of restricted stock 32,859 — — — —

Proceeds from sale of common stock 8,048 204,000 — — 204,000

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

Balance at March 31, 2024 11,130,933 $ 70,617,000 $ 213,839,000 $ ( 41,832,000 ) $ 242,624,000

See Report of Independent Registered Public Accounting Firm.

3 unchanged sentences

and Subsi diary

For the nine months ended September 30,

For the three months ended March 31,

Cash flows from operating activities

3 unchanged sentences

Change in deferred taxes 319,000 ( 1,453,000 )

Provision for credit losses 501,000 1,300,000

Provision (reduction) for credit losses ( 513,000 ) 550,000

Loans originated for resale ( 363,000 ) ( 705,000 )

1 unchanged sentence

Net gain on sales of loans ( 10,000 ) ( 16,000 )

Net gain on sale or call of securities — ( 7,000 )

Net amortization of premiums on investments 135,000 122,000

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

Equity compensation expense 231,000 184,000

Net increase in other assets and accrued interest ( 5,982,000 ) ( 7,296,000 )

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

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

Net (decrease) increase in other liabilities ( 2,385,000 ) 4,115,000

Net loss on disposal of premises and equipment 9,000 1,000

Amortization of investment in limited partnership 117,000 76,000

Net acquisition amortization 7,000 7,000

Net cash provided by operating activities 26,193,000 32,433,000

Net cash (used) provided by operating activities ( 1,497,000 ) 5,047,000

Cash flows from investing activities

(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

Increase in interest-bearing deposits in other banks 577,000 920,000

Proceeds from maturities, payments and calls of securities available for sale 5,359,000 4,956,000

Proceeds from maturities, payments, calls and sales of securities to be held to maturity 6,011,000 1,594,000

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

Purchases of securities available for sale ( 1,968,000 ) ( 3,496,000 )

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

Redemption of restricted equity securities 23,000 851,000

Change in restricted equity securities ( 2,548,000 ) 9,000

Net increase in loans ( 44,214,000 ) ( 68,198,000 )

Capital expenditures ( 326,000 ) ( 526,000 )

Proceeds from disposal of premises and equipment 3,000 38,000

Net cash used by investing activities ( 37,109,000 ) ( 64,741,000 )

Cash flows from financing activities

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

Net decrease in demand, savings, and money market accounts ( 45,854,000 ) ( 54,172,000 )

Net (decrease) increase in certificates of deposit ( 4,820,000 ) 141,996,000

Net increase (decrease) in short-term borrowings 15,127,000 ( 19,599,000 )

Advances on long-term borrowings 70,000,000 —

Repayment on long-term borrowings — ( 3,000 )

3 unchanged sentences

Net cash provided by financing activities 30,539,000 64,424,000

Net increase in cash and cash equivalents 7,166,000 6,774,000

Net (decrease) increase in cash and cash equivalents ( 8,067,000 ) 4,730,000

Cash and cash equivalents at beginning of period 31,942,000 22,728,000

Cash and cash equivalents at end of period $ 23,875,000 $ 27,458,000

For the nine months ended September 30,

Interest paid $ 19,521,000 $ 11,460,000

Income taxes paid 4,500,000 5,745,000

Non-cash transactions

13 unchanged sentences

For further information, refer to the consolidated financial statements and notes included in the Company's annual report on Form 10-K for the year ended December 31, 2023.

The acronyms, abbreviations and definitions identified below are used throughout this Form 10-Q, including Item 1 - Financial Statements and Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.

The abbreviations and definitions identified below are used throughout this Form 10-Q, including Item 1 - Financial Statements and Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following is provided to aid the reader and provide a reference page when reviewing these sections of the Form 10-Q.

Acronym Description Acronym Description

Abbreviation Description Abbreviation Description

ACL Allowance for credit losses GDP Gross domestic product

1 unchanged sentence

ALCO Asset/Liability Committee HTM Held-to-maturity

AOCI Accumulated other comprehensive income (loss) IRS Internal Revenue Service

ASC Accounting Standards Codification LIBOR London Interbank Offered Rate

AOCI Accumulated other comprehensive income (loss) IAL Individually Analyzed Loans

ASC Accounting Standards Codification IRS Internal Revenue Service

ASU Accounting Standards Update MPF Mortgage Partnership Finance Program

4 unchanged sentences

CLLD Construction, land, and land development OREO Other real estate owned

DFAST Dodd Frank Act Stress Tests POR Period of Redemption

EPS Earnings per share PPP Paycheck Protection Program

EPS Earnings per share POR Period of Redemption

FASB Financial Accounting Standards Board PSA Public Securities Association

FDIC Federal Deposit Insurance Corporation SBA Small Business Association

FHLB Federal Home Loan Bank SEC Securities and Exchange Commission

FHLBB Federal Home Loan Bank of Boston SOFR Secured Overnight Financing Rate

FHLMC Federal Home Loan Mortgage Corporation TDR Troubled debt restructuring

FNMA Federal National Mortgage Association The 2020 Plan The 2020 Equity Incentive Plan

FOMC Federal Open Market Committee The Bank First National Bank

FRB Federal Reserve Board The Company The First Bancorp, Inc.

FRBB Federal Reserve Bank of Boston U.S.

FDIC Federal Deposit Insurance Corporation SEC Securities and Exchange Commission

FHLB Federal Home Loan Bank SOFR Secured Overnight Financing Rate

FHLBB Federal Home Loan Bank of Boston TDR Troubled debt restructuring

FHLMC Federal Home Loan Mortgage Corporation The 2020 Plan The 2020 Equity Incentive Plan

FNMA Federal National Mortgage Association The Bank First National Bank

FOMC Federal Open Market Committee The Company The First Bancorp, Inc.

FRB Federal Reserve Board U.S.

United States of America

FRBB Federal Reserve Bank of Boston USD U.S.

GAAP Accounting principles generally accepted in the U.S.

Risks and Uncertainties

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

Ongoing conflicts between Russia and Ukraine, and Israel and Hamas, continue to contribute to economic uncertainty and geopolitical instability.

Concern about the national commercial real estate market and the impact a downturn in this sector could have on the banking industry continues to be expressed, as does concern about a re-kindling of inflation after higher than expected CPI prints to begin 2024.

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

Subsequent Events

Events occurring subsequent to September 30, 2023, have been evaluated as to their potential impact to the financial statements.

Events occurring subsequent to March 31, 2024, have been evaluated as to their potential impact to the financial statements.

Note 2 – Investment Securities

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

The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2024:

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

17 unchanged sentences

$ 5,933,000 $ — $ — $ 5,933,000

Allowance for Credit Losses:

The Company adopted ASC 326, the CECL standard, in the first quarter of 2023.

In conjunction with adoption, holdings of AFS and HTM securities were evaluated to determine the need to establish an allowance for credit losses, if any.

AFS securities, as shown in the table above, consist of securities issued by U.S.

Government Agencies, U.S.

Government Sponsored Entities, State or Local Municipal Governments, or are backed by collateral that is guaranteed by the U.S.

We monitor the credit quality of these investments through credit ratings issued by major rating providers and through substantial price changes not consistent with general market movements.

Each of the AFS securities is deemed to be investment grade, and no ACL has been established for AFS securities.

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 $ 19,734,000 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 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 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.

Losses would be charged against the allowance when management believes collection of the full contractual amount due on a security is unlikely.

The following table summarizes the amortized cost and estimated fair value of investment securities at December 31, 2023:

12 unchanged sentences

$ 385,669,000 $ 383,000 $ ( 47,482,000 ) $ 338,570,000

Less allowance for credit losses ( 434,000 ) — — —

Net securities to be held to maturity $ 385,235,000 $ 383,000 $ ( 47,482,000 ) $ 338,570,000

Restricted equity securities

2 unchanged sentences

$ 3,385,000 $ — $ — $ 3,385,000

The following table summarizes the amortized cost and estimated fair value of investment securities at September 30, 2022:

The following table summarizes the amortized cost and estimated fair value of investment securities at March 31, 2023:

Cost Unrealized Gains Unrealized Losses Fair Value (Estimated)

11 unchanged sentences

$ 392,283,000 $ 440,000 $ ( 48,670,000 ) $ 344,053,000

Less allowance for credit losses ( 438,000 ) — — —

Net securities to be held to maturity $ 391,845,000 $ 440,000 $ ( 48,670,000 ) $ 344,053,000

Restricted equity securities

2 unchanged sentences

$ 3,874,000 $ — $ — $ 3,874,000

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

Allowance for Credit Losses:

AFS securities, as shown in the above tables, consist of securities issued by U.S.

Government Agencies, U.S.

Government Sponsored Entities, State or Local Municipal Governments, or are backed by collateral that is guaranteed by the U.S.

We monitor the credit quality of these investments through credit ratings issued by major rating providers and through substantial price changes not consistent with general market movements.

Each of the AFS securities is deemed to be investment grade, and no ACL has been established for AFS securities.

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 $ 19,441,000 as of March 31, 2024.

Corporate securities in HTM consist of 13 individual companies in the banking industry.

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

As of March 31, 2024 and 2023, and December 31, 2023, the total ACL for HTM securities was $ 182,000 , $ 438,000 and $ 434,000 , respectively.

Changes in the ACL are recorded as credit loss expense, or reversal.

Losses would be charged against the allowance when management believes collection of the full contractual amount due on a security is unlikely.

The following table summarizes the contractual maturities of investment securities at March 31, 2024:

Securities available for sale Securities to be held to maturity

15 unchanged sentences

$ 332,148,000 $ 282,053,000 $ 385,669,000 $ 338,570,000

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

The following table summarizes the contractual maturities of investment securities at March 31, 2023:

Securities available for sale Securities to be held to maturity

6 unchanged sentences

$ 339,555,000 $ 288,242,000 $ 392,283,000 $ 344,053,000

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.

At March 31, 2024, securities with a carrying value of $ 314,208,000 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 $ 340,623,000 as of December 31, 2023 and $ 324,716,000 at March 31, 2023, pledged for the same purposes.

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

The following table shows securities gains and losses for the nine months and quarters ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

Proceeds from sales of securities $ — $ 1,301,000 $ — $ 1,301,000

Gross realized gains — 8,000 — 6,000

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

Net gain (loss) $ — $ 7,000 $ — $ 5,000

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

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

There were no gains or losses on the sale of securities for the three months ended March 31, 2024 and 2023.

As of March 31, 2024, there were 236 AFS 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 September 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position:

The following table summarizes AFS debt securities in an unrealized loss position for which an ACL has not been recorded at March 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position:

Less than 12 months 12 months or more Total

3 unchanged sentences

State and political subdivisions 4,520,000 ( 30,000 ) 29,161,000 ( 6,308,000 ) 33,681,000 ( 6,338,000 )

Asset-backed securities — — 1,510,000 ( 4,000 ) 1,510,000 ( 4,000 )

Corporate securities — — 21,677,000 ( 3,823,000 ) 21,677,000 ( 3,823,000 )

$ 9,113,000 $ ( 46,000 ) $ 251,590,000 $ ( 54,270,000 ) $ 260,703,000 $ ( 54,316,000 )

As of December 31, 2022, there were 869 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 300 had been temporarily impaired for 12 months or more.

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

As of December 31, 2023, there were 226 AFS 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 AFS debt securities in an unrealized loss position for which an ACL has not been recorded at December 31, 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

4 unchanged sentences

Asset-backed securities — — 1,464,000 ( 9,000 ) 1,464,000 ( 9,000 )

Corporate securities 19,857,000 ( 2,143,000 ) 3,160,000 ( 340,000 ) 23,017,000 ( 2,483,000 )

$ 3,794,000 $ ( 63,000 ) $ 257,711,000 $ ( 50,342,000 ) $ 261,505,000 $ ( 50,405,000 )

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 September 30, 2022 is summarized below:

As of March 31, 2023, there were 232 AFS 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 AFS debt securities in an unrealized loss position for which an ACL has not been recorded at March 31, 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

4 unchanged sentences

Asset-backed securities — — 3,284,000 ( 63,000 ) 3,284,000 ( 63,000 )

Corporate securities 20,186,000 ( 1,814,000 ) 3,229,000 ( 271,000 ) 23,415,000 ( 2,085,000 )

$ 37,993,000 $ ( 1,205,000 ) $ 245,361,000 $ ( 50,192,000 ) $ 283,354,000 $ ( 51,397,000 )

2 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.

2 unchanged sentences

High credit quality state and municipal obligations have a history of zero to near-zero credit loss.

All of the Mortgage-backed securities owned were issued either by a U.S.

Government Agency (GNMA) or a Government Sponsored Enterprise (FNMA or FHLMC).

HTM municipal debt holdings also include two unrated private activity bonds issued by well known customers of the Bank.

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

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

both issuers were in good standing as of March 31, 2024.

HTM corporate debt holdings consist of 13 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 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:

each were in good standing as of March 31, 2024.

The following table presents the activity in the ACL for HTM debt securities by major security type for the three months ended March 31, 2024:

State and Political Subdivisions Corporate Securities Total

1 unchanged sentence

Beginning balance $ 222,000 $ 212,000 $ 434,000

Impact of adopting ASC 326 229,000 209,000 438,000

Credit loss expense (reduction) ( 109,000 ) ( 143,000 ) ( 252,000 )

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

Securities charged-off — — —

1 unchanged sentence

Total ending allowance balance $ 113,000 $ 69,000 $ 182,000

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 September 30, 2023 .

Government-sponsored enterprise, agency securities, or mortgage-backed securities as of March 31, 2024 .

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

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

As of March 31, 2024, 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 $ 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.

The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $ 54,000 , net of taxes, at March 31, 2024.

This compares to $ 56,000 and $ 60,000 , net of taxes, at December 31, 2023 and March 31, 2023, 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 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.

As of March 31, 2024 and 2023, and December 31, 2023, the Bank's investment in FHLBB stock totaled $ 4,896,000 , $ 2,837,000 and $ 2,348,000 , 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 September 30, 2023 and 2022, and December 31, 2022.

The Bank's investment in FRBB stock totaled $ 1,037,000 at March 31, 2024 and 2023, and December 31, 2023.

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 September 30, 2023.

No impairment losses have been recorded through March 31, 2024.

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

Note 3 – Loans

Upon adoption of ASU 2016-13/ASC 326, the CECL standard, as described in Notes 4 and 16 of these financial statements, the Company updated the segmentation of its loan portfolio.

The updates primarily consist of reporting what had been a single class, commercial real estate loans, as three classes - commercial real estate owner occupied, commercial real estate non-owner occupied, and commercial multi-family.

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

The Company periodically reviews and updates the segmentation of its loan portfolio.

Updates performed in conjunction with adoption of ASC 326 in 2023 consisted of reporting what had been a single class, commercial real estate loans, as three classes - commercial real estate owner occupied, commercial real estate non-owner occupied, and commercial multi-family.

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

In the current reporting period, a new segment has been established for Agriculture loans;

certain prior period information of these loans continues to be included the C&I and CRE non-owner occupied segments.

Loan Portfolio by Class:

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

The following table shows the composition of the Company's loan portfolio by class of financing receivable as of March 31, 2024 and 2023 and at December 31, 2023:

March 31, 2024 December 31, 2023 March 31, 2023

Real estate owner occupied $ 327,496,000 15.1 % $ 314,819,000 14.8 % $ 285,224,000 14.4 %

3 unchanged sentences

Multifamily 101,344,000 4.7 % 93,476,000 4.4 % 81,089,000 4.1 %

Agriculture 45,064,000 2.1 % 45,230,000 2.1 % 48,338,000 2.4 %

Municipal 54,746,000 2.5 % 51,423,000 2.4 % 47,166,000 2.4 %

4 unchanged sentences

Total $ 2,173,746,000 100.0 % $ 2,129,454,000 100.0 % $ 1,982,847,000 100.0 %

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.

Loan balances include net deferred loan costs of $ 11,745,000 as of March 31, 2024, $ 11,479,000 as of December 31, 2023, and $ 10,315,000 as of March 31, 2023.

Net deferred loan costs have increased from a year ago and year-to-date based upon loan origination unit volume over the periods, prepayments, and normal repayment activity.

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.

This adjustment added $ 313,000 to the loan balances as of March 31, 2024 and $ 2,149,000 as of December 31, 2023;

there was no such adjustment as of March 31, 2023.

Pursuant to collateral agreements, qualifying first mortgage loans and commercial real estate loans, which totaled $ 565,047,000 at March 31, 2024, were used to collateralize borrowings from the FHLBB.

This compares to qualifying loans which totaled $ 561,574,000 at December 31, 2023, and $ 527,949,000 at March 31, 2023.

In addition, commercial, residential construction and home equity loans totaling $ 322,124,000 at March 31, 2024, $ 320,083,000 at December 31, 2023, and $ 373,791,000 at March 31, 2023, were used to collateralize a standby line of credit at the FRBB.

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 September 30, 2023, is presented in the following table:

Information on the past-due status of loans by class of financing receivable as of March 31, 2024, is presented in the following table:

Past Due 60-89 Days

6 unchanged sentences

Multifamily — — — — 101,344,000 101,344,000 —

Agriculture 119,000 — — 119,000 44,945,000 45,064,000 —

Municipal — — — — 54,746,000 54,746,000 —

8 unchanged sentences

Past Due Current Total 90+ Days

Real estate $ — $ 3,000 $ 190,000 $ 193,000 $ 699,147,000 $ 699,340,000 $ —

Real estate owner occupied $ — $ — $ — $ — $ 314,819,000 $ 314,819,000 $ —

Real estate non-owner occupied — — — — 393,636,000 393,636,000 —

Construction — 9,000 8,000 17,000 88,656,000 88,673,000 —

Other 118,000 23,000 85,000 226,000 319,133,000 319,359,000 34,000

C&I 714,000 35,000 120,000 869,000 355,918,000 356,787,000 10,000

Multifamily — — — — 93,476,000 93,476,000 —

Municipal 31,000 — — 31,000 51,392,000 51,423,000 —

1 unchanged sentence

Construction — — — — 32,358,000 32,358,000 —

Home equity line of credit 241,000 29,000 151,000 421,000 92,654,000 93,075,000 86,000

Revolving and term 495,000 95,000 26,000 616,000 103,410,000 104,026,000 —

Consumer 475,000 22,000 58,000 555,000 18,846,000 19,401,000 59,000

Total $ 1,969,000 $ 979,000 $ 940,000 $ 3,888,000 $ 2,125,566,000 $ 2,129,454,000 $ 429,000

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

Information on the past-due status of loans by class of financing receivable as of March 31, 2023, is presented in the following table:

Past Due 60-89 Days

1 unchanged sentence

Past Due Current Total 90+ Days

Real estate $ — $ 4,000 $ 191,000 $ 195,000 $ 638,513,000 $ 638,708,000 $ —

Real estate owner occupied $ — $ 1,000 $ 151,000 $ 152,000 $ 285,072,000 $ 285,224,000 $ —

Real estate non-owner occupied — — — — 384,457,000 384,457,000 —

Construction — — — — 72,705,000 72,705,000 —

Other 172,000 16,000 83,000 271,000 309,839,000 310,110,000 —

C&I 106,000 12,000 182,000 300,000 339,388,000 339,688,000 34,000

Multifamily — — — — 81,089,000 81,089,000 —

Municipal — — — — 47,166,000 47,166,000 —

1 unchanged sentence

Construction — — — — 52,712,000 52,712,000 —

Home equity line of credit 473,000 29,000 — 502,000 87,401,000 87,903,000 —

Revolving and term 498,000 6,000 64,000 568,000 92,954,000 93,522,000 —

Consumer 104,000 15,000 1,000 120,000 19,315,000 19,435,000 1,000

6 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 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

The following table presents the amortized costs basis of loans on nonaccrual status as of March 31, 2024, December 31, 2023 and March 31, 2023:

March 31, 2024 December 31, 2023 March 31, 2023

Dollars in thousands Nonaccrual with Allowance for Credit Loss Nonaccrual with no Allowance for Credit Loss Total Nonaccrual Nonaccrual with Allowance for Credit Loss Nonaccrual with no Allowance for Credit Loss Total Nonaccrual Nonaccrual with Allowance for Credit Loss Nonaccrual with no Allowance for Credit Loss Total Nonaccrual

Real estate owner occupied $ — $ — $ — $ — $ — $ — $ — $ 152,000 $ 152,000

3 unchanged sentences

Multifamily — — — — — — — — —

Agriculture — 33,000 33,000 — — — — — —

Municipal — — — — — — — — —

Residential — — —

Term — 1,959,000 1,959,000 304,000 1,011,000 1,315,000 — 443,000 443,000

Construction — — — — — — — — —

Home equity — — —

Revolving and term — 304,000 304,000 — 296,000 296,000 — 534,000 534,000

2 unchanged sentences

Individually Analyzed Loans:

Individually analyzed loans include loans placed on non-accrual and loans reported as TDR prior to adoption of ASU 2022-02 Troubled Debt Restructurings and Vintage Disclosures, with balances of $250,000 or more.

IAL include loans placed on non-accrual and loans reported as TDR prior to adoption of ASU 2022-02 with balances of $250,000 or more.

These loans are measured at the present value of expected future cash flows discounted at the loan's effective interest rate or at the fair value of the collateral if the loan is collateral dependent.

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 September 30, 2023 by collateral type:

If the measure of an IAL 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 IAL 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 March 31, 2024 by collateral type:

Collateral Type

Commercial Real Estate Residential Real Estate Total

Residential Real Estate Total

Real estate owner occupied $ — $ —

2 unchanged sentences

Multifamily — —

Agriculture — —

Municipal — —

2 unchanged sentences

Revolving and term — —

Consumer — — —

Total $ 950,000 $ 950,000

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 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

With No Related Allowance

The following table presents the amortized cost basis of collateral-dependent loans as of December 31, 2023 by collateral type:

Collateral Type

Residential Real Estate Total

Real estate owner occupied $ — $ —

1 unchanged sentence

Construction — —

C&I — — — 72,000 — — —

Multifamily — —

3 unchanged sentences

Revolving and term — —

Consumer — — — — — — —

$ 384,000 $ 411,000 $ — $ 2,124,000 $ 15,000 $ 384,000 $ ( 4,000 )

With an Allowance Recorded

Total $ 685,000 $ 685,000

For the period ended March 31, 2023, IAL include all loans that had been reported as TDR loans prior to adoption of ASU 2022-02 and loans placed on non-accrual.

The following table presents the amortized cost basis of collateral-dependent loans as of March 31, 2023 by collateral type:

Collateral Type

Commercial Real Estate Residential Real Estate Equipment 1

Real estate owner occupied $ 198,000 $ — $ — $ 198,000

8 unchanged sentences

Consumer — — — —

$ 929,000 $ 1,029,000 $ 266,000 $ 1,389,000 $ 10,000 $ 1,063,000 $ ( 2,000 )

Real estate owner occupied $ — $ — $ — $ 143,000 $ — $ — $ —

Real estate non-owner occupied — — — 537,000 — — ( 12,000 )

Total $ 1,144,000 $ 1,972,000 $ 192,000 $ 3,308,000

1 Collateral may consist of a boat, vehicle or other equipment.

Loan Modifications to Borrowers Experiencing Financial Difficulty:

Loan modifications to borrowers experiencing financial difficulty may include interest rate reduction, term extension, payment deferral, principle forgiveness or a combination thereof.

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

The following tables represent loan modifications made to borrowers experiencing financial difficulty by modification type and class of financing receivable, during the three months ended March 31, 2024:

Payment Deferral

Amortized Cost Basis at March 31, 2024 % of Total Class of Financing Receivable

Construction $ 69,000 0.08 %

1 unchanged sentence

Multifamily 1,932,000 1.91 %

Municipal — — — — — — —

Term 1,023,000 0.15 %

Construction — — — — — — —

Total $ 3,085,000

Payment Deferral & Term Extension

Amortized Cost Basis at March 31, 2024 % of Total Class of Financing Receivable

Revolving and Term $ 69,000 0.07 %

Consumer — — — — — — —

$ 1,313,000 $ 1,440,000 $ 266,000 $ 3,513,000 $ 25,000 $ 1,447,000 $ ( 6,000 )

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

A breakdown of individually analyzed loans by class of financing receivable as of and for the year ended December 31, 2022 is presented in the following table:

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

With No Related Allowance

Real estate $ 1,236,000 $ 1,532,000 $ — $ 1,440,000 $ 50,000

Construction 685,000 687,000 — 81,000 35,000

Other 301,000 348,000 — 408,000 13,000

Municipal — — — — —

Term 1,833,000 2,035,000 — 4,507,000 56,000

Construction — — — — —

Home equity line of credit 304,000 340,000 — 295,000 —

Consumer — — — 1,000 —

$ 4,359,000 $ 4,942,000 $ — $ 6,732,000 $ 154,000

With an Allowance Recorded

Real estate $ — $ — $ — $ 11,000 $ —

Construction — — — 606,000 —

Other 545,000 647,000 298,000 693,000 —

Municipal — — — — —

Term 1,256,000 1,259,000 100,000 1,486,000 50,000

Construction — — — — —

Home equity line of credit — — — 8,000 —

Consumer — — — — —

$ 1,801,000 $ 1,906,000 $ 398,000 $ 2,804,000 $ 50,000

Real estate $ 1,236,000 $ 1,532,000 $ — $ 1,451,000 $ 50,000

Construction 685,000 687,000 — 687,000 35,000

Other 846,000 995,000 298,000 1,101,000 13,000

Municipal — — — — —

Term 3,089,000 3,294,000 100,000 5,993,000 106,000

Construction — — — — —

Home equity line of credit 304,000 340,000 — 303,000 —

Consumer — — — 1,000 —

$ 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 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

With No Related Allowance

Real estate $ 1,295,000 $ 1,607,000 $ — $ 1,497,000 $ 42,000 $ 1,314,000 $ 14,000

Construction 25,000 27,000 — 26,000 — 25,000 —

Other 399,000 459,000 — 432,000 10,000 405,000 2,000

Municipal — — — — — — —

Term 1,912,000 2,139,000 — 5,380,000 40,000 4,666,000 ( 9,000 )

Construction — — — — — — —

Home equity line of credit 247,000 279,000 — 299,000 — 249,000 —

Consumer — — — 1,000 — — —

$ 3,878,000 $ 4,511,000 $ — $ 7,635,000 $ 92,000 $ 6,659,000 $ 7,000

With an Allowance Recorded

Real estate $ — $ — $ — $ 14,000 $ — $ — $ —

Construction 661,000 661,000 6,000 661,000 27,000 661,000 16,000

Other 552,000 647,000 315,000 745,000 — 679,000 —

Municipal — — — — — — —

Term 1,264,000 1,267,000 99,000 1,562,000 34,000 1,384,000 9,000

Construction — — — — — — —

Home equity line of credit — — — 11,000 — — —

Consumer — — — — — — —

$ 2,477,000 $ 2,575,000 $ 420,000 $ 2,993,000 $ 61,000 $ 2,724,000 $ 25,000

Real estate $ 1,295,000 $ 1,607,000 $ — $ 1,511,000 $ 42,000 $ 1,314,000 $ 14,000

Construction 686,000 688,000 6,000 687,000 27,000 686,000 16,000

Other 951,000 1,106,000 315,000 1,177,000 10,000 1,084,000 2,000

Municipal — — — — — — —

Term 3,176,000 3,406,000 99,000 6,942,000 74,000 6,050,000 —

Construction — — — — — — —

Home equity line of credit 247,000 279,000 — 310,000 — 249,000 —

Consumer — — — 1,000 — — —

$ 6,355,000 $ 7,086,000 $ 420,000 $ 10,628,000 $ 153,000 $ 9,383,000 $ 32,000

Loan Modifications:

ASU 2022-02 amends ASC 326 for entities that have adopted ASU 2016-13, the CECL standard, such as the Company.

ASU 2022-02 eliminates the accounting guidance for TDRs and introduces new guidance for enhanced reporting of certain loan modifications to borrowers experiencing financial difficulty.

Loan modifications may include interest rate reduction, term extension, payment deferral, principle forgiveness or a combination thereof.

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 September 30, 2023:

Total $ 69,000

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months ended March 31, 2024:

Payment Deferral

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

Real estate owner occupied $ 504,000 0.17 %

Financial Effect

Construction Temporary payment accommodation, payments deferred to end of loan.

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

Multifamily Temporary payment accommodation, payments deferred to end of loan.

Term Temporary payment accommodation, payments deferred to end of loan.

Payment Deferral & Term Extension

Financial Effect

Revolving and Term Temporary payment accommodation, extended term 60 days.

Term Extension

Amortized Cost Basis at March 31, 2023 % of Total Class of Financing Receivable

C&I $ 23,000 0.01 %

$ 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:

Total $ 23,000

Payment Deferral

Amortized Cost Basis at March 31, 2023 % of Total Class of Financing Receivable

C&I $ 227,000 0.07 %

Total $ 227,000

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months ended March 31, 2023:

Term Extension

Financial Effect

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

C&I Extended Term 12 months

Payment Deferral

Financial Effect

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 nine months ended September 30, 2023:

The following table depicts the performance of loans that have been modified during the previous 12 months:

Payment Status (Amortized Cost Basis)

3 unchanged sentences

Real estate owner occupied $ 786,000 $ — $ — $ —

C&I 220,000 40,000 — —

Total $ 723,000 $ 40,000 $ — $ —

Troubled Debt Restructured:

Prior to adoption of ASU 2022-02, the Company evaluated loan modifications and other transactions to determine if classification as a TDR was necessary.

A TDR constitutes a restructuring of debt if the Company, for economic or legal reasons related to the borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider.

To determine whether or not a loan was to be classified as a TDR, Management evaluated a loan based upon the following criteria:

• The borrower demonstrates financial difficulty;

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

• The Company has granted a concession;

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

As of December 31, 2022, the company had 29 loans with a balance of $ 4,744,000 that were classified as TDRs.

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 December 31, 2022:

Number of Loans Balance Specific Reserves

Real estate 5 $ 1,044,000 $ —

Construction 69,000 — — —

Other 3 361,000 81,000

Municipal — — —

Term 20 2,678,000 100,000

Construction — — —

Home equity line of credit — — —

Consumer — — —

29 $ 4,744,000 $ 181,000

As of December 31, 2022, one of the loans classified as TDR with a total balance of $ 97,000 was more than 30 days past due and was not placed on TDR status in the previous 12 months.

The following table shows past-due TDRs by class and the associated specific reserves included in the allowance for loan losses as of December 31, 2022:

Number of Loans Balance Specific Reserves

Real estate — $ — $ —

Construction — — —

Other 1 97,000 —

Municipal — — —

Construction — — —

Home equity line of credit — — —

Consumer — — —

1 $ 97,000 $ —

For the year ended December 31, 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 December 31, 2022:

Number of Loans Pre-Modification

Recorded Investment Post-Modification Outstanding

Investment Specific Reserves

Real estate — $ — $ — $ —

Construction — — — —

Other — — — —

Municipal — — — —

C&I 96,000 — — —

Multifamily 1,932,000 — — —

Term 1,023,000 — — —

Construction — — — —

Home equity line of credit — — — —

Revolving and term 70,000 — — —

Consumer 34,000 — — —

1 $ 38,000 $ 38,000 $ —

As of December 31, 2022, Management was aware of four loans classified as TDRs that are involved in bankruptcy with an outstanding balance of $ 550,000 .

As of December 31, 2022, there were five loans with an outstanding balance of $ 339,000 that were classified as TDRs and were on non-accrual status, of which none were in the process of foreclosure.

Total $ 4,010,000 $ — $ — $ —

The following table depicts the performance of loans that have been modified during the three months ended March 31, 2023:

Payment Status (Amortized Cost Basis)

Current 30-59 Days

Past Due 60-89 Days

Past Due 90+ Days

C&I $ 227,000 $ — $ — $ 23,000

Total $ 227,000 $ — $ — $ 23,000

Residential Mortgage Loans in Process of Foreclosure

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.

As of March 31, 2024, there were four mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 510,000 .

This compares to five mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 400,000 as of December 31, 2023 and two mortgage loans collateralized by residential real estate in the process of foreclosure with a total balance of $ 166,000 March 31, 2023.

Allowance for Credit Losses

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.

6 unchanged sentences

Loans are segmented by common risk characteristics as delineated in the paragraph below.

Prior to adoption of ASC 326, under the incurred loss methodology, the Company evaluated portfolio risk characteristics largely on loan purpose.

The Company provides for loan losses through the allowance for credit losses which represents an estimated reserve for losses in the loan portfolio.

The Company provides for loan losses through the ACL which represents an estimated reserve for losses in the loan portfolio.

To determine an appropriate level for general reserves, a discounted cash flow approach is applied to each portfolio segment implementing a probability of default and loss given default estimate based upon a number of factors including historical losses over an economic cycle, economic forecasts, loan prepayment speeds and curtailment rates.

To determine an appropriate level for qualitative reserves, various factors are considered including underwriting policies, credit administration practices, experience, ability and depth of lending management, and economic factors not captured in the general reserve calculation.

Adoption of ASC 326 added $ 6,210,000 to the Allowance for Credit Losses, recorded as a charge to retained earnings at January 1, 2023.

Loan Portfolio Composition & Risk Characteristics:

The loan portfolio is segmented into ten classes and credit risk is evaluated separately in each class.

The loan portfolio is segmented into eleven classes and credit risk is evaluated separately in each class.

Major risk characteristics relevant to each portfolio segment are as follows:

24 unchanged sentences

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

Agriculture - agriculture loans consist mostly of amortizing term loans and revolving lines of credit made to borrowers in agriculture related industries.

For the Company, this includes loans made to land based agricultural production and to participants in the fishing industry.

Collateral values are determined based on appraisals and evaluations in accordance with established policy and regulatory guidelines.

Loans are primarily paid by the cash flow generated from the agricultural property or operation of equipment.

Risk factors typically include competitive market forces, overall economic demand for the product, and may be further influenced by weather conditions which impact growing and/or harvesting, or other factors such as changes in government regulation(s).

Residential Real Estate Term - residential term loans consist of residential real estate loans held in the Company's loan portfolio made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors.

23 unchanged sentences

Construction, land, and land development :

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.

CLLD loans, both commercial and residential, represented 43.4 % of total Bank capital as of March 31, 2024 and remain below the regulatory guidance of 100.0 % of total Bank capital.

Construction loans and non-owner-occupied commercial real estate loans represented 223.7 % of total Bank capital at March 31, 2024, 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 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

A breakdown of the ACL as of March 31, 2024, by class of financing receivable and allowance element, is presented in the following table:

As of March 31, 2024 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 $ — $ 4,177,000 $ 1,003,000 $ 5,180,000

3 unchanged sentences

Multifamily — 1,348,000 159,000 1,507,000

Agriculture — 358,000 34,000 392,000

Municipal — 38,000 156,000 194,000

4 unchanged sentences

$ 243,000 $ 20,509,000 $ 3,455,000 $ 24,207,000

A breakdown of the allowance for loan losses as of December 31, 2022 under the incurred loss method, by class of financing receivable and allowance element, is presented in the following table:

As of December 31, 2022 Specific Reserves on Loans Evaluated Individually for Impairment General Reserves on Loans Based on Historical Loss Experience Reserves for Qualitative Factors Unallocated

Reserves Total Reserves

Real estate $ — $ 974,000 $ 5,142,000 $ — $ 6,116,000

A breakdown of the ACL as of December 31, 2023, by class of financing receivable and allowance element, is presented in the following table:

As of December 31, 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 $ — $ 3,891,000 $ 742,000 $ 4,633,000

Real estate non-owner occupied — 3,759,000 526,000 4,285,000

Construction — 1,849,000 129,000 1,978,000

Other 298,000 446,000 2,353,000 — 3,097,000

C&I 223,000 4,238,000 540,000 5,001,000

Multifamily — 1,237,000 81,000 1,318,000

Municipal — 307,000 27,000 334,000

1 unchanged sentence

Construction — 642,000 ( 24,000 ) 618,000

Home equity line of credit — 101,000 928,000 — 1,029,000

Revolving and term — 469,000 157,000 626,000

Consumer — 217,000 29,000 246,000

Unallocated — — — 1,678,000 1,678,000

$ 264,000 $ 20,833,000 $ 2,933,000 $ 24,030,000

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

Real estate $ — $ 867,000 $ 4,708,000 $ — $ 5,575,000

A breakdown of the ACL as of March 31, 2023, by class of financing receivable and allowance element, is presented in the following table:

As of March 31, 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 $ — $ 3,792,000 $ 678,000 $ 4,470,000

Real estate non-owner occupied — 3,914,000 508,000 4,422,000

Construction — 1,729,000 55,000 1,784,000

Other 315,000 420,000 2,279,000 — 3,014,000

C&I 291,000 3,937,000 610,000 4,838,000

Multifamily — 1,146,000 60,000 1,206,000

Municipal — 272,000 35,000 307,000

1 unchanged sentence

Construction — 939,000 10,000 949,000

Home equity line of credit — 106,000 887,000 — 993,000

Revolving and term 3,000 457,000 143,000 603,000

Consumer — 244,000 27,000 271,000

Unallocated — — — 1,937,000 1,937,000

$ 388,000 $ 20,216,000 $ 2,854,000 $ 23,458,000

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.

The ACL as a percent of total loans stood at 1.11 % as of March 31, 2024, 1.13 % at December 31, 2023 and 1.18 % as of March 31, 2023.

Off-Balance Sheet Credit Exposures:

In the ordinary course of business, the Company enters into commitments to extend credit, including commercial letters of credit and standby letters of credit.

In the ordinary course of business, the Company enters into commitments to extend credit, including construction lines of credit, revolving lines of credit, written commitments to provide financing, commercial letters of credit and standby letters of credit.

Such financial instruments are recorded as loans when they are funded .

5 unchanged sentences

Once the expected funded amount for each loan segment is determined, the loss rate, which is the calculated expected loan loss as a percent of the amortized cost basis for each loan segment, is applied to calculate the ACL on off-balance sheet credit exposures as of the reporting date.

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 nine months ended September 30, 2023 :

The Company’s ACL 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 three months ended March 31, 2024:

Allowance for credit losses:

Beginning balance, prior to adoption of ASC 326 $ 100,000

Impact of adopting ASC 326 1,297,000

Credit loss expense 89,000

Beginning balance $ 1,255,000

Credit loss reduction ( 360,000 )

Total ending allowance balance $ 895,000

26 unchanged sentences

Loans that are past due more than 90 days are considered non-performing.

The following table summarizes the credit quality for the Company's portfolio by risk category of loans and by class by vintage as follows:

The following table summarizes the credit quality for the Company's portfolio by risk category of loans and by class by vintage as of March 31, 2024:

Term Loans Amortized Cost Basis by Origination Year

Dollars in thousands 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

As of September 30, 2023

As of March 31, 2024

Real estate owner occupied

34 unchanged sentences

Doubtful (risk rating 8) — — — — — — — — —

Total Agriculture 4,351 3,825 7,534 4,358 15,357 8,135 1,270 234 45,064

Current period gross write-offs — — — — — — — — —

Term Loans Amortized Cost Basis by Origination Year

Dollars in thousands 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total

As of March 31, 2024

Pass (risk rating 1-5) 2,420 21,146 4,714 4,335 9,770 12,361 — — 54,746

Special Mention (risk rating 6) — — — — — — — — —

Substandard (risk rating 7) — — — — — — — — —

Doubtful (risk rating 8) — — — — — — — — —

Total Municipal 2,420 21,146 4,714 4,335 9,770 12,361 — — 54,746

Current period gross write-offs — — — — — — — — —

Performing 10,439 64,948 157,400 138,399 91,824 209,986 3,011 127 676,134

Non-performing — — 299 269 404 987 — — 1,959

Total Term 10,439 64,948 157,699 138,668 92,228 210,973 3,011 127 678,093

Current period gross write-offs — — — — — — — — —

Performing 1,329 29,910 2,246 — 1,339 — — — 34,824

Non-performing — — — — — — — — —

Total Construction 1,329 29,910 2,246 — 1,339 — — — 34,824

Current period gross write-offs — — — — — — — — —

Home Equity Revolving and Term

Performing 3,594 10,114 9,134 2,007 1,175 2,166 66,901 10,419 105,510

Non-performing — — — — — 104 18 182 304

Total Home Equity Revolving and Term 3,594 10,114 9,134 2,007 1,175 2,270 66,919 10,601 105,814

Current period gross write-offs — — — — — — — — —

Performing 775 3,347 1,806 1,055 1,625 4,724 5,703 — 19,035

Non-performing — — — — — — — — —

Total Consumer 775 3,347 1,806 1,055 1,625 4,724 5,703 — 19,035

Current period gross write-offs — ( 11 ) ( 41 ) ( 21 ) ( 5 ) ( 18 ) — — ( 96 )

Total loans $ 59,411 $ 345,017 $ 461,964 $ 389,425 $ 233,250 $ 486,759 $ 186,099 $ 11,821 $ 2,173,746

The following table summarizes the credit quality for the Company's portfolio by risk category of loans and by class by vintage as of December 31, 2023:

Term Loans Amortized Cost Basis by Origination Year

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

As of September 30, 2023

As of December 31, 2023

Real estate owner occupied

Pass (risk rating 1-5) $ 64,693 $ 73,920 $ 40,782 $ 28,716 $ 29,856 $ 59,236 $ 8,993 $ — $ 306,196

Special Mention (risk rating 6) 1,903 — — — 5,605 313 — — 7,821

Substandard (risk rating 7) 283 — — — 503 16 — — 802

Doubtful (risk rating 8) — — — — — — — — —

Total Real Estate Owner Occupied 66,879 73,920 40,782 28,716 35,964 59,565 8,993 — 314,819

Current period gross write-offs — — — — — 40 — — 40

Real estate non-owner occupied

Pass (risk rating 1-5) 30,666 70,442 129,299 47,959 27,159 83,820 4,230 — 393,575

Special Mention (risk rating 6) — — — — — — — — —

Substandard (risk rating 7) — — — — — 61 — — 61

Doubtful (risk rating 8) — — — — — — — — —

Total Real Estate Non-Owner Occupied 30,666 70,442 129,299 47,959 27,159 83,881 4,230 — 393,636

Current period gross write-offs — — — — — — — — —

Pass (risk rating 1-5) 29,781 45,130 8,705 1,581 1,034 2,373 — — 88,604

Special Mention (risk rating 6) — — 69 — — — — — 69

Substandard (risk rating 7) — — — — — — — — —

Doubtful (risk rating 8) — — — — — — — — —

Total Construction 29,781 45,130 8,774 1,581 1,034 2,373 — — 88,673

Current period gross write-offs — — — — — — — — —

Pass (risk rating 1-5) 49,147 61,628 51,848 33,955 6,103 32,032 87,949 973 323,635

Special Mention (risk rating 6) 23,970 3,414 267 546 — 3,373 330 — 31,900

Substandard (risk rating 7) 126 354 35 — 180 455 102 — 1,252

Doubtful (risk rating 8) — — — — — — — — —

Total C&I 73,243 65,396 52,150 34,501 6,283 35,860 88,381 973 356,787

Current period gross write-offs — 114 — — 16 23 — — 153

Pass (risk rating 1-5) 12,046 30,565 18,053 15,033 5,540 8,527 416 — 90,180

Special Mention (risk rating 6) — 1,020 — 912 — — — — 1,932

Substandard (risk rating 7) — — 1,364 — — — — — 1,364

Doubtful (risk rating 8) — — — — — — — — —

Total Multifamily 12,046 31,585 19,417 15,945 5,540 8,527 416 — 93,476

Current period gross write-offs — — — — — — — — —

Pass (risk rating 1-5) 20,210 4,741 3,982 9,775 5,156 7,559 — — 51,423

Special Mention (risk rating 6) — — — — — — — — —

Substandard (risk rating 7) — — — — — — — — —

Doubtful (risk rating 8) — — — — — — — — —

Total Municipal 20,210 4,741 3,982 9,775 5,156 7,559 — — 51,423

Current period gross write-offs — — — — — — — — —

Term Loans Amortized Cost Basis by Origination Year

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

As of December 31, 2023

Performing 65,605 156,495 140,254 93,774 39,896 174,341 3,046 129 673,540

16 unchanged sentences

Total loans $ 337,620 $ 465,386 $ 397,864 $ 236,621 $ 122,371 $ 379,108 $ 178,798 $ 11,686 $ 2,129,454

The following table summarizes the credit quality for the Company's portfolio by risk category of loans and by class by vintage as of March 31, 2023:

Term Loans Amortized Cost Basis by Origination Year

Dollars in thousands 2023 2022 2021 2020 2019 Prior Total

As of March 31, 2023

Real estate owner occupied

Pass (risk rating 1-5) $ 15,632 $ 77,722 $ 43,127 $ 30,277 $ 39,979 $ 78,184 $ 284,921

Special Mention (risk rating 6) 25 — — — — — 25

Substandard (risk rating 7) — — — — — 278 278

Doubtful (risk rating 8) — — — — — — —

Total Real Estate Owner Occupied 15,657 77,722 43,127 30,277 39,979 78,462 285,224

Current period gross write-offs — — — — — 39 39

Real estate non-owner occupied

Pass (risk rating 1-5) 12,167 72,434 132,514 49,921 28,367 88,991 384,394

Special Mention (risk rating 6) — — — — — — —

Substandard (risk rating 7) — — — — — 63 63

Doubtful (risk rating 8) — — — — — — —

Total Real Estate Non-Owner Occupied 12,167 72,434 132,514 49,921 28,367 89,054 384,457

Current period gross write-offs — — — — — — —

Pass (risk rating 1-5) 3,205 46,630 7,796 421 234 834 59,120

Special Mention (risk rating 6) — — — — — — —

Substandard (risk rating 7) — — — — — — —

Doubtful (risk rating 8) — — — — — — —

Total Construction 3,205 46,630 7,796 421 234 834 59,120

Current period gross write-offs — — — — — — —

Pass (risk rating 1-5) 25,052 112,238 78,357 59,431 9,229 47,179 331,486

Special Mention (risk rating 6) — 41 268 400 — 12 721

Substandard (risk rating 7) — 378 35 13 218 684 1,328

Doubtful (risk rating 8) — — — — — — —

Total C&I 25,052 112,657 78,660 59,844 9,447 47,875 333,535

Current period gross write-offs — — — — — — —

Pass (risk rating 1-5) 3,496 21,254 22,160 16,333 5,972 11,874 90,180

Special Mention (risk rating 6) — — — — — — 1,932

Substandard (risk rating 7) — — — — — — 1,364

Doubtful (risk rating 8) — — — — — — —

Total Multifamily 3,496 21,254 22,160 16,333 5,972 11,874 93,476

Current period gross write-offs — — — — — — —

Pass (risk rating 1-5) 6,785 7,186 6,518 11,063 5,732 9,882 47,166

Special Mention (risk rating 6) — — — — — — —

Substandard (risk rating 7) — — — — — — —

Doubtful (risk rating 8) — — — — — — —

Total Municipal 6,785 7,186 6,518 11,063 5,732 9,882 47,166

Current period gross write-offs — — — — — — —

Term Loans Amortized Cost Basis by Origination Year

Dollars in thousands 2023 2022 2021 2020 2019 Prior Total

As of March 31, 2023

Pass (risk rating 1-5) 6,640 51,206 34,748 16,901 6,777 18,211 134,483

Special Mention (risk rating 6) — — — — — — —

Substandard (risk rating 7) — — — — — 59 59

Doubtful (risk rating 8) — — — — — — —

Total Term 6,640 51,206 34,748 16,901 6,777 18,270 134,542

Current period gross write-offs — — — — — — —

Pass (risk rating 1-5) 1,310 5,915 3,219 1,046 — — 11,490

Special Mention (risk rating 6) — — — — — — —

Substandard (risk rating 7) — — — — — — —

Doubtful (risk rating 8) — — — — — — —

Total Construction 1,310 5,915 3,219 1,046 — — 11,490

Current period gross write-offs — — — — — — —

Home Equity Revolving and Term

Pass (risk rating 1-5) 1,472 10,440 2,194 1,453 445 1,735 17,739

Special Mention (risk rating 6) — — — — — — —

Substandard (risk rating 7) — — — — — 185 185

Doubtful (risk rating 8) — — — — — — —

Total Home Equity Revolving and Term 1,472 10,440 2,194 1,453 445 1,920 17,924

Current period gross write-offs — — — — — — —

Pass (risk rating 1-5) 190 — — — — 1 191

Special Mention (risk rating 6) — — — — — — —

Substandard (risk rating 7) — — — — — — —

Doubtful (risk rating 8) — — — — — — —

Total Consumer 190 — — — — 1 191

Current period gross write-offs — 6 7 11 2 11 37

Total loans $ 75,974 $ 405,444 $ 330,936 $ 187,259 $ 96,953 $ 258,172 $ 1,354,738

Loss Recognition:

5 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 nine months and quarter ended September 30, 2023:

The following table presents ACL activity by class for the three months ended March 31, 2024:

Dollars in thousands Commercial Municipal Residential Home Equity Consumer Total

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

For the three months ended March 31, 2024

Beginning balance $ 4,633 $ 4,285 $ 1,978 $ 5,001 $ 1,318 $ — $ 334 $ 4,991 $ 618 $ 626 $ 246 $ 24,030

Charge offs — — — — — — — — — — ( 96 ) ( 96 )

Recoveries 100 — — 23 — — — 25 — 3 23 174

Provision (credit) 447 ( 20 ) ( 1,158 ) 59 189 392 ( 140 ) 338 ( 56 ) 48 — 99

Ending balance $ 5,180 $ 4,265 $ 820 $ 5,083 $ 1,507 $ 392 $ 194 $ 5,354 $ 562 $ 677 $ 173 $ 24,207

The following table presents ACL activity by class for the year ended December 31, 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 nine months ended September 30, 2023

For the year ended December 31, 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 $ 4,633 $ 4,285 $ 1,978 $ 5,001 $ 1,318 $ 334 $ 4,991 $ 618 $ 626 $ 246 $ — $ 24,030

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

The following table presents ACL activity by class for the three months ended March 31, 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 three months ended March 31, 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

Charge offs ( 39 ) — — — — — — — — ( 37 ) — ( 76 )

Recoveries — — — 2 — — 2 — 4 43 — 51

Provision (credit) ( 209 ) ( 63 ) 133 92 ( 35 ) ( 23 ) 51 ( 33 ) ( 21 ) 22 — ( 161 )

Provision 79 107 20 94 22 13 169 15 26 5 — 550

Impact of adopting ASC 326 ( 1,686 ) 4,315 943 1,645 1,184 132 1,878 735 ( 456 ) ( 802 ) ( 1,678 ) 6,210

Ending balance $ 4,470 $ 4,422 $ 1,784 $ 4,838 $ 1,206 $ 307 $ 4,608 $ 949 $ 603 $ 271 $ — $ 23,458

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:

As of March 31, 2024, 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 :

1 unchanged sentence

• Commercial Real Estate Owner Occupied:

FOMC median forecasts of national unemployment and change in national GDP

FOMC median forecasts of national unemployment and change in national real GDP

• Commercial Real Estate Non-Owner Occupied:

FOMC median forecasts of national unemployment and change in national GDP

FOMC median forecasts of national unemployment and change in national real GDP

• Commercial Construction:

FOMC median forecasts of national unemployment and change in national GDP

FOMC median forecasts of national unemployment and change in national real GDP

• Commercial & Industrial:

FOMC median forecasts of national unemployment and change in national GDP

FOMC median forecasts of national unemployment and change in national real GDP

• Commercial Multifamily:

FOMC median forecast of national unemployment and Case-Shiller National Home Price Index

FOMC median forecasts of national unemployment and change in national GDP

FOMC median forecast of national unemployment

• Commercial Agriculture:

FOMC median forecasts of national unemployment and change in national real GDP

Probability of default is measured based upon an index supplied by a nationally recognized ratings agency

• Residential Real Estate Term:

FOMC median forecasts of national unemployment and change in national GDP

FOMC median forecasts of national unemployment and change in national real GDP

• Residential Real Estate Construction:

FOMC median forecast of national unemployment

FOMC median forecast of national unemployment and change in national real GDP

• Home Equity Revolving & Term:

FOMC median forecasts of national unemployment and change in national GDP

FOMC median forecasts of national unemployment and change in national real GDP

Reasonable and supportable forecast period:

5 unchanged sentences

Qualitative factors:

The ACL on loans estimate incorporated various qualitative factors into the calculation such as changes in lending policies, changes in the nature and volume and terms of loans, changes in the experience, depth and ability of lending management, and economic factors not captured in the quantitative model.

The following table presents allowance for loan losses activity by class for the year ended December 31, 2022:

Dollars in thousands Commercial Municipal Residential Home Equity Line of Credit Consumer Unallocated Total

Real Estate Construction Other Term Construction

For the year ended December 31, 2022

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

Charge offs — — 309 — 8 — 29 412 — 758

Recoveries 20 — 13 — 29 — 4 144 — 210

Provision (credit) 729 75 563 5 ( 195 ) 51 129 497 ( 104 ) 1,750

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 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 nine months ended September 30, 2022

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

Charge offs — — 272 — — — 29 318 — 619

Recoveries 16 — 11 — 27 — 3 128 — 185

Provision (credit) 192 375 445 3 ( 213 ) 20 94 229 155 1,300

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

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

Charge offs — — 229 — — — — 31 — 260

Recoveries ( 1 ) — 9 — 16 — 2 20 — 46

Provision (credit) 96 ( 30 ) 286 3 ( 61 ) ( 23 ) 25 17 87 400

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

Note 5 – Stock-Based Compensation

4 unchanged sentences

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

As of September 30, 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:

As of March 31, 2024, 131,419 shares of restricted stock had been granted under the 2020 Plan, of which 88,268 shares remain restricted as of March 31, 2024 as detailed in the following table:

Granted Vesting Term

6 unchanged sentences

2024 2.0 2,119 1.8

2024 1.0 2,403 0.8

The compensation cost related to these non-vested restricted stock grants is $ 2,569,000 and is recognized over the vesting terms of each grant.

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.

In the three months ended March 31, 2024, $ 231,000 of expense was recognized for these restricted shares, leaving $ 1,486,000 in unrecognized expense as of March 31, 2024.

In the three months ended March 31, 2023, $ 184,000 of expense was recognized for restricted shares, leaving $ 1,501,000 in unrecognized expense as of March 31, 2023.

Note 6 – Common Stock

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

Proceeds from sale of common stock totaled $ 204,000 and $ 212,000 for the three months ended March 31, 2024 and 2023, respectively.

Note 7 – Earnings Per Share

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 nine months ended September 30, 2023

Net income as reported $ 22,839,000

Income available to common shareholders 22,839,000 10,993,406 $ 2.08

Effect of dilutive securities:

restricted stock 84,089

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

For the nine months ended September 30, 2022

Net income as reported $ 29,793,000

Income available to common shareholders 29,793,000 10,927,920 $ 2.73

Effect of dilutive securities:

restricted stock 98,651

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 September 30, 2023 and 2022:

The following table sets forth the computation of basic and diluted EPS for the three months ended March 31, 2024 and 2023:

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

For the quarter ended September 30, 2023

For the three months ended March 31, 2024

Net income as reported $ 6,021,000

3 unchanged sentences

Income available to common shareholders plus assumed conversions $ 6,021,000 11,119,821 $ 0.54

For the quarter ended September 30, 2022

For the three months ended March 31, 2023

Net income as reported $ 7,971,000

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 $ 826,000 and $ 752,000 for the nine months ended September 30, 2023 and 2022, respectively.

The expense related to the 401(k) plan was $ 315,000 and $ 326,000 for the three months ended March 31, 2024 and 2023, 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 $ 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.

The expense of these supplemental retirement benefits was $ 37,000 and $ 41,000 for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, the associated accrued liability included in other liabilities in the balance sheet was $ 2,629,000 compared to $ 2,664,000 and $ 2,862,000 at December 31, 2023 and March 31, 2023, respectively.

Postretirement Benefit Plans

6 unchanged sentences

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

At or for the nine months ended September 30,

At or for the three months ended March 31,

Change in benefit obligation

8 unchanged sentences

The following table sets forth the net periodic pension cost:

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

2023 2022 2023 2022

For the three months ended March 31,

Components of net periodic benefit cost

2 unchanged sentences

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

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

March 31, 2024 December 31, 2023 March 31, 2023

Unamortized net actuarial gain $ 384,000 $ 384,000 $ 345,000

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 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

The following table summarizes activity in the unrealized gain or loss on available for sale securities included in OCI for the three months ended March 31, 2024 and 2023.

For the three months ended March 31,

Balance at beginning of period $ ( 39,575,000 ) $ ( 44,718,000 )

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 )

Unrealized (losses) gains arising during the period ( 4,102,000 ) 5,292,000

Related deferred taxes 861,000 ( 1,111,000 )

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 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

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 three months ended March 31, 2024 and 2023.

For the three months ended March 31,

Balance at beginning of period $ ( 56,000 ) $ ( 64,000 )

3 unchanged sentences

Balance at end of period $ ( 54,000 ) $ ( 60,000 )

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

The following table presents the effect of the Company's derivative financial instruments included in OCI for the three months ended March 31, 2024 and 2023.

For the three months ended March 31,

Balance at beginning of period $ 300,000 $ 544,000

Unrealized gains on cash flow hedging derivatives arising during the period 1,096,000 633,000 924,000 448,000

Unrealized gains (losses) on cash flow hedging derivatives arising during the period 551,000 ( 3,463,000 )

Related deferred taxes ( 116,000 ) 727,000

1 unchanged sentence

Balance at end of period $ 735,000 $ ( 2,192,000 )

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.

There was no activity in the unrealized gain or loss on postretirement benefits included in OCI for the three months ended March 31, 2024 and 2023.

Note 10 - Financial Derivative Instruments

5 unchanged sentences

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.

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

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

3 unchanged sentences

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

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

March 31, 2024 December 31, 2023 March 31, 2023

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

5 unchanged sentences

04/27/2022 04/27/2024 USD-SOFR-COMPOUND 2.619 % Other Assets 10,000,000 21,000 10,000,000 86,000 10,000,000 209,000

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

01/10/2023 01/01/2026 USD-SOFR-OIS COMPOUND 3.836 % Other (Liabilities) Assets 75,000,000 910,000 75,000,000 272,000 75,000,000 ( 196,000 )

$ 85,000,000 $ 931,000 $ 95,000,000 $ 380,000 $ 105,000,000 $ 322,000

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 — — — —

03/08/2023 03/01/2026 USD-SOFR-OIS COMPOUND 4.712 % Other Liabilities $ 40,000,000 $ ( 126,000 ) $ 40,000,000 $ ( 581,000 ) $ 40,000,000 $ ( 1,062,000 )

03/08/2023 03/01/2027 USD-SOFR-OIS COMPOUND 4.402 % Other Liabilities 30,000,000 ( 132,000 ) 30,000,000 ( 598,000 ) 30,000,000 ( 958,000 )

03/08/2023 03/01/2028 USD-SOFR-OIS COMPOUND 4.189 % Other Liabilities 30,000,000 ( 127,000 ) 30,000,000 ( 678,000 ) 30,000,000 ( 1,076,000 )

07/12/2023 08/01/2025 USD-SOFR-OIS COMPOUND 4.703 % Other Assets 50,000,000 72,000 50,000,000 ( 292,000 ) — —

7 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 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

At March 31, 2024 and December 31, 2023, there were seven customer loan swap arrangements in place.

This compares to six customer loan swap arrangements in place at March 31, 2023.

The details of the Bank's customer loan swap arrangements are detailed below:

March 31, 2024 December 31, 2023 March 31, 2023

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

Pay Fixed, Receive Variable Other Assets 7 $ 40,593,000 $ 4,778,000 6 $ 36,286,000 $ 4,259,000 6 $ 37,129,000 $ 4,098,000

Pay Fixed, Receive Variable Other Liabilities — — — 1 5,048,000 ( 89,000 ) — — —

7 40,593,000 4,778,000 7 41,334,000 4,170,000 6 37,129,000 4,098,000

Receive Fixed, Pay Variable Other Assets — — — 1 5,048,000 89,000 — — —

Receive Fixed, Pay Variable Other Liabilities 7 40,593,000 ( 4,778,000 ) 6 36,286,000 ( 4,259,000 ) 6 37,129,000 ( 4,098,000 )

4 unchanged sentences

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

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

Cessation of LIBOR

The Company adopted SOFR as its replacement reference rate index for each of the customer loan interest rate swap contracts that were tied to a LIBOR tenor.

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 completed in the second quarter 2023.

At March 31, 2024, there was no collateral posted on its swap contracts or required amount to be pledged.

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

As of March 31, 2024, the prepayment assumption using the PSA model was 101, which translates into an anticipated prepayment rate of 4.85 %.

The discount rate is 9.75 %.

2 unchanged sentences

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

For the nine months ended September 30, 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.

For the three months ended March 31, 2024 and 2023, servicing rights capitalized totaled $ 4,000 and $ 7,000 , respectively.

Servicing rights amortized for the three-month periods ended March 31, 2024 and 2023 were $ 84,000 and $ 98,000 , respectively.

The fair value of servicing rights was $ 3,423,000 , $ 3,583,000 , and $ 3,505,000 at March 31, 2024, December 31, 2023 and March 31, 2023, respectively.

The Bank serviced loans for others totaling $ 315,414,000 , $ 321,178,000 , and $ 337,585,000 at March 31, 2024, December 31, 2023, and March 31, 2023, respectively.

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

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

March 31, 2024 December 31, 2023 March 31, 2023

Mortgage servicing rights $ 8,705,000 $ 8,702,000 $ 8,661,000

6 unchanged sentences

Note 13 - Certificates of Deposit

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

The following table represents the breakdown of certificates of deposit at March 31, 2024 and 2023, and at December 31, 2023:

March 31, 2024 December 31, 2023 March 31, 2023

Certificates of deposit < $100,000 $ 655,576,000 $ 646,818,000 $ 592,052,000

9 unchanged sentences

For example, securities available for sale are recorded at fair value on a recurring basis.

Other assets, such as other real estate owned and individually analyzed loans, are recorded at fair value on a nonrecurring basis using the lower of cost or market methodology to determine impairment of individual assets.

Other assets, such as other real estate owned and IAL, are recorded at fair value on a nonrecurring basis using the lower of cost or market methodology to determine impairment of individual assets.

The Company groups assets and liabilities, which are recorded at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

21 unchanged sentences

However, because there is no market for many of these financial instruments, Management has no basis to determine whether the fair value presented above would be indicative of the value negotiated in an actual sale.

As such, the Company classifies loans as Level 3, except for certain individually analyzed loans.

Fair values of individually analyzed loans are based on estimated cash flows and are discounted using a rate commensurate with the risk associated with the estimated cash flows, or if collateral dependent, discounted to the appraised value of the collateral as determined by reference to sale prices of similar properties, less costs to sell.

As such, the Company classifies individually analyzed loans for which a specific reserve results in a fair value measure as Level 2.

All other individually analyzed loans are classified as Level 3.

As such, the Company classifies loans as Level 3, except for certain IAL.

Fair values of IAL are based on estimated cash flows and are discounted using a rate commensurate with the risk associated with the estimated cash flows, or if collateral dependent, discounted to the appraised value of the collateral as determined by reference to sale prices of similar properties, less costs to sell.

As such, the Company classifies IAL for which a specific reserve results in a fair value measure as Level 2.

All other IAL are classified as Level 3.

Other Real Estate Owned

17 unchanged sentences

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

As of September 30, 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 March 31, 2024 and 2023, and December 31, 2023, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives due to collateral postings.

Customer Loan Derivatives

12 unchanged sentences

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

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

At September 30, 2023

The following tables present the balances of assets and liabilities that were measured at fair value on a recurring basis as of March 31, 2024, December 31, 2023 and March 31, 2023.

At March 31, 2024

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total assets $ — $ 280,232,000 $ — $ 280,232,000

At September 30, 2023

At March 31, 2024

Level 1 Level 2 Level 3 Total

16 unchanged sentences

Level 1 Level 2 Level 3 Total

Interest rate swap agreements $ — $ 2,149,000 $ — $ 2,149,000

Customer loan interest swap agreements $ — $ 4,348,000 $ — $ 4,348,000

Total liabilities $ — $ 6,497,000 $ — $ 6,497,000

At September 30, 2022

At March 31, 2023

Level 1 Level 2 Level 3 Total

9 unchanged sentences

Total assets $ — $ 292,858,000 $ — $ 292,858,000

At September 30, 2022

At March 31, 2023

Level 1 Level 2 Level 3 Total

Interest rate swap agreements $ — $ 3,293,000 $ — $ 3,293,000

Customer loan interest swap agreements $ — $ 4,098,000 $ — $ 4,098,000

3 unchanged sentences

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

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 $ 19,000 , $ 135,000 and $ 151,000 at September 30, 2023, December 31, 2022, and September 30, 2022, respectively.

At September 30, 2023

Only collateral-dependent IAL with a related specific ACL or a partial charge off are included in IAL for purposes of fair value disclosures.

There were no collateral-dependent IAL with a related specific ACL or a partial charge off at March 31, 2024.

IAL below are presented net of specific allowances of $ 19,000 and $ 132,000 at December 31, 2023, and March 31, 2023, respectively.

At March 31, 2024

Level 1 Level 2 Level 3 Total

Mortgage servicing rights $ — $ 3,423,000 $ — $ 3,423,000

Individually analyzed loans — 285,000 — 285,000

Total assets $ — $ 3,423,000 $ — $ 3,423,000

4 unchanged sentences

Total assets $ — $ 3,868,000 $ — $ 3,868,000

At September 30, 2022

At March 31, 2023

Level 1 Level 2 Level 3 Total

15 unchanged sentences

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

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

The carrying amount and estimated fair values for financial instruments as of March 31, 2024 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

22 unchanged sentences

Financial assets

Securities to be held to maturity $ 393,896,000 $ 339,011,000 $ — $ 339,011,000 $ —

Loans (net of allowance for loan losses)

Securities to be held to maturity (net of allowance for credit losses) $ 385,235,000 $ 338,570,000 $ — $ 338,570,000 $ —

Loans (net of allowance for credit losses)

Real estate 699,537,000 658,732,000 — — 658,732,000

15 unchanged sentences

Total borrowed funds 69,652,000 69,536,000 — 69,536,000 —

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

The carrying amount and estimated fair values for financial instruments as of March 31, 2023 were as follows:

Carrying value Estimated fair value Level 1 Level 2 Level 3

Financial assets

Securities to be held to maturity $ 381,906,000 $ 313,796,000 $ — $ 313,796,000 $ —

Loans (net of allowance for loan losses)

Securities to be held to maturity (net of allowance for credit losses) $ 391,845,000 $ 344,053,000 $ — $ 344,053,000 $ —

Loans (net of allowance for credit losses)

Real estate 660,789,000 630,944,000 — — 630,944,000

16 unchanged sentences

Note 16 – Impact of Recently Issued Accounting Standards

Adoption of New Accounting Standards:

On January 1, 2023, the Company adopted ASU No.

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

Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the CECL methodology.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities.

It also applies to off-balance sheet credit exposures not accounted for as loans, such as loan commitments, standby letters of credit, certain lines of credit.

In addition, ASC 326 made changes to the accounting for available-for-sale debt securities.

One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets, measured at amortized cost, and off-balance-sheet credit exposures.

Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

On adoption, the Company recognized an increase in the allowance for credit losses on held to maturity securities of $ 438,000 , an increase to the allowance for credit losses on loans of $ 6,210,000 , and an increase to the reserve for off-balance sheet commitments of $ 1,297,000 .

The net, after-tax impact of the increases of the allowances for credit losses and reserve for off-balance sheet commitments was a net decrease to retained earnings of $ 6,277,000 shown in the Consolidated Statements of Changes in Stockholders Equity.

Additional details can be found in Notes 3 and 4.

In March 2023, the FASB issued ASU No.

4 unchanged sentences

The ASU is effective beginning in 2024 for calendar year-end public business entities.

Adoption is not expected to have a material impact on the Company's consolidated financial statements.

Adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This ASU requires public business entities, such as the Company, to provide enhanced disclosures on the amount of income taxes paid disaggregated by type and jurisdiction.

Adoption is required for annual periods beginning after December 15, 2024 and is not expected to have a material impact on the Company's consolidated financial statements.

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

What changed 10-Q

Item 1. Financial Statements