What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-12 · 132 added, 120 removed, 826 unchanged (23% 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

Six Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

35 unchanged sentences

Three Months Ended

Other comprehensive income (loss)

September 30,

Other comprehensive (loss) income

Investment securities available for sale:

2 unchanged sentences

recognized in net income

Other comprehensive (loss)

Comprehensive (Loss) Income

Nine Months Ended

September 30,

Other comprehensive (loss) income

Comprehensive Income (Loss)

Six Months Ended

Other comprehensive income (loss)

Investment securities available for sale:

3 unchanged sentences

Other comprehensive (loss)

Comprehensive Income (Loss)

Comprehensive (Loss) Income

See accompanying notes to the unaudited consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Six Months Ended June 30, 2022 and 2021

Nine Months Ended September 30, 2022 and 2021

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

9 unchanged sentences

Compensation expense related to stock options

Balance, June 30, 2022

Balance, September 30, 2022

Treasury Stock

8 unchanged sentences

Compensation expense related to stock options

Balance, June 30, 2021

Balance, September 30, 2021

NORWOOD FINANCIAL CORP

Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Three Months Ended June 30, 2022 and 2021

Three Months Ended September 30, 2022 and 2021

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

2 unchanged sentences

Income (Loss)

Balance, March 31, 2022

Balance, June 30, 2022

Other comprehensive loss

4 unchanged sentences

Compensation expense related to stock options

Balance, June 30, 2022

Balance, September 30, 2022

Treasury Stock

Comprehensive

Balance, March 31, 2021

Other comprehensive gain

Balance, June 30, 2021

Other comprehensive loss

Cash dividends declared ($ 0.26 per share)

Acquisition of treasury stock

Compensation expense related to restricted stock

1 unchanged sentence

Compensation expense related to stock options

Balance, June 30, 2021

Balance, September 30, 2021

See accompanying notes to the unaudited consolidated financial statements.

2 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

14 unchanged sentences

(Increase) decrease in accrued interest receivable

Decrease in accrued interest payable

Increase (decrease) in accrued interest payable

Net cash provided by operating activities

5 unchanged sentences

Redemption of regulatory stock

Net (decrease) increase in loans

Net (increase) decrease in loans

Proceeds from bank-owned life insurance policies

11 unchanged sentences

Cash dividends paid

Net cash provided by financing activities

Net cash (used in) provided by financing activities

(Decrease) increase in cash and cash equivalents

4 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental Disclosures of Cash Flow Information

5 unchanged sentences

Dividends payable

Right of use for operating leases

Lease liability for operating leases

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 six-month periods ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any other future interim period.

The operating results for the three-month and nine-month periods ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 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 six months ended June 30:

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:

Three months ended

September 30,

(dollars in thousands)

17 unchanged sentences

Total Noninterest Income

Six months ended

Nine months ended

September 30,

(dollars in thousands)

24 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Weighted average shares outstanding

4 unchanged sentences

Diluted EPS weighted average shares outstanding

For the three and six month periods ended June 30, 2022, there were 151,600 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 $ 24.26 per share as of June 30, 2022.

For the three and six month periods ended June 30, 2021, there were 115,100 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of Norwood common stock of $ 26.00 per share as of June 30, 2021.

For the three and nine month periods ended September 30, 2022, there were 108,100 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 $ 26.58 per share as of September 30, 2022.

For the three and nine month periods ended September 30, 2021, there were 110,100 stock options that were anti-dilutive and thereby excluded from the earnings per share calculations based upon the closing price of Norwood common stock of $ 25.50 per share as of September 30, 2021.

Stock-Based Compensation

During the six-month period ended June 30, 2022, no stock options were granted.

As of June 30, 2022, there was $ 135,000 of total unrecognized compensation cost related to non-vested options granted in 2021 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2022.

Compensation costs related to stock options amounted to $ 134,000 and $ 107,000 during the six-month periods ended June 30, 2022 and 2021, respectively.

A summary of the Company’s stock option activity for the six-month period ended June 30, 2022 is as follows:

During the nine-month period ended September 30, 2022, no stock options were granted.

As of September 30, 2022, there was $ 67,000 of total unrecognized compensation cost related to non-vested options granted in 2021 under the 2014 Equity Incentive Plan, which will be fully amortized by December 31, 2022.

Compensation costs related to stock options amounted to $ 201,000 and $ 160,000 during the nine-month periods ended September 30, 2022 and 2021, respectively.

A summary of the Company’s stock option activity for the nine-month period ended September 30, 2022 is as follows:

Average Exercise

3 unchanged sentences

Outstanding at January 1, 2022

Outstanding at June 30, 2022

Exercisable at June 30, 2022

Outstanding at September 30, 2022

Exercisable at September 30, 2022

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 $ 24.26 per share as of June 30, 2022 and $ 25.99 per share as of December 31, 2021.

A summary of the Company’s restricted stock activity for the six-month periods ended June 30, 2022 and 2021 is as follows:

The market price was $ 26.58 per share as of September 30, 2022 and $ 25.99 per share as of December 31, 2021.

A summary of the Company’s restricted stock activity for the nine-month periods ended September 30, 2022 and 2021 is as follows:

Weighted-Average

3 unchanged sentences

Non-vested, January 1,

Non-vested, June 30,

The expected future compensation expense relating to the 39,530 shares of non-vested restricted stock outstanding as of June 30, 2022 is $ 976,000 .

Non-vested, September 30,

The expected future compensation expense relating to the 39,530 shares of non-vested restricted stock outstanding as of September 30, 2022 is $ 875,000 .

This cost will be recognized over the remaining vesting period of 4.25 years.

Compensation costs related to restricted stock amounted to $ 171,000 and $ 167,000 during the six-month periods ended June 30, 2022 and 2021, respectively.

Compensation costs related to restricted stock amounted to $ 272,000 and $ 251,000 during the nine-month periods ended September 30, 2022 and 2021, respectively.

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 six months ended June 30, 2022 and 2021:

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, 2022 and 2021:

Unrealized gains (losses) on

3 unchanged sentences

Other comprehensive loss before reclassification

Amount reclassified from accumulated other comprehensive income

Amount reclassified from accumulated other comprehensive loss

Total other comprehensive loss

Balance as of June 30, 2022

Balance as of September 30, 2022

Unrealized gains (losses) on

5 unchanged sentences

Total other comprehensive loss

Balance as of June 30, 2021

Balance as of September 30, 2021

Unrealized gains (losses) on

1 unchanged sentence

securities (a)

Balance as of March 31, 2022

Balance as of June 30, 2022

Other comprehensive loss before reclassification

1 unchanged sentence

Total other comprehensive loss

Balance as of June 30, 2022

Balance as of September 30, 2022

Unrealized gains (losses) on

1 unchanged sentence

securities (a)

Balance as of March 31, 2021

Balance as of June 30, 2021

Other comprehensive income before reclassification

Amount reclassified from accumulated other comprehensive income

Amount reclassified from accumulated other comprehensive loss

Total other comprehensive income

Balance as of June 30, 2021

Balance as of September 30, 2021

(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 six months ended June 30, 2022 and 2021:

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, 2022 and 2021:

Amount Reclassified

4 unchanged sentences

Three months ended

September 30,

Details about other comprehensive income

2 unchanged sentences

Income tax expense

Six months ended

Nine months ended

September 30,

Unrealized gains on available for sale securities

10 unchanged sentences

(in thousands)

September 30,

Commitments to grant loans

13 unchanged sentences

required under the corresponding guarantees.

The current amount of the liability as of June 30, 2022 for guarantees under standby letters of credit issued is not material.

The current amount of the liability as of September 30, 2022 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:

June 30, 2022

September 30, 2022

(In Thousands)

16 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):

June 30, 2022

September 30, 2022

Less than 12 Months

17 unchanged sentences

Mortgage-backed securities-government sponsored entities

At June 30, 2022, the Company had 292 debt securities in an unrealized loss position in the less than twelve months category and 33 debt securities in the twelve months or more category.

At September 30, 2022, the Company had 270 debt securities in an unrealized loss position in the less than twelve months category and 86 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 June 30, 2022 by contractual maturity are shown below.

The amortized cost and fair value of debt securities as of September 30, 2022 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 June 30,

Ended September 30,

Gross realized gains

2 unchanged sentences

Proceeds from sales of securities

Securities with a carrying value of $ 378,696,000 and $ 339,769,000 at June 30, 2022 and December 31, 2021, 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 $ 365,210,000 and $ 339,769,000 at September 30, 2022 and December 31, 2021, 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):

June 30, 2022

September 30, 2022

December 31, 2021

8 unchanged sentences

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 June 30, 2022 and December 31, 2021, the Company had outstanding principal balances of $ 983,000 and $ 15.2 million, respectively,

in PPP loans.

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, 2022 and December 31, 2021, the Company had outstanding principal balances of $ 755,000 and $ 15.2 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 June 30, 2022, $ 150.5 million of PPP loans have been forgiven.

PPP loans are included in the commercial loan category.

1 unchanged sentence

Upon funding of the loan, these fees were deferred and will be amortized over the life of the loan as an adjustment to yield in accordance with FASB ASC 310-20-25-2.

As of June 30, 2022, the carrying value of these unamortized loan fees was $ 30,000 .

As of September 30, 2022, the carrying value of these unamortized loan fees was $ 20,000 .

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

June 30, 2022

September 30, 2022

December 31, 2021

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 six-months ended June 30, 2022 and 2021, were as follows (in thousands):

Changes in the accretable yield for purchased credit impaired loans for the nine-months ended September 30, 2022 and 2021, 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 June 30, 2022 and December 31, 2021, foreclosed real estate owned totaled $ 346,000 and $ 1,742,000 , respectively.

During the six months ended June 30, 2022, there were no additions to the foreclosed real estate category.

As of September 30, 2022 and December 31, 2021, foreclosed real estate owned totaled $ 346,000 and $ 1,742,000 , respectively.

During the nine months ended September 30, 2022, there were no additions to the foreclosed real estate category.

The Co mpany disposed of a parcel of one property that was previously transferred to foreclosed real estate owned with a carrying value of $ 364,000 , and disposed of another property with a carrying value of $ 1,032,000 through the sale of the property.

As of June 30, 2022, the Company has initiated formal foreclosure proceedings on four properties classified as consumer residential mortgages with an aggregate carrying value of $ 180,000 .

As of September 30, 2022, the Company has initiated formal foreclosure proceedings on four properties classified as consumer residential mortgages with an aggregate carrying value of $ 160,000 .

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

June 30, 2022

September 30, 2022

(In thousands)

9 unchanged sentences

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

June 30, 2022

September 30, 2022

(in thousands)

13 unchanged sentences

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 June 30, 2022 and 2021, 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 September 30, 2022 and 2021, respectively (in thousands):

Average Recorded

3 unchanged sentences

Other agricultural loans

The following table presents the average recorded investment in impaired loans and the related amount of interest income recognized during the six-month periods ended June 30, 2022 and 2021, respectively (in thousands):

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, 2022 and 2021, respectively (in thousands):

Average Recorded

4 unchanged sentences

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 June 30, 2022 and December 31, 2021, the Company had no troubled debt restructured loans to report.

For the six-month period ended June 30, 2022 and 2021, there were no new loans identified as troubled debt restructurings.

As of September 30, 2022 and December 31, 2021, the Company had no troubled debt restructured loans to report.

For the nine-month period ended September 30, 2022 and 2021, there were no new loans identified as troubled debt restructurings.

Management uses an eight point internal risk rating system to monitor the credit quality of the overall loan portfolio.

2 unchanged sentences

The Special Mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a Substandard classification.

Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected.

Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a

distinct possibility that some loss will be sustained if the weaknesses are not corrected.

All loans greater than 90 days past due are considered Substandard.

6 unchanged sentences

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 June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

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, 2022 and December 31, 2021 (in thousands):

September 30, 2022

Commercial real estate loans

8 unchanged sentences

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 June 30, 2022 and December 31, 2021 (in thousands):

The following table presents the recorded investment in the loan classes based on payment activity as of September 30, 2022 and December 31, 2021 (in thousands):

Nonperforming

June 30, 2022

September 30, 2022

Residential real estate loans

5 unchanged sentences

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 June 30, 2022 and December 31, 2021 (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 September 30, 2022 and December 31, 2021 (in thousands):

31-60 Days Past Due

3 unchanged sentences

Purchased Credit-Impaired

June 30, 2022

September 30, 2022

Real Estate loans

14 unchanged sentences

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

As of June 30, 2022, the allocation of the allowance pertaining to each major category of loans includes an allocation for loans secured by farmland and other agricultural loans.

As of June 30 2022, the Company has also continued to incorporate qualitative factors related to the pandemic to capture some of the risk associated with higher-risk industries, although the factor has been reduced from the December 31, 2021 level.

As of September 30, 2022, the allocation of the allowance includes an allocation for loans secured by farmland and other agricultural loans.

As of September 30 2022, the Company has also continued to incorporate qualitative factors related to the pandemic to capture some of the risk associated with higher-risk industries, although the factor has been reduced from the December 31, 2021 level.

The qualitative factor related to the deferral of payments due to COVID-19 has been eliminated.

At June 30, 2022, the allowance for loan losses includes $ 1.2 million of COVID related factors, compared to $ 2.3 million at December 31, 2021.

At September 30, 2022, the allowance for loan losses includes $ 583,000 of COVID related factors, compared to $ 2.3 million at December 31, 2021.

The 2022 allowance for loan losses excludes 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.

6 unchanged sentences

Provision for loan losses

Ending balance, June 30, 2022

Ending balance, September 30, 2022

Ending balance individually evaluated

6 unchanged sentences

Other Agricultural

Beginning balance, March 31, 2022

Beginning balance, June 30, 2022

Provision for loan losses

Ending balance, June 30, 2022

Ending balance, September 30, 2022

(In thousands)

4 unchanged sentences

Provision for loan losses

Ending balance, June 30, 2021

Ending balance, September 30, 2021

Ending balance individually evaluated

6 unchanged sentences

Other Agricultural

Beginning balance, March 31, 2021

Beginning balance, June 30, 2021

Provision for loan losses

Ending balance, June 30, 2021

The Company’s primary business activity as of June 30, 2022 was with customers located in northeastern Pennsylvania and the New York counties of Delaware, Sullivan, Ontario, Otsego and Yates.

Ending balance, September 30, 2021

The Company’s primary business activity as of September 30, 2022 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 repay their loans is influenced by the region’s economy.

As of June 30, 2022, the Company considered its concentration of credit risk to be acceptable.

As of September 30, 2022, the Company considered its concentration of credit risk to be acceptable.

The highest concentrations are in commercial rentals with $ 152.4 million of loans outstanding, or 10.6 % of total loans outstanding, and residential rentals with loans outstanding of $ 121.4 million, or 8.5 % of loans outstanding.

For the six months ended June 30, 2022, the Company did not recognize any charge offs on loans in the named concentrations.

For the nine months ended September 30, 2022, the Company did not recognize any charge offs on loans in the named concentrations.

Operating Leases

4 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 six-month periods ended June 30, 2022 and 2021, amounted to $ 299,000 and $ 294,000 respectively.

The lease cost associated with the operating leases for the nine-month periods ended September 30, 2022 and 2021, amounted to $ 454,000 and $ 441,000 respectively.

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

2 unchanged sentences

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 June 30, 2022.

The following table presents the weighted-average remaining lease term and discount rate for the leases outstanding at September 30, 2022.

Weighted-average remaining term

Weighted-average discount rate

The following table presents the undiscounted cash flows due related to operating leases as of June 30, 2022, 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 September 30, 2022, 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 June 30, 2022 and December 31, 2021 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 September 30, 2022 and December 31, 2021 are as follows:

Fair Value Measurement Using

Reporting Date

June 30, 2022

September 30, 2022

(In thousands)

31 unchanged sentences

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 June 30, 2022 and December 31, 2021 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 September 30, 2022 and December 31, 2021 are as follows:

Fair Value Measurement Using Reporting Date

(In thousands)

June 30, 2022

September 30, 2022

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 June 30, 2022, the fair value investment in impaired loans was $ 13,000 which included one loan relationship that did not require a valuation allowance since the estimated realizable value of the collateral exceeded the recorded investment in the loan.

As of June 30, 2022, the Company has not recognized charge-offs against the allowance for loan losses on any of these impaired loans.

As of September 30, 2022, the fair value investment in impaired loans was $ 12,000 which included one loan relationship that did not require a valuation allowance since the estimated realizable value of the collateral exceeded the recorded investment in the loan.

As of September 30, 2022, the Company has not recognized charge-offs against the allowance for loan losses on any of these impaired loans.

As of December 31, 2021, the fair value investment in impaired loans totaled $ 1,402,000 which included three loan relationships with a carrying value of $ 157,000 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.

13 unchanged sentences

Range (Weighted Average)

June 30, 2022

September 30, 2022

Impaired loans

27 unchanged sentences

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 June 30, 2022 and December 31, 2021.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2022 and December 31, 2021.

Loans receivable (carried at cost):

11 unchanged sentences

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 June 30, 2022 and December 31, 2021.

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, 2022 and December 31, 2021.

(In thousands)

Fair Value Measurements at June 30, 2022

Fair Value Measurements at September 30, 2022

Carrying Amount

38 unchanged sentences

There was no effect on earnings in any periods presented.

At June 30, 2022 and December 31, 2021, 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 June 30, 2022 and December 31, 2021 was $ 1,167,000 and $ 235,000 , respectively.

At September 30, 2022 and December 31, 2021, 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 September 30, 2022 and December 31, 2021 was $ 1,548,000 and $ 235,000 , respectively.

Summary information regarding these derivatives is presented below

1 unchanged sentence

Notional Amount

June 30, 2022

September 30, 2022

December 31, 2021

1 unchanged sentence

Interest Rate Received

June 30, 2022

September 30, 2022

December 31, 2021

1 unchanged sentence

Maturing November, 2030

1 month LIBOR + Margin

Term SOFR + Margin

Maturing December, 2030

1 month LIBOR + Margin

Term SOFR + Margin

Third party interest rate swap

Maturing November, 2030

1 month LIBOR + Margin

Term SOFR + Margin

Maturing December, 2030

1 month LIBOR + Margin

Term SOFR + Margin

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

2 unchanged sentences

Balance Sheet Location

June 30, 2022

September 30, 2022

Interest rate derivatives

13 unchanged sentences

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.

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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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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Other amendments are effective upon issuance of this ASU.

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

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

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

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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