In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the results for the interim periods.

The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). The Notes to Consolidated Financial Statements in SJW Group’s 20182019 Annual Report on Form 10-K should be read with the accompanying unaudited condensed consolidated financial statements.

In FebruaryJune 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases2016-13, “Financial Instruments - Credit Losses (Topic 842),326): Measurement of Credit Losses on Financial Instruments,” as amended, which supersedes the lease requirements in “Leases (Topic 840).” Thisand subsequent amendments. Topic 326 requires measurement and recognition of expected credit losses for financial assets held. ASU generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the Consolidated Balance Sheets and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. ASU 2016-02 also makes some changes to lessor accounting and aligns with the new revenue recognition guidance.2016-13 was effective for SJW Group adopted the new standard effective January 1, 2019, on a modified retrospective basis and did not restate comparative periods. SJW Group also elected the package of practical expedients permitted under the transition guidance and combined lease and non-lease components. In addition, SJW Group kept leases with an initial term of 12 months or less off the Consolidated Balance Sheets and recognized the associated lease payments in the Consolidated Statementsfirst quarter of Comprehensive Income on a straight-line basis over the lease term.fiscal 2020. The adoption of this standardASU 2016-13 did not have a material impact on SJW Group’sthe consolidated financial statements.

Water sales are seasonal in nature and influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly. Due to the seasonal nature of the water business, the operating results for interim periods are not indicative of the operating results for a 12-month period. Revenue is generally higher in the warm, dry summer months when water usage and sales are greater, and lower in the winter months when cooler temperatures and increased rainfallprecipitation curtail water usage and sales.

The major streams of revenue for SJW Group are as follows:

Basic earnings per share is calculated using income available to common stockholders, divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated using income available to common stockholders divided by the weighted average number of shares of common stock including both shares outstanding and shares potentially issuable in connection with restricted common stock awards under SJW Group’s Long-Term Incentive Plan (as amended, the “Incentive Plan”), shares potentially issuable under the performance stock plans assumed through the business combination with Connecticut Water Service, Inc. (“CTWS”), and shares potentially issuable under the Employee Stock Purchase Plan (“ESPP”). For the three months ended June 30, 2020 and 2019, 9,397 and 2018, 2,217 and 2,094 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively. For the six months ended June 30, 2020 and 2019, 19,191 and 2018, 9,634 and 3,256 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

A portion of depreciation expense is allocated to administrative and general expense. For the three months ended June 30, 20192020 and 2018,2019, the amounts allocated to administrative and general expense were $673$370 and $572,$673, respectively. For the six months ended June 30, 2019,2020, and 2018,2019, the amounts allocated to administrative and general expense were $1,469 and $1,330, respectively.

SJW Group accounts for stock-based compensation based on the grant date fair value of awards issued to employees in accordance with FASB ASC Topic 718 - “Compensation - Stock Compensation,” which requires the measurement and recognition of compensation expense based on the estimated fair value of stock-based payment awards.

The Incentive Plan allows SJW Group to provide employees, non-employee board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the company or any parent or subsidiary the opportunity to acquire an equity interest in SJW Group. The types of awards included in the Incentive Plan are restricted stock awards, restricted stock units, performance shares, or other share-based awards. As of June 30, 2019, 157,0632020, 179,913 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units and an additional 823,597745,492 shares are available for award issuances under the Incentive Plan. In addition, shares are issued to employees under the company’s ESPP.

Stock compensation costs charged to income are recognized on a straight-line basis over the requisite service period. A summary of compensation costs charged to income and proceeds from the exercise of any restricted stock options and similar instruments and the tax benefit realized from any stock options and similar instruments exercised, that are recorded to additional paid-in capital and common stock, by award type, are presented below for the three and six months ended June 30, 2019,2020, and 2018.2019.

On January 2,For the three months ended June 30, 2020, and 2019, SJW Group granted under the Incentive Plan 14,346 and 9,114, respectively, one year and three year service-based restricted stock units covering an aggregate of 17,451 shares of common stock of SJW Group were granted to certain officers of SJW Group and its subsidiaries. The units vest in three equal successive installments upon completion of each year of serviceawards with no dividend equivalent rights. Share-based compensation expense of $51.28 per unit which was based on the awarda weighted-average grant date fair value is being recognized overof $60.17 and $51.69, respectively, per unit.

For the service period beginning in 2019.

Performance-based and market-based restricted stock awards granted for the three months ended June 30, 2020, and 2019 were 138 and 0 target units, covering an aggregaterespectively, with a weighted-average grant date fair value of $66.99 and $0 respectively, per unit.

Performance-based and market-based restricted stock awards granted for the six months ended June 30, 2020, and 2019 were 24,719 and 30,401 target numberunits, respectively, with a weighted-average grant date fair value of SJW Group’s shares of common stock equal to 9,882 that will vest based on the$72.01 and $60.46, respectively, per unit. Based upon actual attainment of specified performance goals measured in two separate tranches over the period from January 1, 2019,relative to December 31, 2019, and January 1, 2019, to December 31, 2020, each covering 50% of the target shares, and continued service through December 31, 2019, and December 31, 2020, respectively. Theperformance metric, the number of shares issuable under such units, rangingcan range between 0% to 150% of the target number of shares is based on the level of actual attainment of specified performance goals. The units do not include dividend equivalent rights. The awards allow for pro-rata vesting, based on actual performance and number of months in service over the performance period, in the event an officer’s employment terminates under specific circumstances prior to the end of the performance period. The awards have no market conditions and the stock-based compensation expense of $57.12 and $55.97 per unit for each of the two tranches which was based on the award grant date fair values are being recognized assuming the performance goals will be attained.

As of June 30, 2020, the Monte Carlo valuation model, using the fair value of SJW Group’s commontotal unrecognized compensation costs related to restricted and deferred restricted stock with the effect of market conditions and no dividend yield on the date of grant, and assumes the performance goals will be attained. Stock-based compensation expenseplans amounted to $6,050. This cost is being recognized at $70.47 per unit. If such goals are not met, no compensation cost willexpected to be recognized and any recognized compensation cost will be reversed.over a weighted-average period of 2.03 years.

The ESPP allows eligible employees to purchase shares of SJW Group’s common stock at 85% of the fair value of shares on the purchase date. Under the ESPP, employees can designate up to a maximum of 10% of their base compensation for the purchase of shares of common stock, subject to certain restrictions. A total of 400,000 shares of common stock have been reserved for issuance under the ESPP.

Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, ranging from 7 to 39 years. Substantially all of the real estate investments relate to assets that are currently subject to operating leases.

On April 6, 2017, 444 West Santa Clara Street, L.P. sold all of its interest in the commercial building and land the partnership owned and operated. In connection with this sale, the partnership was required to deposit $750 into an escrow account for estimated repairs to the creek next to the land the partnership sold. On April 22, 2019, all creek repairs were completed and a reimbursement of $745 was provided to the partnership. SJW Land Company holds a 70% limited partner interest in 444 West Santa Clara Street, L.P. SJW Land Company and the noncontrolling interest recognized a pre-tax gain on the creek reimbursement of $521 and $224, respectively, on the transaction.

SJW Group maintains noncontributory defined benefit pension plans for its eligible employees. San Jose Water Company sponsors a noncontributory defined benefit retirement plan for its eligible employees. Employees(“SJWC”) and CTWS employees hired before March 31, 2008, and January 1, 2009, respectively, are entitled to receive retirement benefits using a formulaunder the pension plans based on the employee’s three highest years of compensation (whether or not consecutive).service and compensation. Certain employees hired before March 1, 2012, and covered by a plan merged into the CTWS plan in 2013 are also entitled to benefits based on the employee’s years of service and compensation. For SJWC employees hired on or after March 31, 2008, benefits are determined using a cash balance formula based onupon compensation credits and interest credits for each employee. OfficersCTWS employees hired on or after January 1, 2009, are entitled to an additional 1.5% of eligible compensation to their company sponsored savings plan. SJW Group does not have multi-employer plans.

In addition, senior management hired before March 31, 2008, for SJWC and January 1, 2009, for CTWS are eligible to receive additional retirement benefits under the Executive Supplemental Retirement Plan,supplemental executive retirement plans and officersretirement contracts. SJWC’s senior management hired on or after March 31, 2008, are eligible to receive additional retirement benefits under theSJWC’s Cash Balance Executive Supplemental Retirement Plan. BothThe supplemental retirement plans and Cash Balance Executive Supplemental Retirement Plan are non-qualified plans in which only officerssenior management and other designated members of management may participate. San Jose Water CompanySJW Group also provides health care and life insurance benefits for retired employees under the San Jose Water Company Social Welfare Plan.employer-sponsored postretirement benefits other than pension plans.

The components of net periodic benefit costs for San Jose Water Company’s retirement plan, its Executive Supplemental Retirement Plan, Cash Balance Executive Supplemental Retirement Planthe defined benefit plans and Social Welfare Planother postretirement benefits for the three and six months ended June 30, 2019,2020, and 20182019 are as follows:

In 2019, San Jose Water Company2020, SJW Group expects to make required and discretionary cash contributions of up to $8,337$8,594 to the pension plans and Social Welfare Plan. For the three and six months ended June 30, 2019, San Jose Water Company2020, SJW Group has made $2,2940 contributions to such plans.

SJW Group is a holding company with four4 subsidiaries: (i) San Jose Water Company,SJWC, a water utility operation with both regulated and non-tariffed businesses, (ii) SJWTX, Inc. which is doing business as Canyon Lake Water Service Company (“CLWSC”), a regulated water utility located in Canyon Lake, Texas, and its consolidated non-tariffed variable interest entity, Acequia Water Supply Corporation, (iii) SJW Land Company and its consolidated variable interest entity, 444 West Santa Clara Street, L.P., which operated commercial building rentals, and (iv) Hydro Sub, Inc.,as of October 9, 2019, SJWNE LLC a Connecticut corporation that was formed on March 9, 2018holding company for the sole purpose of effecting the CTWS and its

subsidiaries, The Connecticut Water Service,Company (“Connecticut Water”), The Maine Water Company (“Maine Water”), The Heritage Village Water Company (“HVWC”), The Avon Water Company (“Avon Water”), New England Water Utility Services, Inc. (“CTWS”NEWUS”) proposed merger (see discussion on the proposed merger at Note 11).and Chester Realty, Inc. In accordance with FASB ASC Topic 280 - “Segment Reporting,” The chief operating decision maker of SJW Group has determined that it has two2 reportable business segments. The first segment is that of providing water utility and utility-related services to its customers through SJW Group’s subsidiaries, San JoseSJWC, Connecticut Water, CompanyCLWSC, Maine Water, HVWC, Avon Water, and CLWSC,NEWUS together referred to as “Water Utility Services.” The second segment is property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

SJW Group’s reportable segments have been determined based on information used by the chief operating decision maker. SJW Group’s chief operating decision maker includes the Chairman, President and Chief Executive Officer, and his seniorexecutive staff. The senior staff reviews financial information presented on a consolidated basis that is accompanied by disaggregated information about operating revenue, net income and total assets, by subsidiaries.