What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 211 added, 287 removed, 780 unchanged (39% of the section changed)

3 unchanged sentences

(dollars in thousands, except share and per share data)

September 30,

Cash and due from banks

38 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

24 unchanged sentences

Amortization of intangibles

Merger related

Total other expenses

8 unchanged sentences

Three Months Ended

September 30,

Other comprehensive income:

Investment securities available for sale:

Unrealized holding gain (loss)

Unrealized holding (loss) gain

Reclassification of investment securities gains

2 unchanged sentences

Comprehensive Income

Nine Months Ended

September 30,

Other comprehensive income

Investment securities available for sale:

Unrealized holding gain

Reclassification of investment securities gains

recognized in net income

Other comprehensive income

Comprehensive Income

See accompanying notes to the unaudited consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Nine Months Ended September 30, 2020 and 2019

Three Months Ended March 31, 2021 and 2020

( dollars in thousands, except share and per share data)

2 unchanged sentences

Balance, December 31, 2020

Other comprehensive income

Cash dividends declared ($ 0.75 per share)

Acquisition of UpState New York Bancorp, Inc.

Acquisition of treasury stock

Compensation expense related to restricted stock

Stock options exercised

Compensation expense related to stock options

Balance, September 30, 2020

Treasury Stock

Comprehensive

Balance, December 31, 2018

Other comprehensive loss

Cash dividends declared ($ 0.26 per share)

Compensation expense related to restricted stock

Acquisition of treasury stock

Stock options exercised

Compensation expense related to stock options

Balance, September 30, 2019

NORWOOD FINANCIAL CORP

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Three Months Ended September 30, 2020 and 2019

( dollars in thousands, except share and per share data)

Treasury Stock

Comprehensive

Income (Loss)

Balance, June 30, 2020

Other comprehensive loss

Cash dividends declared ($ 0.25 per share)

Acquisition of UpState New York Bancorp, Inc.

Compensation expense related to restricted stock

1 unchanged sentence

Compensation expense related to stock options

Balance, September 30, 2020

Balance, March 31, 2021

Treasury Stock

Comprehensive

Balance, June 30, 2019

Balance, December 31, 2019

Other comprehensive income

3 unchanged sentences

Compensation expense related to stock options

Balance, September 30, 2019

Balance, March 31, 2020

See accompanying notes to the unaudited consolidated financial statements.

2 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

22 unchanged sentences

Net increase in loans

Proceeds from bank-owned life insurance policies

Purchase of premises and equipment

Proceeds from sales of foreclosed real estate owned

Proceeds from sales of bank premises and equipment

Acquisition, net of cash and cash equivalents acquired

Net cash used in investing activities

Net cash (used in) provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

2 unchanged sentences

Repayments of other borrowings

Proceeds from other borrowings

Stock options exercised

8 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental Disclosures of Cash Flow Information

5 unchanged sentences

Dividends payable

Merger with UpState New York Bancorp, Inc.

Noncash assets acquired:

Securities available-for-sale

Regulatory stock

Premises and equipment, net

Accrued interest receivable

Deferred tax assets

Liabilities assumed:

Time deposits

Deposits other than time deposits

Accrued interest payable

Other liabilities

Net Noncash Assets Acquired

Cash Acquired

See accompanying notes to the unaudited consolidated financial statements.

8 unchanged sentences

The financial statements reflect, in the opinion of management, all normal, recurring adjustments necessary to present fairly the consolidated financial position and results of operations of the Company.

The operating results for the three-month and nine-month periods ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or any other future interim period.

The operating results for the three-months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other future interim period.

Revenue Recognition

Under ASC Topic 606, management determined that the primary sources of revenue emanating from interest and dividend income on loans and investments along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans sold and earnings on bank-owned life insurance are not within the scope of this Topic.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and nine months ended September 30:

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended March 31:

Three months ended

September 30,

(dollars in thousands)

16 unchanged sentences

Total Noninterest Income

Nine months ended

September 30,

(dollars in thousands)

Noninterest Income

In-scope of Topic 606:

Service charges on deposit accounts

Overdraft fees

Safe deposit box rental

Loan related service fees

Debit card fees

Fiduciary activities

Commissions on mutual funds and annuities

Noninterest Income ( in-scope of Topic 606 )

Out-of-scope of Topic 606:

Net realized gains on sales of securities

Loan servicing fees

Gains on sales of loans

Earnings on and proceeds from bank-owned life insurance

Noninterest Income ( out-of-scope of Topic 606 )

Total Noninterest Income

Earnings Per Share

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Weighted average shares outstanding

4 unchanged sentences

Diluted EPS weighted average shares outstanding

For the three and nine month periods ended September 30, 2020, there were 112,600 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of the Company’s common stock of $ 24.32 per share as of September 30, 2020.

For the three and nine month periods ending September 30, 2019, there were 60,650 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of the Company’s common stock of $ 31.61 per share on September 30, 2019.

For the three month period ended March 31, 2021, there were 114,100 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of the Company’s common stock of $ 26.61 per share as of March 31, 2021.

As of March 31, 2020, there were 82,600 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of the Company’s common stock of $ 26.70 per share on March 31, 2020.

Stock-Based Compensation

No awards were granted during the nine-month period ended September 30, 2020.

As of September 30, 2020, there was $ 51,000 of total unrecognized compensation cost related to non-vested options granted in 2019 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2020.

Compensation costs related to stock options amounted to $ 153,000 and $ 156,000 during the nine-month periods ended September 30, 2020 and 2019, respectively.

A summary of the Company’s stock option activity for the nine-month period ended September 30, 2020 is as follows:

No awards were granted during the three-month period ended March 31, 2021.

As of March 31, 2021, there was $ 160,000 of total unrecognized compensation cost related to non-vested options granted in 2020 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2021.

Compensation costs related to stock options amounted to $ 54,000 and $ 51,000 during the three-month periods ended March 31, 2021 and 2020, respectively.

A summary of the Company’s stock option activity for the three-month period ended March 31, 2021 is as follows:

Average Exercise

3 unchanged sentences

Outstanding at January 1, 2021

Outstanding at September 30, 2020

Exercisable at September 30, 2020

Outstanding at March 31, 2021

Exercisable at March 31, 2021

Intrinsic value represents the amount by which the market price of the stock on the measurement date exceeded the exercise price of the option.

The market price was $ 24.32 per share as of September 30, 2020 and $ 38.90 per share as of December 31, 2019.

A summary of the Company’s restricted stock activity for the nine-month periods ended September 30, 2020 and 2019 is as follows:

The market price was $ 26.61 per share as of March 31, 2021 and $ 26.17 per share as of December 31, 2020.

A summary of the Company’s restricted stock activity for the three-month periods ended March 31, 2021 and 2020 is as follows:

Weighted-Average

3 unchanged sentences

Non-vested, January 1,

Non-vested, September 30,

The expected future compensation expense relating to the 36,195 shares of non-vested restricted stock outstanding as of September 30, 2020 is $ 895,000 .

Non-vested, March 31,

The expected future compensation expense relating to the 35,235 shares of non-vested restricted stock outstanding as of March 31, 2021 is $ 998,000 .

This cost will be recognized over the remaining vesting period of 4.75 years.

Compensation costs related to restricted stock amounted to $ 250,000 and $ 217,000 during the nine-month periods ended September 30, 2020 and 2019, respectively.

Compensation costs related to restricted stock amounted to $ 84,000 during the three-month periods ended March 31, 2021 and 2020.

Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in accumulated other comprehensive income (loss) (in thousands) by component net of tax for the three and nine months ended September 30, 2020 and 2019:

Unrealized gains (losses) on

available for sale

securities (a)

Balance as of June 30, 2020

Other comprehensive loss before reclassification

Amount reclassified from accumulated other comprehensive loss

Total other comprehensive loss

Balance as of September 30, 2020

Unrealized gains (losses) on

available for sale

securities (a)

Balance as of June 30, 2019

Other comprehensive income before reclassification

Amount reclassified from accumulated other comprehensive income

Total other comprehensive income

Balance as of September 30, 2019

The following table presents the changes in accumulated other comprehensive income (loss) (in thousands) by component net of tax for the three months ended March 31, 2021 and 2020:

Unrealized gains (losses) on

2 unchanged sentences

Balance as of December 31, 2020

Other comprehensive income before reclassification

Other comprehensive loss before reclassification

Amount reclassified from accumulated other comprehensive income

Total other comprehensive income

Balance as of September 30, 2020

Total other comprehensive loss

Balance as of March 31, 2021

Unrealized gains (losses) on

5 unchanged sentences

Total other comprehensive income

Balance as of September 30, 2019

Balance as of March 31, 2020

(a) All amounts are net of tax.

Amounts in parentheses indicate debits.

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) (in thousands) for the three and nine months ended September 30, 2020 and 2019:

The following table presents significant amounts reclassified out of each component of accumulated other comprehensive income (loss) (in thousands) for the three months ended March 31, 2021 and 2020:

Amount Reclassified

From Accumulated

Affected Line Item in

Comprehensive

Details about other comprehensive income

Income (Loss) (a)

Affected Line Item in

Three months ended

September 30,

Unrealized gains on available for sale securities

Net realized gains on sales of securities

Income tax expense

Nine months ended

September 30,

Details about other comprehensive income

Unrealized gains on available for sale securities

10 unchanged sentences

(in thousands)

September 30,

Commitments to grant loans

10 unchanged sentences

The credit risk involved in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers.

The Bank, generally, holds

collateral and/or personal guarantees supporting these commitments.

The Bank, generally, holds collateral and/or personal guarantees supporting these commitments.

Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees.

The current amount of the liability as of September 30, 2020 for guarantees under standby letters of credit issued is not material.

The current amount of the liability as of March 31, 2021 for guarantees under standby letters of credit issued is not material.

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale were as follows:

September 30, 2020

March 31, 2021

(In Thousands)

Available for Sale:

Government agencies

States and political subdivisions

6 unchanged sentences

Available for Sale:

Government agencies

States and political subdivisions

4 unchanged sentences

The following tables show the Company’s investments’ gross unrealized losses and fair value aggregated by length of time that individual securities have been in a continuous unrealized loss position (in thousands):

September 30, 2020

March 31, 2021

Less than 12 Months

3 unchanged sentences

Unrealized Losses

Government agencies

States and political subdivisions

Mortgage-backed securities-government sponsored entities

5 unchanged sentences

Unrealized Losses

States and political subdivisions

Government agencies

Mortgage-backed securities-government sponsored entities

At September 30, 2020, the Company had eight debt securities in an unrealized loss position in the less than twelve months category and no debt securities in the twelve months or more category.

At March 31, 2021, the Company had 53 debt securities in an unrealized loss position in the less than twelve months category and no debt securities in the twelve months or more category.

In Management’s opinion the unrealized losses reflect changes in interest rates subsequent to the acquisition of specific securities.

1 unchanged sentence

Management believes that all unrealized losses represent temporary impairment of the securities as the Company does not have the intent to sell the securities and it is more likely than not that it will not have to sell the securities before recovery of its cost basis.

The amortized cost and fair value of debt securities as of September 30, 2020 by contractual maturity are shown below.

The amortized cost and fair value of debt securities as of March 31, 2021 by contractual maturity are shown below.

Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without call or prepayment penalties.

8 unchanged sentences

Gross realized gains and gross realized losses on sales of securities available for sale were as follows (in thousands):

Ended September 30,

Ended March 31,

Gross realized gains

2 unchanged sentences

Proceeds from sales of securities

Securities with a carrying value of $ 189,346,000 and $ 157,233,000 at September 30, 2020 and December 31, 2019, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

Securities with a carrying value of $ 259,532,000 and $ 199,361,000 at March 31, 2021 and December 31, 2020, respectively, were pledged to secure public deposits, securities sold under agreements to repurchase and for other purposes as required or permitted by law.

Loans Receivable and Allowance for Loan Losses

Set forth below is selected data relating to the composition of the loan portfolio at the dates indicated (dollars in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

7 unchanged sentences

Net loans receivable

During 2020 the Company participated in the Paycheck Protection Program (“PPP”), administered directly by the United States Small Business Administration (“SBA”).

During 2020 and 2021 the Company participated in the Paycheck Protection Program (“PPP”), administered directly by the United States Small Business Administration (“SBA”).

The PPP provides loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during the COVID-19 emergency.

As of September 30, 2020, the Company had outstanding principal balances of $ 95,035,000 in PPP loans.

The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs,

rent, and utility costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels.

PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company.

As of March 31, 2021 and December 31, 2020, the Company had outstanding principal balances of $ 119.3 million and $ 95.0 million, respectively, in PPP loans.

The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels.

PPP loans deemed eligible

for forgiveness by the SBA will be repaid by the SBA to the Company.

As of March 31, 2021, $ 30.0 million of PPP loans have been forgiven.

PPP loans are included in the Commercial loan category.

2 unchanged sentences

The following table presents information regarding loans acquired and accounted for in accordance with ASC 310-30 (in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

6 unchanged sentences

For loans acquired without a deterioration of credit quality, losses incurred will result in adjustments to the allowance for loan losses through the allowance for loan loss adequacy calculation.

Changes in the accretable yield for purchased credit impaired loans for the nine-months ended September 30, 2019 and 2020, were as follows:

Changes in the accretable yield for purchased credit impaired loans for the three-months ended March 31, 2021 and 2020, were as follows (in thousands):

Balance at beginning of period

20 unchanged sentences

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in foreclosed real estate owned on the Consolidated Balance Sheets.

As of September 30, 2020 and December 31, 2019, foreclosed real estate owned totaled $ 965,000 and $ 1,556,000 , respectively.

During the nine months ended September 30, 2020, there were no additions to the foreclosed real estate category.

The Co mpany disposed of one property that was previously transferred to foreclosed real estate owned with a carrying value of $ 591,000 through the sale of the property.

As of September 30, 2020, the Company has initiated formal foreclosure proceedings on three properties classified as consumer residential mortgages with an aggregate carrying value of $ 440,000 .

As of March 31, 2021 and December 31, 2020, foreclosed real estate owned totaled $ 844,000 and $ 965,000 , respectively.

During the three months ended March 31, 2021, there were no additions to

the foreclosed real estate category.

The Co mpany disposed of a parcel of the one property that was previously transferred to foreclosed real estate owned with a carrying value of $ 121,000 through the sale of the property.

As of March 31, 2021, the Company has initiated formal foreclosure proceedings on five properties classified as consumer residential mortgages with an aggregate carrying value of $ 1,061,000 .

The following table shows the amount of loans in each category that were individually and collectively evaluated for impairment at the dates indicated:

Real Estate Loans

September 30, 2020

March 31, 2021

(In thousands)

3 unchanged sentences

Real Estate Loans

December 31, 2019

(In thousands)

December 31, 2020

Individually evaluated for impairment

2 unchanged sentences

The following table includes the recorded investment and unpaid principal balances for impaired loans with the associated allowance amount, if applicable.

September 30, 2020

March 31, 2021

(in thousands)

1 unchanged sentence

Real Estate Loans:

Commercial Loans

With an allowance recorded:

Commercial Loans

Real Estate Loans:

Commercial Loans

Total Impaired Loans

3 unchanged sentences

Real Estate Loans:

Commercial Loans

With an allowance recorded:

1 unchanged sentence

Real Estate Loans:

Commercial Loans

Total Impaired Loans

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the three-month periods ended September 30, 2020 and 2019, respectively (in thousands):

Average Recorded

Interest Income

Real Estate Loans:

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the nine-month periods ended September 30, 2020 and 2019, respectively (in thousands):

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the three-month periods ended March 31, 2021 and 2020, respectively (in thousands):

Average Recorded

1 unchanged sentence

Real Estate Loans:

Commercial Loans

Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of financial difficulties experienced by the borrower, who could not obtain comparable terms from alternate financing sources.

As of September 30, 2020 and December 31, 2019, troubled debt restructured loans totaled $ 91,000 and $ 99,000 , respectively , with no specific reserve.

For the nine-month period ended September 30, 2020 and 2019, there were no new loans identified as troubled debt restructurings.

As of March 31, 2021 and December 31, 2020, troubled debt restructured loans totaled $ 75,000 , with no specific reserve.

For the three-month period ended March 31, 2021 and 2020, there were no new loans identified as troubled debt restructurings.

During 2020, the Company recognized a charge-off $ 20,000 on a loan that was previously identified as a troubled debt restructuring.

The loan was transferred to foreclosed real estate during the first quarter of 2019 with a carrying value of $ 608,000 .

On April 7, 2020, federal banking regulators issued a revised interagency statement that included guidance on their approach for the accounting of loan modifications in light of the economic impact of the COVID-19 pandemic.

11 unchanged sentences

The Company’s Loan Review Department is responsible for the timely and accurate risk rating of the loans on an ongoing basis.

Every credit which must be approved by Loan Committee or the Board of Directors is assigned a risk rating at time of consideration.

Every credit which must be approved by Loan Committee or the Board of

Directors is assigned a risk rating at time of consideration.

Loan Review also annually reviews relationships of $ 1,500,000 and over to assign or re-affirm risk ratings.

Loans in the Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020

The following table presents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard, Doubtful and Loss within the internal risk rating system as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021

Commercial real estate loans

Agricultural real estate loans

Real estate - agricultural

Commercial loans

2 unchanged sentences

Commercial real estate loans

Real estate - agricultural

Commercial loans

Other agricultural loans

For residential real estate loans, construction loans and consumer loans, the Company evaluates credit quality based on the performance of the individual credits.

The following table presents the recorded investment in the loan classes based on payment activity as of September 30, 2020 and December 31, 2019 (in thousands):

The following table presents the recorded investment in the loan classes based on payment activity as of March 31, 2021 and December 31, 2020 (in thousands):

Nonperforming

September 30, 2020

March 31, 2021

Residential real estate loans

Consumer loans

Consumer loans to individuals

Nonperforming

1 unchanged sentence

Residential real estate loans

Consumer loans

Consumer loans to individuals

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of September 30, 2020 and December 31, 2019 (in thousands):

The following table presents the classes of the loan portfolio summarized by the aging categories of performing loans and nonaccrual loans as of March 31, 2021 and December 31, 2020 (in thousands):

31-60 Days Past Due

3 unchanged sentences

Purchased Credit-Impaired

September 30, 2020

March 31, 2021

Real Estate loans

10 unchanged sentences

Commercial loans

Other agricultural loans

Consumer loans

1 unchanged sentence

When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the allowance.

As of September 30, 2020, the allocation of the allowance pertaining to each major category of loans is higher than the allocation as of December 31, 2019.

This increase is due primarily to an increase in the qualitative factor for economic conditions which worsened as a result of the COVID-19 pandemic.

The increase in the economic factor added $ 2.2 million to the required allowance for loan losses.

As of September 30, 2020, the Company has also added qualitative factors related to the pandemic to capture some of the risk associated with higher-risk industries and to recognize risk related to loans that have been granted deferral of payments due to COVID-19.

At September 30, 2020, the allowance for loan losses includes $ 1.5 million of COVID related factors.

These increases in the required allowance were offset partially by a decrease in the qualitative factor relating to loan growth which decreased by $ 986,000 due to a reduction in loan growth from 8.75 % in 2019 to projected growth of approximately 2.00 % for the year

The 2020 growth excludes growth in Paycheck Protection Program loans which are fully guaranteed by the Small Business Association as well as loans acquired from UpState.

As of March 31, 2021, the allocation of the allowance pertaining to each major category of loans is higher than the allocation as of December 31, 2020.

This increase is due primarily to an increase in the qualitative factors related to Lending Management and External Factors resulting from the resignation of the Company’s Chief Lending Officer.

As of March 31, 2021, the Company has also continued to incorporate qualitative factors related to the pandemic to capture some of the risk associated with higher-risk industries and to recognize risk related to loans that have been granted deferral of payments due to COVID-19.

At March 31, 2021, the allowance for loan losses includes $ 2.3 million of COVID related factors.

The 2021 allowance for loan losses excludes growth in Paycheck Protection Program loans which are fully guaranteed by the Small Business Association as well as loans acquired from UpState which were recorded at fair value.

The following table presents the allowance for loan losses by the classes of the loan portfolio:

4 unchanged sentences

Provision for loan losses

Ending balance, September 30, 2020

Ending balance, March 31, 2021

Ending balance individually evaluated

5 unchanged sentences

Commercial Real Estate

Beginning balance, June 30, 2020

Provision for loan losses

Ending balance, September 30, 2020

(In thousands)

Residential Real Estate

Commercial Real Estate

Beginning balance, December 31, 2019

Provision for loan losses

Ending balance, September 30, 2019

Ending balance, March 31, 2020

Ending balance individually evaluated

2 unchanged sentences

‎ for impairment

(In thousands)

Residential Real Estate

Commercial Real Estate

Beginning balance, June 30, 2019

Provision for loan losses

Ending balance, September 30, 2019

The Company’s primary business activity as of September 30, 2020 was with customers located in northeastern Pennsylvania and the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates.

The Company’s primary business activity as of March 31, 2021 was with customers located in northeastern Pennsylvania and the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates.

Accordingly, the Company has extended credit primarily to commercial entities and individuals in this area whose ability to honor their contracts is influenced by the region’s economy.

As of September 30, 2020, the Company considered its concentration of credit risk to be acceptable.

As of March 31, 2021, the Company considered its concentration of credit risk to be acceptable.

The highest concentrations are in commercial rentals with $ 130.9 million of loans outstanding, or 9.2 % of total loans outstanding, and residential rentals with loans outstanding of $ 115.6 million, or 8.1 % of loans outstanding.

6 unchanged sentences

These variable nonlease components were excluded from the calculation of the present value of the remaining lease payments, therefore, they are not included in other assets and other liabilities on the Consolidated Balance Sheets.

The lease cost associated with the operating leases for the nine-month periods ending September 30, 2020 and 2019, amounted to $ 425,000 and $ 382,000 respectively.

The lease cost associated with the operating leases for the three-month periods ending March 31, 2021 and 2020, amounted to $ 147,000 and $ 140,000 respectively.

Certain of the Company’s leases contain options to renew the lease after the initial term.

1 unchanged sentence

If management concludes that there is reasonable certainty about the renewal option, it is included in the calculation of the remaining term of each applicable lease.

The discount rate utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease.

The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at September 30, 2020.

The discount rate

utilized in calculating the present value of the remaining lease payments for each lease was the Federal Home Loan Bank of Pittsburgh advance rate corresponding to the remaining maturity of the lease.

The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at March 31, 2021.

Weighted-average remaining term

Weighted-average discount rate

The following table presents the undiscounted cash flows due related to operating leases as of September 30, 2020, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:

The following table presents the undiscounted cash flows due related to operating leases as of March 31, 2021, along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets:

Undiscounted cash flows due (in thousands)

15 unchanged sentences

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Recurring Basis

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2020 and December 31, 2019 are as follows:

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2021 and December 31, 2020 are as follows:

Fair Value Measurement Using

Reporting Date

March 31, 2021

(In thousands)

September 30, 2020

Available for Sale:

Government agencies

States and political subdivisions

2 unchanged sentences

sponsored entities

Interest rate derivatives

The fair value of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.

3 unchanged sentences

Internal cash flow models using a present value formula that includes assumptions market participants would use along with indicative exit pricing obtained from broker/dealers (where available) are used to support fair values of certain Level 3 investments, if applicable.

Interest rate derivatives:

The fair value of interest rate derivatives is based on settlement values adjusted for credit risks associated with the counter parties and the Company and observable market interest rate curves.

Assets and Liabilities Required to be Measured and Reported at Fair Value on a Non-Recurring Basis

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2020 and December 31, 2019 are as follows:

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at March 31, 2021 and December 31, 2020 are as follows:

Fair Value Measurement Using Reporting Date

(In thousands)

September 30, 2020

March 31, 2021

Impaired Loans

6 unchanged sentences

Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the lowest level of input that is significant to the fair value measurements.

As of September 30, 2020, the fair value investment in impaired loans was $ 0 since no loans required a specific reserve at period end.

As of December 31, 2019, the fair value investment in impaired loans totaled $ 1,584,000 which included two loans that required a valuation allowance of $ 417,000 since the estimated realizable value of the collateral or the discounted cash flows were not sufficient to cover the recorded investment in the loans.

As of December 31, 2019, the Company had no t recognized any charge-offs against the allowance for loan losses on these impaired loans.

As of March 31, 2021, the fair value investment in impaired loans was $ 2,711,000 which included five loan relationships that did not require a valuation allowance since the estimated realizable value of the collateral exceeded the recorded investment in the loan, and two loan relationships with a value of $ 38,000 that required a specific reserve of $ 38,000 .

As of March 31, 2021, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $ 652,000 over the life of the loans.

As of December 31, 2020, the fair value investment in impaired loans totaled $ 2,662,000 which included six loan relationships that did not require a valuation allowance since either the estimated realizable value of the collateral or the discounted cash flows exceeded the recorded investment in the loan.

As of December 31, 2020, the Company has recognized charge-offs against the allowance for loan losses on these impaired loans in the amount of $ 652,000 over the life of the loans.

There were no loan relationships which required a valuation allowance.

Foreclosed real estate owned (carried at fair value):

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Range (Weighted Average)

September 30, 2020

March 31, 2021

Impaired loans

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Appraisal adjustments(2)

0 %- 100 % ( 10.13 %)

Foreclosed real estate owned

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0 %- 10.59 % ( 9.75 %)

Impaired loans

Present value of future cash flows

Loan discount rate

4.00 - 6.97 % ( 5.55 %)

Probability of default

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Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2020 and December 31, 2019.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at March 31, 2021 and December 31, 2020.

Loans receivable (carried at cost):

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These prices obtained from this active market represent a fair value that is deemed to represent the transfer price if the liability were assumed by a third party.

The estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at September 30, 2020 and December 31, 2019.

The estimated fair values of the Bank’s financial instruments not required to be measured or reported at fair value were as follows at March 31, 2021 and December 31, 2020.

(In thousands)

Fair Value Measurements at September 30, 2020

Fair Value Measurements at March 31, 2021

Carrying Amount

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(1) This financial instrument is carried at cost, which approximates the fair value of the instrument.

Interest Rate Swaps

The Company enters into interest rate swaps that allow our commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement.

Under these agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable-rate into a fixed-rate.

The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement.

The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are not marked to market through earnings.

As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings;

however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820.

There was no effect on earnings in any periods presented.

At March 31, 2021 and December 31, 2020, based upon the swap contract values, the company pledged cash in the amount of $ 350,000 as collateral for its interest rate swaps with a third-party financial institution.

The fair value of the swaps as of March 31, 2021 and December 31, 2020 was $ 334,000 and $ 276,000 , respectively.

Summary information regarding these derivatives is presented below:

(Amounts in thousands)

Notional Amount

March 31, 2021

December 31, 2020

Interest Rate Paid

Interest Rate Received

March 31, 2021

December 31, 2020

Customer interest rate swap

Maturing November, 2030

1 month LIBOR + Margin

Maturing December, 2030

1 month LIBOR + Margin

Third party interest rate swap

Maturing November, 2030

1 month LIBOR + Margin

Maturing December, 2030

1 month LIBOR + Margin

The following table presents the fair values of derivative instruments in the Consolidated Balance Sheet.

(Amounts in thousands)

Balance Sheet Location

March 31, 2021

Interest rate derivatives

Other liabilities

December 31, 2020

Interest rate derivatives

Other liabilities

New and Recently Adopted Accounting Pronouncements

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The income statement will be affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.

With certain exceptions, transition to the new r equirements will be through a cumulative-effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) .

This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

We expect to recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective

but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

With certain exceptions, transition to the new requirements will be through a cumulative-effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted.

This Update is effective for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

We expect to recognize a one-time cumulative-effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment .

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In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

Instead, under the amendments in this Update, an entity should perform

its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;

however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) , which deferred the effective date for ASC 350, Intangibles – Goodwill and Other , for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.

This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits (Topic 715-20).

This Update amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans.

The Update eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year.

The Update also removes the disclosure requirements for the effects of a one percentage point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost, and the benefit obligation for postretirement health care benefits.

This Update is effective for public business entities for fiscal years ending after December 15, 2020, and must be applied on a retrospective basis.

For all other entities, this Update is effective for fiscal years ending after December 15, 2021.

The Update is effective for smaller reporting companies and all other entities for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years .

This Update is not expected to have a significant impact on the Company’s financial statements.

In April 2019, the FASB issued ASU 201 9-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 825), which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance.

Topic 326 , Financial Instruments – Credit Losses , amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

For all other public business entities, the effective date is for fiscal years beginning after December 15, 2020, and for all other entities, the effective date is for fiscal years beginning after December 15, 2021.

Topic 815 , Derivatives and Hedging , amendments are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020.

For entities that have adopted the amendments in Update 2017-12, the effective date is as of the beginning of the first annual period beginning after the issuance of this Update.

Topic 825 , Financial Instruments , amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) .

Furthermore, the ASU provides a one-year deferral of the effective dates of the ASUs on derivatives and hedging for companies that are not public business entities.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Derivatives, and Hedging (Topic 815);

and Financial Instruments (Topic 825), which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance.

ASU 2019-04 makes clarifying amendments to certain financial instrument standards.

For entities that have not yet adopted ASU 2016-13, the effective dates for the amendments related to ASU 2016-13 are the same as the effective dates in ASU 2016-13.

For entities that have adopted ASU 2016-13, the amendments related to ASU 2016-13 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For entities that have not yet adopted ASU 2017-12 as of April 25, 2019, the effective dates for the amendments to Topic 815 are the same as the effective dates in ASU 2017-12.

For entities that have adopted ASU 2017-12 as of April 25, 2019, the effective date is as of the beginning of the first annual period beginning after April 25, 2019.

The amendments related to ASU 2016-01 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company qualifies as a smaller reporting company and does not expect to early adopt these ASUs.

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Changes in fair value of that financial asset would subsequently be reported in current earnings.

For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13.

For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption is permitted once ASU 2016-13 has been adopted.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) .

The Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

For entities that have not yet adopted the credit losses standard, the ASU is effective when they implement the credit losses standard.

For entities that already have adopted the credit losses standard, the ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company qualifies as a smaller reporting company and does not expect to early adopt ASU 2016-13.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) .

The Update defers the effective dates of ASU 2016-13 for SEC filers that are eligible to

be smaller reporting companies, non-SEC filers, and all other companies, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Update defers the effective dates of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, non-SEC filers, and all other companies, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

This Update also amends the mandatory effective date for the elimination of Step 2 from the goodwill impairment test under ASU No.

7 unchanged sentences

and extends the practical expedient to exclude accrued interest receivable from all additional relevant disclosures involving amortized cost basis.

The effective dates in this Update are the same as those applicable for ASU 2019-10.

For entities that have not yet adopted ASU 2016-13 as of November 26, 2019, the effective dates for ASU 2019-11 are the same as the effective dates and transition requirements in ASU 2016-13.

For entities that have adopted ASU 2016-13, ASU 2019-11 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company qualifies as a smaller reporting company and does not expect to early adopt these ASUs.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) , to simplify the accounting for income taxes, change the accounting for certain tax transactions, and make minor improvements to the codification.

This Update provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax and provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized or was a separate transaction.

The Update also changes current guidance for making an intraperiod allocation if there is a loss in continuing operations and gains outside of continuing operations, determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting, accounting for tax law changes and year-to-date losses in interim periods, and determining how to apply the income tax guidance to franchise taxes that are partially based on income.

For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2020, the FASB issued ASU 2020-03 , Codification Improvements to Financial Instruments.

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Early adoption is not permitted before an entity’s adoption of ASU 2016-01.

Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU 2016-13.

Amendments related to ASU 2016-13 for entities that have not yet adopted that guidance

are effective upon adoption of the amendments in ASU 2016-13.

Early adoption is not permitted before an entity’s adoption of ASU 2016-13.

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Facilitation of the Effects of Reference Rate Reform on Financial Reporting, March 2020 , to provide temporary optional expedients and exceptions to the U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate.

Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met.

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It is too early to predict whether a new rate index replacement and the adoption of the ASU will have a material impact on the Company’s financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) , which provides optional temporary guidance for entities transitioning away from the London Interbank Offered Rate (LIBOR) and other interbank offered rates (IBORs) to new references rates so that derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions within Topic 848.

ASU 2021-01 clarifies that the derivatives affected by the discounting transition are explicitly eligible for certain optional expedients and exceptions in Topic 848.

ASU 2021-01 is effective immediately for all entities.

Entities may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued.

The amendments in this update do not apply to contract modifications made, as well as new hedging relationships entered into, after December 31, 2022, and to existing hedging relationships evaluated for effectiveness for periods after December 31, 2022, except for certain hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship.

The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

Acquisition of UpState New York Bancorp, Inc.

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At acquisition, UpState’s loan portfolio without evidence of deterioration totaled $ 400,127,000 and was recorded at a fair value of $ 393,580,000 .

The allocation of purchase consideration related to the Merger is considered preliminary, primarily with respect to certain tax-related assets and liabilities.

Subsequent to the closing date of the acquisition, final tax returns were prepared and filed for UpState, which are expected to result in tax refunds, which relate to the operations of UpState and USNY Bank.

In accordance with ASC 805 the acquiring Company shall adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

A provisional amount is necessary when the buyer must issue financial statements prior to completing its accounting for the business combination (i.e.

prior to the end of the measurement period).

The measurement period begins on the acquisition date and ends on the earlier of either:

(a) the buyer obtaining the information needed to finish the accounting for the business combination or (b) one year from the acquisition date.

Adjustments to preliminary allocations related to certain tax-related assets and liabilities occurred in the fourth quarter of 2020.

The change to provisional amounts resulted in a reduction in goodwill of $ 923,000 and no impact to results of operations during the fourth quarter.

The Company expects to finalize the allocation of purchase price within the one-year measurement-period following the acquisition.

The following table summarizes the purchase of UpState as of July 7, 2020:

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Goodwill is not amortized, but is periodically evaluated for impairment.

The Company did no t recognize any impairment during the nine months ended September 30, 2020.

The carrying amount of the goodwill at September 30, 2020 related to the UpState acquisition was $ 18,882,000 .

The Company did no t recognize any impairment during the three months ended March 31, 2021.

The carrying amount of the goodwill at March 31, 2021 related to the UpState acquisition was $ 17,959,000 .

Identifiable intangibles are amortized to their estimated residual values over the expected useful lives.

Such lives are also periodically reassessed to determine if any amortization period adjustments are required.

During the nine months ended September 30, 2020, no such adjustments were recorded.

During the three months ended March 31, 2021, no such adjustments were recorded.

The identifiable intangible assets consist of a core deposit intangible which is being amortized on an accelerated basis over the useful life of such asset.

The gross carrying amount of the core deposit intangible at September 30, 2020 was $ 409,000 with $ 19,000 accumulated depreciation as of that date.

As of September 30, 2020, the current year and estimated future amortization expense for the core deposit intangible associated with the UpState acquisition is:

The gross carrying amount of the core deposit intangible at March 31, 2021 was $ 409,000 with $ 56,000 accumulated amortization as of that date.

As of March 31, 2021, the current year and estimated future amortization expense for the core deposit intangible associated with the UpState acquisition is:

(In thousands)

After five years

The following table presents financial information for the former UpState included in the Consolidated Statements of Income from the date of acquisition through September 30, 2020:

Acquisition Date

September 30,2020

(in thousands)

Net interest income after provision for loan losses

Noninterest income

The following table presents pro forma information for the nine and three-month periods ended September 30, 2020 and 2019, as if the acquisition of UpState had occurred on January 1, 2019.

This table has been prepared for comparative purposes only, and is not indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results:

Nine Months Ended September 30,

Three Months Ended September 30,

(In Thousands, Except Per Share Data)

Net interest income after provision for loan losses

Noninterest income

Pro forma earnings per share:

Risks and Uncertainties

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The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses.

As of September 30, 2020, the Company approved 1,138 applications for $ 95.0 million of loans under the PPP.

As of March 31, 2021, the Company has approved over 1,700 applications for $ 149.2 million of loans since the inception of the PPP.

Since the opening of the PPP, several larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP.

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(2) executed on a loan that was not more than 30 days past due as of December 31, 2019;

and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date on which the national emergency concerning the novel coronavirus disease (COVID–19) outbreak declared by the President on March 13, 2020, under the National Emergencies Act terminates, or (B) December 31, 2020.

According to the Interagency Statement on Loan

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This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

See Note 8 of the financial statements for additional disclosure of TDRs at September 30, 2020.

The following table presents a summary of loans that were granted forbearance by type of loan during the nine-months ended September 30, 2020:

See Note 8 of the financial statements for additional disclosure of TDRs at March 31, 2021.

The following table presents a summary of loans that were granted forbearance by type of loan since the inception of the CARES Act through March 31, 2021:

‎ (in thousands)

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Consumer loans to individuals

The following table presents a summary of loans that remain in forbearance by type of loan as of September 30, 2020:

The following table presents a summary of loans that remain in forbearance by type of loan as of March 31, 2021:

‎ (in thousands)

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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