What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 328 added, 275 removed, 965 unchanged (38% of the section changed)

48 unchanged sentences

in thousands, except per share data)

Interest Income

Total interest income

15 unchanged sentences

Title insurance income

Gain on sale/disposal of assets

Gain (loss) on sale/disposal of assets

Total noninterest income

21 unchanged sentences

in thousands)

Other comprehensive income (loss)

Other comprehensive loss

Available for sale investment securities:

Gross unrealized holding income (loss) arising in the period

Related tax benefit (expense)

Net effect on other comprehensive income (loss)

Gross unrealized holding loss arising in the period

Related tax benefit

Net effect on other comprehensive loss

Total comprehensive income (loss)

1 unchanged sentence

Consolidated Statements of Shareholders’ Equity (unaudited)

Accumulated Other

($ in thousands, except per share data)

Comprehensive

($ in thousands, except per share data)

Income (Loss)

12 unchanged sentences

Balance, June 30, 2022

Accumulated Other

($ in thousands, except per share data)

Other comprehensive loss

Dividends on common, $ 0.12 per share

Restricted stock vesting

Repurchased stock ( 77,326 shares)

Stock based compensation expense

Balance, September 30, 2022

Comprehensive

($ in thousands, except per share data)

Income (Loss)

January 1, 2021

10 unchanged sentences

Balance, June 30, 2021

Other comprehensive loss

Dividends on common, $ 0.11 per share

Restricted stock vesting

Repurchased stock ( 106,911 shares)

Stock based compensation expense

Balance, September 30, 2021

See notes to condensed consolidated financial statements (unaudited)

2 unchanged sentences

Flows (unaudited)

September 30,

in thousands)

Operating Activities

20 unchanged sentences

Purchase of bank owned life insurance

Purchase of Federal Reserve and Federal Home Loan Bank Stock

Proceeds from sale of Federal Reserve and Federal Home Loan Bank Stock

Proceeds from sale of foreclosed assets

3 unchanged sentences

& savings accounts

Net decrease in time deposits

Net increase (decrease) in time deposits

Net increase in short term borrowings

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recurring adjustments.

Results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of results

for the complete year.

Results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of

results for the complete year.

The condensed consolidated balance sheet of the

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New and applicable accounting pronouncements:

Investments – Equity

Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) –

Clarifying the Interactions between Topic 321, Topic 323 and Topic 815

Accounting Standards Update (ASU) No.

Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and

Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323 and Topic 815

This guidance was issued in January 2020 to clarify

34 unchanged sentences

for expected credit losses on debt securities.

The new accounting guidance is effective

for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019.

FASB has deferred the effective date for this ASU for smaller reporting companies, such as the Company, to annual reporting periods and

interim reporting periods within those annual periods, beginning after December 15, 2022.

The Company will continue to estimate

the impact of adopting ASU 2016-13 throughout 2022.

The new accounting guidance is effective for annual

reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019.

However, the Financial

Accounting Standards Board (“FASB”) has deferred the effective date for this ASU for smaller reporting companies, such as

the Company, to annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2022.

The Company will continue to estimate the impact

of adopting ASU 2016-13 throughout 2022.

We expect to be fully prepared for implementation by January 1, 2023.

1 unchanged sentence

Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures

The amendments to ASU 2016-13 (Financial

Instruments – Credit Losses) update the prior guidance on Troubled Debt Restructurings (“TDR”) by eliminating the TDR

recognition and measurement guidance and, instead, require that an entity evaluate whether the modification represents a new loan or a

continuation of an existing loan.

In addition, entities are required to disclose current-period gross writeoffs by year of origination

for financing receivables and net investment in leases.

The new accounting guidance is effective

for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019.

FASB has deferred the effective date for this ASU for smaller reporting companies, such as the Company, to annual reporting periods and

interim reporting periods within those annual periods, beginning after December 15, 2022.

The Company will continue to estimate

the impact of adopting the amendments throughout 2022.

The amendments to ASU 2016-13 (Financial Instruments

– Credit Losses) update the prior guidance on Troubled Debt Restructurings (“TDR”) by eliminating the TDR recognition

and measurement guidance and, instead, require that an entity evaluate whether the modification represents a new loan or a continuation

of an existing loan.

In addition, entities are required to disclose current-period gross writeoffs by year of origination for financing

receivables and net investment in leases.

The new accounting guidance is effective for annual

reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019.

However, the FASB has

deferred the effective date for this ASU for smaller reporting companies, such as the Company, to annual reporting periods and interim

reporting periods within those annual periods, beginning after December 15, 2022.

The Company will continue to estimate the impact

of adopting the amendments throughout 2022.

We expect to be fully prepared for implementation by January 1, 2023.

8 unchanged sentences

Three Months Ended

September 30,

($ and outstanding shares in thousands - except per share data)

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Diluted earnings per common share

Six Months Ended

Nine Months Ended

September 30,

($ and outstanding shares in thousands - except per share data)

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its Board of Directors had declared a 5 percent common stock dividend payable on February 4, 2022, to shareholders of record as of January

Holders of the Company’s common shares as of the record date received one additional common share for every twenty common

Holders of the Company’s common shares as of the record date received one additional common share for every 20 common

shares held on the record date.

1 unchanged sentence

the closing price of the Company’s common shares on the record date of $ 19.89 .

Had the 5 percent common stock dividend been included in the Company’s

2021 financial statements, common shares outstanding would have increased by approximately 345,000 and diluted earnings per share, assuming

the shares were outstanding for the three and six months ended June 30, 2021, would have decreased by $ 0.03 and $ 0.07 per share, respectively.

Had the 5 percent common stock dividend been included

in the Company’s 2021 financial statements, common shares outstanding would have increased by approximately 345,000 and diluted

earnings per share, assuming the shares were outstanding for the three and nine months ended September 30, 2021, would have decreased

by $ 0.03 and $ 0.07 per share, respectively.

In connection with the 5 percent common stock

7 unchanged sentences

The amortized cost and appropriate fair values,

together with gross unrealized gains and losses, of securities at June 30, 2022 and December 31, 2021 were as follows:

together with gross unrealized gains and losses, of securities at September 30, 2022 and December 31, 2021 were as follows:

($ in thousands)

June 30, 2022

September 30, 2022

Treasury and Government agencies

7 unchanged sentences

Other corporate securities

The amortized cost and fair value of securities available

for sale at June 30, 2022, by contractual maturity, are

The amortized cost and fair value of securities

available for sale at September 30, 2022, by contractual maturity, are shown below.

Expected maturities will differ from contractual maturities

7 unchanged sentences

The fair value of securities pledged as collateral,

to secure public deposits and for other purposes, was $ 60.3 million at June 30, 2022 and $ 54.2 million at December 31, 2021.

value of securities delivered for repurchase agreements was $ 27.5 million at June 30, 2022 and $ 23.6 million at December 31, 2021.

to secure public deposits and for other purposes, was $ 63.1 million at September 30, 2022 and $ 54.2 million at December 31, 2021.

fair value of securities delivered for repurchase agreements was $ 24.6 million at September 30, 2022 and $ 23.6 million at December 31,

There were no realized gains or losses from sales

of available-for-sale securities for the six months ended June 30, 2022 or June 30, 2021.

of available-for-sale securities for the three and nine months ended September 30, 2022 or September 30, 2021.

Certain investments in debt securities are reported

1 unchanged sentence

Total fair value of these investments was $ 239.5

million at June 30, 2022, and $ 214.2 million at December 31, 2021, which consisted of 139 securities, or approximately 97 percent, and

64 securities, or approximately 81 percent, respectively, of the Company’s available-for-sale investment portfolio at such dates.

million at September 30, 2022, and $ 214.2 million at December 31, 2021, which consisted of 145 securities, or approximately 99 percent,

and 64 securities, or approximately 81 percent, respectively, of the Company’s available-for-sale investment portfolio at such dates.

Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information and information

4 unchanged sentences

Securities with unrealized losses, aggregated

by investment class and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2022

by investment class and length of time that individual securities have been in a continuous unrealized loss position at September 30,

2022 and December 31, 2021, are as follows:

1 unchanged sentence

12 Months or Longer

June 30, 2022

($ in thousands)

September 30, 2022

Treasury and Government agencies

5 unchanged sentences

December 31, 2021

Unrealized Losses

Treasury and Government agencies

3 unchanged sentences

The total unrealized loss in the securities portfolio

was $ 28.1 million as of June 30, 2022 compared to a $ 3.6 million unrealized loss at December 31, 2021.

was $ 42.3 million as of September 30, 2022 compared to a $ 3.6 million unrealized loss at December 31, 2021.

Management evaluates securities

4 unchanged sentences

Management has determined there is no

other-than-temporary-impairment on its securities as of June 30, 2022.

other-than-temporary-impairment on its securities as of September 30, 2022.

NOTE 4 – LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans that management has the intent

and ability to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances adjusted

for any charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts

on purchased loans.

Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over

the loan term.

Generally, all loan classes are placed on nonaccrual status not later than 90 days past due, unless the loan is well-secured

and in the process of collection.

Loans that management has the intent and ability

to hold for the foreseeable future, or until maturity or payoffs, are reported at their outstanding principal balances adjusted for any

charge-offs, the allowance for loan losses, any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased

Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan

Generally, all loan classes are placed on nonaccrual status not later than 90 days past due, unless the loan is well-secured and

in the process of collection.

All interest accrued, but not collected, for loans that are placed on nonaccrual or charged-off is reversed

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and future payments are reasonably assured.

The allowance for loan losses is established

as losses are estimated to have occurred through a provision for loan losses charged to income.

The allowance for loan losses is established as

losses are estimated to have occurred through a provision for loan losses charged to income.

Loan losses are charged against the allowance

1 unchanged sentence

Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated

on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical

The allowance for loan losses is evaluated on

a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical

experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated

2 unchanged sentences

that are susceptible to significant revision as new information becomes available.

The allowance consists of allocated

and general components.

The allowance consists of allocated and general

The allocated component relates to loans that are classified as impaired.

For those loans that are classified

as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired

loan is lower than the carrying value of that loan.

The general component covers nonclassified loans and is based on historical charge-off

experience and expected loss given default derived from the Company’s internal risk rating process.

Other adjustments may be made

to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected

in the historical loss or risk rating data.

A loan is considered impaired when,

based on current information and events, it is probable that State Bank will be unable to collect the scheduled payments of principal

or interest when due according to the contractual terms of the loan agreement.

Factors considered by management in determining impairment

include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due.

experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

Management determines the significance

of payment delays and payment shortfalls on a case-by-case basis, taking into consideration each of the circumstances surrounding the

loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the

amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan-by-loan basis for commercial,

agricultural, and construction loans by either the present value of expected future cash flows discounted at the loan’s effective

interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

When State Bank moves a loan to nonaccrual

status, total unpaid interest accrued to date is reversed from income.

Subsequent payments are applied to the outstanding principal balance

with the interest portion of the payment recorded on the balance sheet as a contra-loan.

For those loans that are classified as impaired,

an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower

than the carrying value of that loan.

The general component covers nonclassified loans and is based on historical charge-off experience

and expected loss given default derived from the Company’s internal risk rating process.

Other adjustments may be made to the allowance

for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical

loss or risk rating data.

A loan is considered impaired when, based on current

information and events, it is probable that State Bank will be unable to collect the scheduled payments of principal or interest when

due according to the contractual terms of the loan agreement.

Factors considered by management in determining impairment include payment

status, collateral value and the probability of collecting scheduled principal and interest payments when due.

Loans that experience insignificant

payment delays and payment shortfalls generally are not classified as impaired.

Management determines the significance of payment delays

and payment shortfalls on a case-by-case basis, taking into consideration each of the circumstances surrounding the loan and the borrower,

including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall

in relation to the principal and interest owed.

Impairment is measured on a loan-by-loan basis for commercial, agricultural, and construction

loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s

obtainable market price or the fair value of the collateral if the loan is collateral dependent.

When State Bank moves a loan to nonaccrual status,

total unpaid interest accrued to date is reversed from income.

Subsequent payments are applied to the outstanding principal balance with

the interest portion of the payment recorded on the balance sheet as a contra-loan.

Interest received on impaired loans may be realized

6 unchanged sentences

for impairment measurements, unless such loans are the subject of a restructuring agreement due to financial difficulties of the borrower.

Categories of loans at June 30, 2022 and December 31, 2021 include:

Categories of loans at September 30, 2022 and December 31, 2021 include:

Nonaccrual Loans

($ in thousands)

December 2021

Commercial & industrial

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The following tables present the activity in the

allowance for loan losses for the three and six months ended June 30, 2022 and June 30, 2021, and the recorded investment in loans based

on portfolio segment and impairment method as of June 30, 2022 and December 31, 2021.

allowance for loan losses for the three and nine months ended September 30, 2022 and September 30, 2021, and the recorded investment in

loans based on portfolio segment and impairment method as of September 30, 2022 and December 31, 2021.

($ in thousands)

For the Three Months Ended June 30, 2022

For the Three Months Ended

September 30, 2022

Beginning balance

Ending balance

For the Six Months Ended June 30, 2022

For the Nine Months Ended

September 30, 2022

Beginning balance

Ending balance

For the Three Months Ended June 30, 2021

For the Three Months Ended

September 30, 2021

Beginning balance

Ending balance

For the Six Months Ended June 30, 2021

For the Nine Months Ended

September 30, 2021

Commercial real estate

Residential real estate

Beginning balance

Ending balance

Loans Receivable at June 30, 2022

Loans Receivable at

September 30, 2022

Commercial real estate

Residential real estate

Ending balance:

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collectively evaluated for impairment

Loans Receivable at December 31, 2021

Loans Receivable at

Ending balance:

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Credit Risk Profile

The Company categorizes loans into

risk categories based on relevant information about the ability of borrowers to service their debt such as:

current financial information,

historical payment experience, credit documentation, public information and current economic trends, among other factors.

analyzes loans individually by classifying the loans as to credit risk.

This analysis includes loans with an outstanding balance greater

than $ 100,000 and non-homogeneous loans, such as commercial and commercial real estate loans.

This analysis is performed on a quarterly

The Company uses the following definitions for risk ratings:

The Company categorizes loans into risk categories

based on relevant information about the ability of borrowers to service their debt such as:

current financial information, historical

payment experience, credit documentation, public information and current economic trends, among other factors.

The Company analyzes loans

individually by classifying the loans as to credit risk.

This analysis includes loans with an outstanding balance greater than $ 100,000

and non-homogeneous loans, such as commercial and commercial real estate loans.

This analysis is performed on a quarterly basis.

uses the following definitions for risk ratings:

Pass (grades 1 – 4):

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Special Mention (5):

have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may result

in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Special mention

assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Ordinarily, special

mention credits have characteristics which corrective management action would remedy.

Assets have potential weaknesses that deserve management’s close attention.

If left uncorrected, these potential weaknesses may

result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

special mention credits have characteristics which corrective management action would remedy.

Substandard (6):

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The following tables present the credit risk profile

of the Company’s loan portfolio based on rating category as of June 30, 2022 and December 31, 2021.

of the Company’s loan portfolio based on rating category as of September 30, 2022 and December 31, 2021.

($ in thousands)

June 30, 2022

September 30, 2022

real estate -

owner occupied

real estate -

3 unchanged sentences

real estate -

owner occupied

real estate -

1 unchanged sentence

Substandard (6)

The Company evaluates the loan risk

grading system definitions and allowance for loan loss methodology on an ongoing basis.

The following tables present the Company’s

loan portfolio aging analysis as of June 30, 2022 and December 31, 2021.

The Company evaluates the loan risk grading system

definitions and allowance for loan loss methodology on an ongoing basis.

The following tables present the Company’s loan portfolio

aging analysis as of September 30, 2022 and December 31, 2021.

($ in thousands)

June 30, 2022

September 30, 2022

90 Days Past Due

Commercial & industrial

3 unchanged sentences

December 31, 2021

90 Days Past Due

Commercial & industrial

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Impaired loans include nonperforming

commercial loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing

financial difficulties.

These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness

of principal, forbearance or other actions intended to maximize collection.

commercial loans but also include loans modified in troubled debt restructurings (“TDRs”) where concessions have been granted

to borrowers experiencing financial difficulties.

These concessions could include a reduction in the interest rate on the loan, payment

extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

The following tables present impaired loan information as of and for

the three and six months ended June 30, 2022 and 2021, and for the twelve months ended December 31, 2021:

the three and nine months ended September 30, 2022 and 2021, and for the twelve months ended December 31, 2021:

($ in thousands)

Six Months Ended June 30, 2022

Nine Months Ended

Unpaid Principal

Average Recorded

Interest Income

September 30, 2022

With no related allowance recorded:

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Residential real estate

Three Months Ended

September 30, 2022

($ in thousands)

Three Months Ended June 30, 2022

With no related allowance recorded:

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($ in thousands)

Twelve Months Ended December 31, 2021

Twelve Months Ended

Unpaid Principal

Average Recorded

Interest Income

December 31, 2021

With no related allowance recorded:

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Residential real estate

Six Months Ended

Nine Months Ended

Three Months Ended

September 30, 2021

Average Recorded

Interest Income

Average Recorded

Interest Income

($ in thousands)

June 30, 2021

With no related allowance recorded:

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Residential real estate

Impaired loans less than $ 100,000 are

included in groups of homogenous loans.

Impaired loans less than $ 100,000 are included in groups of homogenous

These loans are evaluated based on delinquency status.

Interest income recognized on a cash

basis does not materially differ from interest income recognized on an accrual basis.

Interest income recognized on a cash basis does

not materially differ from interest income recognized on an accrual basis.

Troubled Debt Restructured (TDR) Loans

TDRs are modified loans where a concession

was provided to a borrower experiencing financial difficulties.

Loan modifications are considered TDRs when the concessions provided are

not available to the borrower through either normal channels or other sources.

TDRs are modified loans where a concession was

provided to a borrower experiencing financial difficulties.

Loan modifications are considered TDRs when the concessions provided are not

available to the borrower through either normal channels or other sources.

However, not all loan modifications are TDRs.

TDR Concession Types

The Company’s standards relating

to loan modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations.

Each potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific

circumstances at a point in time.

All loan modifications, including those classified as TDRs,

are reviewed and approved by management.

The types of concessions provided to borrowers include:

rate reduction:

A reduction of the stated interest rate to a nonmarket rate for the remaining

original life of the loan.

The Company also may grant interest rate concessions for a limited

timeframe on a case by case basis.

The Company’s standards relating to loan

modifications consider, among other factors, minimum verified income requirements, cash flow analysis, and collateral valuations.

potential loan modification is reviewed individually and the terms of the loan are modified to meet a borrower’s specific circumstances

at a point in time.

All loan modifications, including those classified as TDRs, are reviewed and approved by management.

concessions provided to borrowers include:

● Interest rate reduction:

A reduction of the stated

interest rate to a nonmarket rate for the remaining original life of the loan.

The Company also may grant interest rate concessions for

a limited timeframe on a case by case basis.

● Amortization

or maturity date change:

A change in the amortization or maturity date beyond what the collateral

supports, including a concession that does any of the following:

(1) Lengthens

the amortization period of the amortized principal beyond market terms.

This concession reduces

the minimum monthly payment and increases the amount of the balloon payment at the end of

A change in the amortization or maturity date beyond what the collateral supports, including a concession that

does any of the following:

(1) Lengthens the amortization period of the amortized principal

beyond market terms.

This concession reduces the minimum monthly payment and increases the amount of the balloon payment at the end of

the term of the loan.

Principal is generally not forgiven.

the amount of loan principal to be amortized.

This concession also reduces the minimum monthly

payment and increases the amount of the balloon payment at the end of the term of the loan.

(2) Reduces the amount of loan principal to be amortized.

concession also reduces the minimum monthly payment and increases the amount of the balloon payment at the end of the term of the loan.

Principal is generally not forgiven.

the maturity date or dates of the debt beyond what the collateral supports.

This concession

generally applies to loans without a balloon payment at the end of the term of the loan.

In addition, there may be instances where renewing loans potentially require non-market terms

and would then be reclassified as TDRs.

A concession that is not categorized as one of the concessions described above.

These concessions

include, but are not limited to:

principal forgiveness, collateral concessions, covenant

concessions, and reduction of accrued interest.

Principal forgiveness may result from any

TDR modification of any concession type.

Company had no new TDR activity in the three and six months ended June 30, 2022, and June 30, 2021, respectively.

The Company had one

TDR, a residential loan with a recorded balance of $ 62,000 ,that during the past twelve months defaulted on its modified contractual agreement.

March 22, 2020, a statement was issued by the Company’s bank regulators and titled the “Interagency Statement on Loan Modifications

and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” (the “Interagency Statement”)

that encouraged financial institutions to work prudently with borrowers unable to meet the contractual payment obligations due

to the effects of COVID-19.

Additionally, Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended

(the “CARES Act”) further provided that a qualified loan modification is exempt by law from classification as a troubled

debt restructure as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2021 or the date that

is 60 days after the date on which the national emergency concerning the COVID-19 outbreak under the National Emergencies Act (50 U.S.C.

(3) Extends the maturity date or dates of the debt beyond what

the collateral supports.

This concession generally applies to loans without a balloon payment at the end of the term of the loan.

addition, there may be instances where renewing loans potentially require non-market terms and would then be reclassified as TDRs.

A concession that is not categorized as

one of the concessions described above.

These concessions include, but are not limited to:

principal forgiveness, collateral concessions,

covenant concessions, and reduction of accrued interest.

Principal forgiveness may result from any TDR modification of any concession

The Company had no new TDR activity in the three

and nine months ended September 30, 2022, and September 30, 2021, respectively.

The Company had one TDR, a residential loan with a recorded

balance of $ 62,000 , that during the past twelve months defaulted on its modified contractual agreement.

On March 22, 2020, a statement was issued by the

Company’s bank regulators and titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions

Working with Customers Affected by the Coronavirus” (the “Interagency Statement”) that encouraged financial institutions

to work prudently with borrowers unable to meet the contractual payment obligations due to the effects of COVID-19.

Additionally, Section

4013 of the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”) further provided that

a qualified loan modification is exempt by law from classification as a troubled debt restructure as defined by GAAP, from the period

beginning March 1, 2020 until the earlier of December 31, 2021 or the date that is 60 days after the date on which the national emergency

concerning the COVID-19 outbreak under the National Emergencies Act (50 U.S.C.

1601 et seq.) terminates.

As of June 30, 2022, all loans previously modified under Section 4013 of the CARES Act had returned to normal

payment terms.

As of September 30, 2022, all

loans previously modified under Section 4013 of the CARES Act had returned to normal payment terms.

NOTE 5 – GOODWILL

A summary of the activity in goodwill is presented

Three Months Ended

Six Months Ended

September 30,

in thousands)

4 unchanged sentences

impairment annually, and on an interim basis if events or circumstances change that indicate an impairment may exist.

As of June 30, 2022 and December 31, 2021, the

carrying amount of goodwill was $ 23.2 million.

Goodwill is assessed for impairment annually as of December 31, or more frequently if events

occur or circumstances change that indicate an impairment may exist.

When assessing goodwill for impairment, first, a qualitative assessment

can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated

carrying value.

As of September 30, 2022 and December 31, 2021,

the carrying amount of goodwill was $ 23.2 million.

Goodwill is assessed for impairment annually as of December 31, or more frequently

if events occur or circumstances change that indicate an impairment may exist.

When assessing goodwill for impairment, first, a qualitative

assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than

its estimated carrying value.

If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed.

Alternatively,

a quantitative goodwill test can be performed without performing a qualitative assessment.

Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a qualitative

5 unchanged sentences

The unpaid principal balance of mortgage loans serviced for others approximated $ 1.36

billion at June 30, 2022 and $ 1.36 billion at December 31, 2021.

Contractually specified servicing fees of $ 0.9 million and $ 1.7 million

were included in mortgage loan servicing fees in the consolidated income statement for the three months and six months ended June 30,

2022, respectively.

Servicing fees of $ 0.8 million and $ 1.7 million were included for the three and six months ended June 30, 2021, respectively.

billion at September 30, 2022 and $ 1.36 billion at December 31, 2021.

Contractually specified servicing fees of $ 0.9 million and $ 2.6

million were included in mortgage loan servicing fees in the consolidated income statement for the three months and nine months ended

September 30, 2022, respectively.

Servicing fees of $ 0.9 million and $ 2.5 million were included in mortgage loan servicing fees for the

three and nine months ended September 30, 2021, respectively.

The following table summarizes mortgage servicing

rights capitalized and related amortization, along with activity in the related valuation allowance:

Three Months Ended

Six Months Ended

September 30,

($ in thousands)

44 unchanged sentences

The table below presents the notional amount and

fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of June 30, 2022 and December 31, 2021.

June 30, 2022

December 31, 2021

fair value of the Company’s interest rate swaps, IRLCs and forward contracts utilized as of September 30, 2022 and December 31,

($ in thousands)

15 unchanged sentences

The following table presents the amounts included

in the consolidated statements of income for non-hedging derivative financial instruments for the three and six months ended June 30,

in the consolidated statements of income for non-hedging derivative financial instruments for the three and nine months ended September

30, 2022 and 2021.

Three Months Ended

Six Months Ended

September 30,

in thousands)

Statement of income classification

of income classification

Interest rate swap contracts

3 unchanged sentences

The following table shows the offsetting of financial assets and derivative

assets at June 30, 2022 and December 31, 2021.

amounts not offset in the

assets at September 30, 2022 and December 31, 2021.

Gross amounts

not offset in the

consolidated balance sheet

($ in thousands)

Gross amounts

of recognized

offset in the

balance sheet

the consolidated

balance sheet

June 30, 2022

Cash collateral

September 30, 2022

Interest rate swaps

December 31, 2021

Interest rate swaps

The following table shows the offsetting of financial liabilities and

derivative liabilities at June 30, 2022 and December 31, 2021.

of liabilities

Gross amounts not offset in the

derivative liabilities at September 30, 2022 and December 31, 2021.

Gross amounts

not offset in the

consolidated balance sheet

($ in thousands)

Gross amounts

of recognized

1 unchanged sentence

balance sheet

the consolidated

balance sheet

Cash collateral

June 30, 2022

September 30, 2022

Interest rate swaps

2 unchanged sentences

NOTE 8 – DEPOSITS

Major classification of deposits at June 30, 2022

Major classification of deposits at September

30, 2022 and at December 31, 2021 were as follows:

5 unchanged sentences

Total Deposits

Included in time deposits at June 30, 2022 and

December 31, 2021 were $ 45.0 million and $ 55.6 million, respectively, of deposits which were obtained through the Certificate of Deposit

Included in time deposits at September 30, 2022

and December 31, 2021 were $ 52.5 million and $ 55.6 million, respectively, of deposits which were obtained through the Certificate of Deposit

Account Registry Service (CDARS).

NOTE 9 – SHORT-TERM BORROWINGS

($ in thousands)

Fed funds borrowed

Securities sold under repurchase agreements

5 unchanged sentences

through 2061.

As of June 30, 2022, these REPO agreements were secured by securities totaling $ 27.5 million.

As of September 30, 2022, these REPO agreements were secured by securities totaling $ 24.6 million.

The REPO agreements mature

2 unchanged sentences

Federal Reserve Discount Window (“Discount Window”) by pledging either securities or loans as collateral.

As of June 30, 2022,

As of September

30, 2022, there was no collateral pledged or borrowings drawn at the Discount Window.

At June 30, 2022 and December 31, 2021, the Company

had $ 41.0 million in federal funds lines, of which $ 5.0 million was drawn.

At September 30, 2022 and December 31, 2021, the

Company had $ 41.0 million in federal funds lines, of which none was drawn.

NOTE 10 – FEDERAL HOME LOAN BANK ADVANCES

The Company’s FHLB advances were secured

by $ 174.2 million in mortgage loans at June 30, 2022.

All advances at June 30, 2022 had a 90 day maturity and a variable interest rate.

Aggregate annual maturities of FHLB advances at June 30, 2022 were:

by $ 188.3 million in mortgage loans at September 30, 2022.

Advances consisted of fixed and variable interest rates from 3.13 to 3.53 percent.

Fixed rate advances are subject to restrictions or penalties in the event of prepayment.

Aggregate annual maturities of FHLB advances

at September 30, 2022 were:

($ in thousands)

10 unchanged sentences

The balance of the Capital Securities

as of June 30, 2022 and December 31, 2021 was $ 10.3 million, with a maturity date of September 15, 2035 .

as of September 30, 2022 and December 31, 2021 was $ 10.3 million, with a maturity date of September 15, 2035 .

NOTE 12 – SUBORDINATED DEBT

23 unchanged sentences

levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets

or liabilities

Level 2 Observable

inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

Quoted prices in active markets for identical assets or liabilities

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or

Level 3 Unobservable inputs that are supported by little or

no market activity and that are significant to the fair value of the assets or liabilities

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies

29 unchanged sentences

of assets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements

fell at June 30, 2022 and December 31, 2021.

fell at September 30, 2022 and December 31, 2021.

($ in thousands)

Fair value at

September 30,

Treasury and Government Agencies

14 unchanged sentences

Forward contracts

- quoted prices in active markets for identical assets

- significant other observable inputs

- significant unobservable inputs

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable inputs

The following table reconciles the beginning and

ending balances of recurring fair value measurements recognized in the accompanying consolidated balance sheets using significant unobservable

(Level 3) inputs for the three and six months ended June 30, 2022 and 2021.

for the Three Months Ended

for the Six Months Ended

(Level 3) inputs for the three and nine months ended September 30, 2022 and 2021.

Three Months Ended

September 30,

Nine Months Ended

September 30,

($ in thousands)

3 unchanged sentences

Balance at end of period

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable inputs

The following is a description of the valuation

14 unchanged sentences

review policy.

All impaired loans held by the Company were collateral dependent at June 30, 2022 and December 31, 2021.

All impaired loans held by the Company were collateral dependent at September 30, 2022 and December 31, 2021.

Mortgage Servicing Rights

15 unchanged sentences

Fair value at

September 30,

Impaired loans

4 unchanged sentences

Mortgage servicing rights

- quoted prices in active markets for identical assets

- significant other observable inputs

- significant unobservable inputs

Level 1 - quoted prices in active markets for identical assets

Level 2 - significant other observable inputs

Level 3 - significant unobservable inputs

Unobservable (Level 3) Inputs

3 unchanged sentences

Fair value at

September 30,

Unobservable inputs

Range (weighted-average)

(weighted-average)

Collateral-dependent impaired loans

14 unchanged sentences

Unobservable inputs

Range (weighted-average)

(weighted-average)

Collateral-dependent impaired loans

12 unchanged sentences

There were no changes in the inputs or methodologies

used to determine fair value at June 30, 2022 as compared to December 31, 2021.

used to determine fair value at September 30, 2022 as compared to December 31, 2021.

The following methods were used to estimate the

18 unchanged sentences

The estimated fair value for fixed-maturity time deposits and FHLB advances are based on estimates

of the rate State Bank could pay on similar instruments with similar terms and maturities at June 30, 2022 and December 31, 2021.

of the rate State Bank could pay on similar instruments with similar terms and maturities at September 30, 2022 and December 31, 2021.

Loan Commitments

3 unchanged sentences

The estimated fair values for other financial instruments and off-balance-sheet loan commitments

approximate cost at June 30, 2022 and December 31, 2021 and are not considered significant to this presentation.

approximate cost at September 30, 2022 and December 31, 2021 and are not considered significant to this presentation.

Trust Preferred Securities

16 unchanged sentences

Fair value measurements using

June 30, 2022

September 30, 2022

Financial assets

38 unchanged sentences

A total of 500,000 common shares of the Company are available for grants or awards

under the 2017 Plan, of which 121,823 shares had been granted under the plan as of June 30, 2022.

under the 2017 Plan, of which 122,823 shares had been granted under the plan as of September 30, 2022.

The 2017 Plan is intended to advance the interests

9 unchanged sentences

valuation model.

As of June 30, 2022, there were no stock options outstanding, and no unrecognized compensation cost related to stock

As of September 30, 2022, there were no stock options outstanding, and no unrecognized compensation cost related to stock

option awards.

No stock options were granted in the first six months of 2022.

On February 5, 2013, the Company adopted a Long Term Incentive (LTI) Plan,

which provides for awards of restricted stock in the Company to certain key executives.

These restricted stock awards vest over a four-year

period and are intended to assist the Company in retention of key executives.

The compensation cost charged against income for awards

under the LTI Plan for the three and six months ended June 30, 2022, was $ 0.2 million and $ 0.4 million, respectively, and for the three

and six months ended June 30, 2021, was $ 0.1 million and $ 0.2 million, respectively.

As of June 30, 2022, there was $ 0.9 million of

total unrecognized compensation cost related to non-vested share-based compensation arrangements related to the restricted stock awards

No stock options were granted in the first nine months of 2022.

On February 5, 2013, the Company adopted a Long

Term Incentive (LTI) Plan, which provides for awards of restricted stock in the Company to certain key executives.

These restricted stock

awards vest over a four-year period and are intended to assist the Company in retention of key executives.

The compensation cost charged

against income for awards under the LTI Plan for the three and nine months ended September 30, 2022 was $ 0.1 million and $ 0.5 million,

respectively, and for the three and nine months ended September 30, 2021, was $ 0.1 million and $ 0.4 million, respectively.

As of September 30, 2022, there was $ 0.8 million

of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to the restricted stock awards

under the 2017 Plan which were granted in accordance with the LTI plan.

2 unchanged sentences

The table below is a summary of restricted stock

activity under the Company’s 2017 Plan for the six months ended June 30, 2022.

activity under the Company’s 2017 Plan for the nine months ended September 30, 2022.

Weighted-Average

Value per Share

Nonvested, January 1, 2022

Nonvested, June 30, 2022

Nonvested, September 30, 2022

NOTE 15 – GENERAL LITIGATION

3 unchanged sentences

It is the opinion of management that the disposition or ultimate resolution of any such claims, lawsuits and examinations pending

at June 30, 2022, will not have a material adverse effect on the consolidated financial position, results of operations and cash flow

of the Company.

at September 30, 2022, will not have a material adverse effect on the consolidated financial position, results of operations and cash

flow of the Company.

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