What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-12 compared with 2021-08-13 · 198 added, 212 removed, 752 unchanged (35% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

2021 December 31,

27 unchanged sentences

Authorized - 90,000,000 shares

Issued and outstanding - 12,684,977 shares and 13,193,760 shares at June 30, 2021 and December 31, 2020, respectively

Issued and outstanding - 12,432,184 shares and 13,193,760 shares at September 30, 2021 and December 31, 2020, respectively

124,322 131,938

2 unchanged sentences

Unearned employee stock ownership plan (ESOP) ( 13,112,188 ) ( 13,664,373 )

Accumulated other comprehensive income 1,662,818 3,708,605

Accumulated other comprehensive (loss) income ( 1,265,712 ) 3,708,605

Total stockholders' equity 178,637,699 192,712,708

3 unchanged sentences

Condensed Consolidated Statements of Income

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

18 unchanged sentences

Net gains on loan and lease sales 556,664 1,327,639 2,090,892 2,586,515

Other loan fees 335,040 244,702 582,931 327,576

Other income 249,184 220,180 791,648 767,764

25 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

1 unchanged sentence

Other Comprehensive Income (Loss)

Unrealized gain (loss) on available-for-sale securities, net of tax expense (benefit) of $ 437,111 , $ 312,821 , $( 535,855 ), and $ 1,270,737 , respectively.

Unrealized (loss) gain on available-for-sale securities, net of tax (benefit) expense of $( 774,714 ), $ 45,101 , $( 1,310,569 ), and $ 1,040,994 , respectively.

( 2,914,399 ) 169,667 ( 4,930,236 ) 3,916,120

12 unchanged sentences

Outstanding Amount

Balances, March 31, 2021 13,050,996 $ 130,510 $ 122,814,920 $ 80,005,652 $ ( 13,479,847 ) $ 48,399 $ 189,519,634

Balances, June 30, 2021 12,684,977 $ 126,850 $ 118,118,524 $ 75,957,135 $ ( 13,296,017 ) $ 1,662,818 $ 182,569,310

Net income — — — 3,082,275 — — 3,082,275

Other comprehensive income — — — — — 1,614,419 1,614,419

Other comprehensive loss — — — — — ( 2,928,530 ) ( 2,928,530 )

ESOP shares earned — — 23,233 — 183,829 — 207,062

Granting of restricted stock awards 4,000 40 ( 40 ) — — — —

Stock based compensation — — 387,853 — — — 387,853

Common stock dividends ($ 0.07 per share)

— — — ( 828,417 ) — — ( 828,417 )

Exercise of stock options 12,116 121 127,460 — — — 127,581

Common stock dividends ($ 0.07 per share)

1 unchanged sentence

Repurchase of common stock ( 264,909 ) ( 2,649 ) ( 4,003,622 ) — — — ( 4,006,271 )

Balances, June 30, 2021 12,684,977 $ 126,850 $ 118,118,524 $ 75,957,135 $ ( 13,296,017 ) $ 1,662,818 $ 182,569,310

Balances, September 30, 2021 12,432,184 $ 124,322 $ 114,653,448 $ 78,237,829 $ ( 13,112,188 ) $ ( 1,265,712 ) $ 178,637,699

Common Stock Additional

11 unchanged sentences

Stock based compensation — — 1,423,236 — — — 1,423,236

Exercise of stock options 12,116 121 127,460 — — — 127,581

Common stock dividends ($ 0.21 per share)

3 unchanged sentences

Repurchase of common stock ( 777,692 ) ( 7,777 ) ( 11,172,024 ) — — — ( 11,179,801 )

Balances, June 30, 2021 12,684,977 $ 126,850 $ 118,118,524 $ 75,957,135 $ ( 13,296,017 ) $ 1,662,818 $ 182,569,310

Balances, September 30, 2021 12,432,184 $ 124,322 $ 114,653,448 $ 78,237,829 $ ( 13,112,188 ) $ ( 1,265,712 ) $ 178,637,699

Common Stock Additional

4 unchanged sentences

Outstanding Amount

Balances, March 31, 2020 13,526,625 $ 135,266 $ 132,604,734 $ 72,563,580 $ ( 14,216,557 ) $ 2,109,231 $ 193,196,254

Balances, June 30, 2020 13,526,625 $ 135,266 $ 132,563,670 $ 74,446,405 $ ( 14,032,728 ) $ 3,023,289 $ 196,135,902

Net income — — — 2,531,553 — — 2,531,553

3 unchanged sentences

— — — ( 605,081 ) — — ( 605,081 )

Balances, June 30, 2020 13,526,625 $ 135,266 $ 132,563,670 $ 74,446,405 $ ( 14,032,728 ) $ 3,023,289 $ 196,135,902

Repurchase of common stock ( 582,079 ) ( 5,821 ) ( 6,610,672 ) — — — ( 6,616,493 )

Balances, September 30, 2020 12,944,546 $ 129,445 $ 125,920,717 $ 76,372,877 $ ( 13,848,900 ) $ 3,100,286 $ 191,674,425

Common Stock Additional

11 unchanged sentences

— — — ( 1,228,433 ) — — ( 1,228,433 )

Balances, June 30, 2020 13,526,625 $ 135,266 $ 132,563,670 $ 74,446,405 $ ( 14,032,728 ) $ 3,023,289 $ 196,135,902

Repurchase of common stock ( 582,079 ) ( 5,821 ) ( 6,610,672 ) — — — ( 6,616,493 )

Balances, September 30, 2020 12,944,546 $ 129,445 $ 125,920,717 $ 76,372,877 $ ( 13,848,900 ) $ 3,100,286 $ 191,674,425

See Notes to Condensed Consolidated Statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

20 unchanged sentences

Interest payable ( 23,304 ) ( 54,902 )

Net cash (used in) provided by operating activities ( 2,495,108 ) 7,454,992

Net cash provided by operating activities 3,331,813 7,569,126

Investing Activities

16 unchanged sentences

Repurchase of common stock ( 11,179,801 ) ( 6,616,493 )

Proceeds from stock option exercises 127,581 —

Dividends paid ( 8,478,392 ) ( 1,228,433 )

39 unchanged sentences

Troubled debt restructured loans recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least six months.

Certain reclassifications have been made to the 2020 financial statements to conform to the 2021 financial statement presentation.

These reclassifications had no effect on net income.

Accounting Pronouncements

7 unchanged sentences

The Company has taken advantage of this provision to extend certain payment modifications to loan customers in need.

As of June 30, 2021, the Company has six loans outstanding for $ 2.5 million that were modified under the CARES Act guidance.

As of September 30, 2021, the Company had no loans outstanding that were modified under the CARES Act guidance.

The CARES Act also approved the Paycheck Protection Program ("PPP"), administered by the Small Business Administration ("SBA") with funding provided by financial institutions.

3 unchanged sentences

The Company earns a 1% interest rate on PPP loans, plus a processing fee from the SBA for processing and originating a loan.

The Company has originated a total of approximately $ 103.1 million in PPP loans as of June 30, 2021, of which approximately $ 34.6 million were outstanding at June 30, 2021.

The Jumpstart Our Business Startups Act (the "JOBS Act"), which was enacted in April 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets.

The Company had originated approximately $ 103.1 million in PPP loans as of September 30, 2021, of which approximately $ 16.3 million were outstanding at September 30, 2021.

The Jumpstart Our Business Startups Act (the "JOBS Act"), enacted in April 2012, made numerous changes to the federal securities laws to facilitate access to capital markets.

Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as and has elected to be an emerging growth company under the JOBS Act.

14 unchanged sentences

Targeted Transition Relief” (ASU 2019-05).

This ASU provides transition relief for entities adopting the FASB’s credit losses standard, ASU 2016-13 and allows companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for certain financial instruments.

This ASU provides transition relief for entities adopting the FASB’s credit losses standard, ASU

2016-13 and allows companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option for certain financial instruments.

In April 2019, the FASB issued ASU No.

2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” (ASU 2019-04).

ASU clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments.

This ASU clarifies certain aspects of accounting for credit losses, hedging activities, and financial instruments.

In October 2019, the FASB voted to extend the implementation of ASU No.

38 unchanged sentences

The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:

June 30, 2021

September 30, 2021

Available for sale

22 unchanged sentences

Total investment securities $ 252,036 $ 5,276 $ 287 $ 257,025

The amortized cost and fair value of securities at June 30, 2021, by contractual maturity, are shown below.

The amortized cost and fair value of securities at September 30, 2021, by contractual maturity, are shown below.

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

9 unchanged sentences

Totals $ 359,711 $ 358,108 $ 9,549 $ 9,727

Securities with a carrying value of $ 159,483,000 and $ 88,370,000 were pledged at June 30, 2021 and December 31, 2020, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for both the three and six months ended June 30, 2021 were $ 3,981,000 .

For the three and six months ended June 30, 2020, proceeds from the sales of securities available for sale were $ 10,716,000 and $ 22,178,000 , respectively.

Gross gains were recognized on the sale of securities available-for-sale for the three and six months ended June 30, 2021 and 2020 of $ 38,000 , $ 38,000 , $ 66,000 , and $ 136,000 , respectively.

There were no gross losses recognized on the sale of securities available for sale for the three and six months ended June 30, 2021.

Gross losses of $ 56,000 were recognized on the sale of securities available-for-sale for both the three and six months ended June 30, 2020.

Securities with a carrying value of $ 148,262,000 and $ 88,370,000 were pledged at September 30, 2021 and December 31, 2020, respectively, to secure certain deposits and for other purposes as permitted or required by law.

Proceeds from sales of securities available for sale for the three and nine months ended September 30, 2021 were $ 1,316,000 and $ 5,297,000 , respectively.

For the three and nine months ended September 30, 2020, proceeds from the sales of securities available for sale were $ 12,560,000 and $ 34,738,000 , respectively.

Gross gains were recognized on the sale of securities available-for-sale for the three and nine months ended September 30, 2021 and 2020 of $ 18,000 , $ 56,000 , $ 120,000 , and $ 255,000 , respectively.

There were no gross losses recognized on the sale of securities available for sale for the three and nine months ended September 30, 2021.

Gross losses of $ 3,000 and $ 59,000 were recognized on the sale of securities available-for-sale for the three and nine months ended September 30, 2020, respectively.

Certain investments in debt securities, as reflected in the table below, are reported in the condensed consolidated financial statements and notes at an amount less than their historical cost.

Total fair value of these investments at June 30, 2021 and December 31, 2020 was $ 141,724,000 and $ 45,299,000 , respectively, which is approximately 42 % and 18 % of the Company’s aggregated available-for-sale and held-to-maturity investment portfolio at those dates, respectively.

Total fair value of these investments at September 30, 2021 and December 31, 2020 was $ 211,218,000 and $ 45,299,000 , respectively, which is approximately 57 % and 18 % of the Company’s aggregated available-for-sale and held-to-maturity investment portfolio at those dates, respectively.

These declines primarily resulted from changes in market interest rates since their purchase.

1 unchanged sentence

Should the impairment of any other securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following tables show the Company’s investments by gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2021 and December 31, 2020:

Description of

Securities June 30, 2021

Securities September 30, 2021

Less Than 12 Months 12 Months or More Total

7 unchanged sentences

Mortgage-backed securities - GSE residential 92,092 1,460 2,123 18 94,215 1,478

Corporate obligations 1,997 3 — — 1,997 3

Total available-for-sale 200,135 4,481 10,660 289 210,795 4,770

Held-to-maturity

State and municipal obligations 423 1 — — 423 1

Total temporarily impaired securities $ 200,558 $ 4,482 $ 10,660 $ 289 $ 211,218 $ 4,771

18 unchanged sentences

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.

Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2021.

Mortgage-Backed Securities – GSE Residential and SBA Pools.

1 unchanged sentence

The Company expects to recover the amortized cost basis over the term of the securities.

Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2021.

State and Municipal Obligations.

1 unchanged sentence

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.

Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before

recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at September 30, 2021.

Loans, Leases and Allowance

The following table shows the composition of the loan and lease portfolio at June 30, 2021 and December 31, 2020:

The following table shows the composition of the loan and lease portfolio at September 30, 2021 and December 31, 2020:

September 30,

2021 December 31,

11 unchanged sentences

$ 795,407 $ 734,413

The following tables present the activity in the allowance for loan and lease losses for the three and six months ended June 30, 2021 and 2020:

Mortgage (1) Commercial

Industrial Residential

Mortgage (2) Leases Consumer Total

Three Months Ended June 30, 2021:

Balance, beginning of period $ 8,359 $ 1,138 $ 257 $ 1,029 $ 176 $ 10,959

Provision (credit) for losses 557 ( 189 ) ( 17 ) 70 109 530

Charge-offs — ( 3 ) — ( 171 ) ( 64 ) ( 238 )

Recoveries 1 36 51 85 7 180

Balance, end of period $ 8,917 $ 982 $ 291 $ 1,013 $ 228 $ 11,431

Six Months Ended June 30, 2021:

Balance, beginning of period $ 7,797 $ 1,248 $ 270 $ 1,054 $ 217 $ 10,586

Provision (credit) for losses 1,118 ( 322 ) ( 36 ) 145 25 930

Charge-offs — ( 3 ) — ( 365 ) ( 75 ) ( 443 )

Recoveries 2 59 57 179 61 358

Balance, end of period $ 8,917 $ 982 $ 291 $ 1,013 $ 228 $ 11,431

(1) Commercial mortgage includes commercial and multifamily real estate loans and commercial construction and development loans.

(2) Residential mortgage includes one- to four-family and home equity loans and residential construction and development loans.

Mortgage (1) Commercial

Industrial Residential

Mortgage (2) Leases Consumer Total

Three Months Ended June 30, 2020:

Balance, beginning of period $ 4,668 $ 1,772 $ 148 $ 583 $ 135 $ 7,306

Provision (credit) for losses 844 ( 94 ) 172 378 20 1,320

Charge-offs — — ( 20 ) ( 134 ) ( 16 ) ( 170 )

Recoveries 5 32 8 11 9 65

Balance, end of period $ 5,517 $ 1,710 $ 308 $ 838 $ 148 $ 8,521

Six Months Ended June 30, 2020:

Balance, beginning of period $ 4,564 $ 1,852 $ 109 $ 426 $ 138 $ 7,089

Provision (credit) for losses 917 ( 182 ) 210 569 16 1,530

Charge-offs — — ( 35 ) ( 190 ) ( 21 ) ( 246 )

Recoveries 36 40 24 33 15 148

Balance, end of period $ 5,517 $ 1,710 $ 308 $ 838 $ 148 $ 8,521

(1) Commercial mortgage includes commercial and multifamily real estate loans and commercial construction and development loans.

(2) Residential mortgage includes one- to four-family and home equity loans and residential construction and development loans.

The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases based on portfolio segment and impairment method as of June 30, 2021 and December 31, 2020:

June 30, 2021

Mortgage (1) Commercial

Industrial Residential

Mortgage (2) Leases Consumer Total

The following tables present the activity in the allowance for loan and lease losses for the three and nine months ended September 30, 2021 and 2020:

Balance, beginning of period Provision (credit) for losses Charge-offs Recoveries Balance, end of period

Three Months Ended September 30, 2021:

Commercial mortgage $ 4,517 $ 156 $ ( 25 ) $ 7 $ 4,655

Commercial and industrial 1,951 ( 214 ) — 21 1,758

Construction and development 2,009 88 — — 2,097

Multi-family 1,353 273 — — 1,626

Residential mortgage 368 138 ( 80 ) 16 442

Home equity 23 5 — — 28

Leases 1,010 59 ( 31 ) 9 1,047

Consumer 200 ( 5 ) ( 8 ) 9 196

Total $ 11,431 $ 500 $ ( 144 ) $ 62 $ 11,849

Nine Months Ended September 30, 2021:

Commercial mortgage $ 4,628 $ 33 $ ( 25 ) $ 19 $ 4,655

Commercial and industrial 2,271 ( 580 ) ( 3 ) 70 1,758

Construction and development 1,068 1,029 — — 2,097

Multi-family 1,039 587 — — 1,626

Residential mortgage 323 126 ( 80 ) 73 442

Home equity 18 10 — — 28

Leases 1,054 201 ( 396 ) 188 1,047

Consumer 185 24 ( 83 ) 70 196

Total $ 10,586 $ 1,430 $ ( 587 ) $ 420 $ 11,849

Balance, beginning of period Provision (credit) for losses Charge-offs Recoveries Balance, end of period

Three Months Ended September 30, 2020:

Commercial mortgage $ 3,484 $ 699 $ — $ 10 $ 4,193

Commercial and industrial 1,815 265 — 23 2,103

Construction and development 871 53 — 1 925

Multi-family 840 229 — — 1,069

Residential mortgage 517 ( 94 ) — 17 440

Home equity 19 2 — — 21

Leases 838 93 ( 110 ) 70 891

Consumer 137 53 ( 26 ) 3 167

Total $ 8,521 $ 1,300 $ ( 136 ) $ 124 $ 9,809

Nine Months Ended September 30, 2020:

Commercial mortgage $ 2,930 $ 1,232 $ — $ 31 $ 4,193

Commercial and industrial 1,758 293 — 52 2,103

Construction and development 614 284 — 27 925

Multi-family 779 290 — — 1,069

Residential mortgage 441 ( 4 ) ( 35 ) 38 440

Home equity 5 13 — 3 21

Leases 426 662 ( 300 ) 103 891

Consumer 136 60 ( 47 ) 18 167

Total $ 7,089 $ 2,830 $ ( 382 ) $ 272 $ 9,809

Allowance for loan and lease losses:

Individually evaluated for impairment $ 900 $ 52 $ — $ — $ — $ 952

Collectively evaluated for impairment 8,017 930 291 1,013 228 10,479

Balance, June 30 $ 8,917 $ 982 $ 291 $ 1,013 $ 228 $ 11,431

Loans and leases:

Individually evaluated for impairment $ 5,704 $ 424 $ 177 $ — $ — $ 6,305

Collectively evaluated for impairment 466,337 94,604 91,533 121,006 18,945 792,425

Ending Balance, June 30 $ 472,041 $ 95,028 $ 91,710 $ 121,006 $ 18,945 $ 798,730

(1) Commercial mortgage includes commercial and multifamily real estate loans and commercial construction and development loans.

(2) Residential mortgage includes one- to four-family and home equity loans and residential construction and development loans.

December 31, 2020

Mortgage (1) Commercial

Industrial Residential

Mortgage (2) Leases Consumer Total

Individually evaluated for impairment Collectively evaluated for impairment Balance, September 30 Individually evaluated for impairment Collectively evaluated for impairment Balance, September 30

As of September 30, 2021:

Commercial mortgage $ — $ 4,655 $ 4,655 $ 141 $ 255,070 $ 255,211

Commercial and industrial 301 1,457 1,758 1,017 100,801 101,818

Construction and development 750 1,347 2,097 4,900 77,611 82,511

Multi-family — 1,626 1,626 — 92,652 92,652

Residential mortgage — 442 442 202 130,892 131,094

Home equity — 28 28 — 6,784 6,784

Leases — 1,047 1,047 — 123,025 123,025

Consumer — 196 196 — 15,347 15,347

Total $ 1,051 $ 10,798 $ 11,849 $ 6,260 $ 802,182 $ 808,442

Allowance for loan and lease losses:

Individually evaluated for impairment $ 150 $ 52 $ — $ — $ — $ 202

Collectively evaluated for impairment 7,647 1,196 270 1,054 217 10,384

Balance, December 31 $ 7,797 $ 1,248 $ 270 $ 1,054 $ 217 $ 10,586

Loans and leases:

Individually evaluated for impairment $ 701 $ 493 $ 269 $ — $ — $ 1,463

Collectively evaluated for impairment 404,278 106,794 99,393 117,171 17,249 744,885

Ending Balance, December 31 $ 404,979 $ 107,287 $ 99,662 $ 117,171 $ 17,249 $ 746,348

(1) Commercial mortgage includes commercial and multifamily real estate loans and commercial construction and development loans.

(2) Residential mortgage includes one- to four-family and home equity loans and residential construction and development loans.

Individually evaluated for impairment Collectively evaluated for impairment Balance, December 31 Individually evaluated for impairment Collectively evaluated for impairment Balance, December 31

As of December 31, 2020:

Commercial mortgage $ — $ 4,628 $ 4,628 $ 76 $ 247,488 $ 247,564

Commercial and industrial 202 2,069 2,271 1,118 121,713 122,831

Construction and development — 1,068 1,068 — 58,424 58,424

Multi-family — 1,039 1,039 — 55,998 55,998

Residential mortgage — 323 323 269 124,852 125,121

Home equity — 18 18 — 5,982 5,982

Leases — 1,054 1,054 — 117,171 117,171

Consumer — 185 185 — 13,257 13,257

Total $ 202 $ 10,384 $ 10,586 $ 1,463 $ 744,885 $ 746,348

The Company rates all loans and leases by credit quality using the following designations:

37 unchanged sentences

This classification does not mean that the loan or lease has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan or lease even though partial recovery may be effected in the future.

The risk characteristics of each loan and lease portfolio segment are as follows:

No material changes have been made to the risk characteristics pertaining to the loan and lease portfolio contained in the Company's 2020 Form 10-K.

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of September 30, 2021 and December 31, 2020:

Pass Special Mention Substandard Doubtful Loss Total

As of September 30, 2021:

Commercial mortgage $ 251,470 $ 3,600 $ 141 $ — $ — $ 255,211

Commercial and industrial 94,691 5,773 1,354 — — 101,818

Commercial and industrial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.

The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value.

Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee.

Short-term loans may be made on an unsecured basis.

In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial Mortgage including Construction

Loans in this segment include commercial loans, commercial construction loans, and multi-family loans.

This segment also includes loans secured by 1-4 family residences which were made for investment purposes.

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate.

Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan.

Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.

The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area.

Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria.

In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk.

In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews and financial analysis of the developers and property owners.

Construction loans are generally based on estimates of costs and value associated with the complete project.

These estimates may be inaccurate.

Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project.

Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained.

These loans are closely monitored by on-site inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

Residential, Brokered and Consumer

Residential, brokered and consumer loans consist of three segments – residential mortgage loans, brokered mortgage loans and personal loans.

For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.

Brokered mortgages are purchased residential mortgage loans meeting the Company’s criteria established for originating residential mortgage loans.

Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles.

Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit.

Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels.

Repayment can also be impacted by changes in property values on residential properties.

Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Lease financing consists of direct financing leases and are used by commercial customers to finance capital purchases of equipment.

The credit decisions for these transactions are based upon an assessment of the overall financial capacity of the applicant.

A determination is made as to the applicant’s financial condition and ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved.

The following tables present the credit risk profile of the Company’s loan and lease portfolio based on rating category and payment activity as of June 30, 2021 and December 31, 2020:

June 30, 2021

Mortgage Industrial Construction

Development Multi-

Family Residential

Mortgage Home

Equity Leases Consumer Total

1-4 Pass $ 241,322 $ 110,773 $ 75,785 $ 80,534 $ 126,914 $ 6,273 $ 120,862 $ 14,665 $ 777,128

5 Special Mention 7,854 4,939 — — — — — — 12,793

6 Substandard 200 1,367 4,900 — 2,135 52 57 11 8,722

7 Doubtful — — — — — — 87 — 87

8 Loss — — — — — — — — —

$ 249,376 $ 117,079 $ 80,685 $ 80,534 $ 129,049 $ 6,325 $ 121,006 $ 14,676 $ 798,730

December 31, 2020

Mortgage Industrial Construction

Development Multi-

Family Residential

Mortgage Home

Equity Leases Consumer Total

1-4 Pass $ 239,055 $ 114,411 $ 53,524 $ 55,998 $ 121,976 $ 5,916 $ 117,136 $ 13,256 $ 721,272

5 Special Mention 6,976 5,542 4,900 — — — — — 17,418

6 Substandard 1,533 2,878 — — 3,145 66 15 1 7,638

7 Doubtful — — — — — — 20 — 20

8 Loss — — — — — — — — —

$ 247,564 $ 122,831 $ 58,424 $ 55,998 $ 125,121 $ 5,982 $ 117,171 $ 13,257 $ 746,348

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of June 30, 2021 and December 31, 2020:

June 30, 2021

Delinquent Loans Current Total

Construction and development 77,611 — 4,900 — — 82,511

Multi-family 92,652 — — — — 92,652

Residential mortgage 128,698 — 2,396 — — 131,094

Home equity 6,733 — 51 — — 6,784

Leases 122,961 — 16 48 — 123,025

Consumer 15,325 — 22 — — 15,347

Total $ 790,141 $ 9,373 $ 8,880 $ 48 $ — $ 808,442

Pass Special Mention Substandard Doubtful Loss Total

As of December 31, 2020:

Commercial mortgage $ 239,055 $ 6,976 $ 1,533 $ — $ — $ 247,564

Commercial and industrial 114,411 5,542 2,878 — — 122,831

Construction and development 53,524 4,900 — — — 58,424

Multi-family 55,998 — — — — 55,998

Residential mortgage 121,976 — 3,145 — — 125,121

Home equity 5,916 — 66 — — 5,982

Leases 117,136 — 15 20 — 117,171

Consumer 13,256 — 1 — — 13,257

Total $ 721,272 $ 17,418 $ 7,638 $ 20 $ — $ 746,348

The following tables present the Company’s loan and lease portfolio aging analysis of the recorded investment in loans and leases as of September 30, 2021 and December 31, 2020:

September 30, 2021

Delinquent Loans and Leases Current Total

Leases Total Loans

12 unchanged sentences

December 31, 2020

Delinquent Loans Current Total

Delinquent Loans and Leases Current Total

Leases Total Loans

11 unchanged sentences

Totals $ 4,194 $ 5,555 $ 4,638 $ 14,387 $ 731,961 $ 746,348 $ 3,996

The following tables present the Company’s impaired loans and specific valuation allowance at June 30, 2021 and December 31, 2020:

June 30, 2021

The following tables present the Company’s impaired loans and specific valuation allowance at September 30, 2021 and December 31, 2020:

September 30, 2021

Balance Unpaid

6 unchanged sentences

Impaired loans with a specific valuation allowance

Commercial mortgage $ 5,504 $ 5,504 $ 900

Commercial and industrial $ 645 $ 664 $ 301

Construction and development 4,900 4,900 750

$ 5,545 $ 5,564 $ 1,051

2 unchanged sentences

Commercial and industrial 1,017 1,235 301

Construction and development 4,900 4,900 750

Residential mortgage 202 298 —

9 unchanged sentences

Impaired loans with a specific valuation allowance

Commercial mortgage $ 625 $ 625 $ 150

Commercial and industrial 679 689 202

5 unchanged sentences

Total impaired loans $ 1,463 $ 2,036 $ 202

The following tables present the Company’s average investment in impaired loans and leases, and interest income recognized for the three and six months ended June 30, 2021 and 2020:

The following tables present the Company’s average investment in impaired loans and leases, and interest income recognized for the three and nine months ended September 30, 2021 and 2020:

Investment in

Loans and Leases Interest

Three Months Ended June 30, 2021:

Three Months Ended September 30, 2021:

Total impaired loans

1 unchanged sentence

Commercial and industrial 1,022 13

Construction and development 4,900 —

Residential mortgage 190 4

2 unchanged sentences

Loans and Leases Interest

Six Months Ended June 30, 2021:

Nine Months Ended September 30, 2021:

Total impaired loans

1 unchanged sentence

Commercial and industrial 1,054 24

Construction and development 3,675 —

Residential mortgage 185 7

2 unchanged sentences

Loans and Leases Interest

Three Months Ended June 30, 2020:

Three Months Ended September 30, 2020:

Total impaired loans

5 unchanged sentences

Loans and Leases Interest

Six Months Ended June 30, 2020:

Nine Months Ended September 30, 2020:

Total impaired loans

3 unchanged sentences

Total impaired loans and leases $ 1,703 $ 75

The following table presents the Company’s nonaccrual loans and leases at June 30, 2021 and December 31, 2020:

The following table presents the Company’s nonaccrual loans and leases at September 30, 2021 and December 31, 2020:

September 30,

2021 December 31,

4 unchanged sentences

$ 6,226 $ 803

During the three and six months ended June 30, 2021 and 2020, there were no newly classified troubled debt restructured loans or leases (“TDRs”).

For the three and six months ended June 30, 2021 and 2020, the Company recorded no charge-offs related to TDRs.

As of both June 30, 2021 and December 31, 2020, TDRs had a related allowance of $ 52,000 .

During the three and six months ended June 30, 2021, there were no TDRs for which there was a payment default within the first 12 months of the modification.

During the three and nine months ended September 30, 2021 and 2020, there were no newly classified TDRs.

For the three and nine months ended September 30, 2021 and 2020, the Company recorded no charge-offs related to TDRs.

As of September 30, 2021 and December 31, 2020, TDRs had a related allowance of $ 51,000 and $ 52,000 , respectively.

During the three and nine months ended September 30, 2021, there were no TDRs for which there was a payment default within the first 12 months of the modification.

The CARES Act provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs.

3 unchanged sentences

In March 2020, the Company began offering short-term loan modifications to assist borrowers during the COVID-19 pandemic.

As of June 30, 2021, the Company had six loan and lease modifications outstanding related to the COVID-19 pandemic with an

outstanding loan balance totaling $ 2.5 million in accordance with the CARES Act.

As of September 30, 2021, the Company had no loan and lease modifications outstanding related to the COVID-19 pandemic in accordance with the CARES Act.

Accordingly, the Company does not account for such loan modifications as TDRs.

Loan modifications in accordance with the CARES Act and related regulatory guidance are still subject to an evaluation in regard to determining whether or not a loan is deemed to be impaired.

At June 30, 2021 and December 31, 2020, the balance of real estate owned included $ 0 and $ 32,000 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At June 30, 2021 and December 31, 2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $ 442,000 and $ 283,000 , respectively.

At September 30, 2021 and December 31, 2020, the balance of real estate owned included $ 0 and $ 32,000 , respectively, of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property.

At September 30, 2021 and December 31, 2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceeds were in process was $ 326,000 and $ 283,000 , respectively.

The following lists the components of the net investment in direct financing leases:

September 30,

2021 December 31,

4 unchanged sentences

Net investment in direct finance leases $ 123,025 $ 117,171

Leases serviced by First Bank Richmond for the benefit of others totaled approximately $ 0 and $ 86,000 at June 30, 2021 and December 31, 2020, respectively.

Leases serviced by First Bank Richmond for the benefit of others totaled approximately $ 0 and $ 86,000 at September 30, 2021 and December 31, 2020, respectively.

Additionally, certain leases have been sold with partial recourse.

First Bank Richmond estimates and records its obligation based upon historical loss percentages.

At both June 30, 2021 and December 31, 2020, First Bank Richmond recorded a recourse obligation on leases sold of $ 0 , and had a maximum exposure of $ 0 and $ 86,000 , respectively, for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to June 30, 2021:

At both September 30, 2021 and December 31, 2020, First Bank Richmond recorded a recourse obligation on leases sold of $ 0 , and had a maximum exposure of $ 0 and $ 86,000 , respectively, for these leases.

The following table summarizes the future minimum lease payments receivable subsequent to September 30, 2021:

2021 $ 14,225

10 unchanged sentences

Recurring Measurements

The following tables present the fair value measurements of assets recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2021 and December 31, 2020:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

June 30, 2021

September 30, 2021

Available-for-sale securities

19 unchanged sentences

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

There have been no significant changes in the valuation techniques during the six months ended June 30, 2021.

There have been no significant changes in the valuation techniques during the nine months ended September 30, 2021.

Available-for-Sale Securities

5 unchanged sentences

Nonrecurring Measurements

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2021 and December 31, 2020:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

June 30, 2021

September 30, 2021

Impaired loans, collateral dependent $ 4,656 $ — $ — $ 4,656

23 unchanged sentences

Unobservable (Level 3) Inputs

The following tables present the fair value measurement of assets recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2021 and December 31, 2020:

Fair Value at June 30,

Fair Value at September 30,

2021 Valuation

8 unchanged sentences

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments at June 30, 2021 and December 31, 2020:

The following tables present estimated fair values of the Company’s financial instruments at September 30, 2021 and December 31, 2020:

Fair Value Measurements Using

2 unchanged sentences

(Level 2) Significant

June 30, 2021

September 30, 2021

Financial assets

32 unchanged sentences

The following table presents the computation of basic and diluted EPS for the periods indicated:

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

Net income $ 3,082 $ 2,532

8 unchanged sentences

Diluted Earnings Per Share $ 0.27 $ 0.21

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

Net income $ 8,426 $ 7,490

11 unchanged sentences

The Company matches employees' contributions at the rate of 50 percent for the first six percent of base salary contributed by participants.

The Company’s expense for the plan was $ 64,000 , $ 116,000 , $ 57,000 , and $ 106,000 for the three and six months ended June 30, 2021 and 2020, respectively.

The Company’s expense for the plan was $ 49,000 , $ 165,000 , $ 50,000 , and $ 156,000 for the three and nine months ended September 30, 2021 and 2020, respectively.

The Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “DB Plan”), an industry-wide, tax-qualified defined-benefit pension plan.

4 unchanged sentences

The Company’s actual termination expense will be based on the cost of purchasing annuities through an insurance company, and may be higher or lower depending on a number of factors, including the interest rate environment and the valuation of plan assets.

Due to the current low interest rate environment, terminating the DB Plan at this time would require the Company to incur a substantial additional expense over and above the amount presently accrued, as interest rates are even lower now than they were in 2019.

current low interest rate environment, terminating the DB Plan at this time would require the Company to incur a substantial additional expense over and above the amount presently accrued, as interest rates are even lower now than they were in 2019.

As a result, the Company’s Board of Directors will continue to monitor and evaluate the timing of, and costs associated with, termination of the DB Plan, and it is currently uncertain when the termination of the DB Plan will be completed or what the actual costs of such termination will be.

Any additional expenses associated with the termination of the DB Plan will negatively impact our results of operations in the future.

We recorded ongoing expenses of $ 173,000 for the quarter ended June 30, 2021, in connection with the freezing of the DB Plan.

We recorded ongoing expenses of $ 179,000 for the quarter ended September 30, 2021, in connection with the freezing of the DB Plan.

Employee Stock Ownership Plan

4 unchanged sentences

Unearned ESOP shares which have not yet been allocated to ESOP participants are excluded from the computation of average shares outstanding for earnings per share calculation.

Accordingly, $ 13,296,017 and $ 13,664,373 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity at June 30, 2021 and December 31, 2020, respectively.

Accordingly, $ 13,112,188 and $ 13,664,373 of common stock acquired by the ESOP was shown as a reduction of stockholders’ equity at September 30, 2021 and December 31, 2020, respectively.

Shares are released to participants proportionately as the loan is repaid.

ESOP expense for the three and six months ended June 30, 2021 and 2020 was $ 191,000 , $ 374,000 , $ 143,000 , and $ 329,000 , respectively.

ESOP expense for the three and nine months ended September 30, 2021 and 2020 was $ 207,000 , $ 581,000 , $ 152,000 , and $ 481,000 , respectively.

September 30,

2021 December 31,

11 unchanged sentences

On October 1, 2020, the Company awarded 449,086 shares of common stock under the 2020 EIP with a grant date fair value of $ 10.53 per share (total fair value of $ 4.7 million at issuance) to eligible participants.

On April 1, 2021, the Company awarded an additional 4,000 shares of common stock under the 2020 EIP with a grant date fair value of $ 13.86 (total fair value of $ 55,000 ) to eligible participants.

On April 1, 2021, the Company awarded an additional 4,000 shares of common stock under the 2020 EIP with a grant date fair value of $ 13.86 (total fair value of $ 55,000 at issuance) to eligible participants.

These awards vest in five equal annual installments with the first vesting occurring on June 30, 2021.

Forfeited shares may be awarded to other eligible recipients in future grants until the 2020 EIP terminates in September 2030.

The following table summarizes the restricted stock awards activity in the 2020 EIP during the six months ended June 30, 2021.

Six Months Ended June 30, 2021

The following table summarizes the restricted stock awards activity in the 2020 EIP during the nine months ended September 30, 2021.

Nine Months Ended September 30, 2021

Number of Restricted Shares Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited — —

Non-vested, June 30 348,395 10.56

Total compensation cost recognized in the income statement for restricted stock awards during the three and six months ended June 30, 2021 was $ 317,000 and $ 619,000 , respectively, and the related tax benefit recognized was $ 66,000 and $ 130,000 , respectively.

As of June 30, 2021, unrecognized compensation expense related to restricted stock awards was $ 3.7 million.

Non-vested, September 30 348,395 10.56

Total compensation cost recognized in the income statement for restricted stock awards during the three and nine months ended September 30, 2021 was $ 232,000 and $ 851,000 , respectively, and the related tax benefit recognized was $ 49,000 and $ 179,000 , respectively.

As of September 30, 2021, unrecognized compensation expense related to restricted stock awards was $ 3.4 million.

Stock Option Plan.

3 unchanged sentences

Forfeited options may be awarded to other eligible recipients in future grants until the 2020 EIP terminates in September 2030.

The following table summarizes the stock option activity in the 2020 EIP during the six months ended June 30, 2021.

Six Months Ended June 30, 2021

The following table summarizes the stock option activity in the 2020 EIP during the nine months ended September 30, 2021.

Nine Months Ended September 30, 2021

Number of Shares Weighted-Average Exercise Price

3 unchanged sentences

Forfeited/expired — —

Balance, June 30 1,103,657 10.55

Balance, September 30 1,091,541 10.55

Exercisable at end of period 241,083 $ 10.55

5 unchanged sentences

Expected life of options 6.1 years

A summary of the status of the Company stock option shares as of June 30, 2021 is presented below.

A summary of the status of the Company stock option shares as of September 30, 2021 is presented below.

Shares Weighted Average Grant Date Fair Value

3 unchanged sentences

Forfeited — —

Non-vested, June 30 850,458 $ 2.91

Total compensation cost recognized in the income statement for option-based payment arrangements for the three and six months ended June 30, 2021 was $ 211,000 and $ 416,000 , respectively, and the related tax benefit recognized was $ 23,000 and $ 46,000 , respectively.

As of June 30, 2021, unrecognized compensation expense related to the stock option awards was $ 2.5 million.

Non-vested, September 30 850,458 $ 2.91

Total compensation cost recognized in the income statement for option-based payment arrangements for the three and nine months ended September 30, 2021 was $ 156,000 and $ 572,000 , respectively, and the related tax benefit recognized was $ 17,000 and $ 63,000 , respectively.

As of September 30, 2021, unrecognized compensation expense related to the stock option awards was $ 2.3 million.

Subsequent Event

Subsequent to June 30, 2021 through August 13, 2021 the Company purchased 214,096 shares of the Company's common stock pursuant to the existing stock repurchase program, leaving 1,096,311 shares available for future repurchase.

Subsequent to September 30, 2021 through November 12, 2021 the Company purchased 21,651 shares of the Company's common stock pursuant to the existing stock repurchase program, leaving 1,023,847 shares available for future repurchase.

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