What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-06 compared with 2020-08-07 · 174 added, 157 removed, 287 unchanged (54% of the section changed)

37 unchanged sentences

COVID-19 Pandemic

The recent outbreak of COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on economic conditions and created uncertainty in financial markets.

The outbreak of COVID-19, which was declared a pandemic by the World Health Organization on March 11, 2020, has led to adverse impacts on economic conditions and created uncertainty in financial markets.

Correspondingly, in early March 2020, the Company began preparing for potential disruptions and government limitations of activity in the markets in which we serve.

1 unchanged sentence

Since the beginning of the crisis, we have been in close contact with our clients, assessing the level of impact on their businesses, and providing relief programs according to each client’s specific situation and qualifications.

We have also enhanced awareness of digital banking offerings, expanded services at our drive thru locations, and allowed customers to make appointments in the branch for critical services.

We have also enhanced awareness of digital banking offerings, expanded services at our drive through locations, and allowed customers to make appointments in the branch for critical services.

The Company’s branches remain open and have taken steps to comply with various government directives regarding “social distancing,” as well as, enhanced cleaning and disinfecting of all surface areas to protect its clients and employees.

2 unchanged sentences

Loans under the PPP are designed to provide assistance for small businesses during the COVID-19 pandemic to help meet the costs associated with payroll, mortgage interest, rent and utilities.

These loans are guaranteed by the SBA and forgiveness of the loan, by the SBA, is granted to the borrower if the borrower uses at least 60% of the funds to cover payroll costs and benefits.

These loans are guaranteed by the SBA and forgiveness of the loans, by the SBA, is granted to the borrower if the borrower uses at least 60% of the funds to cover payroll costs and benefits.

Forgiveness is also based on the small business maintaining or quickly rehiring their employees and maintaining salary levels for their employees.

Loans under the PPP do not require any collateral or personal guarantees, as such, these loans are included in the Company’s commercial loans segment.

Through June 30, 2020, our team has been able to process 1,427 PPP loans for approximately $123.0 million in the first and second rounds of the program, which has allowed us to further strengthen and deepen our client relationships, while positively impacting thousands of individuals.

Through August 8, 2020, our team was able to process 1,488 PPP loans for approximately $126.7 million in the first and second rounds of the program, which has allowed us to further strengthen and deepen our client relationships, while positively impacting thousands of individuals.

We are also closely monitoring the credit quality of the loan portfolio and monitor lines of credit draws for deviation from normal activity to improve loan performance and reduce credit risk.

4 unchanged sentences

In accordance with interagency guidance issued in April 2020, these short-term modifications made to a borrower affected by the COVID-19 pandemic and governmental shutdown orders, such as payment deferrals, fee waivers and extensions of repayment terms, do not need to be identified as TDRs if the loans were current at the time a modification plan was implemented.

As of June 30, 2020, we had deferred payments of principal and/or interest on a short-term basis for commercial and residential loans with an aggregate balance of $221.1 million, or 15.7% of the total loan portfolio.

Loan Balances Modified Due to COVID-19 Through July 31, 2020

For the nine months ended September 30, 2020, the Company had executed principal and/or interest deferrals on outstanding loan balances of $221.1 million, of which only $12.9 million, or 0.91% of the total portfolio remained on deferral as of September 30, 2020.

Loans Modified

Only Payments

Balance as of

Modified as of

Balance as of

Only Payments

(Dollars in thousands)

June 30, 2020

July 31, 2020

September 30, 2020

(6 months or less)

Hospitality Industry

19 unchanged sentences

Share Repurchases

We have suspended all share buybacks of the Company’s common stock until further notice.

We reinstated our common stock repurchase program on September 1, 2020.

During the third quarter of 2020, we repurchased 288,400 shares of the Company’s common stock at an average cost of $10.56 per share or $3.1 million in the aggregate.

Dividends and Capital

We currently expect to maintain our quarterly cash dividend based on our strong capital position.

At June 30, 2020, the Bank exceeded all the capital requirements to which it was subject, and based on the most recent notification from its primary federal regulator is considered to be well-capitalized.

At September 30, 2020, the Bank exceeded all the capital requirements to which it was subject, and based on the most recent notification from its primary federal regulator is considered to be well-capitalized.

There are no conditions or events since that notification that management believes would change the Bank’s classification.

17 unchanged sentences

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired.

Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of

contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability.

Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability.

Goodwill and other intangible assets are required to be recorded at fair value at inception.

4 unchanged sentences

If the fair value of a reporting unit is less than book value, an expense may be required to write down the related goodwill to record an impairment loss.

As of June 30, 2020, the Company had only one banking reporting unit.

The Company reported net income of $5.3 million for the second quarter of 2020, or diluted income per common share of $0.43, compared to net income of $4.2 million, or diluted income per common share of $0.33, for the second quarter of 2019.

For the first quarter of 2020, the Company reported net income of $3.1 million, or diluted income per common share of $0.25.

When comparing net income for the second quarter of 2020 to the second quarter of 2019, the increase was due to a decrease in noninterest expense of $1.3 million, coupled with increases in net interest income of $738 thousand and noninterest income of $160 thousand, partially offset by an increase in the provision for credit losses of $800 thousand.

When comparing net income from continuing operations for the second quarter of 2020 to the first quarter of 2020, the increase was primarily due to a decrease in noninterest expenses of $2.7 million.

In addition, net interest income and noninterest income increased $513 thousand and $417 thousand, respectively, partially offset by an increase in the provision for credit losses of $650 thousand.

For the first six months of 2020, the Company reported net income of $8.5 million, or diluted income per common share of $0.68, compared to net income of $8.0 million, or diluted income per common share of $0.62, for the first six months of 2019.

When comparing net income from continuing operations for the first six months of 2020 to the first six months of 2019, the improved results were due to increases in net interest income of $862 thousand and noninterest income of $324 thousand, coupled with a decrease in noninterest expense of $316 thousand, partially offset by an increase in the provision for credit losses of $1.1 million.

As of September 30, 2020, the Company had only one banking reporting unit.

The Company reported net income of $3.4 million for the third quarter of 2020, or diluted income per common share of $0.27, compared to net income of $4.2 million, or diluted income per common share of $0.33, for the third quarter of 2019.

For the second quarter of 2020, the Company reported net income of $5.3 million, or diluted income per common share of $0.43.

When comparing net income for the third quarter of 2020 to the third quarter of 2019, the decrease was due to an increase in noninterest expense of $447 thousand, coupled with an increase in provision for credit losses of $1.3 million, partially offset by an increase in net interest income of $603 thousand.

When comparing net income from continuing operations for the third quarter of 2020 to the second quarter of 2020, the decrease was primarily due to an increase in noninterest expenses of $2.2 million.

Net interest income increased $252 thousand in the third quarter when compared to the second quarter, which was more than offset by an increase in provision for credit losses of $500 thousand and a decrease in noninterest income of $188 thousand.

For the first nine months of 2020, the Company reported net income of $11.8 million, or diluted income per common share of $0.95, compared to net income of $12.3 million, or diluted income per common share of $0.95, for the first nine months of 2019.

When comparing net income from continuing operations for the first nine months of 2020 to the first nine months of 2019, the decrease was primarily due to increases in the provision for credit losses of $2.4 million and noninterest expenses of $131 thousand, partially offset by higher net interest income of $1.5 million and noninterest income of $376 thousand.

RESULTS OF OPERATIONS

1 unchanged sentence

Tax-equivalent net interest income is net interest income adjusted for the tax-favored status of income from certain loans and investments.

As shown in the table below, tax-equivalent net interest income was $13.1 million for the second quarter of 2020 and $12.3 million for the second quarter of 2019.

Tax-equivalent net interest income was $12.6 million for the first quarter of 2020.

The increase in net interest income for the second quarter of 2020 when compared to the second quarter of 2019 was due to lower interest expenses on interest bearing deposits of $648 thousand, or 29.4% and short and long-term borrowings of $245 thousand, or 92.2%.

In addition, interest on loans increased $192 thousand, or 1.4%.

These improvements to net interest income were partially offset by decreases in interest income on taxable investment securities of $249 thousand, or 28.1%, and interest-bearing deposits with other banks of $102 thousand, or 90.3%.

Net interest income increased for the second quarter of 2020 when compared to the first quarter of 2020 due to lower interest expenses on interest bearing deposits of $503 thousand, or 24.4%, and short and long-term borrowings of $102 thousand, or 93.6%.

In addition, interest on loans increased $151 thousand, or 1.1%.

As shown in the table below, tax-equivalent net interest income was $13.3 million for the third quarter of 2020 and $12.7 million for the third quarter of 2019.

Tax-equivalent net interest income was $13.1 million for the second quarter of 2020.

The increase in net interest income for the third quarter of 2020 when compared to the third quarter of 2019 was due to lower interest expenses on interest bearing deposits of $819 thousand, or 35.8% and the elimination of short and long-term advances from the Federal Home Loan Bank (“FHLB“) which reduced interest expense by a combined $220 thousand.

These improvements to net interest income were partially offset by decreases in interest income on taxable investment securities of $140 thousand, or 16.1%, and interest-bearing deposits with other banks of $190 thousand, or 85.2%.

Net interest income increased for the third quarter of 2020 when compared to the second quarter of 2020 due to increases in the average balances in loans of $32.4 million, taxable investment securities of $28.1 million and interest-bearing deposits with other banks of $69.8 million.

These increases in the average balances on earning assets contributed $304 thousand to interest income over the second quarter, despite a decline in the weighted average yield on these assets of 26 basis points (bps).

In addition, the weighted average rate paid on interest-bearing deposits declined by 8bps in the third quarter when compared to the second quarter, reducing interest expense by $87 thousand.

However, this decline was more than offset by the $148 thousand of additional interest expense related to subordinated debt issued during the third quarter.

Net interest margin is tax-equivalent net interest income (annualized) divided by average earning assets.

The net interest margin for the second quarter of 2020 was 3.41%, which was a decrease of 13 basis points (bps) when compared to 3.54% for the second quarter of 2019 and a decrease of 7bps when compared to 3.48% for the first quarter of 2020.

The net interest margin for the third quarter of 2020 was 3.17%, which was a decrease of 35bps when compared to 3.52% for the third quarter of 2019 and a decrease of 24bps when compared to 3.41% for the second quarter of 2020.

The decline in net interest margin in the third quarter of 2020 when compared to the second quarter of 2020 and the third quarter of 2019, was significantly impacted by excess liquidity of approximately $100 million, which has yet to be fully invested.

This excess liquidity was due to deposit inflows related to customers retaining PPP loan proceeds, customers improving their liquidity position by participating in our deferred loan program and the result of new business and municipal relationships acquired during 2020.

Without this excess liquidity, the margin for the third quarter would have been 3.37%.

Interest Income

On a tax-equivalent basis, interest income decreased $159 thousand, or 1.1%, for the second quarter of 2020 when compared to the second quarter of 2019.

The decrease was due to a decrease in the average balance of taxable investment securities of $52.0 million, or 32.5% due to the proceeds being utilized to fund loan growth between the periods, coupled with a decrease in the average yield on interest-bearing deposits with other banks of 240bps.

The average balance of loans increased $153.1 million, or 12.5%, between the comparable periods and the average yield on loans decreased 44bps, which were the direct result of adding 1,427 PPP loans with an average yield of 2.36%.

On a tax-equivalent basis, interest income decreased $90 thousand, or less than 1%, for the second quarter of 2020 when compared to the first quarter of 2020.

The decrease was primarily due to decreases in the average rate paid on interest-bearing deposits with other banks of 113bps, as well as, a decrease in the average balance of taxable investment securities of $21.5 million, or 16.6%, partially offset by an increase in the average balance of loans of $110.9 million, or 8.8% due to the influx of PPP loans processed during the second quarter of 2020.

On a tax-equivalent basis, interest income decreased $302 thousand, or 2.0%, for the third quarter of 2020 when compared to the third quarter of 2019.

The decrease was due to a decrease in the average yield on interest-bearing deposits with other banks of 203bps resulting from Federal Reserve interest rate cuts during 2020 and decreases in both the average balance and average yield of taxable investment securities of $19.3 million, or 12.4%, and 10bps, respectively.

The average balance of loans increased $171.3 million, or 13.9%, between the comparable periods and the average yield on loans decreased 53bps, which was the direct result of adding 1,488 PPP loans with an average yield of 2.00%.

On a tax-equivalent basis, interest income increased $305 thousand, or 2.1%, for the third quarter of 2020 when compared to the second quarter of 2020.

The increase was primarily due to increases in the average balance of loans of $32.4 million, or 2.4%, and the average balance of investment securities of $28.1 million, or 14.4%, despite the decrease in the average yield on these earning assets of a combined 31bps.

The average balance on interest-bearing deposits increased $69.8 million, or 200.0%, while the average yield also increased 3bps, resulting in an additional $22 thousand in interest income.

The significant volume increases in total deposits was the result of deposit inflows previously stated above.

Interest Expense

Interest expense decreased $893 thousand, or 36.4%, when comparing the second quarter of 2020 to the second quarter of 2019.

The decrease was a direct result of lower interest expenses paid on interest-bearing deposits of $648 thousand, and short and long-term borrowings of $245 thousand.

The average balance of short and long-term borrowings decreased $33.7 million, or 92.2%, while the average rate paid on interest-bearing deposits decreased 37bps, partially offset by an increase in the average balance of interest-bearing deposits of $112.4 million, or 12.6%.

Interest expense decreased $895 thousand, or 35.6%, when comparing the third quarter of 2020 to the third quarter of 2019.

The decrease was a direct result of lower interest expenses paid on interest-bearing deposits of $819 thousand and the elimination of short and long-term advances from FHLB borrowings of $220 thousand.

The average rate paid on interest-bearing deposits decreased 44bps, partially offset by the addition of subordinated debt issued during the third quarter of 2020, which added $148 thousand of interest expense.

The average balance of noninterest-bearing deposits increased $103.7 million, or 29.2% between the comparable quarters.

Interest expense decreased $605 thousand, or 27.9%, when comparing the second quarter of 2020 to the first quarter of 2020.

The decrease in interest expense was mainly due to a decrease in the average rate paid on interest-bearing deposits of 23bps.

The decrease in rates paid on interest-bearing deposits was partially offset by an increase in the average balance of $32.3 million, or 3.3%.

The average balance of noninterest-bearing deposits increased $67.6 million, or 19.2%, when compared to the first quarter of 2020.

The following tables present the distribution of the average consolidated balance sheets, interest income/expense, and annualized yields earned and rates paid for the three months ended June 30, 2020 and 2019.

Interest expense increased $55 thousand, or 3.5%, when comparing the third quarter of 2020 to the second quarter of 2020.

The increase in interest expense was mainly due to the addition of subordinated debt issued in the third quarter, which added $148 thousand of interest expense, partially offset by the decrease of $87 thousand in interest expense on interest-bearing deposits and the payoff of long-term advances from FHLB borrowings.

The average balance of noninterest-bearing deposits increased $38.3 million, or 9.1%, when compared to the second quarter of 2020.

The payoff of long-term advances from FHLB borrowings matured in April of 2020 which carried a rate of 2.82%.

Due to the excess liquidity position of the Bank there was no need to renew these borrowings.

For Three Months Ended

June 30, 2020

June 30, 2019

September 30, 2020

September 30, 2019

(Dollars in thousands)

13 unchanged sentences

Interest-bearing deposits

Short-term borrowings

Long-term debt

Securities sold under retail repurchase agreements and federal funds purchased

Advances from FHLB - short-term

Advances from FHLB - long-term

Subordinated debt

Total interest-bearing liabilities

10 unchanged sentences

Net Interest Income

Tax-equivalent net interest income increased $860 thousand, or 3.5%, during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

The increase in net interest income was due to a decrease in interest expenses on interest-bearing deposits of $535 thousand, or 12.9% and short and long-term borrowings of $455 thousand, or 79.7%.

In addition, the average yield on earning assets decreased 31bps.

This resulted in a net interest margin of 3.45% for the six months ended June 30, 2020 compared to 3.57% for the six months ended June 30, 2019.

Tax-equivalent net interest income increased $1.5 million, or 3.9%, during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

The increase in net interest income was due to decreases in interest expenses on interest-bearing deposits of $1.4 million, or 21.0% and short and long-term advances from FHLB borrowings of $679 thousand, or 85.3%, partially offset by the addition of subordinated debt issued in the third quarter of 2020, which added $148 thousand of interest expense.

Also offsetting the cost savings in interest expenses was a decrease in the average yield on earning assets of 43bps.

This resulted in a net interest margin of 3.35% for the nine months ended September 30, 2020 compared to 3.56% for the nine months ended September 30, 2019.

Interest Income

On a tax-equivalent basis, interest income decreased $130 thousand, or less than 1%, for the six months ended June 30, 2020 when compared to the six months ended June 30, 2019.

The decrease was primarily due to a decline in the average balance of taxable investment securities of $43.8 million, or 26.9%, and the lower yield on interest-bearing deposits with other banks of 178bps.

The average balance of loans increased $107.3 million, or 8.9%, while the average yield declined

31bps, in part due to the funding of 1,348 PPP loans during the second quarter of 2020 which had an average yield of 2.36%.

On a tax-equivalent basis, interest income decreased $433 thousand, or 1.0%, for the nine months ended September 30, 2020 when compared to the nine months ended September 30, 2019.

The decrease was primarily due to a decline in the average balance of taxable investment securities of $35.5 million, or 22.2%, and the lower average yield on interest-bearing deposits with other banks of 192bps.

The average balance of loans increased $128.7 million, or 10.6%, while the average yield declined 39bps, in part due to the funding of 1,488 PPP loans during the second and third quarters of 2020 which had an average yield of 2.00%.

Interest Expense

Interest expense decreased $990 thousand, or 21.0%, when comparing the six months ended June 30, 2020 to the six months ended June 30, 2019.

The decrease in interest expense was due to a decline in the rates paid on interest-bearing deposits of 21bps and the decline in the average balance on short and long-term borrowings of $32.7 million, or 77.4%.

These decreases were partially offset by an increase in the average balance of noninterest-bearing deposits of $51.1 million, or 15.3%.

The following tables present the distribution of the average consolidated balance sheets, interest income/expense, and annualized yields earned and rates paid for the six months ended June 30, 2020 and 2019.

For Six Months Ended

June 30, 2020

June 30, 2019

Interest expense decreased $1.9 million, or 26.1%, when comparing the nine months ended September 30, 2020 to the nine months ended September 30, 2019.

The decrease in interest expense was due to a decline in the rates paid on interest-bearing deposits of 30bps and the payoff of short and long-term advances from FHLB borrowings of $32.8 million, or 86.2%.

The payoff of long-term advances from FHLB borrowings matured in April of 2020 which carried a rate of 2.82%.

Due to the excess liquidity position of the Bank there was no need to renew these borrowings.

The decreases in both short and long-term advances from FHLB borrowings, were partially offset by the addition of subordinated debt issued in the third quarter of 2020 of $25 million and an increase in the average balance of noninterest-bearing deposits of $68.7 million, or 20.1%.

The following tables present the distribution of the average consolidated balance sheets, interest income/expense, and annualized yields earned and rates paid for the nine months ended September 30, 2020 and 2019.

For Nine Months Ended

September 30, 2020

September 30, 2019

(Dollars in thousands)

13 unchanged sentences

Interest-bearing deposits

Short-term borrowings

Long-term debt

Securities sold under retail repurchase agreements and federal funds purchased

Advances from FHLB - short-term

Advances from FHLB - long-term

Subordinated debt

Total interest-bearing liabilities

6 unchanged sentences

Tax-equivalent adjustment

________________________________________

All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

Interest income on loans includes amortized loan fees, net of costs, and accretion of discounts on acquired loans, which are included in the yield calculations.

Noninterest Income

Total noninterest income for the second quarter of 2020 increased $160 thousand, or 6.1%, when compared to the second quarter of 2019.

The increase from the second quarter of 2019 was mainly due to additional income from BOLI purchased late in 2019 and other bank and loan fees, partially offset by lower service charges on deposit accounts.

Noninterest income increased $417 thousand, or 17.7%, when compared to the first quarter of 2020 primarily due to sales of available for sale investment securities at a gain of $347 thousand, other bank service and loan fees of $211 thousand and a gain on directors life insurance of $86 thousand, partially offset by a decrease in service charges on deposit accounts of $322 thousand which was significantly impacted by decreased consumer spending.

Total noninterest income from continuing operations for the six months ended June 30, 2020 increased $324 thousand, or 6.8%, when compared to the same period in 2019.

The increase in noninterest income primarily consisted of increases in BOLI income, gains on sales of available for sale securities and other bank services, partially offset by a decrease in service charges on deposit accounts.

Total noninterest income for the third quarter of 2020 increased $52 thousand, or 2.1%, when compared to the third quarter of 2019.

The increase from the third quarter of 2019 was mainly due to additional income from BOLI purchased late in 2019 and other bank and loan fees, partially offset by lower service charges on deposit accounts.

Noninterest income decreased $188 thousand, or 6.8%, when compared to the second quarter of 2020 primarily due to the sale of available for sale investment securities at a gain of $347 thousand in the second quarter.

Absent the sale of these securities, noninterest income would have increased $159 thousand, or 6.6%, for the third quarter of 2020, which was primarily the result of increases in loan fee income and service charges on deposit accounts.

Total noninterest income from continuing operations for the nine months ended September 30, 2020 increased $376 thousand, or 5.1%, when compared to the same period in 2019.

Noninterest Expense

Total noninterest expense from continuing operations for the second quarter of 2020 decreased $1.3 million, or 14.7%, when compared to the second quarter of 2019 and decreased $2.7 million, or 26.0%, when compared to the first quarter of 2020.

The decrease in noninterest expense when compared to the second quarter of 2019 and the first quarter of 2020 was primarily in salaries and wages, due to the origination of PPP loans which resulted in heightened loan origination costs being deferred for the period.

These loan origination costs were deferred at origination along with the related origination fees.

The net fees of $2.6 million have and will continue to be accreted to interest income as a yield adjustment over the lives of the related PPP loans, which for most was 24 months at the time of origination.

The recognition of these deferred fees and costs as a component of interest income will be accelerated upon forgiveness or repayment of the PPP loans.

As previously stated, the Company processed 1,427 PPP loans during the second quarter of 2020 and does not anticipate additional originations at this volume resulting in additional reductions of salaries and wages expense in future quarters.

Total noninterest expense from continuing operations for the six months ended June 30, 2020 decreased $316 thousand, or 1.7%, when compared to the same period in 2019.

The decrease was a result of lower salaries and wages due to FASB 91 deferrals, lower FDIC insurance premiums and other real estate owned expenses, partially offset by higher employee benefit costs.

Total noninterest expense from continuing operations for the third quarter of 2020 increased $447 thousand, or 4.8%, when compared to the third quarter of 2019 and increased $2.2 million, or 28.3%, when compared to the second quarter of 2020.

The increase in noninterest expenses when compared to the third quarter of 2019 was primarily due to higher salaries and wages, employee benefits and data processing fees, partially offset by decreases in other real estate owned expenses and other loan expenses.

The increases in employee benefit expense and data processing fees when compared to 2019, are the result of higher health insurance claims and the increase level of new deposit and loan relationships in 2020.

The increase in noninterest expense when compared to the second quarter of 2020 was primarily related to higher salaries and wages, due to the significant volume of PPP loans originated in the second quarter which resulted in heightened deferrals of direct origination costs during the second quarter of 2020.

The deferred origination costs are being amortized over the lives of the related PPP loans and will be accelerated upon forgiveness or repayment.

Total noninterest expense from continuing operations for the nine months ended September 30, 2020 increased $131 thousand, or less than 1%, when compared to the same period in 2019.

The increase was a result of higher costs related to employee benefits and higher data processing fees, which were almost entirely offset by decreases in salaries and wages due to the deferral of direct origination costs related to the origination of PPP loans, FDIC insurance premiums, other real estate owned expenses, and other loan related expenses.

The deferred costs for salaries and wages are being recognized over the lives of the related loans as previously mentioned.

Provision for Credit Losses

The provision for credit losses was $1.0 million for the second quarter of 2020, $200 thousand for the second quarter of 2019 and $350 thousand for the first quarter of 2020.

The ratio of the allowance for credit losses to period-end loans was 0.79% at June 30, 2020.

Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 0.86% at June 30, 2020, higher than both the 0.83% at June 30, 2019 and the 0.81% at March 31, 2020.

The primary drivers of the increased percentage of the allowance to total loans, excluding the guaranteed PPP loans, and the increase in provision for loan losses as compared to both the prior periods were increases in qualitative factors and, in particular, elevated unemployment statistics and the impact of the COVID-19 pandemic.

Net charge-offs were $288 thousand for the second quarter of 2020, compared to $313 thousand for the second quarter of 2019 and $479 thousand for the first quarter of 2020.

The charge-offs in the second quarter related to continued workout efforts on nonperforming assets.

The provision for credit losses for the six months ended June 30, 2020 and 2019 was $1.4 million and $300 thousand, respectively, while net charge-offs were $767 thousand and $338 thousand, respectively.

The increase in provision for credit losses was the result of higher charge-offs in 2020, qualitative factors related to economic conditions and the COVID-19 pandemic.

The ratio of allowance to total loans decreased over the first six months of the year from 0.84% at December 31, 2019 to 0.79% at June 30, 2020.

As previously discussed, this ratio decreased as a result of the PPP loans’ inclusion in the balance of total loans.

Additionally, a reduction in specific reserves for certain credits through charge-offs during the six months ended June 30, 2020 reduced the allowance to total loans ratio.

The general reserve component of

the allowance to legacy, non-impaired and non-PPP loans increased from 0.75% at December 31, 2019 to 0.89% at June 30, 2020, primarily resulting from increased qualitative allocations related to the COVID-19 pandemic.

The ratio of annualized net charge-offs to average loans was 0.12% for the first half of 2020 and 0.06% for the first half of 2019.

Management will continue to evaluate the adequacy of the allowance for credit losses as more economic data becomes available and as changes within the Company’s portfolio are known.

The Company reported income tax expense from continuing operations of $1.8 million for the second quarter of 2020, $1.5 million for the second quarter of 2019 and $1.1 million for the first quarter of 2020.

Income tax expense increased when compared to the second quarter of 2019 and the first quarter of 2020 due to higher pre-tax earnings.

The effective tax rate on continuing operations for the second and first quarter of 2020 was 25.2%.

The effective tax rate for the second quarter of 2019 was 26.0%.

Income taxes from continuing operations for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019 increased $55 thousand or 2.0%, due to an increase in net income.

The provision for credit losses was $1.5 million for the third quarter of 2020, $200 thousand for the third quarter of 2019 and $1.0 million for the second quarter of 2020.

The ratio of the allowance for credit losses to period-end loans was 0.90% at September 30, 2020.

Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 0.98% at September 30, 2020, higher than both the 0.85% at September 30, 2019 and the 0.86% at June 30, 2020.

The primary drivers of the increased percentage of the allowance to total loans, excluding PPP loans, and the increase in provision for loan losses as compared to both the prior periods were the new and elevated qualitative factors within the allowance model related to economic conditions and the COVID-19 pandemic.

The Company reported net recoveries in the third quarter of 2020 of $187 thousand, compared to net charge-offs of $67 thousand for the third quarter of 2019 and $288 thousand for the second quarter of 2020.

The provision for credit losses for the nine months ended September 30, 2020 and 2019 was $2.9 million and $500 thousand, respectively, while net charge-offs were $580 thousand and $405 thousand, respectively.

The increase in provision for credit losses was the result of new and elevated qualitative factors within the allowance model related to economic conditions and the COVID-19 pandemic.

Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans increased to 0.98% at September 30, 2020 from 0.84% at December 31, 2019.

As previously discussed, this ratio increased primarily due to the addition of qualitative factors in the analysis of the allowance for loan losses.

The ratio of annualized net charge-offs to average loans was 0.06% for the first nine months of 2020 and 0.04% for the first nine months of 2019.

Management will continue to evaluate the adequacy of the allowance for credit losses as more economic data becomes available and the risk profile of the portfolio is more clearly defined.

The Company reported income tax expense from continuing operations of $1.1 million for the third quarter of 2020, $1.4 million for the third quarter of 2019 and $1.8 million for the second quarter of 2020.

Income tax expense decreased when compared to the third quarter of 2019 and the second quarter of 2020 due to lower pre-tax earnings.

The effective tax rate on continuing operations for the third and second quarter of 2020 was 25.2%.

The effective tax rate for the third quarter

of 2019 was 25.1%.

Income taxes from continuing operations for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 decreased $214 thousand or 5.1%, due to a decrease in pre-tax income.

ANALYSIS OF FINANCIAL CONDITION

Loans totaled $1.407 billion at June 30, 2020 and $1.249 billion at December 31, 2019, an increase of $158.6 million, or 12.7%.

Loans totaled $1.424 billion at September 30, 2020 and $1.249 billion at December 31, 2019, an increase of $175.3 million, or 14.0%.

The increase was primarily due to the origination of 1,488 PPP loans totaling $126.7 million.

Organic growth for the first six months of 2020 was $35.6 million, which consisted of increases in commercial real estate loans of $39.8 million, construction loans of $10.8 million and consumer loans of $7.5 million, partially offset by decreases in residential real estate loans of $12.1 million and commercial loans, excluding PPP loans, of $10.4 million.

Loans included deferred costs, net of deferred fees, of $470 thousand and discounts on acquired loans of $912 thousand at June 30, 2020, compared to $1.8 million and $1.1 million, respectively, at December 31, 2019.

Excluding PPP loans, organic growth for the first nine months of 2020 was $48.6 million, which consisted of increases in commercial real estate loans of $43.1 million, consumer loans of $9.8 million and construction loans of $6.2 million, partially offset by decreases in residential real estate loans of $366 thousand and commercial loans, excluding PPP loans, of $10.1 million.

Loans included deferred fees, net of deferred costs, of $12 thousand and discounts on acquired loans of $825 thousand at September 30, 2020, compared to deferred costs, net of deferred fees, of $1.8 million and discounts on acquired loans of $1.1 million at December 31, 2019.

We do not engage in foreign or subprime lending activities.

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Our loan portfolio has a commercial real estate loan concentration, which is generally defined as a combination of certain construction and commercial real estate loans.

Construction loans were $110.7 million, or 7.9% of total loans, at June 30, 2020 and $99.8 million, or 8.0% of total loans at December 31, 2019.

Commercial real estate loans were $626.3 million, or 44.5% of total loans, at June 30, 2020, compared to $586.6 million, or 47.0% of total loans, at December 31, 2019.

Construction loans were $106.0 million, or 7.4% of total loans, at September 30, 2020 and $99.8 million, or 8.0% of total loans, at December 31, 2019.

Commercial real estate loans were $629.6 million, or 44.2% of total loans, at September 30, 2020, compared to $586.6 million, or 47.0% of total loans, at December 31, 2019.

The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending.

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The Company, like many community banks, has a concentration in commercial real estate loans, and the Company has experienced significant growth in its commercial real estate portfolio in recent years.

At June 30, 2020, non-owner-occupied commercial real estate loans (including construction, land and land development loans) represented 291.0% of total risk-based capital.

At September 30, 2020, non-owner-occupied commercial real estate loans (including construction, land and land development loans) represented 291.2% of total risk-based capital.

At such time, construction, land and land development loans represented 56.0% of total risk-based capital.

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Monitoring practices include periodic stress testing analysis to evaluate changes to cash flows, owing to interest rate increases and declines in net operating income.

We may be required to maintain higher levels of capital as a result of

our commercial real estate concentrations, which could require us to obtain additional capital or be required to sell/participate portions of loans, which may adversely affect shareholder returns.

We may be required to maintain higher levels of capital as a result of our commercial real estate concentrations, which could require us to obtain additional capital or be required to sell/participate portions of loans, which may adversely affect shareholder returns.

Allowance for Credit Losses

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Management evaluates the adequacy of the allowance for credit losses at least quarterly and adjusts the provision for credit losses based on this analysis.

The evaluation of the adequacy of the allowance for credit losses is based primarily on a risk rating system of individual loans, as well as on a collective evaluation of smaller balance homogenous loans, each grouped by loan type.

by loan type.

Each loan type is assigned allowance factors based on criteria such as past credit loss experience, local economic and industry trends, and other measures which may impact collectability.

Please refer to the discussion above under the caption “Critical Accounting Policies” for an overview of the underlying methodology management employs to maintain the allowance.

The allowance for credit losses was $11.1 million at June 30, 2020, $10.3 million at June 30, 2020 and $10.4 million at March 31, 2020.

Net charge offs for the second quarter of 2020 were $288 thousand, compared to $313 thousand for the second quarter of 2019 and $479 thousand for the first quarter of 2020.

The ratio of net charge-offs to average loans was 0.08% for the second quarter of 2020, compared to 0.10% for the second quarter of 2019 and 0.15% for the first quarter of 2020.

Net charge-offs were $767 thousand for the six months ended June 30, 2020, compared to $338 thousand for the six months ended June 30, 2019.

The ratio of net charge-offs to average loans was 0.12% and 0.06% for the six months ended June 30, 2020 and June 30, 2019, respectively.

The allowance for credit losses was $12.8 million at September 30, 2020, $10.4 million at September 30, 2019 and $11.1 million at June 30, 2020.

Net recoveries for the third quarter of 2020 were $187 thousand, compared to net charge-offs of $67 thousand for the third quarter of 2019 and $288 thousand for the second quarter of 2020.

The ratio of annualized net recoveries to average loans was 0.05% for the third quarter of 2020, compared to annualized net charge-offs of 0.02% for the third quarter of 2019 and 0.08% for the second quarter of 2020.

Net charge-offs were $580 thousand for the nine months ended September 30, 2020, compared to $405 thousand for the nine months ended September 30, 2019.

The ratio of net charge-offs to average loans was 0.06% and 0.04% for the nine months ended September 30, 2020 and September 30, 2019, respectively.

Management remains focused on its efforts to dispose of problem loans and to prudently charge-off nonperforming loans to enable the Company to continue to improve its overall credit quality.

The allowance for credit losses as a percentage of period-end loans was 0.79% at June 30, 2020, 0.83% at June 30, 2019 and 0.84% at December 31, 2019.

Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 0.86% at June 30, 2020, higher than both the 0.83% and 0.84% at June 30, 2019 and December 31, 2019.

The increase in the percentage of the allowance to total loans at June 30, 2020, compared to June 30, 2019 and December 31, 2019, was primarily due to increases in qualitative factors, and in particular, elevated unemployment statistics, the impact of COVID-19 pandemic.

Management currently believes that the provision for credit losses and the resulting allowance were adequate to provide for probable losses inherent in our loan portfolio at June 30, 2020.

The allowance for credit losses as a percentage of period-end loans was 0.90% at September 30, 2020, 0.85% at September 30, 2019 and 0.84% at December 31, 2019.

Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 0.98% at September 30, 2020, higher than both the 0.85% and 0.84% at September 30, 2019 and December 31, 2019.

The increase in the percentage of the allowance to total loans at September 30, 2020, compared to September 30, 2019 and December 31, 2019, was primarily due to new and elevated qualitative factors within the allowance model related to economic conditions and the COVID-19 pandemic.

Management currently believes that the provision for credit losses and the resulting allowance were adequate to provide for probable losses inherent in our loan portfolio at September 30, 2020.

However, management will continue to evaluate the adequacy of the allowance for credit losses as more economic data becomes available and as the impact of the COVID 19 pandemic on the Company’s portfolio becomes known.

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Deterioration in credit quality in conjunction with weakness in current and expected economic conditions, may require us to record additional provisions for credit losses in excess of historical levels.

The following table presents a summary of the activity in the allowance for credit losses at or for the three and six months ended June 30, 2020 and 2019.

The following table presents a summary of the activity in the allowance for credit losses at or for the three and nine months ended September 30, 2020 and 2019.

At or for Three Months Ended

At or for Six Months Ended

At or for Nine Months Ended

September 30,

(Dollars in thousands)

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Commercial real estate

Net charge-offs

Net recoveries (charge-offs)

Provision for credit losses

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Average loans outstanding during the period

Net charge-offs (annualized) as a percentage of average loans outstanding during the period

Net (recoveries) charge-offs (annualized) as a percentage of average loans outstanding during the period

Allowance for credit losses at period end as a percentage of total period end loans (1)

Allowance for credit losses at period end as a percentage of average loans

(1) At June 30, 2020, the ratio includes PPP loans of $123.0 million.

Without PPP loans, the ratio is 0.86%.

(1) At September 30, 2020, the loan balances used to calculate the ratio include PPP loans of $126.7 million.

Excluding PPP loans, the ratio is 0.98%.

Nonperforming Assets and Accruing TDRs

As shown in the following table, nonperforming assets increased $301 thousand to $12.3 million at June 30, 2020 from $12.0 million at December 31, 2019, primarily due to an increase in nonaccrual loans of $1.1 million, or 10.0%, partially offset by a decrease in loans 90 days past due and still accruing of $722 thousand, or 54.4%.

Accruing TDRs decreased $189 thousand to $7.3 million at June 30, 2020 from $7.5 million at December 31, 2019.

As shown in the following table, nonperforming assets decreased $3.6 million to $8.4 million at September 30, 2020 from $12.0 million at December 31, 2019, primarily due to a decrease in nonaccrual loans of $3.6 million, or 34.2%.

Accruing TDRs decreased $234 thousand to $7.3 million at September 30, 2020 from $7.5 million at December 31, 2019.

Additionally, other real estate owned decreased $36 thousand, or 48.6%, when compared to December 31, 2019.

The increase in nonaccrual loans was due to one loan relationship with a residential real estate customer with nonaccrual loans amounting to $1.1 million, which the Bank has been monitoring for several quarters.

The decrease in nonaccrual loans was due to three loan relationships with commercial real estate customers with nonaccrual loans of approximately $3.5 million, for which the Bank received payoffs during the third quarter of 2020, resulting in net recoveries for the period.

The decrease in accruing TDRs was due to normal payments.

The ratio of nonaccrual loans and accruing TDRs to total loans decreased 10 bps to 1.35% at June 30, 2020 from 1.45% at December 31, 2019.

The ratio of nonaccrual loans and accruing TDRs to total loans decreased to 1.00% at September 30, 2020 from 1.45% at December 31, 2019.

The Company continues to focus on the resolution of its nonperforming and problem assets.

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charging-off loans;

transferring loans to other real estate owned;

transferring loans to other

real estate owned;

aggressively marketing other real estate owned.

The reduction of nonperforming and problem assets is and will continue to be a high priority for the Company.

The following table summarizes our nonperforming assets and accruing TDRs at June 30, 2020 and December 31, 2019.

The following table summarizes our nonperforming assets and accruing TDRs at September 30, 2020 and December 31, 2019.

(Dollars in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

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Investment securities available for sale are stated at estimated fair value based on quoted prices.

They represent securities which may be sold as part of the asset/liability management strategy or in response to changing interest rates.

They represent securities which may be sold as part of the asset/liability management strategy or in response to changing

interest rates.

Net unrealized holding gains and losses on these securities are reported net of related income taxes as accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

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We have the intent and current ability to hold such securities until maturity.

At June 30, 2020, 88.0% of the portfolio of debt securities was classified as available for sale and 12.0% was classified as held to maturity, compared to 93.5% and 6.5% respectively, at December 31, 2019.

At September 30, 2020, 87.3% of the portfolio of debt securities was classified as available for sale and 12.7% was classified as held to maturity, compared to 93.5% and 6.5% respectively, at December 31, 2019.

See Note 4 – “Investment Securities”, in the Notes to Consolidated Financial Statements for additional details on the composition of our investment portfolio.

Investment securities including restricted stock totaled $102.7 million at June 30, 2020, a $34.4 million, or 25.1%, decrease since December 31, 2019.

The decrease was due to agency bonds being called during the first quarter of 2020 and the sale of available for sale securities in the second quarter of 2020.

The proceeds were primarily redeployed to fund loan growth during the six months ended June 30, 2020.

At June 30, 2020, 88.6% of the securities available for sale were mortgage-backed and 11.4% were U.S.

Investment securities including restricted stock totaled $164.5 million at September 30, 2020, a $27.4 million, or 20.0%, increase since December 31, 2019.

The increase was primarily due to the purchases of available for sale securities of $60.5 million and held to maturity securities of $11.6 million, partially offset by proceeds from maturities and sales of these securities of $46.5 million, during 2020.

Due to the excess liquidity experienced in 2020, the Company strategically purchased short duration available for sale securities and subordinated debt of other banks which earn significantly higher average yields than interest-bearing deposits with other banks.

As loan demand begins to strengthen, the Company will redeploy proceeds and excess liquidity to fund loan growth.

At September 30, 2020, 82.3% of the securities available for sale were mortgage-backed and 17.7% were U.S.

Government agencies, compared to 80.6% and 19.4%, respectively, at year-end 2019.

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Government agencies or government-sponsored agencies.

Total deposits at June 30, 2020 amounted to $1.50 billion, an increase of $163.4 million, or 12.2% when compared to the level at December 31, 2019.

The increase in total deposits consisted of increases in noninterest-bearing deposits of $86.4 million and interest-bearing deposits of $77.0 million.

The growth in interest-bearing deposits was represented by increases in interest-bearing checking accounts of $42.7 million, savings and money market accounts of $32.7 million, and time deposits greater than $100 thousand of $1.9 million, partially offset by a decrease in other time deposits of $295 thousand.

Total deposits at September 30, 2020 amounted to $1.59 billion, an increase of $252.8 million, or 18.8%, when compared to the level at December 31, 2019.

The increase in total deposits consisted of increases in interest-bearing deposits of $144.1 million and noninterest-bearing deposits of $108.7 million.

The growth in interest-bearing deposits was represented by increases in interest-bearing checking accounts of $109.5 million and savings and money market accounts of $37.3 million, partially offset by a decrease in other time deposits of $2.7 million.

The overall increase in deposits can be attributed to a combination of factors which include, customers retaining PPP loan proceeds, customers improving their liquidity position by participating in our deferred loan program and the result of new business and municipal relationships acquired during 2020.

Short-Term Borrowings

Short-term borrowings decreased by $162 thousand, or 13.2%, to $1.1 million at June 30, 2020 when compared to December 31, 2019.

Short-term borrowings generally consist of securities sold under agreements to repurchase, which are issued in conjunction with cash management services for commercial depositors, overnight borrowings from correspondent banks and short-term advances from the Federal Home Loan Bank (the “FHLB”).

Short-term borrowings consisted of securities sold under agreements to repurchase, which decreased by $207 thousand, or 16.9%, to $1.0 million at September 30, 2020 when compared to December 31, 2019.

Securities sold under agreements to repurchase are issued in conjunction with cash management services for commercial depositors.

Other short-term borrowings may consist of overnight borrowing from correspondent banks or advances from the FHLB.

Short-term advances are defined as those with original maturities of one year or less.

At June 30, 2020 and December 31, 2019, short-term borrowings consisted of repurchase agreements.

At September 30, 2020 and December 31, 2019, the Company had no outstanding short-term advances with FHLB.

Long-Term Debt

The Company uses long-term borrowings to meet longer term liquidity needs, specifically to fund loan growth when liquidity from deposit growth is not sufficient.

The Company had no long-term borrowings at June 30, 2020, due to a payoff of $15.0 million in April of 2020.

The amount of outstanding long-term borrowings at December 31, 2019 was $15.0 million, which carried an interest rate of 2.82%.

During the third quarter of 2020, the Company sold and issued $25.0 million in aggregate principal amount of 5.375% Fixed-to-Floating Rate Subordinated Notes due September 1, 2030.

The amount of outstanding long-term borrowings at December 31, 2019 consisted of long-term advances from FHLB borrowings of $15.0 million, which carried an interest rate of 2.82%.

These advances were paid off in April of 2020.

Liquidity and Capital Resources

We derive liquidity through increased customer deposits, non-reinvestment of the cash flow from the investment portfolio, loan repayments, borrowings and income from earning assets.

As seen in the Consolidated Statements of Cash Flows in the Financial Statements, the net increase in cash and cash equivalents was $31.3 million for the first six months of 2020 compared to a decrease of $27.9 million for the first six months of 2019.

The increase in cash and cash equivalents in 2020 was mainly due to the significant increase in deposits, the direct result of PPP loan proceeds deposited to and remaining in these accounts as of June 30, 2020.

The Company expects these funds to be utilized over the coming weeks and months, which may or may not result in a decline in deposit balances.

Additionally, the increase in cash and cash equivalents was the result of bonds being called in the first quarter of 2020 and the sale of available for sale securities in the second quarter of 2020.

The Company anticipates using these proceeds to purchase additional investment securities and fund loan growth.

As seen in the Consolidated Statements of Cash Flows in the Financial Statements, the net increase in cash and cash equivalents was $61.5 million for the first nine months of 2020 compared to an increase of $36.1 million for the first nine months of 2019.

The increase in cash and cash equivalents in

2020 was mainly due to the significant increase in deposits, the direct result of PPP loan proceeds deposited to and remaining in these accounts as of September 30, 2020.

The Company expects these funds to be utilized over the coming months, which may or may not result in a decline in deposit balances.

Furthermore, the increase in cash and cash equivalents was the result of the issuance of subordinated notes in the third quarter of 2020, which net of issuance costs resulted in $24.4 million in additional liquidity.

To the extent that deposits are not adequate to fund customer loan demand, liquidity needs can be met in the short-term fund markets.

The Bank has arrangements with other corresponding banks whereby it has $15 million available in federal funds lines of credit and a reverse repurchase agreement available to meet any short-term needs which may not otherwise be funded by the Bank’s portfolio of readily marketable investments that can be converted to cash.

The Bank is also a

member of the FHLB, which provides another source of liquidity.

Through the FHLB, the Bank had collateral pledged of approximately $293.4 million and $270.1 million at June 30, 2020 and December 31, 2019, respectively.

The Bank is also a member of the FHLB, which provides another source of liquidity.

Through the FHLB, the Bank had collateral pledged of approximately $313.8 million and $270.1 million at September 30, 2020 and December 31, 2019, respectively.

The Bank has pledged, under a blanket lien, all qualifying residential and commercial real estate loans under borrowing agreements with the FHLB.

Total stockholders’ equity increased $7.3 million to $200.1 million at June 30, 2020 when compared to December 31, 2019 primarily due to the current year’s retained earnings and a positive change in accumulated other comprehensive income of $1.8 million, or 868.1%.

Total stockholders’ equity increased $6.1 million to $198.9 million at September 30, 2020 when compared to December 31, 2019 primarily due to the current year’s retained earnings and a positive change in accumulated other comprehensive income of $1.7 million, or 819.8%, partially offset by dividends paid during the first nine months of 2020 and the repurchase of common stock in the third quarter of 2020.

On September 17, 2019, the FDIC finalized a rule that introduces an optional simplified measure of capital adequacy for qualifying community banking organizations (i.e., the community bank leverage ratio (“CBLR”) framework), as required by the Economic Growth, Regulatory Relief and Consumer Protection Act.

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The CBLR framework was available for banks to use in their March 31, 2020 Call Report.

The Bank did not opt into the CBLR framework in the first or second quarter of 2020.

The Bank did not opt into the CBLR framework in the first, second or third quarter of 2020.

Under final Federal Reserve and FDIC approved rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S.

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The phase-in period for the final rules became effective for the Bank on January 1, 2015, with full compliance with all of the final rules’ requirements phased in over a multi-year schedule, which was fully phased in on January 1, 2019.

As of June 30, 2020, the Bank’s capital levels remained characterized as “well-capitalized” under the new rules.

The following tables present the applicable capital ratios as of June 30, 2020 and December 31, 2019.

As of September 30, 2020, the Bank’s capital levels remained characterized as “well-capitalized” under the rules.

The following tables present the applicable capital ratios as of September 30, 2020 and December 31, 2019.

Common Equity

June 30, 2020

September 30, 2020

capital ratio

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis