UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20212022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
(Exact Name of Company as Specified in its Charter)
Maryland (State of Other Jurisdiction of Incorporation) | 001-36695 (Commission File No.) | 38-3941859 (I.R.S. Employer Identification No.)
|
214 West First Street, Oswego, NY13126
(Address of Principal Executive Office) (Zip Code)
(315)
(315) 343-0057
(Issuer'sIssuer’s Telephone Number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value | PBHC | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| YES☒ NO ☐ |
Indicate by check mark whether the registrant has submitted electronically Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| YES☒ NO ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer☒ | Smaller reporting company ☒ | Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
As of November 12, 2021,9, 2022, there were 4,583,2154,620,822 shares outstanding of the registrant’s Voting common stock and 1,380,283 shares outstanding of the registrant’s Series A Non-Voting common stock.
PATHFINDER BANCORP, INC.
INDEX
PART I - FINANCIAL INFORMATION |
| PAGE NO. | |
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Item 1. |
| 3 | |
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| 3 | |
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| 4 | |
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| 5 | |
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| 6 | |
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| 8 | |
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| 10 | |
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Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) |
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Item 3. |
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Item 4. |
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PART II - OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I - FINANCIAL INFORMATION
Item 1 – Consolidated Financial Statements
Pathfinder Bancorp, Inc.
Consolidated Statements of Condition
(Unaudited)
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(In thousands, except share and per share data) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Cash and due from banks (including restricted balances of $1,600 and $1,600, respectively) |
| $ | 27,230 |
|
| $ | 14,906 |
| ||||||||
Interest-earning deposits (including restricted balances of $0 and $0, respectively) |
|
| 48,010 |
|
|
| 28,558 |
| ||||||||
Cash and due from banks (including restricted balances of $1,600 and $1,600, respectively) |
| $ | 15,584 |
|
| $ | 13,856 |
| ||||||||
Interest-earning deposits (including restricted balances of $0 and $0, respectively) |
|
| 28,870 |
|
|
| 23,293 |
| ||||||||
Total cash and cash equivalents |
|
| 75,240 |
|
|
| 43,464 |
|
|
| 44,454 |
|
|
| 37,149 |
|
Available-for-sale securities, at fair value |
|
| 175,523 |
|
|
| 128,261 |
|
|
| 191,506 |
|
|
| 190,598 |
|
Held-to-maturity securities, at amortized cost (fair value of $164,896 and $174,935, respectively) |
|
| 161,736 |
|
|
| 171,224 |
| ||||||||
Held-to-maturity securities, at amortized cost (fair value of $184,007 and $162,805, respectively) |
|
| 195,930 |
|
|
| 160,923 |
| ||||||||
Marketable equity securities, at fair value |
|
| 667 |
|
|
| 1,850 |
|
|
| 1,203 |
|
|
| 677 |
|
Federal Home Loan Bank stock, at cost |
|
| 3,737 |
|
|
| 4,390 |
|
|
| 3,715 |
|
|
| 4,189 |
|
Loans |
|
| 787,854 |
|
|
| 823,969 |
|
|
| 885,931 |
|
|
| 831,946 |
|
Loans held-for-sale |
|
| 294 |
|
|
| 1,526 |
|
|
| 275 |
|
|
| 513 |
|
Less: Allowance for loan losses |
|
| 14,065 |
|
|
| 12,777 |
|
|
| 13,632 |
|
|
| 12,935 |
|
Loans receivable, net |
|
| 774,083 |
|
|
| 812,718 |
|
|
| 872,574 |
|
|
| 819,524 |
|
Premises and equipment, net |
|
| 21,943 |
|
|
| 22,264 |
|
|
| 21,981 |
|
|
| 21,659 |
|
Operating lease right-of-use assets |
|
| 2,170 |
|
|
| 2,240 |
|
|
| 2,033 |
|
|
| 2,136 |
|
Accrued interest receivable |
|
| 4,599 |
|
|
| 4,549 |
|
|
| 5,172 |
|
|
| 4,520 |
|
Foreclosed real estate |
|
| 221 |
|
|
| - |
| ||||||||
Intangible assets, net |
|
| 121 |
|
|
| 133 |
|
|
| 104 |
|
|
| 117 |
|
Goodwill |
|
| 4,536 |
|
|
| 4,536 |
|
|
| 4,536 |
|
|
| 4,536 |
|
Bank owned life insurance |
|
| 23,282 |
|
|
| 17,864 |
|
|
| 23,864 |
|
|
| 23,423 |
|
Other assets |
|
| 14,561 |
|
|
| 13,950 |
|
|
| 29,653 |
|
|
| 15,726 |
|
Total assets |
| $ | 1,262,198 |
|
| $ | 1,227,443 |
|
| $ | 1,396,946 |
|
| $ | 1,285,177 |
|
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| |||
LIABILITIES AND SHAREHOLDERS' EQUITY: |
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| |||
Deposits: |
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| |||
Interest-bearing |
| $ | 840,004 |
|
| $ | 833,850 |
|
| $ | 993,406 |
|
| $ | 863,448 |
|
Noninterest-bearing |
|
| 206,212 |
|
|
| 162,057 |
|
|
| 187,177 |
|
|
| 191,858 |
|
Total deposits |
|
| 1,046,216 |
|
|
| 995,907 |
|
|
| 1,180,583 |
|
|
| 1,055,346 |
|
Short-term borrowings |
|
| - |
|
|
| 4,020 |
|
|
| 11,500 |
|
|
| 12,500 |
|
Long-term borrowings |
|
| 67,054 |
|
|
| 78,030 |
|
|
| 54,121 |
|
|
| 64,598 |
|
Subordinated loans |
|
| 29,522 |
|
|
| 39,400 |
| ||||||||
Subordinated debt |
|
| 29,689 |
|
|
| 29,563 |
| ||||||||
Accrued interest payable |
|
| 145 |
|
|
| 193 |
|
|
| 494 |
|
|
| 106 |
|
Operating lease liabilities |
|
| 2,469 |
|
|
| 2,525 |
|
|
| 2,348 |
|
|
| 2,440 |
|
Other liabilities |
|
| 10,143 |
|
|
| 9,646 |
|
|
| 10,416 |
|
|
| 9,991 |
|
Total liabilities |
|
| 1,155,549 |
|
|
| 1,129,721 |
|
|
| 1,289,151 |
|
|
| 1,174,544 |
|
Shareholders' equity: |
|
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| ||
Preferred stock, par value $0.01 per share; 0 liquidation preference; 10,000,000 shares authorized; 0 and 1,380,283 shares issued and outstanding, respectively |
|
| - |
|
|
| 14 |
| ||||||||
Voting common stock, par value $0.01; 25,000,000 authorized shares; 4,575,615 and 4,531,383 shares issued and outstanding, respectively |
|
| 46 |
|
|
| 45 |
| ||||||||
Non-Voting common stock, par value $0.01; 1,505,283 authorized shares; 1,380,283 and 0 shares issued and outstanding, respectively |
|
| 14 |
|
|
| - |
| ||||||||
Voting common stock, par value $0.01; 25,000,000 authorized shares; 4,620,489 and 4,603,184 shares |
|
| 46 |
|
|
| 46 |
| ||||||||
Non-Voting common stock, par value $0.01; 1,505,283 authorized shares; 1,380,283 and 1,380,283 shares |
|
| 14 |
|
|
| 14 |
| ||||||||
Additional paid in capital |
|
| 50,693 |
|
|
| 50,024 |
|
|
| 51,603 |
|
|
| 51,044 |
|
Retained earnings |
|
| 57,490 |
|
|
| 50,284 |
|
|
| 68,563 |
|
|
| 60,946 |
|
Accumulated other comprehensive loss |
|
| (1,391 | ) |
|
| (2,236 | ) |
|
| (12,565 | ) |
|
| (1,268 | ) |
Unearned ESOP |
|
| (540 | ) |
|
| (675 | ) |
|
| (360 | ) |
|
| (495 | ) |
Total Pathfinder Bancorp, Inc. shareholders' equity |
|
| 106,312 |
|
|
| 97,456 |
|
|
| 107,301 |
|
|
| 110,287 |
|
Noncontrolling interest |
|
| 337 |
|
|
| 266 |
|
|
| 494 |
|
|
| 346 |
|
Total equity |
|
| 106,649 |
|
|
| 97,722 |
|
|
| 107,795 |
|
|
| 110,633 |
|
Total liabilities and shareholders' equity |
| $ | 1,262,198 |
|
| $ | 1,227,443 |
|
| $ | 1,396,946 |
|
| $ | 1,285,177 |
|
The accompanying notes are an integral part of the consolidated financial statements.
- 3 - -
Pathfinder Bancorp, Inc.
Consolidated Statements of Income
(Unaudited)
|
|
|
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| ||||||
|
| For the three months ended |
|
| For the nine months ended |
|
| For the three months ended |
| For the nine months ended |
| ||||||||||||||||||||
(In thousands, except per share data) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2022 |
|
| September 30, 2021 |
| September 30, 2022 |
| September 30, 2021 |
| |||||||||
Interest and dividend income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, including fees |
| $ | 9,465 |
|
| $ | 8,810 |
|
| $ | 28,096 |
|
| $ | 26,884 |
|
| $ | 9,895 |
|
| $ | 9,465 |
| $ | 27,561 |
|
| $ | 28,096 |
|
Debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Taxable |
|
| 2,049 |
|
|
| 1,520 |
|
|
| 6,177 |
|
|
| 4,761 |
|
|
| 3,052 |
|
|
| 2,049 |
| 7,695 |
|
|
| 6,177 |
| |
Tax-exempt |
|
| 28 |
|
|
| 50 |
|
|
| 99 |
|
|
| 109 |
|
|
| 351 |
|
|
| 28 |
| 612 |
|
|
| 99 |
| |
Dividends |
|
| 87 |
|
|
| 103 |
|
|
| 261 |
|
|
| 237 |
|
|
| 56 |
|
|
| 87 |
| 155 |
|
|
| 261 |
| |
Federal funds sold and interest earning deposits |
|
| 3 |
|
|
| 4 |
|
|
| 7 |
|
|
| 53 |
|
|
| 29 |
|
|
| 3 |
| 48 |
|
|
| 7 |
| |
Total interest and dividend income |
|
| 11,632 |
|
|
| 10,487 |
|
|
| 34,640 |
|
|
| 32,044 |
|
|
| 13,383 |
|
|
| 11,632 |
| 36,071 |
|
|
| 34,640 |
| |
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest on deposits |
|
| 1,154 |
|
|
| 1,616 |
|
|
| 3,825 |
|
|
| 6,376 |
|
|
| 1,907 |
|
|
| 1,154 |
| 4,006 |
|
|
| 3,825 |
| |
Interest on short-term borrowings |
|
| 2 |
|
|
| 38 |
|
|
| 8 |
|
|
| 134 |
|
|
| 123 |
|
|
| 2 |
| 152 |
|
|
| 8 |
| |
Interest on long-term borrowings |
|
| 274 |
|
|
| 331 |
|
|
| 865 |
|
|
| 1,215 |
|
|
| 131 |
|
|
| 274 |
| 405 |
|
|
| 865 |
| |
Interest on subordinated loans |
|
| 411 |
|
|
| 191 |
|
|
| 1,376 |
|
|
| 589 |
| |||||||||||||||
Interest on subordinated debt |
|
| 442 |
|
|
| 411 |
| 1,284 |
|
|
| 1,376 |
| |||||||||||||||||
Total interest expense |
|
| 1,841 |
|
|
| 2,176 |
|
|
| 6,074 |
|
|
| 8,314 |
|
|
| 2,603 |
|
|
| 1,841 |
| 5,847 |
|
|
| 6,074 |
| |
Net interest income |
|
| 9,791 |
|
|
| 8,311 |
|
|
| 28,566 |
|
|
| 23,730 |
|
|
| 10,780 |
|
|
| 9,791 |
| 30,224 |
|
|
| 28,566 |
| |
Provision for loan losses |
|
| 104 |
|
|
| 1,682 |
|
|
| 2,061 |
|
|
| 3,895 |
|
|
| 710 |
|
|
| 104 |
| 871 |
|
|
| 2,061 |
| |
Net interest income after provision for loan losses |
|
| 9,687 |
|
|
| 6,629 |
|
|
| 26,505 |
|
|
| 19,835 |
|
|
| 10,070 |
|
|
| 9,687 |
| 29,353 |
|
|
| 26,505 |
| |
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Service charges on deposit accounts |
|
| 393 |
|
|
| 339 |
|
|
| 1,082 |
|
|
| 998 |
|
|
| 334 |
|
|
| 393 |
| 876 |
|
|
| 1,082 |
| |
Earnings and gain on bank owned life insurance |
|
| 164 |
|
|
| 133 |
|
|
| 418 |
|
|
| 355 |
|
|
| 156 |
|
|
| 164 |
| 441 |
|
|
| 418 |
| |
Loan servicing fees |
|
| 54 |
|
|
| 90 |
|
|
| 155 |
|
|
| 218 |
|
|
| 74 |
|
|
| 54 |
| 260 |
|
|
| 155 |
| |
Net gains on sales and redemptions of investment securities |
|
| 5 |
|
|
| 27 |
|
|
| 56 |
|
|
| 1,076 |
| |||||||||||||||
Gains (losses) on marketable equity securities |
|
| 89 |
|
|
| 118 |
|
|
| 372 |
|
|
| (798 | ) | |||||||||||||||
Net (losses) gains on sales and redemptions of investment securities |
|
| (198 | ) |
|
| 5 |
| (168 | ) |
|
| 56 |
| |||||||||||||||||
Gains on marketable equity securities |
|
| - |
|
|
| 89 |
| 39 |
|
|
| 372 |
| |||||||||||||||||
Net gains on sales of loans and foreclosed real estate |
|
| 67 |
|
|
| 134 |
|
|
| 226 |
|
|
| 903 |
|
|
| 47 |
|
|
| 67 |
| 122 |
|
|
| 226 |
| |
Net gains on sale of premises and equipment |
|
| - |
|
|
| - |
|
|
| 201 |
|
|
| - |
|
|
| - |
|
|
| - |
| - |
|
|
| 201 |
| |
Debit card interchange fees |
|
| 236 |
|
|
| 209 |
|
|
| 698 |
|
|
| 577 |
|
|
| 180 |
|
|
| 236 |
| 639 |
|
|
| 698 |
| |
Insurance agency revenue |
|
| 303 |
|
|
| 217 |
|
|
| 817 |
|
|
| 739 |
|
|
| 258 |
|
|
| 303 |
| 849 |
|
|
| 817 |
| |
Other charges, commissions & fees |
|
| 235 |
|
|
| 224 |
|
|
| 800 |
|
|
| 702 |
|
|
| 310 |
|
|
| 235 |
| 1,002 |
|
|
| 800 |
| |
Total noninterest income |
|
| 1,546 |
|
|
| 1,491 |
|
|
| 4,825 |
|
|
| 4,770 |
|
|
| 1,161 |
|
|
| 1,546 |
| 4,060 |
|
|
| 4,825 |
| |
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Salaries and employee benefits |
|
| 3,624 |
|
|
| 3,396 |
|
|
| 10,466 |
|
|
| 9,615 |
|
|
| 4,196 |
|
|
| 3,624 |
| 12,030 |
|
|
| 10,466 |
| |
Building and occupancy |
|
| 724 |
|
|
| 788 |
|
|
| 2,387 |
|
|
| 2,249 |
|
|
| 835 |
|
|
| 724 |
| 2,491 |
|
|
| 2,387 |
| |
Data processing |
|
| 686 |
|
|
| 569 |
|
|
| 2,016 |
|
|
| 1,721 |
|
|
| 485 |
|
|
| 686 |
| 1,552 |
|
|
| 2,016 |
| |
Professional and other services |
|
| 385 |
|
|
| 282 |
|
|
| 1,253 |
|
|
| 899 |
|
|
| 267 |
|
|
| 385 |
| 1,112 |
|
|
| 1,253 |
| |
Advertising |
|
| 191 |
|
|
| 236 |
|
|
| 696 |
|
|
| 673 |
|
|
| 199 |
|
|
| 191 |
| 621 |
|
|
| 696 |
| |
FDIC assessments |
|
| 222 |
|
|
| 170 |
|
|
| 652 |
|
|
| 509 |
|
|
| 162 |
|
|
| 222 |
| 606 |
|
|
| 652 |
| |
Audits and exams |
|
| 193 |
|
|
| 126 |
|
|
| 572 |
|
|
| 376 |
|
|
| 141 |
|
|
| 193 |
| 424 |
|
|
| 572 |
| |
Insurance agency expense |
|
| 227 |
|
|
| 113 |
|
|
| 627 |
|
|
| 517 |
|
|
| 229 |
|
|
| 227 |
| 687 |
|
|
| 627 |
| |
Community service activities |
|
| 59 |
|
|
| 44 |
|
|
| 181 |
|
|
| 163 |
|
|
| 58 |
|
|
| 59 |
| 193 |
|
|
| 181 |
| |
Foreclosed real estate expenses |
|
| 8 |
|
|
| 7 |
|
|
| 30 |
|
|
| 42 |
|
|
| 17 |
|
|
| 8 |
| 57 |
|
|
| 30 |
| |
Other expenses |
|
| 504 |
|
|
| 499 |
|
|
| 1,424 |
|
|
| 1,469 |
|
|
| 678 |
|
|
| 504 |
| 1,892 |
|
|
| 1,424 |
| |
Total noninterest expense |
|
| 6,823 |
|
|
| 6,230 |
|
|
| 20,304 |
|
|
| 18,233 |
|
|
| 7,267 |
|
|
| 6,823 |
| 21,665 |
|
|
| 20,304 |
| |
Income before income taxes |
|
| 4,410 |
|
|
| 1,890 |
|
|
| 11,026 |
|
|
| 6,372 |
|
|
| 3,964 |
|
|
| 4,410 |
| 11,748 |
|
|
| 11,026 |
| |
Provision for income taxes |
|
| 1,005 |
|
|
| 372 |
|
|
| 2,405 |
|
|
| 1,266 |
|
|
| 772 |
|
|
| 1,005 |
| 2,273 |
|
|
| 2,405 |
| |
Net income attributable to noncontrolling interest and Pathfinder Bancorp, Inc. |
|
| 3,405 |
|
|
| 1,518 |
|
|
| 8,621 |
|
|
| 5,106 |
|
|
| 3,192 |
|
|
| 3,405 |
| 9,475 |
|
|
| 8,621 |
| |
Net income attributable to noncontrolling interest |
|
| 40 |
|
|
| 44 |
|
|
| 93 |
|
|
| 101 |
|
|
| 12 |
|
|
| 40 |
| 73 |
|
|
| 93 |
| |
Net income attributable to Pathfinder Bancorp Inc. |
|
| 3,365 |
|
|
| 1,474 |
|
|
| 8,528 |
|
|
| 5,005 |
|
| $ | 3,180 |
|
| $ | 3,365 |
| $ | 9,402 |
|
| $ | 8,528 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Voting Earnings per common share - basic |
| $ | 0.56 |
|
| $ | 0.25 |
|
| $ | 1.43 |
|
| $ | 0.85 |
| |||||||||||||||
Voting Earnings per common share - diluted |
| $ | 0.56 |
|
| $ | 0.25 |
|
| $ | 1.43 |
|
| $ | 0.85 |
| |||||||||||||||
Series A Non-Voting Earnings per common share- basic |
| $ | 0.56 |
|
| $ | - |
|
| $ | 1.43 |
|
| $ | - |
| |||||||||||||||
Series A Non-Voting Earnings per common share - diluted |
| $ | 0.56 |
|
| $ | - |
|
| $ | 1.43 |
|
| $ | - |
| |||||||||||||||
Voting Earnings per common share - basic and diluted |
| $ | 0.52 |
|
| $ | 0.56 |
| $ | 1.55 |
|
| $ | 1.43 |
| ||||||||||||||||
Series A Non-Voting Earnings per common share- basic and diluted |
| $ | 0.52 |
|
| $ | 0.56 |
| $ | 1.55 |
|
| $ | 1.43 |
| ||||||||||||||||
Dividends per common share (Voting and Series A Non-Voting) |
| $ | 0.07 |
|
| $ | 0.06 |
|
| $ | 0.21 |
|
| $ | 0.18 |
|
| $ | 0.09 |
|
| $ | 0.07 |
| $ | 0.27 |
|
| $ | 0.21 |
|
The accompanying notes are an integral part of the consolidated financial statements.
- 4 - -
Pathfinder Bancorp, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
|
| For the three months ended |
|
| For the nine months ended |
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||||||||||||
(In thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2022 |
| September 30, 2021 |
| September 30, 2022 |
|
| September 30, 2021 |
| ||||||||||
Net Income |
| $ | 3,405 |
|
| $ | 1,518 |
|
| $ | 8,621 |
|
| $ | 5,106 |
|
| $ | 3,192 |
|
| $ | 3,405 |
|
| $ | 9,475 |
|
| $ | 8,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Retirement Plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Retirement plan net losses recognized in plan expenses |
|
| 26 |
|
|
| 58 |
|
|
| 79 |
|
|
| 175 |
|
|
| 1 |
|
|
| 26 |
|
|
| 2 |
|
|
| 79 |
|
Plan gains (losses) not recognized in plan expenses |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| ||||||||||||||||
Net unrealized gain (loss) on retirement plans |
|
| 1 |
|
|
| 26 |
|
|
| 2 |
|
|
| 79 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized holding (losses) gains on available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized holding (losses) gains arising during the period |
|
| (486 | ) |
|
| 1,041 |
|
|
| 477 |
|
|
| 1,801 |
|
|
| (4,588 | ) |
|
| (486 | ) |
|
| (16,542 | ) |
|
| 477 |
|
Reclassification adjustment for net gains included in net income |
|
| (18 | ) |
|
| (27 | ) |
|
| (18 | ) |
|
| (926 | ) | ||||||||||||||||
Reclassification adjustment for net gains on called HTM |
|
|
|
|
|
|
|
| - |
|
|
| - |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Reclassification adjustment for net losses (gains) included in net |
|
| 186 |
|
|
| (18 | ) |
|
| 160 |
|
|
| (18 | ) | ||||||||||||||||
Net unrealized (losses) gains on available-for-sale securities |
|
| (504 | ) |
|
| 1,014 |
|
|
| 459 |
|
|
| 875 |
|
|
| (4,402 | ) |
|
| (504 | ) |
|
| (16,382 | ) |
|
| 459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives and hedging activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized holding gains (losses) arising during the period |
|
| 263 |
|
|
| 114 |
|
|
| 590 |
|
|
| (1,413 | ) | ||||||||||||||||
Net unrealized gains (losses) on derivatives and hedging activities |
|
| 263 |
|
|
| 114 |
|
|
| 590 |
|
|
| (1,413 | ) | ||||||||||||||||
Unrealized holding gains arising during the period |
|
| 116 |
|
|
| 263 |
|
|
| 1,087 |
|
|
| 590 |
| ||||||||||||||||
Net unrealized gains on derivatives and hedging activities |
|
| 116 |
|
|
| 263 |
|
|
| 1,087 |
|
|
| 590 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accretion of net unrealized loss on securities transferred to held-to- maturity(1) |
|
| 4 |
|
|
| 8 |
|
|
| 17 |
|
|
| 26 |
| ||||||||||||||||
Accretion of net unrealized loss on securities transferred to held-to-maturity |
|
| - |
|
|
| 4 |
|
|
| - |
|
|
| 17 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other comprehensive (loss) income, before tax |
|
| (211 | ) |
|
| 1,194 |
|
|
| 1,145 |
|
|
| (337 | ) |
|
| (4,285 | ) |
|
| (211 | ) |
|
| (15,293 | ) |
|
| 1,145 |
|
Tax effect |
|
| 55 |
|
|
| (251 | ) |
|
| (300 | ) |
|
| 70 |
|
|
| 1,119 |
|
|
| 55 |
|
|
| 3,996 |
|
|
| (300 | ) |
Other comprehensive (loss) income, net of tax |
|
| (156 | ) |
|
| 943 |
|
|
| 845 |
|
|
| (267 | ) |
|
| (3,166 | ) |
|
| (156 | ) |
|
| (11,297 | ) |
|
| 845 |
|
Comprehensive income |
| $ | 3,249 |
|
| $ | 2,461 |
|
| $ | 9,466 |
|
| $ | 4,839 |
| ||||||||||||||||
Comprehensive income (loss) |
| $ | 26 |
|
| $ | 3,249 |
|
| $ | (1,822 | ) |
| $ | 9,466 |
| ||||||||||||||||
Comprehensive income, attributable to noncontrolling interest |
| $ | 40 |
|
| $ | 44 |
|
| $ | 93 |
|
| $ | 101 |
|
| $ | 12 |
|
| $ | 40 |
|
| $ | 73 |
|
| $ | 93 |
|
Comprehensive income attributable to Pathfinder Bancorp, Inc. |
| $ | 3,209 |
|
| $ | 2,417 |
|
| $ | 9,373 |
|
| $ | 4,738 |
| ||||||||||||||||
Comprehensive income (loss) attributable to Pathfinder Bancorp, Inc. |
| $ | 14 |
|
| $ | 3,209 |
|
| $ | (1,895 | ) |
| $ | 9,373 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Tax Effect Allocated to Each Component of Other Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Retirement plan net losses recognized in plan expenses |
| $ | (7 | ) |
| $ | (13 | ) |
| $ | (22 | ) |
| $ | (37 | ) |
| $ | - |
|
| $ | (7 | ) |
| $ | (1 | ) |
| $ | (22 | ) |
Unrealized holding (losses) gains on available-for-sale securities arising during the period |
|
| 127 |
|
|
| (220 | ) |
|
| (124 | ) |
|
| (379 | ) | ||||||||||||||||
Reclassification adjustment for net gains included in net income |
|
| 5 |
|
|
| 6 |
|
|
| 5 |
|
|
| 194 |
| ||||||||||||||||
Unrealized gains (losses) on derivatives and hedging arising during the period |
|
| (69 | ) |
|
| (23 | ) |
|
| (154 | ) |
|
| 297 |
| ||||||||||||||||
Accretion of net unrealized loss on securities transferred to held-to- maturity(1) |
|
| (1 | ) |
|
| (1 | ) |
|
| (5 | ) |
|
| (5 | ) | ||||||||||||||||
Income tax effect related to other comprehensive (loss) income |
| $ | 55 |
|
| $ | (251 | ) |
| $ | (300 | ) |
| $ | 70 |
| ||||||||||||||||
Unrealized holding gains (losses) on available-for-sale securities |
|
| 1,199 |
|
|
| 127 |
|
|
| 4,324 |
|
|
| (124 | ) | ||||||||||||||||
Reclassification adjustment for net (gains) losses included in net |
|
| (50 | ) |
|
| 5 |
|
|
| (43 | ) |
|
| 5 |
| ||||||||||||||||
Unrealized gains on derivatives and hedging arising during |
|
| (30 | ) |
|
| (69 | ) |
|
| (284 | ) |
|
| (154 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Accretion of net unrealized loss on securities transferred to held-to-maturity |
|
| - |
|
|
| (1 | ) |
|
| - |
|
|
| (5 | ) | ||||||||||||||||
Income tax effect related to other comprehensive income (loss) |
| $ | 1,119 |
|
| $ | 55 |
|
| $ | 3,996 |
|
| $ | (300 | ) |
|
|
The accompanying notes are an integral part of the consolidated financial statements.
- 5 -
Pathfinder Bancorp, Inc. |
| |||||||||||||||||||||||||||||||||||
Consolidated Statements of Changes in Shareholders' Equity |
| |||||||||||||||||||||||||||||||||||
Three months ended September 30, 2022 and September 30, 2021 |
| |||||||||||||||||||||||||||||||||||
(Unaudited) |
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
(In thousands, except share and per share data) |
| Preferred Stock |
|
| Common Stock |
|
| Non-Voting Common Stock |
|
| Additional Paid in Capital |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Loss |
|
| Unearned ESOP |
|
| Non-controlling Interest |
|
| Total |
| |||||||||
Balance, June 30, 2022 |
| $ | - |
|
| $ | 46 |
|
| $ | 14 |
|
| $ | 51,388 |
|
| $ | 66,077 |
|
| $ | (9,399 | ) |
| $ | (405 | ) |
| $ | 407 |
|
| $ | 108,128 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,180 |
|
|
| - |
|
|
| - |
|
|
| 12 |
|
|
| 3,192 |
|
Other comprehensive income, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (3,166 | ) |
|
| - |
|
|
| - |
|
|
| (3,166 | ) |
ESOP shares earned (6,111 shares) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 77 |
|
|
| - |
|
|
| - |
|
|
| 45 |
|
|
| - |
|
|
| 122 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 45 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 45 |
|
Stock options exercised |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 17 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 17 |
|
Common stock dividends declared ($0.09 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (411 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (411 | ) |
Non-Voting common stock dividends declared ($0.09 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (125 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (125 | ) |
Warrant dividends declared ($0.09 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (11 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (11 | ) |
Cumulative effect of affiliate capital allocation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 76 |
|
|
| (147 | ) |
|
| - |
|
|
| - |
|
|
| 71 |
|
|
| - |
|
Distributions from affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4 |
|
|
| 4 |
|
Balance, September 30, 2022 |
| $ | - |
|
| $ | 46 |
|
| $ | 14 |
|
| $ | 51,603 |
|
| $ | 68,563 |
|
| $ | (12,565 | ) |
| $ | (360 | ) |
| $ | 494 |
|
| $ | 107,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance, June 30, 2021 |
| $ | - |
|
| $ | 45 |
|
| $ | 14 |
|
| $ | 50,451 |
|
| $ | 54,545 |
|
| $ | (1,235 | ) |
| $ | (585 | ) |
| $ | 297 |
|
| $ | 103,532 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,365 |
|
|
| - |
|
|
| - |
|
|
| 40 |
|
|
| 3,405 |
|
Conversion of Preferred stock to Non-Voting common stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other comprehensive income, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (156 | ) |
|
| - |
|
|
| - |
|
|
| (156 | ) |
ESOP shares earned (6,111 shares) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 54 |
|
|
| - |
|
|
| - |
|
|
| 45 |
|
|
| - |
|
|
| 99 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 46 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 46 |
|
Stock options exercised |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 142 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 143 |
|
Common stock dividends declared ($0.07 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (315 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (315 | ) |
Non-Voting common stock dividends declared ($0.07 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (96 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (96 | ) |
Warrant dividends declared ($0.07 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (9 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (9 | ) |
Cumulative effect of affiliate capital allocation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Distributions from affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance, September 30, 2021 |
| $ | - |
|
| $ | 46 |
|
| $ | 14 |
|
| $ | 50,693 |
|
| $ | 57,490 |
|
| $ | (1,391 | ) |
| $ | (540 | ) |
| $ | 337 |
|
| $ | 106,649 |
|
- 5 -
Pathfinder Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
Three months ended September 30, 2021 and September 30, 2020
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share and per share data) |
| Preferred Stock |
|
| Common Stock |
|
| Non-Voting Common Stock |
|
| Additional Paid in Capital |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Loss |
|
| Unearned ESOP |
|
| Non-controlling Interest |
|
| Total |
| |||||||||
Balance, June 30, 2021 |
| $ | - |
|
| $ | 45 |
|
| $ | 14 |
|
| $ | 50,451 |
|
| $ | 54,545 |
|
| $ | (1,235 | ) |
| $ | (585 | ) |
| $ | 297 |
|
| $ | 103,532 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,365 |
|
|
| - |
|
|
| - |
|
|
| 40 |
|
|
| 3,405 |
|
Other comprehensive loss, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (156 | ) |
|
| - |
|
|
| - |
|
|
| (156 | ) |
ESOP shares earned (6,111 shares) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 54 |
|
|
| - |
|
|
| - |
|
|
| 45 |
|
|
| - |
|
|
| 99 |
|
Restricted stock units (13,436 shares issued) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 46 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 46 |
|
Stock options exercised |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 142 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 143 |
|
Common stock dividends declared ($0.07 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (315 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (315 | ) |
Non-Voting common stock dividends declared ($0.07 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (96 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (96 | ) |
Warrant dividends declared ($0.07 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (9 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (9 | ) |
Capital transfer from affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance, September 30, 2021 |
| $ | - |
|
| $ | 46 |
|
| $ | 14 |
|
| $ | 50,693 |
|
| $ | 57,490 |
|
| $ | (1,391 | ) |
| $ | (540 | ) |
| $ | 337 |
|
| $ | 106,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2020 |
| $ | 12 |
|
| $ | 48 |
|
| $ | - |
|
| $ | 49,747 |
|
| $ | 47,660 |
|
| $ | (4,387 | ) |
| $ | (765 | ) |
| $ | 292 |
|
| $ | 92,607 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,474 |
|
|
| - |
|
|
| - |
|
|
| 44 |
|
|
| 1,518 |
|
Other comprehensive income, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 943 |
|
|
| - |
|
|
| - |
|
|
| 943 |
|
ESOP shares earned (6,111 shares) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 16 |
|
|
| - |
|
|
| - |
|
|
| 45 |
|
|
| - |
|
|
| 61 |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 73 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 73 |
|
Common stock dividends declared ($0.06 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (279 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (279 | ) |
Preferred stock dividends declared ($0.06 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (70 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (70 | ) |
Warrant dividends declared ($0.06 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7 | ) |
Capital transfer from affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7 | ) |
|
| - |
|
Cumulative effect of affiliate capital allocation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 42 |
|
|
| (82 | ) |
|
| - |
|
|
| - |
|
|
| 40 |
|
|
| - |
|
Distributions from affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (98 | ) |
|
| (98 | ) |
Balance, September 30, 2020 |
| $ | 12 |
|
| $ | 48 |
|
| $ | - |
|
| $ | 49,885 |
|
| $ | 48,696 |
|
| $ | (3,444 | ) |
| $ | (720 | ) |
| $ | 271 |
|
| $ | 94,748 |
|
The accompanying notes are an integral part of the consolidated financial statements.
- 6 - -
Pathfinder Bancorp, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
Nine months ended September 30, 2021 and September 30, 2020
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share and per share data) |
| Preferred Stock |
|
| Common Stock |
|
| Non-Voting Common Stock |
|
| Additional Paid in Capital |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive Loss |
|
| Unearned ESOP |
|
| Non-controlling Interest |
|
| Total |
| |||||||||
Balance, January 1, 2021 |
| $ | 14 |
|
| $ | 45 |
|
| $ | - |
|
| $ | 50,024 |
|
| $ | 50,284 |
|
| $ | (2,236 | ) |
| $ | (675 | ) |
| $ | 266 |
|
| $ | 97,722 |
|
Net income |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 8,528 |
|
|
| - |
|
|
| - |
|
|
| 93 |
|
|
| 8,621 |
|
Conversion of Preferred stock to Non-Voting common stock |
|
| (14 | ) |
|
| - |
|
|
| 14 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Other comprehensive income, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 845 |
|
|
| - |
|
|
| - |
|
|
| 845 |
|
ESOP shares earned (18,332 shares) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 138 |
|
|
| - |
|
|
| - |
|
|
| 135 |
|
|
| - |
|
|
| 273 |
|
Restricted stock units vested (13,769 shares issued) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 194 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 194 |
|
Stock options exercised |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 304 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 305 |
|
Common stock dividends declared ($0.21 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (941 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (941 | ) |
Non-Voting common stock dividends declared ($0.14 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (193 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (193 | ) |
Preferred stock dividends declared ($0.07 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (97 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (97 | ) |
Warrant dividends declared ($0.21 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (26 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (26 | ) |
Cumulative effect of affiliate capital allocation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 33 |
|
|
| (65 | ) |
|
| - |
|
|
| - |
|
|
| 32 |
|
|
| - |
|
Distributions from affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (54 | ) |
|
| (54 | ) |
Balance, September 30, 2021 |
| $ | - |
|
| $ | 46 |
|
| $ | 14 |
|
| $ | 50,693 |
|
| $ | 57,490 |
|
| $ | (1,391 | ) |
| $ | (540 | ) |
| $ | 337 |
|
| $ | 106,649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2020 |
| $ | 12 |
|
| $ | 47 |
|
| $ | - |
|
| $ | 49,362 |
|
| $ | 44,839 |
|
| $ | (2,971 | ) |
| $ | (855 | ) |
| $ | 235 |
|
| $ | 90,669 |
|
Net income |
|
| - |
|
|
| - |
|
|
|
|
|
|
| - |
|
|
| 5,005 |
|
|
| - |
|
|
| - |
|
|
| 101 |
|
|
| 5,106 |
|
Reevaluation of deferred tax asset valuation allowance (1) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (206 | ) |
|
| - |
|
|
| - |
|
|
| (206 | ) |
Other comprehensive loss, net of tax |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (267 | ) |
|
| - |
|
|
| - |
|
|
| (267 | ) |
ESOP shares earned (18,332 shares) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 68 |
|
|
| - |
|
|
| - |
|
|
| 135 |
|
|
| - |
|
|
| 203 |
|
Restricted stock units (13,437 shares issued) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Stock based compensation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 212 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 212 |
|
Stock options exercised |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 194 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 195 |
|
Common stock dividends declared ($0.18 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (836 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (836 | ) |
Preferred stock dividends declared ($0.18 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (208 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (208 | ) |
Warrant dividends declared ($0.18 per share) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (22 | ) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (22 | ) |
Capital transfer from affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 7 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (7 | ) |
|
| - |
|
Cumulative effect of affiliate capital allocation |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 42 |
|
|
| (82 | ) |
|
| - |
|
|
| - |
|
|
| 40 |
|
|
| - |
|
Distributions from affiliates |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (98 | ) |
|
| (98 | ) |
Balance, September 30, 2020 |
| $ | 12 |
|
| $ | 48 |
|
| $ | - |
|
| $ | 49,885 |
|
| $ | 48,696 |
|
| $ | (3,444 | ) |
| $ | (720 | ) |
| $ | 271 |
|
| $ | 94,748 |
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
- 7 - -
Pathfinder Bancorp, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
|
| For the nine months ended September 30, |
|
| For the nine months ended September 30, |
| ||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
| 2021 |
| |||||
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income attributable to Pathfinder Bancorp, Inc. |
| $ | 8,528 |
|
| $ | 5,005 |
|
| $ | 9,402 |
|
| $ | 8,528 |
|
Adjustments to reconcile net income to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Provision for loan losses |
|
| 2,061 |
|
|
| 3,895 |
|
|
| 871 |
|
|
| 2,061 |
|
Amortization of operating leases |
|
| 14 |
|
|
| 15 |
|
|
| 11 |
|
|
| 14 |
|
Proceeds from sales of loans |
|
| 7,076 |
|
|
| 43,753 |
|
|
| 6,789 |
|
|
| 7,076 |
|
Originations of loans held-for-sale |
|
| (5,618 | ) |
|
| (7,597 | ) |
|
| (6,429 | ) |
|
| (5,618 | ) |
Realized losses (gains) on sales, redemptions and calls of: |
|
|
|
|
|
|
|
| ||||||||
Real estate acquired through foreclosure |
|
| 0 |
|
|
| 5 |
| ||||||||
Realized (gains) losses on sales, redemptions and calls of: |
|
|
|
|
|
| ||||||||||
Loans |
|
| (226 | ) |
|
| (908 | ) |
|
| (122 | ) |
|
| (226 | ) |
Available-for-sale investment securities |
|
| (18 | ) |
|
| (1,042 | ) |
|
| 160 |
|
|
| (18 | ) |
Held-to-maturity investment securities |
|
| (38 | ) |
|
| (34 | ) |
|
| 8 |
|
|
| (38 | ) |
Premises and equipment |
|
| (201 | ) |
|
| 0 |
|
|
| - |
|
|
| (201 | ) |
Marketable equity securities |
|
| (372 | ) |
|
| 798 |
|
|
| (39 | ) |
|
| (372 | ) |
Depreciation |
|
| 1,361 |
|
|
| 1,249 |
|
|
| 1,108 |
|
|
| 1,361 |
|
Amortization of mortgage servicing rights |
|
| (7 | ) |
|
| (325 | ) |
|
| (1 | ) |
|
| (7 | ) |
Amortization of deferred loan costs |
|
| 1,499 |
|
|
| 355 |
|
|
| 389 |
|
|
| 1,499 |
|
Amortization of deferred financing from subordinated debt |
|
| 122 |
|
|
| 26 |
|
|
| 126 |
|
|
| 122 |
|
Earnings on bank owned life insurance |
|
| (418 | ) |
|
| (355 | ) |
|
| (441 | ) |
|
| (418 | ) |
Net amortization of premiums and discounts on investment securities |
|
| 1,837 |
|
|
| 1,572 |
|
|
| 1,475 |
|
|
| 1,837 |
|
Amortization of intangible assets |
|
| 12 |
|
|
| 12 |
|
|
| 13 |
|
|
| 12 |
|
Stock based compensation and ESOP expense |
|
| 467 |
|
|
| 415 |
|
|
| 487 |
|
|
| 467 |
|
Net change in accrued interest receivable |
|
| (50 | ) |
|
| (1,194 | ) |
|
| (652 | ) |
|
| (50 | ) |
Payment of executive deferred compensation and SERP contracts, expensed in prior periods |
|
| (571 | ) |
|
| 0 |
|
|
| - |
|
|
| (571 | ) |
Net change in other assets and liabilities |
|
| 248 |
|
|
| (573 | ) |
|
| (1,003 | ) |
|
| 248 |
|
Net cash flows from operating activities |
|
| 15,707 |
|
|
| 45,072 |
|
|
| 12,152 |
|
|
| 15,707 |
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Purchase of investment securities available-for-sale |
|
| (133,834 | ) |
|
| (107,075 | ) |
|
| (51,411 | ) |
|
| (133,834 | ) |
Purchase of investment securities held-to-maturity |
|
| (28,059 | ) |
|
| (75,234 | ) |
|
| (60,253 | ) |
|
| (28,059 | ) |
Purchase of Federal Home Loan Bank stock |
|
| (3,923 | ) |
|
| (3,016 | ) |
|
| (9,769 | ) |
|
| (3,923 | ) |
Proceeds from redemption of Federal Home Loan Bank stock |
|
| 4,576 |
|
|
| 2,490 |
|
|
| 10,243 |
|
|
| 4,576 |
|
Purchase of marketable securities |
|
| (1,215 | ) |
|
| - |
| ||||||||
Proceeds from maturities and principal reductions of investment securities available-for-sale |
|
| 46,491 |
|
|
| 71,970 |
|
|
| 16,449 |
|
|
| 46,491 |
|
Proceeds from maturities and principal reductions of investment securities held-to-maturity |
|
| 36,091 |
|
|
| 31,730 |
|
|
| 23,322 |
|
|
| 36,091 |
|
Proceeds from sales, redemptions and calls of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Available-for-sale investment securities |
|
| 38,243 |
|
|
| 24,795 |
|
|
| 8,358 |
|
|
| 38,243 |
|
Held-to-maturity investment securities |
|
| 1,215 |
|
|
| 1,701 |
|
|
| 2,196 |
|
|
| 1,215 |
|
Marketable equity securities |
|
| 1,555 |
|
|
| 0 |
|
|
| 714 |
|
|
| 1,555 |
|
Real estate acquired through foreclosure |
|
| 0 |
|
|
| 132 |
| ||||||||
Purchase of bank owned life insurance |
|
| (5,000 | ) |
|
| 0 |
|
|
| - |
|
|
| (5,000 | ) |
Net change in loans |
|
| 35,075 |
|
|
| (74,980 | ) |
|
| (54,562 | ) |
|
| 35,075 |
|
Purchase of premises and equipment |
|
| (1,070 | ) |
|
| (1,354 | ) |
|
| (1,430 | ) |
|
| (1,070 | ) |
Proceeds from sale of premises and equipment |
|
| 231 |
|
|
| 0 |
|
|
| - |
|
|
| 231 |
|
Net cash outflows from investing activities |
|
| (8,409 | ) |
|
| (128,841 | ) |
|
| (117,358 | ) |
|
| (8,409 | ) |
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net change in demand deposits, NOW accounts, savings accounts, money management deposit accounts, MMDA accounts and escrow deposits |
|
| 102,484 |
|
|
| 130,533 |
|
|
| 848 |
|
|
| 102,484 |
|
Net change in time deposits |
|
| (11,275 | ) |
|
| (51,337 | ) |
|
| (20,707 | ) |
|
| (11,275 | ) |
Net change in brokered deposits |
|
| 145,096 |
|
|
| (40,900 | ) | ||||||||
Net change in short-term borrowings |
|
| (1,000 | ) |
|
| (4,020 | ) | ||||||||
Payments on long-term borrowings |
|
| (12,227 | ) |
|
| (18,071 | ) | ||||||||
Proceeds from long-term borrowings |
|
| 1,750 |
|
|
| 7,095 |
|
- 8 - -
Net change in brokered deposits |
|
| (40,900 | ) |
|
| 37,144 |
| ||||||||
Net change in short-term borrowings |
|
| (4,020 | ) |
|
| (15,118 | ) | ||||||||
Payments on long-term borrowings |
|
| (18,071 | ) |
|
| (32,331 | ) | ||||||||
Proceeds from long-term borrowings |
|
| 7,095 |
|
|
| 34,550 |
| ||||||||
Payments on sub-debt borrowings |
|
| (10,000 | ) |
|
| 0 |
|
|
| - |
|
|
| (10,000 | ) |
Proceeds from exercise of stock options |
|
| 305 |
|
|
| 195 |
|
|
| 131 |
|
|
| 305 |
|
Cash dividends paid to common shareholders |
|
| (1,005 | ) |
|
| (852 | ) | ||||||||
Cash dividends paid to common voting shareholders |
|
| (1,152 | ) |
|
| (1,005 | ) | ||||||||
Cash dividends paid to common non-voting shareholders |
|
| (345 | ) |
|
| - |
| ||||||||
Cash dividends paid to preferred shareholders |
|
| (180 | ) |
|
| (208 | ) |
|
| - |
|
|
| (180 | ) |
Cash dividends paid on warrants |
|
| (25 | ) |
|
| (22 | ) |
|
| (31 | ) |
|
| (25 | ) |
Change in noncontrolling interest, net |
|
| 71 |
|
|
| 36 |
|
|
| 148 |
|
|
| 71 |
|
Net cash flows from financing activities |
|
| 24,479 |
|
|
| 102,590 |
|
|
| 112,511 |
|
|
| 24,479 |
|
Change in cash and cash equivalents |
|
| 31,776 |
|
|
| 18,821 |
|
|
| 7,305 |
|
|
| 31,777 |
|
Cash and cash equivalents at beginning of period |
|
| 43,464 |
|
|
| 20,160 |
|
|
| 37,149 |
|
|
| 43,464 |
|
Cash and cash equivalents at end of period |
| $ | 75,240 |
|
| $ | 38,981 |
|
| $ | 44,454 |
|
| $ | 75,241 |
|
CASH PAID DURING THE PERIOD FOR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest |
| $ | 6,122 |
|
| $ | 8,522 |
|
| $ | 1,452 |
|
| $ | 6,122 |
|
Income taxes |
|
| 1,355 |
|
|
| 1,850 |
|
|
| 2,518 |
|
|
| 1,355 |
|
NON-CASH INVESTING ACTIVITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Real estate acquired in exchange for loans |
|
| 0 |
|
|
| 58 |
|
|
| 252 |
|
|
| - |
|
RESTRICTED CASH |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Collateral deposits for hedge position included in cash and due from banks |
|
| 1,600 |
|
|
| 1,600 |
|
|
| 1,600 |
|
|
| 1,600 |
|
The accompanying notes are an integral part of the consolidated financial statements.
- 9 - -
Notes to Consolidated Financial Statements (Unaudited)
Note 1: Basis of Presentation
The accompanying unaudited consolidated financial statements of Pathfinder Bancorp, Inc., (the “Company”), Pathfinder Bank (the “Bank”) and its other wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, the instructions for Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes necessary for a complete presentation of consolidated financial condition, results of operations and cash flows in conformity with generally accepted accounting principles. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included. Certain amounts in the 20202021 consolidated financial statements may have been reclassified to conform to the current period presentation. These reclassifications had no effect on net income or comprehensive income as previously reported. Operating results for the three and nine months ended September 30, 20212022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 20212022 or any other interim period.
The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices or are provided by unaffiliated third-party sources, when available. When third party information is not available, valuation adjustments are estimated in good faith by management.
Although the Company owns, through its subsidiary Pathfinder Risk Management Company, Inc., 51%51% of the membership interest in FitzGibbons Agency, LLC (“Agency”), the Company is required to consolidate 100%100% of the Agency within the consolidated financial statements. The 49%49% of which the Company does not own is accounted for separately as noncontrolling interests within the consolidated financial statements.
Note 2: New Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) and, to a lesser extent, other authoritative rulemaking bodies promulgate generally accepted accounting principles (“GAAP”) to regulate the standards of accounting in the United States. From time to time, the FASB issues new GAAP standards, known as Accounting Standards Updates (“ASUs”) some of which, upon adoption, may have the potential to change the way in which the Company recognizes or reports within its consolidated financial statements. The following table provides a description of the accounting standards that are not currently effective, but could have an impact on the Company's consolidated financial statements upon adoption.
- 10 - -
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- 11 -
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- 12 -
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Standards Not Yet Adopted as of September 30, | ||||||
Standard |
| Description |
| Required Date |
| |
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| Effect on Consolidated Financial Statements | |||
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- 13 -
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- 14 -
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Measurement of Credit Losses on Financial Instruments |
| The amended guidance replaces the current incurred loss model for determining the allowance for credit losses. The guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses will represent a valuation account that is deducted from the amortized cost basis of the financial assets to present their net carrying value at the amount expected to be collected. The income statement will reflect the measurement of credit losses for newly recognized financial assets as well as expected increases or decreases of expected credit losses that have taken place during the period. When determining the allowance, expected credit losses over the contractual term of the financial asset(s) (taking into account prepayments) will be estimated considering relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The amended guidance also requires recording an allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination. The initial allowance for these assets will be added to the purchase price at acquisition rather than being reported as an expense. Subsequent changes in the allowance will be recorded through the income statement as an expense adjustment. In addition, the amended guidance requires credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The calculation of credit losses for available-for-sale securities will be similar to how it is determined under existing guidance. |
| January 1, 2023 (early adoption |
| The Company is assessing new guidance to determine what modifications to existing credit estimation processes may be required. The new guidance is complex and management is evaluating preliminary output from models that have been developed during this evaluative phase. In addition, future levels of allowances will also reflect new requirements to include estimated credit losses on investment securities classified as held-to-maturity, if any. The Company has formed an Implementation Committee, whose membership includes representatives of senior management, and has developed plans that encompass: (1) internal methodology changes (2) data collection and management activities, (3) internal communication requirements, and (4) estimation of the projected impact of this guidance. It has been generally assumed that the conversion from the incurred loss model, required under current GAAP, to the current expected credit loss (CECL) methodology (as required upon implementation of this Update) will, more likely than not, result in increases to the allowances for credit losses at many financial institutions. However, the amount of any change in the allowance for credit losses resulting from the new guidance will ultimately be impacted by the provisions of this guidance as well as by the loan and debt security portfolios composition and asset quality at the adoption date, and economic conditions and forecasts at the time of adoption. The amendments in this Update will be applied on a modified retrospective basis by means of a cumulative-effect adjustment to the opening retained earnings balance in the statement of financial position as of the date of adoption. |
- 11 -
Standard | Description | Required Date | Effect on Consolidated Financial Statements | |||
Transition Relief for the Implementation of ASU-2016-13 (ASU 2019-5: Financial Instruments—Credit Losses [Topic 326]: Targeted Transition Relief) | The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently apply the guidance in Subtopics 820-10, Fair Value Measurement—Overall, and 825-10. General guidance for the use of the fair value option is contained in Subtopic 825-10. The irrevocable election of the fair value option must be applied on an instrument-by-instrument basis for eligible instruments, whose characteristics are within the scope of Subtopic 326-20. Upon adoption of Topic 326, for items measured at fair value in accordance with paragraph 326-10-65-1(i), the difference between the carrying amount and the fair value shall be recorded by means of a cumulative-effect adjustment to the opening retained earnings balance as of the beginning of the first reporting period that an entity has adopted ASU 2016-13. Those differences may include, but are not limited to: (1) unamortized deferred costs, fees, premiums, and discounts (2) valuation allowances (for example, allowance for loan losses), or (3) accrued interest. | January 1, 2023 (early adoption permitted as of January 1, 2019) | The Company is assessing the new guidance to determine what modifications to existing credit estimation processes may be required. The new guidance is complex and management is still evaluating the preliminary output from models that have been developed during this evaluative phase. In addition, future levels of allowances will also reflect new requirements to include estimated credit losses on investment securities classified as held-to-maturity, if any. The Company has formed an Implementation Committee, whose membership includes representatives of senior management, to develop plans that will encompass: (1) internal methodology changes (2) data collection and management activities, (3) internal communication requirements, and (4) estimation of the projected impact of this guidance. It has been generally assumed that the conversion from the incurred loss model, required under current GAAP, to the current expected credit loss (CECL) methodology (as required upon implementation of this Update) will, more likely than not, result in increases to the allowances for credit losses at many financial institutions. However, the amount of any change in the allowance for credit losses resulting from the new guidance will ultimately be impacted by the provisions of this guidance as well as by the loan and debt security portfolios composition and asset quality at the adoption date, and economic conditions and forecasts at the time of adoption. The amendments in this Update should be applied on a modified retrospective basis by means of a cumulative-effect adjustment to the opening retained earnings balance in the statement of financial position as of the date that an entity adopted the amendments in Update 2016-13. The cumulative impact of the economic effects of the COVID-19 pandemic on the changes to the allowance for loan losses, that will be required upon the implementation of the CECL methodology, cannot be estimated at this time. |
- 1512 - -
Standard |
| Description |
| Required Date
|
| Effect on Consolidated Financial Statements |
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- 16 -
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| On June 16, 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss model for the impairment of financial assets measured at amortized cost basis. That model replaces the probable, incurred loss model for those assets. Through the amendments in that Update, the Board added Topic 326, Financial Instruments—Credit Losses, and made several consequential amendments to the Codification. The Board has an ongoing project on its agenda for improving the Codification or correcting its unintended application. The items addressed in that project generally are not expected to have a significant effect on current accounting practice or create a significant administrative cost for most entities. The amendments in this Update are similar to those items. However, the Board decided to issue a separate Update for improvements to the amendments in Update 2016-13 to increase stakeholder awareness of those amendments and to expedite the improvement process. The amendments include items brought to the Board's attention by stakeholders. The amendments in this Update clarify or address stakeholders' specific issues about certain aspects of the amendments in Update 2016-13 as described below:
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| The Company is assessing the new guidance to determine what modifications to existing credit estimation processes may be required. The new guidance is complex and management is still evaluating the preliminary output from models that have been developed during this evaluative phase. In addition, future levels of allowances will also reflect new requirements to include estimated credit losses on investment securities classified as held-to-maturity, if any. The Company has formed an Implementation Committee, whose membership includes representatives of senior management, to develop plans that will encompass: (1) internal methodology changes (2) data collection and management activities, (3) internal communication requirements, and (4) estimation of the projected impact of this guidance. It has been generally assumed that the conversion from the incurred loss model, required under current GAAP, to the CECL methodology will, more likely than not, result in increases to the allowances for credit losses at many financial institutions. However, the amount of any change in the allowance for credit losses resulting from the new guidance will ultimately be impacted by the provisions of this guidance as well as by the loan and debt security portfolios composition and asset quality at the adoption date, and economic conditions and forecasts at the time of adoption. The amendments in this Update |
- 13 -
Standard | Description | Required Date | Effect on Consolidated Financial Statements | |||
Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (ASU 2022-03) | ASU 2022-03 provides clarification that a “contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security” and is not included in the equity security's unit of account. Accordingly, an entity should not consider the contractual sale restriction when measuring the equity security’s fair value (i.e., the entity should not apply a discount related to the contractual sale restriction, as stated in ASC 820-10-35-36B as amended by the ASU). In addition, the ASU prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. | For public business entities, such as the Company, fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted. | The Company is assessing the new guidance to determine the financial impact of this transition and does not expect that the guidance will have a material effect on its consolidated statements of financial condition or income. |
Standard | Description | Required Date | Effect on Consolidated Financial Statements | |||
Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method (ASU 2022-01) | Under current guidance, the last-of-layer method enables an entity to apply fair value hedging to a stated amount of a closed portfolio of prepayable financial assets (or one or more beneficial interests secured by a portfolio of prepayable financial instruments) without having to consider prepayment risk or credit risk when measuring those assets. ASU 2022-01 expands the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and nonprepayable financial assets. This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same method to similar hedging strategies. ASU 2022-01 expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges. An entity should adjust the basis of the hedged item for the change in fair value that is attributable to changes in the hedged risk (i.e., interest rate risk) as of each reporting date. However, the hedged item (i.e., the hedged layer) in a portfolio layer method hedge is related to multiple assets within a closed portfolio, but it is not necessarily related to all of the assets within that portfolio. Accordingly, ASU 2022-01 clarifies that an entity would adjust the basis at the portfolio level and should not allocate it to individual assets within the portfolio. The ASU does not change an entity’s current requirement to allocate the portfolio-level basis adjustment to the individual assets within a closed portfolio upon a dedesignation of a hedging relationship. The entity must, however, 1. recognize the reversal of all basis adjustments associated with a breach in interest income and, 2. disclose the specific amount and cause of the breach. Companies are allowed to reclassify debt securities from held-to-maturity to available-for-sale upon adoption of the rules but only if they intend to apply portfolio layer method hedging to a closed portfolio that includes those debt securities. The decision of which securities to reclassify must be made within 30 days after the date of adoption, and the securities must be included in a closed portfolio that is designated in a portfolio layer method hedge within that 30-day period. | For public business entities, fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. For all other entities, fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The guidance may be early adopted if an entity has adopted ASU 2017-12 for the corresponding period. | The Company has not yet determined which transition method will be applied to the extent that such transition adjustments are applicable. The Company does not expect that the guidance will have a material effect on its consolidated statements of financial condition or income. |
- 14 -
Standard | Description | Required Date | Effect on Consolidated Financial Statements | |||
Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ASU 2022-02 | ASU 2022-02 supersedes the accounting guidance for TDRs for creditors in ASC 310-40 in its entirety and requires entities to evaluate all receivable modifications under ASC 310-20-35-9 through 35-11 to determine whether a modification made to a borrower results in a new loan or a continuation of the existing loan. The ASU also amends other subtopics to remove references to TDRs for creditors. In addition to the elimination of TDR guidance, an entity that has adopted ASU 2022-02 no longer considers renewals, modifications, and extensions that result from reasonably expected TDRs in their calculation of the allowance for credit losses in accordance with ASC 326-20. Due to the removal of the TDR accounting model, all loan modifications will be accounted for under the general loan modification guidance in Subtopic 310-20. On a prospective basis, entities will be subject to new disclosure requirements covering modifications of receivables to borrowers experiencing financial difficulty. Public entities within the scope of Topic 326 vintage disclosure requirements also will be required to prospectively disclose current-period gross write-off information by vintage, or year of origination. In lieu of the TDR accounting model, creditors now will apply the general loan modification guidance in Subtopic 310-20 to all loan modifications, including modifications made for borrowers experiencing financial difficulty. Under the general loan modification guidance, a modification is treated as a new loan only if the following two conditions are met: | For entities that have adopted the amendments in ASU 2016-13, the amendments in ASU 2022-02 are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For entities that have not yet adopted the amendments in ASU 2016-13, such as the Company, the effective dates for the amendments in ASU 2022-02 are the same as the effective dates in ASU 2016-13. The amendments in ASU 2022-02 will be applied prospectively, except as provided in the next sentence. For the transition method related to the recognition and measurement of TDRs, an entity has the option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption. | The Company is assessing the new guidance to determine what modifications to existing TDRs may be required. The new guidance is being evaluated as part of the CECL methodology and will be considered in conjunction with the preliminary output from CECL models that have been developed during this evaluative phase. The Company has formed an Implementation Committee, whose membership includes representatives of senior management, to develop plans that will encompass: (1) internal methodology changes (2) data collection and management activities, (3) internal communication requirements, and (4) estimation of the projected impact of this guidance. |
- 15 -
- 17 -
Note 3: Earnings per Common Share
Following shareholder approval received on June 4, 2021, the Company converted 1,380,283 shares of its Series B Convertible Perpetual Preferred Stock ("Convertible Perpetual Preferred Stock") to an equal number of shares of its newly-created Series A Non-Voting Common Stock. The conversion, which was effective on June 28, 2021, represented 100% of the Company's Convertible Perpetual Preferred Stock outstanding at the time of the conversion and retired the Convertible Perpetual Preferred Stock in perpetuity.
The Company has voting common stock, non-voting common stock and a warrant that are all eligible to participate in dividends equal to the voting common stock dividends on a per share basis. Securities that participate in dividends, such as the Company’s non-voting common stock and warrant, are considered “participating securities”. The Company calculates net income available to voting common shareholders using the two-class method required for capital structures that include participating securities.
In applying the two-class method, basic net income per share was calculated by dividing net income (less any dividends on participating securities) by the weighted average number of shares of voting common stock and participating securities outstanding for the period. Diluted earnings per share may include the additional effect of other securities, if dilutive, in which case the dilutive effect of such securities is calculated by applying either the two-class method or the Treasury Stock method to the assumed exercise or vesting of potentially dilutive common shares. The method yielding the more dilutive result is ultimately reported for the applicable period. Potentially dilutive common stock equivalents primarily consist of employee stock options and restricted stock units. Unallocated common shares held by the ESOP are not included in the weighted average number of common shares outstanding for purposes of calculating earnings per common share until they are committed to be released to plan participants.
Anti-dilutive shares are common stock equivalents with average exercise prices in excess of the weighted average market price for the period presented. Anti-dilutive stock options, not included in the computation below, were -0--0- for the three and nine months ended September 30, 2021. Anti-dilutive stock options, not included in the computation below,were 256,145 for the three months ended2022, and September 30, 2020 and 170,763 for the nine months ended September 30, 2020.2021, respectively.
- 18 -
The following table sets forth the calculation of basic and diluted earnings per share.
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(In thousands, except per share data) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net income attributable to Pathfinder Bancorp, Inc. |
| $ | 3,365 |
|
| $ | 1,474 |
|
| $ | 8,528 |
|
| $ | 5,005 |
|
Convertible preferred stock dividends |
|
| - |
|
|
| 70 |
|
|
| 180 |
|
|
| 208 |
|
Series A Non-Voting Common Stock dividends |
|
| 96 |
|
|
| - |
|
|
| 110 |
|
|
| - |
|
Warrant dividends |
|
| 9 |
|
|
| 7 |
|
|
| 26 |
|
|
| 22 |
|
Undistributed earnings allocated to participating securities |
|
| 739 |
|
|
| 241 |
|
|
| 1,833 |
|
|
| 853 |
|
Net income available to common shareholders- Voting |
| $ | 2,521 |
|
| $ | 1,156 |
|
| $ | 6,379 |
|
| $ | 3,922 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Pathfinder Bancorp, Inc. |
| $ | 3,365 |
|
| $ | - |
|
| $ | 8,528 |
|
| $ | - |
|
Convertible preferred stock dividends |
|
| - |
|
|
| - |
|
|
| 180 |
|
|
| - |
|
Voting Common Stock dividends |
|
| 315 |
|
|
| - |
|
|
| 941 |
|
|
| - |
|
Warrant dividends |
|
| 9 |
|
|
| - |
|
|
| 26 |
|
|
| - |
|
Undistributed earnings allocated to participating securities |
|
| 2,266 |
|
|
| - |
|
|
| 6,624 |
|
|
| - |
|
Net income available to common shareholders- Series A Non-Voting |
| $ | 775 |
|
| $ | - |
|
| $ | 757 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding- Voting |
|
| 4,488 |
|
|
| 4,650 |
|
|
| 4,465 |
|
|
| 4,632 |
|
Basic weighted average common shares outstanding- Series A Non-Voting |
|
| 1,380 |
|
|
| - |
|
|
| 531 |
|
|
| - |
|
Diluted weighted average common shares outstanding- Voting |
|
| 4,488 |
|
|
| 4,650 |
|
|
| 4,465 |
|
|
| 4,632 |
|
Diluted weighted average common shares outstanding- Series A Non-Voting |
|
| 1,380 |
|
|
| - |
|
|
| 531 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share- Voting |
| $ | 0.56 |
|
| $ | 0.25 |
|
| $ | 1.43 |
|
| $ | 0.85 |
|
Basic earnings per common share- Series A Non-Voting |
| $ | 0.56 |
|
| $ | - |
|
| $ | 1.43 |
|
| $ | - |
|
Diluted earnings per common share- Voting |
| $ | 0.56 |
|
| $ | 0.25 |
|
| $ | 1.43 |
|
| $ | 0.85 |
|
Diluted earnings per common share- Series A Non-Voting |
| $ | 0.56 |
|
| $ | - |
|
| $ | 1.43 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2020 |
|
|
|
|
| |||
Voting Common Stock shares outstanding at period end |
|
| 4,576 |
|
|
| 4,531 |
|
|
| 4,754 |
|
|
|
|
|
Series A Non-Voting Common Stock shares outstanding at period end |
|
| 1,380 |
|
|
| - |
|
|
| - |
|
|
|
|
|
Series B Convertible Preferred Stock shares outstanding at period end |
|
| - |
|
|
| 1,380 |
|
|
| 1,155 |
|
|
|
|
|
Total shares of all classes of stock outstanding at period end |
|
| 5,956 |
|
|
| 5,911 |
|
|
| 5,909 |
|
|
|
|
|
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(In thousands, except share and per share data) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income attributable to Pathfinder Bancorp, Inc. |
| $ | 3,180 |
|
| $ | 3,365 |
|
| $ | 9,402 |
|
| $ | 8,528 |
|
Convertible preferred stock dividends |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 180 |
|
Series A Non-Voting Common Stock dividends |
|
| 125 |
|
|
| 96 |
|
|
| 373 |
|
|
| 110 |
|
Warrant dividends |
|
| 11 |
|
|
| 9 |
|
|
| 34 |
|
|
| 26 |
|
Amount attributable to Series A Non-Voting Common Stock and participating warrants |
|
| 653 |
|
|
| 739 |
|
|
| 1,930 |
|
|
| 1,833 |
|
Net income available to common shareholders-Voting |
| $ | 2,391 |
|
| $ | 2,521 |
|
| $ | 7,065 |
|
| $ | 6,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income attributable to Pathfinder Bancorp, Inc. |
| $ | 3,180 |
|
| $ | 3,365 |
|
| $ | 9,402 |
|
| $ | 8,528 |
|
Convertible preferred stock dividends |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 180 |
|
Voting Common Stock dividends |
|
| 411 |
|
|
| 315 |
|
|
| 1,231 |
|
|
| 941 |
|
Warrant dividends |
|
| 11 |
|
|
| 9 |
|
|
| 34 |
|
|
| 26 |
|
Amount attributable to Voting Common Stock and participating warrants |
|
| 2,034 |
|
|
| 2,266 |
|
|
| 5,994 |
|
|
| 6,624 |
|
Net income available to common shareholders-Series A Non-Voting |
| $ | 724 |
|
| $ | 775 |
|
| $ | 2,143 |
|
| $ | 757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted weighted average common shares outstanding-Voting |
|
| 4,564 |
|
|
| 4,488 |
|
|
| 4,550 |
|
|
| 4,465 |
|
Basic and diluted weighted average common shares outstanding-Series A Non-Voting |
|
| 1,380 |
|
|
| 1,380 |
|
|
| 1,380 |
|
|
| 531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted earnings per common share-Voting |
| $ | 0.52 |
|
| $ | 0.56 |
|
| $ | 1.55 |
|
| $ | 1.43 |
|
Basic and diluted earnings per common share-Series A Non-Voting |
| $ | 0.52 |
|
| $ | 0.56 |
|
| $ | 1.55 |
|
| $ | 1.43 |
|
- 16 -
19 -
Note 4: Investment Securities
The amortized cost and estimated fair value of investment securities are summarized as follows:
|
| September 30, 2021 |
|
| September 30, 2022 |
| ||||||||||||||||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
| Estimated |
|
|
|
|
| Gross |
|
| Gross |
|
| Estimated |
| |||||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||
(In thousands) |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
US Treasury, agencies and GSEs |
| $ | 33,329 |
|
| $ | 19 |
|
| $ | (305 | ) |
| $ | 33,043 |
|
| $ | 32,979 |
|
| $ | 44 |
|
| $ | (3,543 | ) |
| $ | 29,480 |
|
State and political subdivisions |
|
| 27,577 |
|
|
| 1,333 |
|
|
| 0 |
|
|
| 28,910 |
|
|
| 47,695 |
|
|
| 56 |
|
|
| (5,026 | ) |
|
| 42,725 |
|
Corporate |
|
| 13,620 |
|
|
| 560 |
|
|
| (25 | ) |
|
| 14,155 |
|
|
| 11,814 |
|
|
| 723 |
|
|
| (524 | ) |
|
| 12,013 |
|
Asset backed securities |
|
| 12,520 |
|
|
| 33 |
|
|
| (57 | ) |
|
| 12,496 |
|
|
| 16,651 |
|
|
| - |
|
|
| (575 | ) |
|
| 16,076 |
|
Residential mortgage-backed - US agency |
|
| 23,567 |
|
|
| 268 |
|
|
| (229 | ) |
|
| 23,606 |
|
|
| 18,383 |
|
|
| - |
|
|
| (1,611 | ) |
|
| 16,772 |
|
Collateralized mortgage obligations - US agency |
|
| 15,043 |
|
|
| 56 |
|
|
| (291 | ) |
|
| 14,808 |
|
|
| 13,354 |
|
|
| - |
|
|
| (1,331 | ) |
|
| 12,023 |
|
Collateralized mortgage obligations - Private label |
|
| 48,070 |
|
|
| 412 |
|
|
| (183 | ) |
|
| 48,299 |
|
|
| 66,227 |
|
|
| - |
|
|
| (4,016 | ) |
|
| 62,211 |
|
Total |
|
| 173,726 |
|
|
| 2,681 |
|
|
| (1,090 | ) |
|
| 175,317 |
|
|
| 207,103 |
|
|
| 823 |
|
|
| (16,626 | ) |
|
| 191,300 |
|
Equity investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Common stock - financial services industry |
|
| 206 |
|
|
| 0 |
|
|
| 0 |
|
|
| 206 |
|
|
| 206 |
|
|
| - |
|
|
| - |
|
|
| 206 |
|
Total |
|
| 206 |
|
|
| 0 |
|
|
| 0 |
|
|
| 206 |
|
|
| 206 |
|
|
| - |
|
|
| - |
|
|
| 206 |
|
Total available-for-sale |
| $ | 173,932 |
|
| $ | 2,681 |
|
| $ | (1,090 | ) |
| $ | 175,523 |
|
| $ | 207,309 |
|
| $ | 823 |
|
| $ | (16,626 | ) |
| $ | 191,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Held-to-Maturity Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
US Treasury, agencies and GSEs |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3,862 |
|
| $ | - |
|
| $ | (275 | ) |
| $ | 3,587 |
|
State and political subdivisions |
|
| 17,393 |
|
|
| 507 |
|
|
| (93 | ) |
|
| 17,807 |
|
|
| 15,225 |
|
|
| - |
|
|
| (2,418 | ) |
|
| 12,807 |
|
Corporate |
|
| 45,301 |
|
|
| 1,487 |
|
|
| (37 | ) |
|
| 46,751 |
|
|
| 45,095 |
|
|
| - |
|
|
| (2,186 | ) |
|
| 42,909 |
|
Asset backed securities |
|
| 15,099 |
|
|
| 122 |
|
|
| (136 | ) |
|
| 15,085 |
|
|
| 19,585 |
|
|
| 51 |
|
|
| (1,123 | ) |
|
| 18,513 |
|
Residential mortgage-backed - US agency |
|
| 10,103 |
|
|
| 369 |
|
|
| 0 |
|
|
| 10,472 |
|
|
| 7,622 |
|
|
| 4 |
|
|
| (721 | ) |
|
| 6,905 |
|
Collateralized mortgage obligations - US agency |
|
| 12,173 |
|
|
| 483 |
|
|
| (5 | ) |
|
| 12,651 |
|
|
| 15,335 |
|
|
| - |
|
|
| (1,191 | ) |
|
| 14,144 |
|
Collateralized mortgage obligations - Private label |
|
| 61,667 |
|
|
| 564 |
|
|
| (101 | ) |
|
| 62,130 |
|
|
| 89,206 |
|
|
| - |
|
|
| (4,064 | ) |
|
| 85,142 |
|
Total held-to-maturity |
| $ | 161,736 |
|
| $ | 3,532 |
|
| $ | (372 | ) |
| $ | 164,896 |
|
| $ | 195,930 |
|
| $ | 55 |
|
| $ | (11,978 | ) |
| $ | 184,007 |
|
- 2017 - -
|
| December 31, 2021 |
| |||||||||||||
|
|
|
|
| Gross |
|
| Gross |
|
| Estimated |
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
(In thousands) |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
US Treasury, agencies and GSEs |
| $ | 32,669 |
|
| $ | 17 |
|
| $ | (413 | ) |
| $ | 32,273 |
|
State and political subdivisions |
|
| 37,860 |
|
|
| 1,383 |
|
|
| (44 | ) |
|
| 39,199 |
|
Corporate |
|
| 13,603 |
|
|
| 562 |
|
|
| (38 | ) |
|
| 14,127 |
|
Asset backed securities |
|
| 13,693 |
|
|
| 9 |
|
|
| (89 | ) |
|
| 13,613 |
|
Residential mortgage-backed - US agency |
|
| 22,482 |
|
|
| 148 |
|
|
| (466 | ) |
|
| 22,164 |
|
Collateralized mortgage obligations - US agency |
|
| 12,658 |
|
|
| 30 |
|
|
| (403 | ) |
|
| 12,285 |
|
Collateralized mortgage obligations - Private label |
|
| 56,848 |
|
|
| 285 |
|
|
| (402 | ) |
|
| 56,731 |
|
Total |
|
| 189,813 |
|
|
| 2,434 |
|
|
| (1,855 | ) |
|
| 190,392 |
|
Equity investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common stock - financial services industry |
|
| 206 |
|
|
| - |
|
|
| - |
|
|
| 206 |
|
Total |
|
| 206 |
|
|
| - |
|
|
| - |
|
|
| 206 |
|
Total available-for-sale |
| $ | 190,019 |
|
| $ | 2,434 |
|
| $ | (1,855 | ) |
| $ | 190,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Held-to-Maturity Portfolio |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
US Treasury, agencies and GSEs |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
State and political subdivisions |
|
| 14,790 |
|
|
| 416 |
|
|
| (140 | ) |
|
| 15,066 |
|
Corporate |
|
| 46,290 |
|
|
| 1,252 |
|
|
| (102 | ) |
|
| 47,440 |
|
Asset backed securities |
|
| 14,636 |
|
|
| 67 |
|
|
| (188 | ) |
|
| 14,515 |
|
Residential mortgage-backed - US agency |
|
| 9,740 |
|
|
| 277 |
|
|
| (18 | ) |
|
| 9,999 |
|
Collateralized mortgage obligations - US agency |
|
| 11,362 |
|
|
| 367 |
|
|
| (9 | ) |
|
| 11,720 |
|
Collateralized mortgage obligations - Private label |
|
| 64,105 |
|
|
| 222 |
|
|
| (262 | ) |
|
| 64,065 |
|
Total held-to-maturity |
| $ | 160,923 |
|
| $ | 2,601 |
|
| $ | (719 | ) |
| $ | 162,805 |
|
|
| December 31, 2020 |
| |||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
| Estimated |
| |||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
(In thousands) |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury, agencies and GSEs |
| $ | 6,428 |
|
| $ | 12 |
|
| $ | (24 | ) |
| $ | 6,416 |
|
State and political subdivisions |
|
| 23,235 |
|
|
| 538 |
|
|
| (20 | ) |
|
| 23,753 |
|
Corporate |
|
| 12,393 |
|
|
| 275 |
|
|
| 0 |
|
|
| 12,668 |
|
Asset backed securities |
|
| 8,572 |
|
|
| 39 |
|
|
| (4 | ) |
|
| 8,607 |
|
Residential mortgage-backed - US agency |
|
| 24,856 |
|
|
| 355 |
|
|
| 0 |
|
|
| 25,211 |
|
Collateralized mortgage obligations - US agency |
|
| 26,776 |
|
|
| 149 |
|
|
| (461 | ) |
|
| 26,464 |
|
Collateralized mortgage obligations - Private label |
|
| 24,662 |
|
|
| 384 |
|
|
| (110 | ) |
|
| 24,936 |
|
Total |
|
| 126,922 |
|
|
| 1,752 |
|
|
| (619 | ) |
|
| 128,055 |
|
Equity investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock - financial services industry |
|
| 206 |
|
|
| 0 |
|
|
| 0 |
|
|
| 206 |
|
Total |
|
| 206 |
|
|
| 0 |
|
|
| 0 |
|
|
| 206 |
|
Total available-for-sale |
| $ | 127,128 |
|
| $ | 1,752 |
|
| $ | (619 | ) |
| $ | 128,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury, agencies and GSEs |
| $ | 1,000 |
|
| $ | 2 |
|
| $ | 0 |
|
| $ | 1,002 |
|
State and political subdivisions |
|
| 16,482 |
|
|
| 527 |
|
|
| (58 | ) |
|
| 16,951 |
|
Corporate |
|
| 36,441 |
|
|
| 1,101 |
|
|
| (7 | ) |
|
| 37,535 |
|
Asset backed securities |
|
| 18,414 |
|
|
| 217 |
|
|
| (176 | ) |
|
| 18,455 |
|
Residential mortgage-backed - US agency |
|
| 11,807 |
|
|
| 475 |
|
|
| 0 |
|
|
| 12,282 |
|
Collateralized mortgage obligations - US agency |
|
| 24,482 |
|
|
| 850 |
|
|
| (1 | ) |
|
| 25,331 |
|
Collateralized mortgage obligations - Private label |
|
| 62,598 |
|
|
| 902 |
|
|
| (121 | ) |
|
| 63,379 |
|
Total held-to-maturity |
| $ | 171,224 |
|
| $ | 4,074 |
|
| $ | (363 | ) |
| $ | 174,935 |
|
The amortized cost and estimated fair value of debt investments at September 30, 20212022 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
|
| Available-for-Sale |
|
| Held-to-Maturity |
|
| Available-for-Sale |
|
| Held-to-Maturity |
| ||||||||||||||||||||
|
| Amortized |
|
| Estimated |
|
| Amortized |
|
| Estimated |
|
| Amortized |
|
| Estimated |
|
| Amortized |
|
| Estimated |
| ||||||||
(In thousands) |
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
|
| Cost |
|
| Fair Value |
| ||||||||
Due in one year or less |
| $ | 5,892 |
|
| $ | 6,219 |
|
| $ | 6,320 |
|
| $ | 6,416 |
|
| $ | 4,569 |
|
| $ | 5,286 |
|
| $ | - |
|
| $ | - |
|
Due after one year through five years |
|
| 5,241 |
|
|
| 5,402 |
|
|
| 8,232 |
|
|
| 8,748 |
|
|
| 5,269 |
|
|
| 5,016 |
|
|
| 14,364 |
|
|
| 13,899 |
|
Due after five years through ten years |
|
| 35,544 |
|
|
| 35,312 |
|
|
| 40,257 |
|
|
| 41,365 |
|
|
| 34,937 |
|
|
| 31,136 |
|
|
| 44,973 |
|
|
| 42,233 |
|
Due after ten years |
|
| 40,369 |
|
|
| 41,671 |
|
|
| 22,984 |
|
|
| 23,114 |
|
|
| 64,364 |
|
|
| 58,856 |
|
|
| 24,430 |
|
|
| 21,684 |
|
Sub-total |
|
| 87,046 |
|
|
| 88,604 |
|
|
| 77,793 |
|
|
| 79,643 |
|
|
| 109,139 |
|
|
| 100,294 |
|
|
| 83,767 |
|
|
| 77,816 |
|
Residential mortgage-backed - US agency |
|
| 23,567 |
|
|
| 23,606 |
|
|
| 10,103 |
|
|
| 10,472 |
|
|
| 18,383 |
|
|
| 16,772 |
|
|
| 7,622 |
|
|
| 6,905 |
|
Collateralized mortgage obligations - US agency |
|
| 15,043 |
|
|
| 14,808 |
|
|
| 12,173 |
|
|
| 12,651 |
|
|
| 13,354 |
|
|
| 12,023 |
|
|
| 15,335 |
|
|
| 14,144 |
|
Collateralized mortgage obligations - Private label |
|
| 48,070 |
|
|
| 48,299 |
|
|
| 61,667 |
|
|
| 62,130 |
|
|
| 66,227 |
|
|
| 62,211 |
|
|
| 89,206 |
|
|
| 85,142 |
|
Totals |
| $ | 173,726 |
|
| $ | 175,317 |
|
| $ | 161,736 |
|
| $ | 164,896 |
|
| $ | 207,103 |
|
| $ | 191,300 |
|
| $ | 195,930 |
|
| $ | 184,007 |
|
- 2118 - -
The Company’s investment securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:
|
| September 30, 2021 |
|
| September 30, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Less than Twelve Months |
|
| Twelve Months or More |
|
| Total |
|
| Less than Twelve Months |
|
| Twelve Months or More |
|
| Total |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Number of |
|
|
|
|
|
|
|
|
|
| Number of |
|
|
|
|
|
|
|
|
|
| Number of |
|
|
|
|
|
|
|
|
|
| Number of |
|
|
|
|
| Number of |
|
|
|
|
| Number of |
|
|
|
|
| ||||||||||||||||||||
|
| Individual |
|
| Unrealized |
|
| Fair |
|
| Individual |
|
| Unrealized |
|
| Fair |
|
| Individual |
|
| Unrealized |
|
| Fair |
|
| Individual |
| Unrealized |
| Fair |
| Individual |
| Unrealized |
| Fair |
| Individual |
| Unrealized |
| Fair |
| ||||||||||||||||||||||||||
(Dollars in thousands) |
| Securities |
|
| Losses |
|
| Value |
|
| Securities |
|
| Losses |
|
| Value |
|
| Securities |
|
| Losses |
|
| Value |
|
| Securities |
| Losses |
| Value |
| Securities |
| Losses |
| Value |
| Securities |
| Losses |
| Value |
| ||||||||||||||||||||||||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
US Treasury, agencies and GSE's |
|
| 3 |
|
| $ | (305 | ) |
| $ | 31,799 |
|
|
| 0 |
|
| $ | 0 |
|
| $ | 0 |
|
|
| 3 |
|
| $ | (305 | ) |
| $ | 31,799 |
|
|
| - |
|
| $ | - |
|
| $ | - |
|
|
| 3 |
|
| $ | (3,543 | ) |
| $ | 26,001 |
|
|
| 3 |
|
| $ | (3,543 | ) |
| $ | 26,001 |
|
State and political subdivisions |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 28 |
|
|
| (4,148 | ) |
|
| 34,549 |
|
|
| 5 |
|
|
| (878 | ) |
|
| 5,898 |
|
|
| 33 |
|
|
| (5,026 | ) |
|
| 40,447 |
|
Corporate |
|
| 2 |
|
|
| (25 | ) |
|
| 1,689 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2 |
|
|
| (25 | ) |
|
| 1,689 |
|
|
| 7 |
|
|
| (274 | ) |
|
| 5,719 |
|
|
| 2 |
|
|
| (250 | ) |
|
| 1,454 |
|
|
| 9 |
|
|
| (524 | ) |
|
| 7,173 |
|
Asset backed securities |
|
| 4 |
|
|
| (57 | ) |
|
| 9,489 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4 |
|
|
| (57 | ) |
|
| 9,489 |
|
|
| 8 |
|
|
| (284 | ) |
|
| 11,492 |
|
|
| 2 |
|
|
| (291 | ) |
|
| 4,584 |
|
|
| 10 |
|
|
| (575 | ) |
|
| 16,076 |
|
Residential mortgage-backed - US agency |
|
| 3 |
|
|
| (229 | ) |
|
| 13,440 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3 |
|
|
| (229 | ) |
|
| 13,440 |
|
|
| 13 |
|
|
| (753 | ) |
|
| 6,320 |
|
|
| 3 |
|
|
| (858 | ) |
|
| 10,450 |
|
|
| 16 |
|
|
| (1,611 | ) |
|
| 16,770 |
|
Collateralized mortgage obligations - US agency |
|
| 3 |
|
|
| (45 | ) |
|
| 6,821 |
|
|
| 2 |
|
|
| (246 | ) |
|
| 2,590 |
|
|
| 5 |
|
|
| (291 | ) |
|
| 9,411 |
|
|
| 7 |
|
|
| (315 | ) |
|
| 4,899 |
|
|
| 5 |
|
|
| (1,016 | ) |
|
| 7,124 |
|
|
| 12 |
|
|
| (1,331 | ) |
|
| 12,023 |
|
Collateralized mortgage obligations - Private label |
|
| 11 |
|
|
| (171 | ) |
|
| 24,927 |
|
|
| 2 |
|
|
| (12 | ) |
|
| 1,579 |
|
|
| 13 |
|
|
| (183 | ) |
|
| 26,506 |
|
|
| 23 |
|
|
| (2,309 | ) |
|
| 32,923 |
|
|
| 11 |
|
|
| (1,707 | ) |
|
| 22,731 |
|
|
| 34 |
|
|
| (4,016 | ) |
|
| 55,654 |
|
Totals |
|
| 26 |
|
| $ | (832 | ) |
| $ | 88,165 |
|
|
| 4 |
|
| $ | (258 | ) |
| $ | 4,169 |
|
|
| 30 |
|
| $ | (1,090 | ) |
| $ | 92,334 |
|
|
| 86 |
|
| $ | (8,083 | ) |
| $ | 95,902 |
|
|
| 31 |
|
| $ | (8,543 | ) |
| $ | 78,242 |
|
|
| 117 |
|
| $ | (16,626 | ) |
| $ | 174,144 |
|
Held-to-Maturity Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
US Treasury, agencies and GSE's |
|
| 2 |
|
| $ | (275 | ) |
| $ | 3,587 |
|
|
| - |
|
| $ | - |
|
| $ | - |
|
|
| 2 |
|
| $ | (275 | ) |
| $ | 3,587 |
| ||||||||||||||||||||||||||||||||||||
State and political subdivisions |
|
| 3 |
|
| $ | (51 | ) |
| $ | 3,333 |
|
|
| 1 |
|
| $ | (42 | ) |
| $ | 2,034 |
|
|
| 4 |
|
| $ | (93 | ) |
| $ | 5,367 |
|
|
| 11 |
|
|
| (1,115 | ) |
|
| 8,667 |
|
|
| 4 |
|
|
| (1,303 | ) |
|
| 4,139 |
|
|
| 15 |
|
|
| (2,418 | ) |
|
| 12,806 |
|
Corporate |
|
| 8 |
|
|
| (37 | ) |
|
| 5,963 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 8 |
|
|
| (37 | ) |
|
| 5,963 |
|
|
| 33 |
|
|
| (1,739 | ) |
|
| 32,356 |
|
|
| 7 |
|
|
| (447 | ) |
|
| 4,803 |
|
|
| 40 |
|
|
| (2,186 | ) |
|
| 37,159 |
|
Asset backed securities |
|
| 3 |
|
|
| (55 | ) |
|
| 4,331 |
|
|
| 2 |
|
|
| (81 | ) |
|
| 1,856 |
|
|
| 5 |
|
|
| (136 | ) |
|
| 6,187 |
|
|
| 6 |
|
|
| (486 | ) |
|
| 10,202 |
|
|
| 2 |
|
|
| (637 | ) |
|
| 2,458 |
|
|
| 8 |
|
|
| (1,123 | ) |
|
| 12,660 |
|
Residential mortgage-backed - US agency |
|
| 10 |
|
|
| (721 | ) |
|
| 5,950 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 10 |
|
|
| (721 | ) |
|
| 5,950 |
| ||||||||||||||||||||||||||||||||||||
Collateralized mortgage obligations - US agency |
|
| 1 |
|
|
| (5 | ) |
|
| 1,209 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
|
| (5 | ) |
|
| 1,209 |
|
|
| 10 |
|
|
| (1,171 | ) |
|
| 13,219 |
|
|
| 1 |
|
|
| (20 | ) |
|
| 925 |
|
|
| 11 |
|
|
| (1,191 | ) |
|
| 14,144 |
|
Collateralized mortgage obligations - Private label |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3 |
|
|
| (101 | ) |
|
| 4,191 |
|
|
| 3 |
|
|
| (101 | ) |
|
| 4,191 |
|
|
| 40 |
|
|
| (3,654 | ) |
|
| 62,865 |
|
|
| 2 |
|
|
| (410 | ) |
|
| 3,129 |
|
|
| 42 |
|
|
| (4,064 | ) |
|
| 65,994 |
|
Totals |
|
| 15 |
|
| $ | (148 | ) |
| $ | 14,836 |
|
|
| 6 |
|
| $ | (224 | ) |
| $ | 8,081 |
|
|
| 21 |
|
| $ | (372 | ) |
| $ | 22,917 |
|
|
| 112 |
|
| $ | (9,161 | ) |
| $ | 136,846 |
|
|
| 16 |
|
| $ | (2,817 | ) |
| $ | 15,454 |
|
|
| 128 |
|
| $ | (11,978 | ) |
| $ | 152,300 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||||||||||||||
|
| Less than Twelve Months |
|
| Twelve Months or More |
|
| Total |
| |||||||||||||||||||||||||||
|
| Number of |
|
|
|
|
|
|
|
| Number of |
|
|
|
|
|
|
|
| Number of |
|
|
|
|
|
|
| |||||||||
|
| Individual |
|
| Unrealized |
|
| Fair |
|
| Individual |
|
| Unrealized |
|
| Fair |
|
| Individual |
|
| Unrealized |
|
| Fair |
| |||||||||
(Dollars in thousands) |
| Securities |
|
| Losses |
|
| Value |
|
| Securities |
|
| Losses |
|
| Value |
|
| Securities |
|
| Losses |
|
| Value |
| |||||||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
US Treasury, agencies and GSE's |
|
| 3 |
|
| $ | (413 | ) |
| $ | 31,195 |
|
|
| - |
|
| $ | - |
|
| $ | - |
|
|
| 3 |
|
| $ | (413 | ) |
| $ | 31,195 |
|
State and political subdivisions |
|
| 3 |
|
|
| (44 | ) |
|
| 4,847 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3 |
|
|
| (44 | ) |
|
| 4,847 |
|
Corporate |
|
| 2 |
|
|
| (5 | ) |
|
| 1,162 |
|
|
| 1 |
|
|
| (33 | ) |
|
| 722 |
|
|
| 3 |
|
|
| (38 | ) |
|
| 1,884 |
|
Asset backed securities |
|
| 5 |
|
|
| (89 | ) |
|
| 11,206 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5 |
|
|
| (89 | ) |
|
| 11,206 |
|
Residential mortgage-backed - US agency |
|
| 3 |
|
|
| (466 | ) |
|
| 13,090 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3 |
|
|
| (466 | ) |
|
| 13,090 |
|
Collateralized mortgage obligations - US agency |
|
| 3 |
|
|
| (126 | ) |
|
| 6,504 |
|
|
| 2 |
|
|
| (277 | ) |
|
| 2,204 |
|
|
| 5 |
|
|
| (403 | ) |
|
| 8,708 |
|
Collateralized mortgage obligations - Private label |
|
| 18 |
|
|
| (388 | ) |
|
| 38,816 |
|
|
| 2 |
|
|
| (14 | ) |
|
| 1,539 |
|
|
| 20 |
|
|
| (402 | ) |
|
| 40,355 |
|
Totals |
|
| 37 |
|
| $ | (1,531 | ) |
| $ | 106,820 |
|
|
| 5 |
|
| $ | (324 | ) |
| $ | 4,465 |
|
|
| 42 |
|
| $ | (1,855 | ) |
| $ | 111,285 |
|
Held-to-Maturity Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
State and political subdivisions |
|
| 4 |
|
| $ | (28 | ) |
| $ | 2,013 |
|
|
| 2 |
|
| $ | (112 | ) |
| $ | 3,988 |
|
|
| 6 |
|
| $ | (140 | ) |
| $ | 6,001 |
|
Corporate |
|
| 9 |
|
|
| (102 | ) |
|
| 7,636 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 9 |
|
|
| (102 | ) |
|
| 7,636 |
|
Asset backed securities |
|
| 2 |
|
|
| (130 | ) |
|
| 2,974 |
|
|
| 2 |
|
|
| (58 | ) |
|
| 1,610 |
|
|
| 4 |
|
|
| (188 | ) |
|
| 4,584 |
|
Residential mortgage-backed - US agency |
|
| 1 |
|
|
| (18 | ) |
|
| 1,941 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| (18 | ) |
|
| 1,941 |
|
Collateralized mortgage obligations - US agency |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| (9 | ) |
|
| 1,109 |
|
|
| 1 |
|
|
| (9 | ) |
|
| 1,109 |
|
Collateralized mortgage obligations - Private label |
|
| 6 |
|
|
| (163 | ) |
|
| 13,070 |
|
|
| 3 |
|
|
| (99 | ) |
|
| 3,820 |
|
|
| 9 |
|
|
| (262 | ) |
|
| 16,890 |
|
Totals |
|
| 22 |
|
| $ | (441 | ) |
| $ | 27,634 |
|
|
| 8 |
|
| $ | (278 | ) |
| $ | 10,527 |
|
|
| 30 |
|
| $ | (719 | ) |
| $ | 38,161 |
|
|
| December 31, 2020 |
| |||||||||||||||||||||||||||||||||
|
| Less than Twelve Months |
|
| Twelve Months or More |
|
| Total |
| |||||||||||||||||||||||||||
|
| Number of |
|
|
|
|
|
|
|
|
|
| Number of |
|
|
|
|
|
|
|
|
|
| Number of |
|
|
|
|
|
|
|
|
| |||
|
| Individual |
|
| Unrealized |
|
| Fair |
|
| Individual |
|
| Unrealized |
|
| Fair |
|
| Individual |
|
| Unrealized |
|
| Fair |
| |||||||||
(Dollars in thousands) |
| Securities |
|
| Losses |
|
| Value |
|
| Securities |
|
| Losses |
|
| Value |
|
| Securities |
|
| Losses |
|
| Value |
| |||||||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury, agencies and GSE's |
|
| 0 |
|
| $ | 0 |
|
| $ | 0 |
|
|
| 1 |
|
| $ | (24 | ) |
| $ | 4,954 |
|
|
| 1 |
|
| $ | (24 | ) |
| $ | 4,954 |
|
State and political subdivisions |
|
| 1 |
|
|
| (20 | ) |
|
| 2,521 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
|
| (20 | ) |
|
| 2,521 |
|
Corporate |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Asset backed securities |
|
| 2 |
|
|
| (2 | ) |
|
| 2,487 |
|
|
| 1 |
|
|
| (2 | ) |
|
| 80 |
|
|
| 3 |
|
|
| (4 | ) |
|
| 2,567 |
|
Residential mortgage-backed - US agency |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Collateralized mortgage obligations - US agency |
|
| 2 |
|
|
| (45 | ) |
|
| 6,974 |
|
|
| 2 |
|
|
| (416 | ) |
|
| 5,683 |
|
|
| 4 |
|
|
| (461 | ) |
|
| 12,657 |
|
Collateralized mortgage obligations - Private label |
|
| 3 |
|
|
| (78 | ) |
|
| 8,071 |
|
|
| 4 |
|
|
| (32 | ) |
|
| 2,574 |
|
|
| 7 |
|
|
| (110 | ) |
|
| 10,645 |
|
Totals |
|
| 8 |
|
| $ | (145 | ) |
| $ | 20,053 |
|
|
| 8 |
|
| $ | (474 | ) |
| $ | 13,291 |
|
|
| 16 |
|
| $ | (619 | ) |
| $ | 33,344 |
|
Held-to-Maturity Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury, agencies and GSE's |
|
| 0 |
|
| $ | 0 |
|
| $ | 0 |
|
|
| 0 |
|
| $ | 0 |
|
| $ | 0 |
|
|
| 0 |
|
| $ | 0 |
|
| $ | 0 |
|
State and political subdivisions |
|
| 3 |
|
|
| (58 | ) |
|
| 7,063 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3 |
|
|
| (58 | ) |
|
| 7,063 |
|
Corporate |
|
| 4 |
|
|
| (7 | ) |
|
| 3,775 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4 |
|
|
| (7 | ) |
|
| 3,775 |
|
Asset backed securities |
|
| 4 |
|
|
| (36 | ) |
|
| 4,209 |
|
|
| 3 |
|
|
| (140 | ) |
|
| 4,683 |
|
|
| 7 |
|
|
| (176 | ) |
|
| 8,892 |
|
Collateralized mortgage obligations - US agency |
|
| 1 |
|
|
| (1 | ) |
|
| 1,496 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
|
| (1 | ) |
|
| 1,496 |
|
Collateralized mortgage obligations - Private label |
|
| 4 |
|
|
| (115 | ) |
|
| 6,442 |
|
|
| 1 |
|
|
| (6 | ) |
|
| 780 |
|
|
| 5 |
|
|
| (121 | ) |
|
| 7,222 |
|
Totals |
|
| 16 |
|
| $ | (217 | ) |
| $ | 22,985 |
|
|
| 4 |
|
| $ | (146 | ) |
| $ | 5,463 |
|
|
| 20 |
|
| $ | (363 | ) |
| $ | 28,448 |
|
Excluding the effects of changes in the characteristics of individual debt securities that potentially give rise to other-than-temporary impairment (“OTTI”), as described below, the fair market value of a debt security as of a particular measurement date is highly dependent upon prevailing market and economic environmental factors at the measurement date relative to the prevailing market and economic environmental factors present at the time the debt security was acquired. The most significant market and environmental factors include, but are not limited to (1) the general level of interest rates, (2) the relationship between shorter-term interest rates and longer-term interest rates (referred to as the “slope” of the interest rate
- 19 -
yield curve), (3) general bond market liquidity, (4) the recent and expected near-term volume of new issuances of similar debt securities, and (5) changes in the market values of individual loan collateral underlying mortgage-backed an asset-backed debt securities. Changes in interest rates affect the fair market values of debt securities by influencing the discount rate applied to the securities’ future expected cash flows. The higher the discount rate, the lower the resultant security price.fair value at the measurement date. Conversely, the lower the discount rate, the higher the resultant security price.fair value at the measurement date. In addition, the cumulative amount and timing of undiscounted cash flows of debt securities may also be also affected by changes in interest rates. For any given level of movement in the general market and economic environmental factors described above, the magnitude of any particular debt security’s price changes will also depend heavily upon security-specific factors such as (1) the
- 22 -
duration of the security, (2) imbedded optionality contractually granted to the issuer of the security with respect to principal prepayments, and (3) changes in the level of market premiums demanded by investors for securities with imbedded credit risk (where applicable).
The available-for-sale investment securities portfolio, with an aggregate amortized historical cost of $189.8 million, had an aggregate fair value that exceeded its aggregate amortized historical cost by $579,000, or 0.31%, at December 31, 2021. The available-for-sale investment securities portfolio, with an aggregate amortized historical cost of $214.4 million, had an aggregate fair value that was less than its aggregate amortized historical cost by $11.4 million, or 5.32%, at September 30, 2022. The resultant $12.0 million total decline in the fair value of the available-for-sale investment portfolio's aggregate fair value relative to its aggregate amortized historical cost, in the nine months ended September 30, 2022, was primarily due to the significant increase in general interest rates that occurred in that period and did not represent any other-than-temporary impairment within the portfolio at September 30, 2022.
The Company conducts a formal review of investment securities on a quarterly basis for the presence of OTTI. The Company assesses whether OTTI is present when the fair value of a debt security is less than its amortized cost basis at the statement of condition date. Under these circumstances, OTTI is considered to have occurred (1) if we intend to sell the security; (2) if it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is not anticipated to be sufficient to recover the entire amortized cost basis. The guidance requires that credit-related OTTI is recognized in earnings while non-credit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (“OCI”). Non-credit-related OTTI is based on other factors, including illiquidity and changes in the general interest rate environment. Presentation of OTTI is made in the consolidated statement of income on a gross basis, including both the portion recognized in earnings as well as the portion recorded in OCI. The gross OTTI would then be offset by the amount of non-credit-related OTTI, showing the net as the impact on earnings.
Management does not believe any unrealized losses in individual unrealized loss ininvestment securities within the portfolio as of September 30, 2021 represents2022 represent OTTI. AtThere were a total of 31securities classified as available-for-sale (aggregate amortized historical cost of $86.8 million, unrealized aggregate loss of $8.5 million, or -9.84%) and 16 securities classified as held-to-maturity (aggregate amortized historical cost of $18.3 million, with an unrealized aggregate loss of $2.8 million, or -15.42%) that were in an unrealized loss position for 12 months or longer at September 30, 2021, the Bank had the following2022. In total, therefore, at September 30, 2022 there were 47 securities with an aggregate book value of $105.1 million and an aggregate fair value of $93.7 million, representing a loss of $11.4 million, or -10.81%, that were in aan unrealized loss position for 12 months or more relativeon that date.
Each security which has been in an unrealized loss position for 12 months or more has been analyzed and is not considered to be impaired. These securities have unrealized losses primarily due to fluctuations in market interest rates or changes in expected prepayments. In substantially all cases, price improvement in future periods will be realized as the securities approach maturity. Of the total of 47 securities in an unrealized loss position for 12 months or more at September 30, 2022, 12 securities, with aggregate amortized cost balances of $49.9 million and representing 47.5% of the aggregate amortized cost of all securities in an unrealized loss position for 12 months or more, are issued by the United States government or GSEs. These positions are deemed to have no credit impairment, thus, the disclosed unrealized losses relate primarily to changes in prevailing interest rates.
Of the total of 47 securities in an unrealized loss position for 12 months or more at September 30, 2022, 16 securities, with aggregate amortized cost balances of $27.5 million and representing 26.2% of the aggregate amortized cost of all securities in an unrealized loss position for 12 months or more, are currently rated by one of more NRSRO at or above the minimum
- 20 -
investment grade. These positions are deemed to have no credit impairment, thus, the disclosed unrealized losses relate primarily to changes in prevailing interest rates.
In addition to the 28 securities discussed above, representing 73.7% of all securities in a loss position greater than 12 months, the Company held 19 non-government-issued/backed securities that were in an unrealized loss position for 12 or more months at September 30, 2022 and are unrated by any NRSRO. All of these securities were unrated at issuance. These securities are primarily privately-issued asset-backed or mortgage-backed securities (including issuances backed by commercial real estate mortgages). Most of these securities have significant credit enhancements in place in the form of cash reserves or other overcollateralization and of these, the vast majority are the most senior tranche with respect to credit priority in the overall issuance structure for that particular security. Given the characteristics of the underlying loans supporting each of these securities and the credit enhancements in place, it is unlikely that any of the Company’s unrated securities, now in a loss position for 12 or more months, will experience any loss of principal in currently foreseeable economic environments prior to the security’s respective maturity dates.
The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell these securities prior to the recovery of the amortized cost.
All other securities with fair market values less than their amortized historical cost, which werecosts for twelve or more months are issued by United States agencies or United States government sponsored enterprises and consist of mortgage-backed securities, collateralized mortgage obligations and direct agency financings. These positions in U.S. government agency and U.S. government-sponsored enterprises are deemed to have no credit impairment, thus, the disclosed unrealized losses relate directly to changes in interest rates subsequent to the acquisition of the individual securities. The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell these securities prior to the recovery of the amortized cost.
Of the total of 10 securities in an unrealized loss position for 12 months or more at September 30, 2021 2 securities, representing 21.1%of the unamortized cost of the total securities in an unrealized loss position for 12 months or more, are issued by United States agencies or GSEs and consist of mortgage-backed securities, collateralized mortgage obligations and direct agency financings. These positions in US government agency and GSEs are deemed to have no credit impairment, thus, the disclosed unrealized losses relate primarily to changes in prepayment assumptions related to significantly lower general interest rates resulting from the economic effects of the pandemic.
The Company does not intend to sell these securities, nor is it more likely than not that the Company will be required to sell these securities prior to the recovery of the amortized cost.
In addition to these securities, the Company held the following eight non-government-issued/backed securities that were in an unrealized loss position for 12 or more months at September 30, 2021:
|
|
|
|
|
|
|
|
- 23 -
|
|
|
In determining whether OTTI has occurred for equity securities, the Company considers the applicable factors described above and the length of time each equity security’s fair value has been below the carrying amount. The Company had no equity investment securities that were impaired at September 30, 2021 or December 31, 2020.
Gross realized gains (losses) on sales and redemptions of securities for the indicated periods are detailed below:
|
| For the three months | For the nine months |
|
| For the three months | For the nine months |
| |||||||||||||||||||||||||
|
| ended September 30, | ended September 30, |
|
| ended September 30, | ended September 30, |
| |||||||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| |||||||||
Realized gains on investments |
| $ | 55 |
|
| $ | 41 |
|
| $ | 113 |
|
| $ | 1,107 |
|
| $ | - |
|
| $ | 55 |
|
|
| $ | 37 |
|
| $ | 113 |
|
Realized losses on investments |
|
| (50 | ) |
|
| (14 | ) |
|
| (57 | ) |
|
| (31 | ) |
|
| (198 | ) |
|
| (50 | ) |
|
|
| (205 | ) |
|
| (57 | ) |
|
| $ | 5 |
|
| $ | 27 |
|
| $ | 56 |
|
| $ | 1,076 |
|
| $ | (198 | ) |
| $ | 5 |
|
|
| $ | (168 | ) |
| $ | 56 |
|
As of September 30, 20212022 and December 31, 2020,2021, securities with a fair value of $121.5$94.7 million and $96.4$103.2 million, respectively, were pledged to collateralize certain municipal deposit relationships. As of the same dates, securities with a fair value of $10.0$8.7 million and $21.3$9.4 million, respectively, were pledged against certain borrowing arrangements.
Management has reviewed its loan and mortgage-backed securities portfolios and determined that, to the best of its knowledge, only minimal exposure exists to sub-prime or other high-risk residential mortgages. With limited exceptions in the Company’s investment portfolio involving the most senior tranches of securitized bonds, the Company is not in the practice of investing in, or originating, these types of investments or loans.
- 24 -
Note 5: Pension and Postretirement Benefits
The Company has a noncontributory defined benefit pension plan covering most employees. The plan provides defined benefits based on years of service and final average salary. On May 14, 2012, the Company informed its employees of its decision to freeze participation and benefit accruals under the plan, primarily to reduce some of the volatility in earnings that can accompany the maintenance of a defined benefit plan. The plan was frozen on June 30, 2012. Compensation earned by employees up to June 30, 2012 is used for purposes of calculating benefits under the plan but there are no future
- 21 -
benefit accruals after this date. Participants as of June 30, 2012 will continue to earn vesting credit with respect to their frozen accrued benefits as they continue to work. In addition, the Company provides certain health and life insurance benefits for a limited number of eligible retired employees. The healthcare plan is contributory with participants’ contributions adjusted annually; the life insurance plan is noncontributory. Employees with less than 14 years of service as of January 1, 1995, are not eligible for the health and life insurance retirement benefits.
The composition of net periodic pension plan and postretirement plan costs for the indicated periods is as follows:
|
| Pension Benefits |
|
| Postretirement Benefits |
|
| Pension Benefits |
|
| Postretirement Benefits |
|
| Pension Benefits |
|
| Postretirement Benefits |
|
| Pension Benefits |
|
| Postretirement Benefits |
| ||||||||||||||||||||||||||||||||||||||||
|
| For the three months ended September 30, |
|
| For the nine months ended September 30, |
|
| For the three months ended September 30, |
|
| For the nine months ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||||||||||||||||||||
Service cost |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Interest cost |
|
| 110 |
|
|
| 116 |
|
|
| 4 |
|
|
| 5 |
|
|
| 331 |
|
|
| 349 |
|
|
| 9 |
|
|
| 12 |
|
|
| 116 |
|
|
| 110 |
|
|
| 3 |
|
|
| 4 |
|
|
| 348 |
|
|
| 331 |
|
|
| 9 |
|
|
| 9 |
|
Expected return on plan assets |
|
| (286 | ) |
|
| (273 | ) |
|
| - |
|
|
| - |
|
|
| (859 | ) |
|
| (820 | ) |
|
| - |
|
|
| - |
|
|
| (267 | ) |
|
| (286 | ) |
|
| - |
|
|
| - |
|
|
| (801 | ) |
|
| (859 | ) |
|
| - |
|
|
| - |
|
Amortization of prior service credits |
|
| - |
|
|
| - |
|
|
| (1 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| (3 | ) |
|
| (3 | ) |
|
| - |
|
|
| - |
|
|
| (1 | ) |
|
| (1 | ) |
|
| - |
|
|
| - |
|
|
| (4 | ) |
|
| (3 | ) |
Amortization of net losses |
|
| 26 |
|
|
| 57 |
|
|
| 2 |
|
|
| 2 |
|
|
| 76 |
|
|
| 171 |
|
|
| 6 |
|
|
| 7 |
|
|
| - |
|
|
| 26 |
|
|
| 2 |
|
|
| 2 |
|
|
| - |
|
|
| 76 |
|
|
| 5 |
|
|
| 6 |
|
Net periodic benefit plan (benefit) cost |
| $ | (150 | ) |
| $ | (100 | ) |
| $ | 5 |
|
| $ | 6 |
|
| $ | (452 | ) |
| $ | (300 | ) |
| $ | 12 |
|
| $ | 16 |
|
| $ | (151 | ) |
| $ | (150 | ) |
| $ | 4 |
|
| $ | 5 |
|
| $ | (453 | ) |
| $ | (452 | ) |
| $ | 10 |
|
| $ | 12 |
|
The Company will evaluate the need for further contributions to the defined benefit pension plan during the fourth quarter of 2021.2022. The prepaid pension asset is recorded in other assets on the statementconsolidated statements of condition as of September 30, 20212022 and December 31, 2020.2021.
- 25 -
Note 6: Loans
Major classifications of loans at the indicated dates are as follows:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Residential mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
1-4 family first-lien residential mortgages |
| $ | 234,940 |
|
| $ | 227,185 |
|
| $ | 245,428 |
|
| $ | 240,434 |
|
Construction |
|
| 7,833 |
|
|
| 6,681 |
|
|
| 14,623 |
|
|
| 6,329 |
|
Loans held-for-sale |
|
| 294 |
|
|
| 1,526 |
|
|
| 275 |
|
|
| 513 |
|
Total residential mortgage loans |
|
| 243,067 |
|
|
| 235,392 |
|
|
| 260,326 |
|
|
| 247,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Real estate |
|
| 277,692 |
|
|
| 286,271 |
|
|
| 337,392 |
|
|
| 288,450 |
|
Lines of credit |
|
| 57,128 |
|
|
| 49,103 |
|
|
| 80,717 |
|
|
| 61,884 |
|
Other commercial and industrial |
|
| 72,241 |
|
|
| 78,629 |
|
|
| 74,641 |
|
|
| 69,135 |
|
Paycheck Protection Program loans |
|
| 27,293 |
|
|
| 60,643 |
|
|
| 693 |
|
|
| 19,338 |
|
Tax exempt loans |
|
| 5,956 |
|
|
| 7,166 |
|
|
| 4,344 |
|
|
| 5,811 |
|
Total commercial loans |
|
| 440,310 |
|
|
| 481,812 |
|
|
| 497,787 |
|
|
| 444,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Home equity and junior liens |
|
| 32,988 |
|
|
| 38,624 |
|
|
| 33,746 |
|
|
| 31,737 |
|
Other consumer |
|
| 73,352 |
|
|
| 70,905 |
|
|
| 95,331 |
|
|
| 110,108 |
|
Total consumer loans |
|
| 106,340 |
|
|
| 109,529 |
|
|
| 129,077 |
|
|
| 141,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Total loans |
|
| 789,717 |
|
|
| 826,733 |
|
|
| 887,190 |
|
|
| 833,739 |
|
Net deferred loan fees |
|
| (1,569 | ) |
|
| (1,238 | ) |
|
| (984 | ) |
|
| (1,280 | ) |
Less allowance for loan losses |
|
| 14,065 |
|
|
| 12,777 |
|
|
| 13,632 |
|
|
| 12,935 |
|
Loans receivable, net |
| $ | 774,083 |
|
| $ | 812,718 |
|
| $ | 872,574 |
|
| $ | 819,524 |
|
Although the Bank may sometimes purchase or fund loan participation interests outside of its primary market areas, the Bank generally originates residential mortgage, commercial, and consumer loans largely to customers throughout Oswego and Onondaga counties. Although the Bank has a diversified loan portfolio, a substantial portion of its borrowers’ abilities to honor their loan contracts is dependent upon the counties’ employment and economic conditions.
The- 22 -
From time to time, the Bank acquires diversified pools of loans, originated by unrelated third parties, as part of the Company’s overall balance sheet management strategies. These acquisitions occurred in tentook place with nine separate transactions commencingthat occurred between 2017 and 2019 with an additional six transactions occurring in 2019 and continuing through 2021, including two separate transactions during2021. The following tables detail the nine months endedpurchased loan pool positions held by the Bank at September 30, 2021.2022 and December 31, 2021 (the month/year of the earliest acquisition date is depicted in parentheses):
(In thousands, except number of loans) |
| September 30, 2022 |
| |||||||||||||||||||
|
| Original Balance |
|
| Current Balance |
|
| Unamortized Premium/ (Discount) |
|
| Number of Loans |
|
| Maturity Range |
| Cumulative net charge-offs |
| |||||
Automobile loans (1/2017) |
| $ | 50,400 |
|
| $ | 5,100 |
|
| $ | 161 |
|
|
| 605 |
|
| 0-5 years |
| $ | 238 |
|
Commercial and industrial loans (6/2019) |
|
| 6,800 |
|
|
| 2,300 |
|
|
| - |
|
|
| 23 |
|
| 3-7 years |
|
| - |
|
Home equity lines of credit (8/2019) |
|
| 21,900 |
|
|
| 6,500 |
|
|
| 202 |
|
|
| 150 |
|
| 1-27 years |
|
| - |
|
Unsecured consumer loan pool 2 (11/2019) |
|
| 26,600 |
|
|
| 2,100 |
|
|
| 14 |
|
|
| 940 |
|
| 0-3 years |
|
| - |
|
Residential real estate loans (12/2019) |
|
| 4,300 |
|
|
| 3,900 |
|
|
| 244 |
|
|
| 49 |
|
| 16-23 years |
|
| - |
|
Unsecured consumer loan pool 1 (12/2019) |
|
| 5,400 |
|
|
| 1,800 |
|
|
| - |
|
|
| 53 |
|
| 1-4 years |
|
| - |
|
Unsecured consumer installment loans pool 3 (12/2019) |
|
| 10,300 |
|
|
| 1,100 |
|
|
| 45 |
|
|
| 503 |
|
| 0-10 years |
|
| 14 |
|
Secured consumer installment loans pool 4 (12/2020) |
|
| 14,500 |
|
|
| 11,500 |
|
|
| (1,553 | ) |
|
| 527 |
|
| 23-24 years |
|
| - |
|
Unsecured consumer loans pool 5 (1/2021) |
|
| 24,400 |
|
|
| 17,500 |
|
|
| (507 | ) |
|
| 690 |
|
| 8-24 years |
|
| - |
|
Commercial Line of Credit 1 (3/2021) |
|
| 11,600 |
|
|
| 9,800 |
|
|
| 17 |
|
|
| 1 |
|
| 0-1 year |
|
| - |
|
Secured consumer installment loans (11/2021) |
|
| 21,300 |
|
|
| 20,000 |
|
|
| (3,319 | ) |
|
| 856 |
|
| 18-25 years |
|
| - |
|
Commercial Line of Credit 2 (11/2021) |
|
| 10,500 |
|
|
| 15,000 |
|
|
| 26 |
|
|
| 1 |
|
| 0-1 year |
|
| - |
|
Unsecured consumer loans pool 6 (11/2021) |
|
| 22,200 |
|
|
| 20,700 |
|
|
| (2,521 | ) |
|
| 549 |
|
| 8-24 years |
|
| - |
|
Total |
| $ | 230,200 |
|
| $ | 117,300 |
|
| $ | (7,191 | ) |
|
| 4,947 |
|
|
|
| $ | 252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
(In thousands, except number of loans) |
| December 31, 2021 |
| |||||||||||||||||||
|
| Original Balance |
|
| Current Balance |
|
| Unamortized Premium/ (Discount) |
|
| Number of Loans |
|
| Maturity Range |
| Cumulative net charge-offs |
| |||||
Automobile loans (1/2017) |
| $ | 50,400 |
|
| $ | 8,800 |
|
| $ | 301 |
|
|
| 855 |
|
| 0-5 years |
| $ | 239 |
|
Commercial and industrial loans (6/2019) |
|
| 6,800 |
|
|
| 3,900 |
|
|
| - |
|
|
| 33 |
|
| 4-8 years |
|
| - |
|
Home equity lines of credit (8/2019) |
|
| 21,900 |
|
|
| 8,400 |
|
|
| 243 |
|
|
| 187 |
|
| 2-28 years |
|
| - |
|
Unsecured consumer loan pool 2 (11/2019) |
|
| 26,600 |
|
|
| 6,300 |
|
|
| 30 |
|
|
| 1,438 |
|
| 1-3 years |
|
| - |
|
Residential real estate loans (12/2019) |
|
| 4,300 |
|
|
| 4,100 |
|
|
| 257 |
|
|
| 51 |
|
| 17-23 years |
|
| - |
|
Unsecured consumer loan pool 1 (12/2019) |
|
| 5,400 |
|
|
| 2,600 |
|
|
| - |
|
|
| 66 |
|
| 3-5 years |
|
| - |
|
Unsecured consumer installment loans pool 3 (12/2019) |
|
| 10,300 |
|
|
| 2,200 |
|
|
| 74 |
|
|
| 1,356 |
|
| 0-6 years |
|
| 30 |
|
Secured consumer installment loans pool 4 (12/2020) |
|
| 14,500 |
|
|
| 12,600 |
|
|
| (1,776 | ) |
|
| 563 |
|
| 23-24 years |
|
| - |
|
Unsecured consumer loans pool 5 (1/2021) |
|
| 24,400 |
|
|
| 19,700 |
|
|
| (583 | ) |
|
| 756 |
|
| 8-24 years |
|
| - |
|
Commercial Line of Credit 1 (3/2021) |
|
| 11,600 |
|
|
| 7,100 |
|
|
| 26 |
|
|
| 1 |
|
| 0-1 year |
|
| - |
|
Secured consumer installment loans (11/2021) |
|
| 21,300 |
|
|
| 21,400 |
|
|
| (3,642 | ) |
|
| 900 |
|
| 19-25 years |
|
| - |
|
Commercial Line of Credit 2 (11/2021) |
|
| 10,500 |
|
|
| 9,300 |
|
|
| 35 |
|
|
| 1 |
|
| 0-1 year |
|
| - |
|
Unsecured consumer loans pool 6 (11/2021) |
|
| 22,200 |
|
|
| 22,100 |
|
|
| (2,785 | ) |
|
| 564 |
|
| 9-24 years |
|
| - |
|
Total |
| $ | 230,200 |
|
| $ | 128,500 |
|
| $ | (7,820 | ) |
|
| 6,771 |
|
|
|
| $ | 269 |
|
- 26 -
|
| September 30, |
|
| December 31, |
| ||
(In thousands, except number of loans) |
| 2021 |
|
| 2020 |
| ||
Purchased residential real estate loans |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 4,300 |
|
| $ | 4,300 |
|
Current Balance |
| $ | 4,158 |
|
| $ | 4,300 |
|
Unamortized Premium (Discount) |
| $ | 261 |
|
| $ | 273 |
|
Percent Owned |
|
| 100 | % |
|
| 100 | % |
Number of Loans |
| 51 |
|
| 51 |
| ||
Maturity range |
| 17-23 years |
|
| 17-25 years |
| ||
Cumulative net charge-offs |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Purchased other commercial and industrial loans |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 6,800 |
|
| $ | 6,800 |
|
Current Balance |
| $ | 4,025 |
|
| $ | 5,500 |
|
Unamortized Premium (Discount) |
| $ | - |
|
| $ | - |
|
Percent Owned |
|
| 100 | % |
|
| 100 | % |
Number of Loans |
| 33 |
|
| 39 |
| ||
Maturity range |
| 4-8 years |
|
| 5-9 years |
| ||
Cumulative net charge-offs |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Purchased home equity lines of credit: |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 21,900 |
|
| $ | 21,900 |
|
Current Balance |
| $ | 9,500 |
|
| $ | 13,900 |
|
Unamortized Premium (Discount) |
| $ | 258 |
|
| $ | 309 |
|
Percent Owned |
|
| 100 | % |
|
| 100 | % |
Number of Loans |
| 202 |
|
| 275 |
| ||
Maturity range |
| 3-28 years |
|
| 3-29 years |
| ||
Cumulative net charge-offs |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Purchased automobile loans: |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 50,400 |
|
| $ | 50,400 |
|
Current Balance |
| $ | 10,491 |
|
| $ | 17,000 |
|
Unamortized Premium (Discount) |
| $ | 392 |
|
| $ | 602 |
|
Percent Owned |
|
| 90 | % |
|
| 90 | % |
Number of Loans |
|
| 946 |
|
|
| 1,257 |
|
Maturity range |
| 0-5 years |
|
| 0-6 years |
| ||
Cumulative net charge-offs |
| $ | 240 |
|
| $ | 230 |
|
|
|
|
|
|
|
|
|
|
Purchased unsecured consumer loan pool 1: |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 5,400 |
|
| $ | 5,400 |
|
Current Balance |
| $ | 2,700 |
|
| $ | 3,600 |
|
Unamortized Premium (Discount) |
| $ | - |
|
| $ | - |
|
Percent Owned |
|
| 100 | % |
|
| 100 | % |
Number of Loans |
| 66 |
|
| 76 |
| ||
Maturity range |
| 3-5 years |
|
| 3-6 years |
| ||
Cumulative net charge-offs |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
- 27 -
|
| September 30, |
|
| December 31, |
| ||
(In thousands, except number of loans) |
| 2021 |
|
| 2020 |
| ||
Purchased unsecured consumer loan pool 2: |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 26,600 |
|
| $ | 26,600 |
|
Current Balance |
| $ | 8,070 |
|
| $ | 15,400 |
|
Unamortized Premium (Discount) |
| $ | 37 |
|
| $ | 63 |
|
Percent Owned |
|
| 59 | % |
|
| 59 | % |
Number of Loans |
|
| 1,629 |
|
|
| 2,246 |
|
Maturity range |
| 3 years |
|
| 2-4 years |
| ||
Cumulative net charge-offs |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Purchased unsecured consumer loan pool 3: |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 10,300 |
|
| $ | 10,300 |
|
Current Balance |
| $ | 2,836 |
|
| $ | 5,500 |
|
Unamortized Premium (Discount) |
| $ | 86 |
|
| $ | 138 |
|
Percent Owned |
|
| 100 | % |
|
| 100 | % |
Number of Loans |
|
| 1,764 |
|
|
| 2,958 |
|
Maturity range |
| 0-6 years |
|
| 0-6 years |
| ||
Cumulative net charge-offs |
| $ | 21 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Purchased secured consumer loan pool 1: |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 14,500 |
|
| $ | 14,500 |
|
Current Balance |
| $ | 13,200 |
|
| $ | 14,500 |
|
Unamortized Premium (Discount) |
| $ | (1,859 | ) |
| $ | (2,124 | ) |
Percent Owned |
|
| 68 | % |
|
| 68 | % |
Number of Loans |
|
| 582 |
|
|
| 619 |
|
Maturity range |
| 24-25 years |
|
| 25 years |
| ||
Cumulative net charge-offs |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Purchased secured consumer loan pool 2: |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 24,400 |
|
| $ | - |
|
Current Balance |
| $ | 20,700 |
|
| $ | - |
|
Unamortized Premium (Discount) |
| $ | (606 | ) |
| $ | - |
|
Percent Owned |
|
| 100 | % |
|
| 0 | % |
Number of Loans |
|
| 772 |
|
|
| - |
|
Maturity range |
| 10-24 years |
|
|
| - |
| |
Cumulative net charge-offs |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Purchased commercial line of credit: |
|
|
|
|
|
|
|
|
Original Balance |
| $ | 11,600 |
|
| $ | - |
|
Current Balance |
| $ | 6,800 |
|
| $ | - |
|
Unamortized Premium (Discount) |
| $ | 29 |
|
| $ | - |
|
Percent Owned |
|
| 12 | % |
|
| 0 | % |
Number of Loans |
|
| 1 |
|
|
| - |
|
Maturity range |
| 3 years |
|
|
| - |
| |
Cumulative net charge-offs |
| $ | - |
|
| $ | - |
|
As of September 30, 20212022 and December 31, 2020,2021, residential mortgage loans with a carrying value of $120.9$117.9 million and $115.6$123.2 million, respectively, have been pledged by the Company to the Federal Home Loan Bank of New York (“FHLBNY”) under a blanket collateral agreement to secure the Company’s line of credit and term borrowings.
Loan Origination / Risk Management
The Company’s lending policies and procedures are presented in Note 5 to the audited consolidated financial statements included in the 20202021 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30,
- 28 -
202125, 2022 and have not changed. As part of the execution of the Company’s overall balance sheet management strategies, the Bank will acquire participating interests in loans originated by unrelated third parties on an occasional basis. The purchase of participations in loans that are originated by third parties only occurs after the completion of thorough pre-acquisition due diligence. Loans in which the Company acquires a participating interest are determined to meet, in all material respects, the Company’s internal underwriting policies, including credit and collateral suitability thresholds, prior to acquisition. In addition, the financial condition of the originating financial institutions, which are generally retained as the ongoing loan
- 23 -
servicing provider for participations acquired by the Bank, are analyzed prior to the acquisition of the participating interests and monitored on a regular basis thereafter for the life of those interests.
To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into 3three portfolio segments, each with different risk characteristics but with similar methodologies for assessing risk. Each portfolio segment is broken down into loan classes where appropriate. Loan classes contain unique measurement attributes, risk characteristics, and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses. Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class.
The following table illustrates the portfolio segments and classes for the Company’s loan portfolio:
Portfolio Segment | Class |
|
|
Residential Mortgage Loans | 1-4 family first-lien residential mortgages |
| Construction |
|
|
Commercial Loans | Real estate |
| Lines of credit |
| Other commercial and industrial |
| Tax exempt loans |
|
|
Consumer Loans | Home equity and junior liens |
| Other consumer |
- 2924 - -
The following tables present the classes of the loan portfolio, not including net deferred loan costs, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated:
|
| As of September 30, 2021 |
|
| As of September 30, 2022 |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Special |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Special |
|
|
|
|
|
|
|
|
| ||||||||
(In thousands) |
| Pass |
|
| Mention |
|
| Substandard |
|
| Doubtful |
|
| Total |
|
| Pass |
|
| Mention |
|
| Substandard |
|
| Doubtful |
| Total |
| |||||||||||
Residential mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1-4 family first-lien residential mortgages |
| $ | 232,084 |
|
| $ | 455 |
|
| $ | 1,904 |
|
| $ | 497 |
|
| $ | 234,940 |
|
| $ | 243,871 |
|
| $ | 502 |
|
| $ | 431 |
|
| $ | 624 |
|
| $ | 245,428 |
|
Construction |
|
| 7,833 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,833 |
|
|
| 14,623 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14,623 |
|
Loans held-for-sale |
|
| 294 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 294 |
|
|
| 275 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 275 |
|
Total residential mortgage loans |
|
| 240,211 |
|
|
| 455 |
|
|
| 1,904 |
|
|
| 497 |
|
|
| 243,067 |
|
|
| 258,769 |
|
|
| 502 |
|
|
| 431 |
|
|
| 624 |
|
|
| 260,326 |
|
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate |
|
| 253,976 |
|
|
| 12,594 |
|
|
| 10,542 |
|
|
| 580 |
|
|
| 277,692 |
|
|
| 316,994 |
|
|
| 8,825 |
|
|
| 11,209 |
|
|
| 364 |
|
|
| 337,392 |
|
Lines of credit |
|
| 48,949 |
|
|
| 5,777 |
|
|
| 2,346 |
|
|
| 56 |
|
|
| 57,128 |
|
|
| 72,670 |
|
|
| 1,867 |
|
|
| 6,141 |
|
|
| 39 |
|
|
| 80,717 |
|
Other commercial and industrial |
|
| 59,596 |
|
|
| 10,043 |
|
|
| 2,411 |
|
|
| 191 |
|
|
| 72,241 |
|
|
| 62,993 |
|
|
| 6,744 |
|
|
| 4,904 |
|
|
| - |
|
|
| 74,641 |
|
Paycheck Protection Program loans |
|
| 27,293 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 27,293 |
|
|
| 693 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 693 |
|
Tax exempt loans |
|
| 5,956 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5,956 |
|
|
| 4,344 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,344 |
|
Total commercial loans |
|
| 395,770 |
|
|
| 28,414 |
|
|
| 15,299 |
|
|
| 827 |
|
|
| 440,310 |
|
|
| 457,694 |
|
|
| 17,436 |
|
|
| 22,254 |
|
|
| 403 |
|
|
| 497,787 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity and junior liens |
|
| 32,016 |
|
|
| 100 |
|
|
| 612 |
|
|
| 260 |
|
|
| 32,988 |
|
|
| 32,843 |
|
|
| 83 |
|
|
| 598 |
|
|
| 222 |
|
|
| 33,746 |
|
Other consumer |
|
| 73,139 |
|
|
| 99 |
|
|
| 106 |
|
|
| 8 |
|
|
| 73,352 |
|
|
| 95,248 |
|
|
| 17 |
|
|
| 66 |
|
|
| - |
|
|
| 95,331 |
|
Total consumer loans |
|
| 105,155 |
|
|
| 199 |
|
|
| 718 |
|
|
| 268 |
|
|
| 106,340 |
|
|
| 128,091 |
|
|
| 100 |
|
|
| 664 |
|
|
| 222 |
|
|
| 129,077 |
|
Total loans |
| $ | 741,136 |
|
| $ | 29,068 |
|
| $ | 17,921 |
|
| $ | 1,592 |
|
| $ | 789,717 |
|
| $ | 844,554 |
|
| $ | 18,038 |
|
| $ | 23,349 |
|
| $ | 1,249 |
|
| $ | 887,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| As of December 31, 2020 |
|
| As of December 31, 2021 |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Special |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Special |
|
|
|
|
|
|
|
|
| |||||||
(In thousands) |
| Pass |
|
| Mention |
|
| Substandard |
|
| Doubtful |
|
| Total |
|
| Pass |
|
| Mention |
|
| Substandard |
|
| Doubtful |
| Total |
| |||||||||||
Residential mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1-4 family first-lien residential mortgages |
| $ | 222,386 |
|
| $ | 1,151 |
|
| $ | 3,196 |
|
| $ | 452 |
|
| $ | 227,185 |
|
| $ | 238,823 |
|
| $ | 269 |
|
| $ | 811 |
|
| $ | 531 |
|
| $ | 240,434 |
|
Construction |
|
| 6,681 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,681 |
|
|
| 6,329 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,329 |
|
Loans held-for-sale |
|
| 1,526 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,526 |
|
|
| 513 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 513 |
|
Total residential mortgage loans |
|
| 230,593 |
|
|
| 1,151 |
|
|
| 3,196 |
|
|
| 452 |
|
|
| 235,392 |
|
|
| 245,665 |
|
|
| 269 |
|
|
| 811 |
|
|
| 531 |
|
|
| 247,276 |
|
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate |
|
| 267,736 |
|
|
| 9,541 |
|
|
| 8,615 |
|
|
| 379 |
|
|
| 286,271 |
|
|
| 267,388 |
|
|
| 9,879 |
|
|
| 10,604 |
|
|
| 579 |
|
|
| 288,450 |
|
Lines of credit |
|
| 40,733 |
|
|
| 5,132 |
|
|
| 3,154 |
|
|
| 84 |
|
|
| 49,103 |
|
|
| 54,408 |
|
|
| 4,036 |
|
|
| 3,387 |
|
|
| 53 |
|
|
| 61,884 |
|
Other commercial and industrial |
|
| 65,441 |
|
|
| 4,770 |
|
|
| 8,153 |
|
|
| 265 |
|
|
| 78,629 |
|
|
| 56,719 |
|
|
| 3,907 |
|
|
| 8,321 |
|
|
| 188 |
|
|
| 69,135 |
|
Paycheck Protection Program loans |
|
| 60,643 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 60,643 |
|
|
| 19,338 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,338 |
|
Tax exempt loans |
|
| 7,166 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,166 |
|
|
| 5,811 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,811 |
|
Total commercial loans |
|
| 441,719 |
|
|
| 19,443 |
|
|
| 19,922 |
|
|
| 728 |
|
|
| 481,812 |
|
|
| 403,664 |
|
|
| 17,822 |
|
|
| 22,312 |
|
|
| 820 |
|
|
| 444,618 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity and junior liens |
|
| 37,926 |
|
|
| 54 |
|
|
| 411 |
|
|
| 233 |
|
|
| 38,624 |
|
|
| 30,740 |
|
|
| 133 |
|
|
| 606 |
|
|
| 258 |
|
|
| 31,737 |
|
Other consumer |
|
| 70,502 |
|
|
| 104 |
|
|
| 218 |
|
|
| 81 |
|
|
| 70,905 |
|
|
| 109,979 |
|
|
| 44 |
|
|
| 77 |
|
|
| 8 |
|
|
| 110,108 |
|
Total consumer loans |
|
| 108,428 |
|
|
| 158 |
|
|
| 629 |
|
|
| 314 |
|
|
| 109,529 |
|
|
| 140,719 |
|
|
| 177 |
|
|
| 683 |
|
|
| 266 |
|
|
| 141,845 |
|
Total loans |
| $ | 780,740 |
|
| $ | 20,752 |
|
| $ | 23,747 |
|
| $ | 1,494 |
|
| $ | 826,733 |
|
| $ | 790,048 |
|
| $ | 18,268 |
|
| $ | 23,806 |
|
| $ | 1,617 |
|
| $ | 833,739 |
|
Management has reviewed its loan portfolio and determined that, to the best of its knowledge, no material exposure exists to sub-prime or other high-risk residential mortgages. The Company is not in the practice of originating these types of loans.
Nonaccrual and Past Due Loans
Loans are placed on nonaccrual when the contractual payment of principal and interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan may be currently performing.
Loans are considered past due if the required principal and interest payments have not been received within thirty days of the payment due date.
- 3025 - -
An age analysis of past due loans, not including net deferred loan costs, segregated by portfolio segment and class of loans, as of September 30, 20212022 and December 31, 2020,2021, are detailed in the following tables:
|
| As of September 30, 2021 |
|
| As of September 30, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| 30-59 Days |
|
| 60-89 Days |
|
| 90 Days |
|
| Total |
|
|
|
|
|
| Total Loans |
|
| 30-59 Days |
|
| 60-89 Days |
|
| 90 Days |
|
| Total |
|
|
|
|
| Total Loans |
| |||||||||||
(In thousands) |
| Past Due |
|
| Past Due |
|
| and Over |
|
| Past Due |
|
| Current |
|
| Receivable |
|
| Past Due |
|
| Past Due |
|
| and Over |
|
| Past Due |
|
| Current |
|
| Receivable |
| ||||||||||||
Residential mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1-4 family first-lien residential mortgages |
| $ | 906 |
|
| $ | 197 |
|
| $ | 647 |
|
| $ | 1,750 |
|
| $ | 233,190 |
|
| $ | 234,940 |
|
| $ | 1,678 |
|
| $ | 333 |
|
| $ | 666 |
|
| $ | 2,677 |
|
| $ | 242,751 |
|
| $ | 245,428 |
|
Construction |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,833 |
|
|
| 7,833 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 14,623 |
|
|
| 14,623 |
|
Loans held-for-sale |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 294 |
|
|
| 294 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 275 |
|
|
| 275 |
|
Total residential mortgage loans |
|
| 906 |
|
|
| 197 |
|
|
| 647 |
|
|
| 1,750 |
|
|
| 241,317 |
|
|
| 243,067 |
|
|
| 1,678 |
|
|
| 333 |
|
|
| 666 |
|
|
| 2,677 |
|
|
| 257,649 |
|
|
| 260,326 |
|
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate |
|
| 5,348 |
|
|
| 1,088 |
|
|
| 3,429 |
|
|
| 9,865 |
|
|
| 267,827 |
|
|
| 277,692 |
|
|
| 1,175 |
|
|
| 3,474 |
|
|
| 4,476 |
|
|
| 9,125 |
|
|
| 328,267 |
|
|
| 337,392 |
|
Lines of credit |
|
| 585 |
|
|
| 1,397 |
|
|
| 80 |
|
|
| 2,062 |
|
|
| 55,066 |
|
|
| 57,128 |
|
|
| 1,020 |
|
|
| 34 |
|
|
| 1,472 |
|
|
| 2,526 |
|
|
| 78,191 |
|
|
| 80,717 |
|
Other commercial and industrial |
|
| 661 |
|
|
| 2,254 |
|
|
| 397 |
|
|
| 3,312 |
|
|
| 68,929 |
|
|
| 72,241 |
|
|
| 1,142 |
|
|
| 1,256 |
|
|
| 2,045 |
|
|
| 4,443 |
|
|
| 70,198 |
|
|
| 74,641 |
|
Paycheck Protection Program loans |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 27,293 |
|
|
| 27,293 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 693 |
|
|
| 693 |
|
Tax exempt loans |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5,956 |
|
|
| 5,956 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,344 |
|
|
| 4,344 |
|
Total commercial loans |
|
| 6,594 |
|
|
| 4,739 |
|
|
| 3,906 |
|
|
| 15,239 |
|
|
| 425,071 |
|
|
| 440,310 |
|
|
| 3,337 |
|
|
| 4,764 |
|
|
| 7,993 |
|
|
| 16,094 |
|
|
| 481,693 |
|
|
| 497,787 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity and junior liens |
|
| 141 |
|
|
| 0 |
|
|
| 291 |
|
|
| 432 |
|
|
| 32,556 |
|
|
| 32,988 |
|
|
| 125 |
|
|
| - |
|
|
| 355 |
|
|
| 480 |
|
|
| 33,266 |
|
|
| 33,746 |
|
Other consumer |
|
| 520 |
|
|
| 297 |
|
|
| 482 |
|
|
| 1,299 |
|
|
| 72,053 |
|
|
| 73,352 |
|
|
| 748 |
|
|
| 210 |
|
|
| 1,221 |
|
|
| 2,179 |
|
|
| 93,152 |
|
|
| 95,331 |
|
Total consumer loans |
|
| 661 |
|
|
| 297 |
|
|
| 773 |
|
|
| 1,731 |
|
|
| 104,609 |
|
|
| 106,340 |
|
|
| 873 |
|
|
| 210 |
|
|
| 1,576 |
|
|
| 2,659 |
|
|
| 126,418 |
|
|
| 129,077 |
|
Total loans |
| $ | 8,161 |
|
| $ | 5,233 |
|
| $ | 5,326 |
|
| $ | 18,720 |
|
| $ | 770,997 |
|
| $ | 789,717 |
|
| $ | 5,888 |
|
| $ | 5,307 |
|
| $ | 10,235 |
|
| $ | 21,430 |
|
| $ | 865,760 |
|
| $ | 887,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| As of December 31, 2020 |
|
| As of December 31, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| 30-59 Days |
|
| 60-89 Days |
|
| 90 Days |
|
| Total |
|
|
|
|
|
| Total Loans |
|
| 30-59 Days |
|
| 60-89 Days |
|
| 90 Days |
|
| Total |
|
|
|
|
| Total Loans |
| |||||||||||
(In thousands) |
| Past Due |
|
| Past Due |
|
| and Over |
|
| Past Due |
|
| Current |
|
| Receivable |
|
| Past Due |
|
| Past Due |
|
| and Over |
|
| Past Due |
|
| Current |
|
| Receivable |
| ||||||||||||
Residential mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1-4 family first-lien residential mortgages |
| $ | 1,250 |
|
| $ | 570 |
|
| $ | 1,098 |
|
| $ | 2,918 |
|
| $ | 224,267 |
|
| $ | 227,185 |
|
| $ | 960 |
|
| $ | 416 |
|
| $ | 891 |
|
| $ | 2,268 |
|
| $ | 238,166 |
|
| $ | 240,434 |
|
Construction |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,681 |
|
|
| 6,681 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6,329 |
|
|
| 6,329 |
|
Loans held-for-sale |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,526 |
|
|
| 1,526 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 513 |
|
|
| 513 |
|
Total residential mortgage loans |
|
| 1,250 |
|
|
| 570 |
|
|
| 1,098 |
|
|
| 2,918 |
|
|
| 232,474 |
|
|
| 235,392 |
|
|
| 960 |
|
|
| 416 |
|
|
| 891 |
|
|
| 2,268 |
|
|
| 245,008 |
|
|
| 247,276 |
|
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real estate |
|
| 480 |
|
|
| 913 |
|
|
| 2,511 |
|
|
| 3,904 |
|
|
| 282,367 |
|
|
| 286,271 |
|
|
| 1,735 |
|
|
| 1,029 |
|
|
| 4,379 |
|
|
| 7,143 |
|
|
| 281,307 |
|
|
| 288,450 |
|
Lines of credit |
|
| 734 |
|
|
| 1,870 |
|
|
| 194 |
|
|
| 2,798 |
|
|
| 46,305 |
|
|
| 49,103 |
|
|
| 156 |
|
|
| 1,180 |
|
|
| 576 |
|
|
| 1,913 |
|
|
| 59,971 |
|
|
| 61,884 |
|
Other commercial and industrial |
|
| 441 |
|
|
| 1,717 |
|
|
| 1,691 |
|
|
| 3,849 |
|
|
| 74,780 |
|
|
| 78,629 |
|
|
| 1,799 |
|
|
| 1,686 |
|
|
| 1,056 |
|
|
| 4,541 |
|
|
| 64,594 |
|
|
| 69,135 |
|
Paycheck Protection Program loans |
|
| 170 |
|
|
| 0 |
|
|
| 0 |
|
|
| 170 |
|
|
| 60,473 |
|
|
| 60,643 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 19,338 |
|
|
| 19,338 |
|
Tax exempt loans |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,166 |
|
|
| 7,166 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5,811 |
|
|
| 5,811 |
|
Total commercial loans |
|
| 1,825 |
|
|
| 4,500 |
|
|
| 4,396 |
|
|
| 10,721 |
|
|
| 471,091 |
|
|
| 481,812 |
|
|
| 3,691 |
|
|
| 3,895 |
|
|
| 6,011 |
|
|
| 13,597 |
|
|
| 471,091 |
|
|
| 444,618 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Home equity and junior liens |
|
| 248 |
|
|
| 78 |
|
|
| 473 |
|
|
| 799 |
|
|
| 37,825 |
|
|
| 38,624 |
|
|
| 17 |
|
|
| 49 |
|
|
| 251 |
|
|
| 317 |
|
|
| 31,420 |
|
|
| 31,737 |
|
Other consumer |
|
| 443 |
|
|
| 252 |
|
|
| 187 |
|
|
| 882 |
|
|
| 70,023 |
|
|
| 70,905 |
|
|
| 571 |
|
|
| 257 |
|
|
| 852 |
|
|
| 1,680 |
|
|
| 108,428 |
|
|
| 110,108 |
|
Total consumer loans |
|
| 691 |
|
|
| 330 |
|
|
| 660 |
|
|
| 1,681 |
|
|
| 107,848 |
|
|
| 109,529 |
|
|
| 588 |
|
|
| 306 |
|
|
| 1,103 |
|
|
| 1,998 |
|
|
| 139,847 |
|
|
| 141,845 |
|
Total loans |
| $ | 3,766 |
|
| $ | 5,400 |
|
| $ | 6,154 |
|
| $ | 15,320 |
|
| $ | 811,413 |
|
| $ | 826,733 |
|
| $ | 5,239 |
|
| $ | 4,617 |
|
| $ | 8,006 |
|
| $ | 17,862 |
|
| $ | 815,877 |
|
| $ | 833,739 |
|
- 3126 - -
Nonaccrual loans, segregated by class of loan, were as follows:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Residential mortgage loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
1-4 family first-lien residential mortgages |
| $ | 1,830 |
|
| $ | 2,608 |
|
| $ | 848 |
|
| $ | 891 |
|
|
|
| 1,830 |
|
|
| 2,608 |
|
|
| 848 |
|
|
| 891 |
|
Commercial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Real estate |
|
| 4,830 |
|
|
| 11,286 |
|
|
| 4,488 |
|
|
| 4,407 |
|
Lines of credit |
|
| 133 |
|
|
| 194 |
|
|
| 1,511 |
|
|
| 629 |
|
Other commercial and industrial |
|
| 703 |
|
|
| 6,498 |
|
|
| 2,202 |
|
|
| 1,261 |
|
|
|
| 5,666 |
|
|
| 17,978 |
|
|
| 8,201 |
|
|
| 6,297 |
|
Consumer loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Home equity and junior liens |
|
| 803 |
|
|
| 473 |
|
|
| 355 |
|
|
| 252 |
|
Other consumer |
|
| 486 |
|
|
| 274 |
|
|
| 1,221 |
|
|
| 852 |
|
Total consumer loans |
|
| 1,289 |
|
|
| 747 |
|
|
| 1,576 |
|
|
| 1,104 |
|
Total nonaccrual loans |
| $ | 8,785 |
|
| $ | 21,333 |
|
| $ | 10,625 |
|
| $ | 8,292 |
|
At September 30, 2022, the Bank's 48 nonperforming loans represented 1.20% of total loans, with an aggregate outstanding balance of $10.6 million, as compared to 53 loans with an aggregate outstanding balance of $11.7 million at June 30, 2022. This decrease of $1.1 million was the result of various commercial and residential loans that met criteria measurements for removal from nonaccrual status. The Bank's management is actively working with each of the nonaccrual loan borrowers and believes that the ultimate resolution of these loans will not have material effect on the results of the Company's operations in future periods.
At December 31, 2021, the Bank's 44 nonperforming loans represented 0.99% of total loans, with an aggregate outstanding balance of $8.3 million, as compared to 48 nonperforming loans with an aggregate outstanding balance of $10.6 million at September 30, 2022. The increase in provision for loan losses in the third quarter of 2022, as compared to the same three month period in 2021, primarily reflected required reserves related to year-over-year loan growth and management's decision to downgrade a specifically-identified commercial real estate and commercial loan combined borrower relationship with an aggregate total related outstanding balance of $7.2 million. This relationship is under active resolution management at September 30, 2022.
The Company is required to disclose certain activities related to Troubled Debt Restructurings (“TDR”) in accordance with accounting guidance. Certain loans have been modified inas a TDR where economic concessions have been granted to a borrower who is experiencing, or expected to experience, financial difficulties. These economic concessions could include a reduction in the loan interest rate, extension of payment terms, reduction of principal amortization, or other actions that it would not otherwise consider for a new loan with similar risk characteristics.
The Company is required to disclose new TDRs for each reporting period for which an income statement is being presented. The pre-modification outstanding recorded investment is the principal loan balance less the provision for loan losses before the loan was modified as a TDR. The post-modification outstanding recorded investment is the principal balance less the provision for loan losses after the loan was modified as a TDR. Additional provision for loan losses is the change in the allowance for loan losses between the pre-modification outstanding recorded investment and post-modification outstanding recorded investment.
The Company had 0no loans that were modified as TDRs forduring the three months ended September 30, 2021.2022.
The Company had 5table below details two loans that have beenwere modified as TDRs forduring the nine months ended September 30, 2021.2022.
- 27 -
| For the nine months ended September 30, 2021 |
| |||||||||||
(In thousands) | Number of loans |
| Pre-modification outstanding recorded investment |
|
| Post-modification outstanding recorded investment |
|
| Additional provision for loan losses |
| |||
Commercial loans | 2 | $ |
| 961 |
| $ |
| 967 |
| $ |
| 6 |
|
Residential real estate loans | 2 | $ |
| 389 |
| $ |
| 389 |
| $ |
| 12 |
|
Home equity and junior liens | 1 | $ |
| 200 |
| $ |
| 504 |
| $ |
| 219 |
|
| For the nine months ended September 30, 2022 |
| |||||||||||
(In thousands, except number of loans) | Number of loans |
| Pre-modification outstanding recorded investment |
|
| Post-modification outstanding recorded investment |
|
| Additional provision for loan losses |
| |||
Commercial real estate loans | 2 |
| $ | 373 |
|
| $ | 367 |
|
| $ | - |
|
The loans evaluated for impairment for the nine months ended September 30, 20212022 have been classified as TDRs due to economic concessions granted, which consisted of a reduction in the stated interest rate, a significant delay in the timing of the payment or an extended maturity date that will result in a significant delay in payment from the original terms.
The Company had 0no loans that were modified as TDRs for the three months ended September 30, 2020.2021.
The Company had 0five loans that were modified as TDRs for the nine months ended September 30, 2020.2021.
The Company is required to disclose loans that have been modified as TDRs within the previous 12 months in which there was payment default after the restructuring. The Company defines payment default as any loans 90 days past due on contractual payments.
- 32 -
The Company had 0no loans that were modified as TDRs during the twelve months prior to September 30, 2022, which had subsequently defaulted during the nine months ended September 30, 2022.
The Company had no loans that were modified as TDRs during the twelve months prior to September 30, 2021, which had subsequently defaulted during the nine months ended September 30, 2021.
The Company had 0 loans that were modified as TDRs during the twelve months prior to September 30, 2020, which had subsequently defaulted during the nine months ended September 30, 2020.
When the Company modifies a loan within a portfolio segment that is individually evaluated for impairment, a potential impairment is analyzed either based on the present value of the expected future cash flows discounted at the interest rate of the original loan terms or the fair value of the collateral less costs to sell. If it is determined that the value of the loan is less than its recorded investment, then impairment is recognized as a component of the provision for loan losses, an associated increase to the allowance for loan losses or as a charge-off to the allowance for loan losses in the current period.
- 28 -
Impaired Loans
The following table summarizes impaired loan information by portfolio class at the indicated dates:
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Unpaid |
|
|
|
|
|
|
|
|
|
| Unpaid |
|
|
|
|
|
|
|
|
| Unpaid |
|
|
|
|
|
|
|
| Unpaid |
|
|
|
| ||||||||
|
| Recorded |
|
| Principal |
|
| Related |
|
| Recorded |
|
| Principal |
|
| Related |
|
| Recorded |
|
| Principal |
|
| Related |
|
| Recorded |
|
| Principal |
|
| Related |
| ||||||||||||
(In thousands) |
| Investment |
|
| Balance |
|
| Allowance |
|
| Investment |
|
| Balance |
|
| Allowance |
|
| Investment |
|
| Balance |
|
| Allowance |
|
| Investment |
|
| Balance |
|
| Allowance |
| ||||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1-4 family first-lien residential mortgages |
| $ | 727 |
|
| $ | 727 |
|
| $ | - |
|
| $ | 665 |
|
| $ | 665 |
|
| $ | - |
|
| $ | 671 |
|
| $ | 671 |
|
| $ | - |
|
| $ | 666 |
|
| $ | 666 |
|
| $ | - |
|
Commercial real estate |
|
| 5,125 |
|
|
| 5,216 |
|
|
| - |
|
|
| 11,053 |
|
|
| 11,136 |
|
|
| - |
|
|
| 4,724 |
|
|
| 4,824 |
|
|
| - |
|
|
| 4,708 |
|
|
| 4,801 |
|
|
| - |
|
Commercial lines of credit |
|
| 100 |
|
|
| 100 |
|
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| - |
|
|
| 1,849 |
|
|
| 1,849 |
|
|
| - |
|
|
| 100 |
|
|
| 104 |
|
|
| - |
|
Other commercial and industrial |
|
| 381 |
|
|
| 411 |
|
|
| - |
|
|
| 5,114 |
|
|
| 5,132 |
|
|
| - |
|
|
| 3,527 |
|
|
| 3,572 |
|
|
| - |
|
|
| 357 |
|
|
| 396 |
|
|
| - |
|
Home equity and junior liens |
|
| 35 |
|
|
| 35 |
|
|
| - |
|
|
| 75 |
|
|
| 75 |
|
|
| - |
|
|
| 88 |
|
|
| 88 |
|
|
| - |
|
|
| 93 |
|
|
| 93 |
|
|
| - |
|
Other consumer |
|
| 0 |
|
|
| 0 |
|
|
| - |
|
|
| 81 |
|
|
| 81 |
|
|
| - |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1-4 family first-lien residential mortgages |
|
| 411 |
|
|
| 411 |
|
|
| 72 |
|
|
| 1,182 |
|
|
| 1,182 |
|
|
| 205 |
|
|
| 454 |
|
|
| 454 |
|
|
| 92 |
|
|
| 539 |
|
|
| 539 |
|
|
| 90 |
|
Commercial real estate |
|
| 2,156 |
|
|
| 2,156 |
|
|
| 234 |
|
|
| 1,729 |
|
|
| 1,729 |
|
|
| 231 |
|
|
| 2,567 |
|
|
| 2,567 |
|
|
| 339 |
|
|
| 2,450 |
|
|
| 2,450 |
|
|
| 300 |
|
Commercial lines of credit |
|
| 56 |
|
|
| 60 |
|
|
| 56 |
|
|
| 925 |
|
|
| 925 |
|
|
| 925 |
|
|
| 2,184 |
|
|
| 2,190 |
|
|
| 2,184 |
|
|
| 53 |
|
|
| 53 |
|
|
| 53 |
|
Other commercial and industrial |
|
| 1,661 |
|
|
| 1,665 |
|
|
| 1,128 |
|
|
| 1,864 |
|
|
| 1,864 |
|
|
| 1,278 |
|
|
| 1,120 |
|
|
| 1,120 |
|
|
| 687 |
|
|
| 1,852 |
|
|
| 1,852 |
|
|
| 1,318 |
|
Home equity and junior liens |
|
| 540 |
|
|
| 540 |
|
|
| 114 |
|
|
| 142 |
|
|
| 142 |
|
|
| 142 |
|
|
| 537 |
|
|
| 537 |
|
|
| 114 |
|
|
| 539 |
|
|
| 539 |
|
|
| 114 |
|
Other consumer |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
| ||||||||||||||||||||||||
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1-4 family first-lien residential mortgages |
|
| 1,138 |
|
|
| 1,138 |
|
|
| 72 |
|
|
| 1,847 |
|
|
| 1,847 |
|
|
| 205 |
|
|
| 1,125 |
|
|
| 1,125 |
|
|
| 92 |
|
|
| 1,205 |
|
|
| 1,205 |
|
|
| 90 |
|
Commercial real estate |
|
| 7,281 |
|
|
| 7,372 |
|
|
| 234 |
|
|
| 12,782 |
|
|
| 12,865 |
|
|
| 231 |
|
|
| 7,291 |
|
|
| 7,391 |
|
|
| 339 |
|
|
| 7,158 |
|
|
| 7,251 |
|
|
| 300 |
|
Commercial lines of credit |
|
| 156 |
|
|
| 160 |
|
|
| 56 |
|
|
| 925 |
|
|
| 925 |
|
|
| 925 |
|
|
| 4,033 |
|
|
| 4,039 | �� |
|
| 2,184 |
|
|
| 153 |
|
|
| 157 |
|
|
| 53 |
|
Other commercial and industrial |
|
| 2,042 |
|
|
| 2,076 |
|
|
| 1,128 |
|
|
| 6,978 |
|
|
| 6,996 |
|
|
| 1,278 |
|
|
| 4,647 |
|
|
| 4,692 |
|
|
| 687 |
|
|
| 2,209 |
|
|
| 2,248 |
|
|
| 1,318 |
|
Home equity and junior liens |
|
| 575 |
|
|
| 575 |
|
|
| 114 |
|
|
| 217 |
|
|
| 217 |
|
|
| 142 |
|
|
| 625 |
|
|
| 625 |
|
|
| 114 |
|
|
| 632 |
|
|
| 632 |
|
|
| 114 |
|
Other consumer |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 81 |
|
|
| 81 |
|
|
| 0 |
| ||||||||||||||||||||||||
Totals |
| $ | 11,192 |
|
| $ | 11,321 |
|
| $ | 1,604 |
|
| $ | 22,830 |
|
| $ | 22,931 |
|
| $ | 2,781 |
|
| $ | 17,721 |
|
| $ | 17,872 |
|
| $ | 3,416 |
|
| $ | 11,357 |
|
| $ | 11,493 |
|
| $ | 1,875 |
|
The following table presents the average recorded investment in impaired loans for the periods indicated:
|
| For the three months ended |
|
| For the nine months ended |
|
| For the three months ended |
| For the nine months ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
| September 30, |
| ||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| ||||||||||
1-4 family first-lien residential mortgages |
| $ | 1,319 |
|
| $ | 1,586 |
|
| $ | 1,498 |
|
| $ | 1,597 |
|
| $ | 1,133 |
|
| $ | 1,319 |
| $ | 1,165 |
|
| $ | 1,498 |
|
Commercial real estate |
|
| 7,114 |
|
|
| 4,991 |
|
|
| 10,133 |
|
|
| 4,714 |
|
|
| 7,124 |
|
|
| 7,114 |
| 7,130 |
|
|
| 10,133 |
| |
Commercial lines of credit |
|
| 580 |
|
|
| 255 |
|
|
| 761 |
|
|
| 219 |
|
|
| 2,089 |
|
|
| 580 |
| 1,120 |
|
|
| 761 |
| |
Other commercial and industrial |
|
| 4,654 |
|
|
| 1,724 |
|
|
| 5,750 |
|
|
| 1,316 |
|
|
| 3,302 |
|
|
| 4,654 |
| 2,750 |
|
|
| 5,750 |
| |
Home equity and junior liens |
|
| 577 |
|
|
| 219 |
|
|
| 487 |
|
|
| 219 |
|
|
| 627 |
|
|
| 577 |
| 629 |
|
|
| 487 |
| |
Other consumer |
|
| 40 |
|
|
| 84 |
|
|
| 63 |
|
|
| 87 |
|
|
| - |
|
|
| 40 |
| - |
|
|
| 63 |
| |
Total |
| $ | 14,284 |
|
| $ | 8,859 |
|
| $ | 18,692 |
|
| $ | 8,152 |
|
| $ | 14,275 |
|
| $ | 14,284 |
| $ | 12,794 |
|
| $ | 18,692 |
|
- 3329 - -
The following table presents the cash basis interest income recognized on impaired loans for the periods indicated:
|
| For the three months ended |
| For the nine months ended |
| ||||||||||
|
| September 30, |
| September 30, |
| ||||||||||
(In thousands) |
| 2022 |
|
| 2021 |
| 2022 |
|
| 2021 |
| ||||
1-4 family first-lien residential mortgages |
| $ | 12 |
|
| $ | 15 |
| $ | 41 |
|
| $ | 47 |
|
Commercial real estate |
|
| 78 |
|
|
| 97 |
|
| 227 |
|
|
| 206 |
|
Commercial lines of credit |
|
| 45 |
|
|
| 4 |
|
| 90 |
|
|
| 8 |
|
Other commercial and industrial |
|
| 48 |
|
|
| 65 |
|
| 184 |
|
|
| 139 |
|
Home equity and junior liens |
|
| 16 |
|
|
| 5 |
|
| 19 |
|
|
| 11 |
|
Other consumer |
|
| - |
|
|
| 1 |
|
| - |
|
|
| - |
|
Total |
| $ | 199 |
|
| $ | 187 |
| $ | 561 |
|
| $ | 411 |
|
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
1-4 family first-lien residential mortgages |
| $ | 15 |
|
| $ | 35 |
|
| $ | 47 |
|
| $ | 62 |
|
Commercial real estate |
|
| 97 |
|
|
| 60 |
|
|
| 206 |
|
|
| 129 |
|
Commercial lines of credit |
|
| 4 |
|
|
| 8 |
|
|
| 8 |
|
|
| 13 |
|
Other commercial and industrial |
|
| 65 |
|
|
| 32 |
|
|
| 139 |
|
|
| 54 |
|
Home equity and junior liens |
|
| 5 |
|
|
| 2 |
|
|
| 11 |
|
|
| 6 |
|
Other consumer |
|
| 1 |
|
|
| 2 |
|
|
| - |
|
|
| 5 |
|
Total |
| $ | 187 |
|
| $ | 139 |
|
| $ | 411 |
|
| $ | 269 |
|
Note 7: Allowance for Loan Losses
Management extensively reviews recent trends in historical losses, qualitative factors, including concentrations of loans to related borrowers and concentrations of loans by collateral type, and specific reserve needs on loans individually evaluated for impairment in its determination of the adequacy of the allowance for loan losses. We recorded $104,000$710,000 in provision for loan losses for the three month period ended September 30, 2021,2022, as compared to $1.7 million$104,000 for the three month period ended September 30, 2020.2021. For the first nine months of 2021,2022, we recorded $2.1 million$871,000 in provision for loan losses as compared to $3.9$2.1 million in the same prior year nine month period.The provisioningincrease in provision for loan losses in the third quarter of 2022, as compared to the same three month period in 2021, and 2020 reflects management’s determination of prudent additions toprimarily reflected required reserves considering loan mix changes, concentrations of loans in certain business sectors, factors related to year-over-year loan quality metrics,growth and continued COVID-19management's decision to downgrade a specifically-identified commercial real estate and commercial loan combined borrower relationship with an aggregate total related economic uncertainty. The credit-sensitiveoutstanding balance of $7.2 million. Certain credit sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its conservative loan classification and reserve building methodologies to the analysis of these portfolios. Please refer to the asset quality section below for a further discussion of asset quality as it relates to the allowance for loan losses.
- 34 -
Summarized in the tables below are changes in the allowance for loan losses for the indicated periods and information pertaining to the allocation of the allowance for loan losses, balances of the allowance for loan losses, loans receivable based inon individual, and collective impairment evaluation by loan portfolio class. An allocation of a portion of the allowance to a given portfolio class does not limit the Company’s ability to absorb losses in another portfolio class.
|
| For the three months ended September 30, 2021 |
| |||||||||||||||||||||
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
|
|
| Other |
|
| Paycheck |
| ||||
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
|
| Protection |
| ||||||
(In thousands) |
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
|
| Program |
| ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance |
| $ | 875 |
|
| $ | 0 |
|
| $ | 6,120 |
|
| $ | 1,810 |
|
| $ | 3,448 |
|
| $ | 0 |
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (50 | ) |
|
| (577 | ) |
|
| 0 |
|
Recoveries |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5 |
|
|
| 0 |
|
|
| 0 |
|
Provisions |
|
| 41 |
|
|
| 0 |
|
|
| (893 | ) |
|
| (912 | ) |
|
| (9 | ) |
|
| 0 |
|
Ending balance |
| $ | 916 |
|
| $ | 0 |
|
| $ | 5,227 |
|
| $ | 853 |
|
| $ | 2,862 |
|
| $ | 0 |
|
Ending balance: related to loans individually evaluated for impairment |
| $ | 72 |
|
| $ | 0 |
|
| $ | 234 |
|
| $ | 56 |
|
| $ | 1,128 |
|
| $ | 0 |
|
Ending balance: related to loans collectively evaluated for impairment |
| $ | 844 |
|
| $ | 0 |
|
| $ | 4,993 |
|
| $ | 797 |
|
| $ | 1,734 |
|
| $ | 0 |
|
Loans receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 234,940 |
|
| $ | 7,833 |
|
| $ | 277,692 |
|
| $ | 57,128 |
|
| $ | 72,241 |
|
| $ | 27,293 |
|
Ending balance: individually evaluated for impairment |
| $ | 1,138 |
|
| $ | 0 |
|
| $ | 7,281 |
|
| $ | 156 |
|
| $ | 2,042 |
|
| $ | 0 |
|
Ending balance: collectively evaluated for impairment |
| $ | 233,802 |
|
| $ | 7,833 |
|
| $ | 270,411 |
|
| $ | 56,972 |
|
| $ | 70,199 |
|
| $ | 27,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Tax exempt |
|
| and junior liens |
|
| Consumer |
|
| Unallocated |
|
| Total |
|
|
|
|
| |||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance |
| $ | 1 |
|
| $ | 805 |
|
| $ | 1,250 |
|
| $ | 294 |
|
|
| 14,603 |
|
|
|
|
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| (32 | ) |
|
| 0 |
|
|
| (659 | ) |
|
|
|
|
Recoveries |
|
| 0 |
|
|
| 0 |
|
|
| 12 |
|
|
| 0 |
|
|
| 17 |
|
|
|
|
|
Provisions |
|
| 0 |
|
|
| (27 | ) |
|
| 502 |
|
|
| 1,402 |
|
|
| 104 |
|
|
|
|
|
Ending balance |
| $ | 1 |
|
| $ | 778 |
|
| $ | 1,732 |
|
| $ | 1,696 |
|
| $ | 14,065 |
|
|
|
|
|
Ending balance: related to loans individually evaluated for impairment |
| $ | 0 |
|
| $ | 114 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1,604 |
|
|
|
|
|
Ending balance: related to loans collectively evaluated for impairment |
| $ | 1 |
|
| $ | 664 |
|
| $ | 1,732 |
|
| $ | 1,696 |
|
| $ | 12,461 |
|
|
|
|
|
Loans receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 5,956 |
|
| $ | 32,988 |
|
| $ | 73,352 |
|
| $ | 294 |
|
| $ | 789,717 |
|
|
|
|
|
Ending balance: individually evaluated for impairment |
| $ | 0 |
|
| $ | 575 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 11,192 |
|
|
|
|
|
Ending balance: collectively evaluated for impairment |
| $ | 5,956 |
|
| $ | 32,413 |
|
| $ | 73,352 |
|
| $ | 294 |
|
| $ | 778,525 |
|
|
|
|
|
- 3530 - -
|
| For the nine months ended September 30, 2021 |
|
| For the three months ended September 30, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
|
|
| Other |
|
| Paycheck |
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
| Other |
| Paycheck |
| |||||||||||
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
|
| Protection |
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
| Protection |
| |||||||||||||
(In thousands) |
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
|
| Program |
|
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
|
| Program |
| ||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Beginning Balance |
| $ | 931 |
|
| $ | 0 |
|
| $ | 4,776 |
|
| $ | 1,670 |
|
| $ | 2,992 |
|
| $ | 0 |
|
| $ | 897 |
|
| $ | - |
|
| $ | 5,522 |
|
| $ | 1,157 |
|
| $ | 2,616 |
|
| $ | - |
|
Charge-offs |
|
| (20 | ) |
|
| 0 |
|
|
| (7 | ) |
|
| (50 | ) |
|
| (677 | ) |
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (134 | ) |
|
| - |
|
Recoveries |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 68 |
|
|
| 0 |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Provisions |
|
| 5 |
|
|
| 0 |
|
|
| 458 |
|
|
| (835 | ) |
|
| 547 |
|
|
| 0 |
| ||||||||||||||||||||||||
Provisions (credits) |
|
| (85 | ) |
|
| - |
|
|
| 234 |
|
|
| 2,212 |
|
|
| (205 | ) |
|
| - |
| ||||||||||||||||||||||||
Ending balance |
| $ | 916 |
|
| $ | 0 |
|
| $ | 5,227 |
|
| $ | 853 |
|
| $ | 2,862 |
|
| $ | 0 |
|
| $ | 812 |
|
| $ | - |
|
| $ | 5,756 |
|
| $ | 3,369 |
|
| $ | 2,277 |
|
| $ | - |
|
Ending balance: related to loans |
| $ | 92 |
|
| $ | - |
|
| $ | 339 |
|
| $ | 2,184 |
|
| $ | 687 |
|
| $ | - |
| ||||||||||||||||||||||||
Ending balance: related to loans |
| $ | 720 |
|
| $ | - |
|
| $ | 5,417 |
|
| $ | 1,185 |
|
| $ | 1,590 |
|
| $ | - |
| ||||||||||||||||||||||||
Loans receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Ending balance |
| $ | 245,428 |
|
| $ | 14,623 |
|
| $ | 337,392 |
|
| $ | 80,717 |
|
| $ | 74,641 |
|
| $ | 693 |
| ||||||||||||||||||||||||
Ending balance: individually |
| $ | 1,125 |
|
| $ | - |
|
| $ | 7,291 |
|
| $ | 4,033 |
|
| $ | 4,647 |
|
| $ | - |
| ||||||||||||||||||||||||
Ending balance: collectively |
| $ | 244,303 |
|
| $ | 14,623 |
|
| $ | 330,101 |
|
| $ | 76,684 |
|
| $ | 69,994 |
|
| $ | 693 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
|
|
| |||||||||
|
| Tax exempt |
|
| and junior liens |
|
| consumer |
|
| Unallocated |
|
| Total |
|
|
|
|
|
| Tax exempt |
|
| and junior liens |
|
| Consumer |
|
| Unallocated |
|
| Total |
|
|
|
| |||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning Balance |
| $ | 1 |
|
| $ | 739 |
|
| $ | 1,123 |
|
| $ | 545 |
|
| $ | 12,777 |
|
|
|
|
|
| $ | 4 |
|
| $ | 750 |
|
| $ | 1,543 |
|
| $ | 589 |
|
| $ | 13,078 |
|
|
|
| |
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| (150 | ) |
|
| 0 |
|
|
| (904 | ) |
|
|
|
|
|
| - |
|
|
|
|
|
| (42 | ) |
|
| - |
|
|
| (176 | ) |
|
|
| ||
Recoveries |
|
| 0 |
|
|
| 0 |
|
|
| 63 |
|
|
| 0 |
|
|
| 131 |
|
|
|
|
|
|
| - |
|
|
|
|
| 20 |
|
|
| - |
|
|
| 20 |
|
|
|
| |||
Provisions |
|
| 0 |
|
|
| 39 |
|
|
| 696 |
|
|
| 1,151 |
|
|
| 2,061 |
|
|
|
|
| ||||||||||||||||||||||||
Provisions (credits) |
|
| (1 | ) |
|
| (321 | ) |
|
| (578 | ) |
|
| (546 | ) |
|
| 710 |
|
|
|
| |||||||||||||||||||||||||
Ending balance |
| $ | 1 |
|
| $ | 778 |
|
| $ | 1,732 |
|
| $ | 1,696 |
|
| $ | 14,065 |
|
|
|
|
|
| $ | 3 |
|
| $ | 429 |
|
| $ | 943 |
|
| $ | 43 |
|
| $ | 13,632 |
|
|
|
| |
Ending balance: related to loans |
| $ | - |
|
| $ | 114 |
|
| $ | - |
|
| $ | - |
|
| $ | 3,416 |
|
|
|
| |||||||||||||||||||||||||
Ending balance: related to loans |
| $ | 3 |
|
| $ | 315 |
|
| $ | 943 |
|
| $ | 43 |
|
| $ | 10,216 |
|
|
| - |
| ||||||||||||||||||||||||
Loans receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Ending balance |
| $ | 4,344 |
|
| $ | 33,746 |
|
| $ | 95,331 |
|
| $ | 275 |
|
| $ | 887,190 |
|
|
|
| |||||||||||||||||||||||||
Ending balance: individually |
| $ | - |
|
| $ | 625 |
|
| $ | - |
|
| $ | - |
|
| $ | 17,721 |
|
|
|
| |||||||||||||||||||||||||
Ending balance: collectively |
| $ | 4,344 |
|
| $ | 33,121 |
|
| $ | 95,331 |
|
| $ | 275 |
|
| $ | 869,469 |
|
|
|
|
|
| For the nine months ended September 30, 2022 |
| |||||||||||||||||||||
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
| Other |
|
| Paycheck |
| ||||||
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
|
| Protection |
| ||||||
(In thousands) |
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
|
| Program |
| ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning Balance |
| $ | 872 |
|
| $ | - |
|
| $ | 5,308 |
|
| $ | 935 |
|
| $ | 2,762 |
|
| $ | - |
|
Charge-offs |
|
| (29 | ) |
|
| - |
|
|
| (23 | ) |
|
| (38 | ) |
|
| (334 | ) |
|
| - |
|
Recoveries |
|
| - |
|
|
| - |
|
|
| 250 |
|
|
| - |
|
|
| 46 |
|
|
| - |
|
Provisions (credits) |
|
| (31 | ) |
|
| - |
|
|
| 221 |
|
|
| 2,472 |
|
|
| (197 | ) |
|
| - |
|
Ending balance |
| $ | 812 |
|
| $ | - |
|
| $ | 5,756 |
|
| $ | 3,369 |
|
| $ | 2,277 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
|
|
|
| ||||||
|
| Tax exempt |
|
| and junior liens |
|
| consumer |
|
| Unallocated |
|
| Total |
|
|
|
| ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning Balance |
| $ | 3 |
|
| $ | 774 |
|
| $ | 1,297 |
|
| $ | 984 |
|
| $ | 12,935 |
|
|
|
| |
Charge-offs |
|
| - |
|
|
| - |
|
|
| (122 | ) |
|
| - |
|
|
| (546 | ) |
|
|
| |
Recoveries |
|
| - |
|
|
| - |
|
|
| 76 |
|
|
| - |
|
|
| 372 |
|
|
|
| |
Provisions (credits) |
|
| - |
|
|
| (345 | ) |
|
| (308 | ) |
|
| (941 | ) |
|
| 871 |
|
|
|
| |
Ending balance |
| $ | 3 |
|
| $ | 429 |
|
| $ | 943 |
|
| $ | 43 |
|
| $ | 13,632 |
|
|
|
|
- 3631 - -
|
| For the three months ended September 30, 2021 |
| |||||||||||||||||||||
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
| Other |
|
| Paycheck |
| ||||||
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
|
| Protection |
| ||||||
(In thousands) |
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
|
| Program |
| ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning Balance |
| $ | 875 |
|
| $ | - |
|
| $ | 6,120 |
|
| $ | 1,810 |
|
| $ | 3,448 |
|
| $ | - |
|
Charge-offs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (50 | ) |
|
| (577 | ) |
|
| - |
|
Recoveries |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| - |
|
Provisions (credits) |
|
| 41 |
|
|
| - |
|
|
| (893 | ) |
|
| (912 | ) |
|
| (9 | ) |
|
| - |
|
Ending balance |
| $ | 916 |
|
| $ | - |
|
| $ | 5,227 |
|
| $ | 853 |
|
| $ | 2,862 |
|
| $ | - |
|
Ending balance: related to loans |
| $ | 72 |
|
| $ | - |
|
| $ | 234 |
|
| $ | 56 |
|
| $ | 1,128 |
|
| $ | - |
|
Ending balance: related to loans |
| $ | 844 |
|
| $ | - |
|
| $ | 4,993 |
|
| $ | 797 |
|
| $ | 1,734 |
|
| $ | - |
|
Loans receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ending balance |
| $ | 234,940 |
|
| $ | 7,833 |
|
| $ | 277,692 |
|
| $ | 57,128 |
|
| $ | 72,241 |
|
| $ | 27,293 |
|
Ending balance: individually |
| $ | 1,138 |
|
| $ | - |
|
| $ | 7,281 |
|
| $ | 156 |
|
| $ | 2,042 |
|
| $ | - |
|
Ending balance: collectively |
| $ | 233,802 |
|
| $ | 7,833 |
|
| $ | 270,411 |
|
| $ | 56,972 |
|
| $ | 70,199 |
|
| $ | 27,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
|
|
|
| ||||||
|
| Tax exempt |
|
| and junior liens |
|
| Consumer |
|
| Unallocated |
|
| Total |
|
|
|
| ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning Balance |
| $ | 1 |
|
| $ | 805 |
|
| $ | 1,250 |
|
| $ | 294 |
|
| $ | 14,603 |
|
|
|
| |
Charge-offs |
|
| - |
|
|
| - |
|
|
| (32 | ) |
|
| - |
|
|
| (659 | ) |
|
|
| |
Recoveries |
|
| - |
|
|
| - |
|
|
| 12 |
|
|
| - |
|
|
| 17 |
|
|
|
| |
Provisions (credits) |
|
| - |
|
|
| (27 | ) |
|
| 502 |
|
|
| 1,402 |
|
|
| 104 |
|
|
|
| |
Ending balance |
| $ | 1 |
|
| $ | 778 |
|
| $ | 1,732 |
|
| $ | 1,696 |
|
| $ | 14,065 |
|
|
|
| |
Ending balance: related to loans |
| $ | - |
|
| $ | 114 |
|
| $ | - |
|
| $ | - |
|
| $ | 1,604 |
|
|
|
| |
Ending balance: related to loans |
| $ | 1 |
|
| $ | 664 |
|
| $ | 1,732 |
|
| $ | 1,696 |
|
| $ | 12,461 |
|
|
|
| |
Loans receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Ending balance |
| $ | 5,956 |
|
| $ | 32,988 |
|
| $ | 73,352 |
|
| $ | 294 |
|
| $ | 789,717 |
|
|
|
| |
Ending balance: individually |
| $ | - |
|
| $ | 575 |
|
| $ | - |
|
| $ | - |
|
| $ | 11,192 |
|
|
|
| |
Ending balance: collectively |
| $ | 5,956 |
|
| $ | 32,413 |
|
| $ | 73,352 |
|
| $ | 294 |
|
| $ | 778,525 |
|
|
|
|
|
| For the three months ended September 30, 2020 |
| |||||||||||||||||||||
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
|
|
| Other |
|
| Paycheck |
| ||||
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
|
| Protection |
| ||||||
(In thousands) |
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
|
| Program |
| ||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance |
| $ | 756 |
|
| $ | 0 |
|
| $ | 4,258 |
|
| $ | 1,208 |
|
| $ | 2,066 |
|
| $ | 0 |
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (53 | ) |
|
| 0 |
|
|
| 0 |
|
Recoveries |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2 |
|
|
| 0 |
|
|
| 0 |
|
Provisions |
|
| 35 |
|
|
| 0 |
|
|
| 558 |
|
|
| 139 |
|
|
| 581 |
|
|
| 0 |
|
Ending balance |
| $ | 791 |
|
| $ | 0 |
|
| $ | 4,816 |
|
| $ | 1,296 |
|
| $ | 2,647 |
|
| $ | 0 |
|
Ending balance: related to loans individually evaluated for impairment |
| $ | 149 |
|
| $ | 0 |
|
| $ | 62 |
|
| $ | 253 |
|
| $ | 1,176 |
|
| $ | 0 |
|
Ending balance: related to loans collectively evaluated for impairment |
| $ | 642 |
|
| $ | 0 |
|
| $ | 4,754 |
|
| $ | 1,043 |
|
| $ | 1,471 |
|
| $ | 0 |
|
Loans receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 216,802 |
|
| $ | 5,677 |
|
| $ | 282,856 |
|
| $ | 52,411 |
|
| $ | 77,824 |
|
| $ | 75,278 |
|
Ending balance: individually evaluated for impairment |
| $ | 1,573 |
|
| $ | 0 |
|
| $ | 5,320 |
|
| $ | 331 |
|
| $ | 2,385 |
|
| $ | 0 |
|
Ending balance: collectively evaluated for impairment |
| $ | 215,229 |
|
| $ | 5,677 |
|
| $ | 277,536 |
|
| $ | 52,080 |
|
| $ | 75,439 |
|
| $ | 75,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Tax exempt |
|
| and junior liens |
|
| Consumer |
|
| Unallocated |
|
| Total |
|
|
|
|
| |||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Balance |
| $ | 1 |
|
| $ | 644 |
|
| $ | 1,055 |
|
| $ | 565 |
|
|
| 10,553 |
|
|
|
|
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| (94 | ) |
|
| 0 |
|
|
| (147 | ) |
|
|
|
|
Recoveries |
|
| 0 |
|
|
| 0 |
|
|
| 13 |
|
|
| 0 |
|
|
| 15 |
|
|
|
|
|
Provisions |
|
| 0 |
|
|
| 91 |
|
|
| 127 |
|
|
| 151 |
|
|
| 1,682 |
|
|
|
|
|
Ending balance |
| $ | 1 |
|
| $ | 735 |
|
| $ | 1,101 |
|
| $ | 716 |
|
| $ | 12,103 |
|
|
|
|
|
Ending balance: related to loans individually evaluated for impairment |
| $ | 0 |
|
| $ | 142 |
|
| $ | 0 |
|
| $ | 0 |
|
|
| 1,782 |
|
|
|
|
|
Ending balance: related to loans collectively evaluated for impairment |
| $ | 1 |
|
| $ | 593 |
|
| $ | 1,101 |
|
| $ | 716 |
|
|
| 10,321 |
|
|
|
|
|
Loans receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
| $ | 6,998 |
|
| $ | 40,505 |
|
| $ | 62,998 |
|
| $ | 687 |
|
|
| 822,036 |
|
|
|
|
|
Ending balance: individually evaluated for impairment |
| $ | 0 |
|
| $ | 218 |
|
| $ | 83 |
|
| $ | 0 |
|
|
| 9,910 |
|
|
|
|
|
Ending balance: collectively evaluated for impairment |
| $ | 6,998 |
|
| $ | 40,287 |
|
| $ | 62,915 |
|
| $ | 687 |
|
| $ | 812,126 |
|
|
|
|
|
- 3732 - -
|
| For the nine months ended September 30, 2020 |
|
|
|
|
|
| For the nine months ended September 30, 2021 |
| ||||||||||||||||||||||||||||||||||||||
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
|
|
| Other |
|
| Paycheck |
|
| first-lien |
| Residential |
|
|
|
|
| Other |
| Paycheck |
| |||||||||||||||
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
|
| Protection |
|
| residential |
| construction |
| Commercial |
| Commercial |
| commercial |
| Protection |
| |||||||||||||||||
(In thousands) |
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
|
| Program |
|
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
|
| Program |
| ||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Beginning Balance |
| $ | 580 |
|
| $ | 0 |
|
| $ | 4,010 |
|
| $ | 1,195 |
|
| $ | 1,645 |
|
| $ | 0 |
|
| $ | 931 |
|
| $ | - |
|
| $ | 4,776 |
|
| $ | 1,670 |
|
| $ | 2,992 |
|
| $ | - |
|
Charge-offs |
|
| (125 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (101 | ) |
|
| (9 | ) |
|
| 0 |
|
|
| (20 | ) |
|
| - |
|
|
| (7 | ) |
|
| (50 | ) |
|
| (677 | ) |
|
| - |
|
Recoveries |
|
| 1 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4 |
|
|
| 0 |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 68 |
|
|
| - |
|
|
| - |
|
Provisions (credits) |
|
| 335 |
|
|
| 0 |
|
|
| 806 |
|
|
| 198 |
|
|
| 1,011 |
|
|
| 0 |
|
|
| 5 |
|
|
| - |
|
|
| 458 |
|
|
| (835 | ) |
|
| 547 |
|
|
| - |
|
Ending balance |
| $ | 791 |
|
| $ | 0 |
|
| $ | 4,816 |
|
| $ | 1,296 |
|
| $ | 2,647 |
|
| $ | 0 |
|
| $ | 916 |
|
| $ | - |
|
| $ | 5,227 |
|
| $ | 853 |
|
| $ | 2,862 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Home equity |
| Other |
|
|
|
|
|
|
| |||||||||||||
|
| Tax exempt |
|
| and junior liens |
|
| consumer |
|
| Unallocated |
|
| Total |
|
|
|
|
|
| Tax exempt |
|
| and junior liens |
|
| consumer |
|
| Unallocated |
|
| Total |
|
|
|
| |||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Beginning Balance |
| $ | 1 |
|
| $ | 553 |
|
| $ | 413 |
|
| $ | 272 |
|
| $ | 8,669 |
|
|
|
|
|
| $ | 1 |
|
| $ | 739 |
|
| $ | 1,123 |
|
| $ | 545 |
|
| $ | 12,777 |
|
|
|
| |
Charge-offs |
|
| 0 |
|
|
| (28 | ) |
|
| (279 | ) |
|
| 0 |
|
| $ | (542 | ) |
|
|
|
|
|
| - |
|
|
| - |
|
|
| (150 | ) |
|
| - |
|
|
| (904 | ) |
|
|
| |
Recoveries |
|
| 0 |
|
|
| 29 |
|
|
| 47 |
|
|
| 0 |
|
| $ | 81 |
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 63 |
|
|
| - |
|
|
| 131 |
|
|
|
| |
Provisions (credits) |
|
| 0 |
|
|
| 181 |
|
|
| 920 |
|
|
| 444 |
|
| $ | 3,895 |
|
|
|
|
|
|
| - |
|
|
| 39 |
|
|
| 696 |
|
|
| 1,151 |
|
|
| 2,061 |
|
|
|
| |
Ending balance |
| $ | 1 |
|
| $ | 735 |
|
| $ | 1,101 |
|
| $ | 716 |
|
| $ | 12,103 |
|
|
|
|
|
| $ | 1 |
|
| $ | 778 |
|
| $ | 1,732 |
|
| $ | 1,696 |
|
| $ | 14,065 |
|
|
|
|
The Company’s methodology for determining its allowance for loan losses includes an analysis of qualitative factors that are added to the historical loss rates in arriving at the total allowance for loan losses needed for this general pool of loans. The qualitative factors include:
• Changes in national and local economic trends; • The rate of growth in the portfolio; • Trends of delinquencies and nonaccrual balances; • Changes in loan policy; and • Changes in lending management experience and related staffing.
|
|
|
|
|
|
|
|
|
|
Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. These qualitative factors, applied to each product class, make the evaluation inherently subjective, as it requires material estimates that may be susceptible to significant revision as more information becomes available. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan losses analysis and calculation.
- 3833 - -
The allocation of the allowance for loan losses summarized on the basis of the Company’s calculation methodology was as follows:
|
| September 30, 2021 |
|
| September 30, 2022 |
| ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
| Other |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
| |||||
(In thousands) |
| 1-4 family first-lien residential mortgage |
|
| Residential construction mortgage |
|
| Commercial real estate |
|
| Commercial lines of credit |
|
| Other Commercial and industrial |
|
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
| ||||||||||
Specifically reserved |
| $ | 72 |
|
| $ | 0 |
|
| $ | 234 |
|
| $ | 56 |
|
| $ | 1,128 |
|
| $ | 92 |
|
| $ | - |
|
| $ | 339 |
|
| $ | 2,184 |
|
| $ | 688 |
|
Historical loss rate |
|
| 84 |
|
|
| 0 |
|
|
| 2 |
|
|
| 18 |
|
|
| 37 |
|
|
| 4 |
|
|
| - |
|
|
| (29 | ) |
|
| 15 |
|
|
| 81 |
|
Qualitative factors |
|
| 760 |
|
|
| 0 |
|
|
| 4,991 |
|
|
| 779 |
|
|
| 1,697 |
|
|
| 715 |
|
|
| - |
|
|
| 5,446 |
|
|
| 1,170 |
|
|
| 1,509 |
|
Total |
| $ | 916 |
|
| $ | 0 |
|
| $ | 5,227 |
|
| $ | 853 |
|
| $ | 2,862 |
|
| $ | 812 |
|
| $ | - |
|
| $ | 5,756 |
|
| $ | 3,369 |
|
| $ | 2,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
| |||||
|
| Tax exempt |
|
| Home equity and junior liens |
|
| Other consumer |
|
| Unallocated |
|
| Total |
|
| Tax exempt |
|
| and junior liens |
|
| consumer |
|
| Unallocated |
|
| Total |
| ||||||||||
Specifically reserved |
| $ | 0 |
|
| $ | 114 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1,604 |
|
| $ | - |
|
| $ | 114 |
|
| $ | - |
|
| $ | - |
|
| $ | 3,417 |
|
Historical loss rate |
|
| 0 |
|
|
| 325 |
|
|
| 1,448 |
|
|
| 0 |
|
|
| 1,914 |
|
|
| - |
|
|
| 1 |
|
|
| 624 |
|
|
| - |
|
|
| 696 |
|
Qualitative factors |
|
| 1 |
|
|
| 339 |
|
|
| 284 |
|
|
| 0 |
|
|
| 8,851 |
|
|
| 3 |
|
|
| 314 |
|
|
| 319 |
|
|
| - |
|
|
| 9,476 |
|
Other |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,696 |
|
|
| 1,696 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 43 |
|
|
| 43 |
|
Total |
| $ | 1 |
|
| $ | 778 |
|
| $ | 1,732 |
|
| $ | 1,696 |
|
| $ | 14,065 |
|
| $ | 3 |
|
| $ | 429 |
|
| $ | 943 |
|
| $ | 43 |
|
| $ | 13,632 |
|
|
| September 30, 2021 |
| |||||||||||||||||
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
| Other |
| |||||
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
| |||||
(In thousands) |
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
| |||||
Specifically reserved |
| $ | 72 |
|
| $ | - |
|
| $ | 234 |
|
| $ | 56 |
|
| $ | 1,128 |
|
Historical loss rate |
|
| 84 |
|
|
| - |
|
|
| 2 |
|
|
| 18 |
|
|
| 37 |
|
Qualitative factors |
|
| 760 |
|
|
| - |
|
|
| 4,991 |
|
|
| 779 |
|
|
| 1,697 |
|
Total |
| $ | 916 |
|
| $ | - |
|
| $ | 5,227 |
|
| $ | 853 |
|
| $ | 2,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
| |||||
|
| Tax exempt |
|
| and junior liens |
|
| consumer |
|
| Unallocated |
|
| Total |
| |||||
Specifically reserved |
| $ | - |
|
| $ | 114 |
|
| $ | - |
|
| $ | - |
|
| $ | 1,604 |
|
Historical loss rate |
|
| - |
|
|
| 325 |
|
|
| 1,448 |
|
|
| - |
|
|
| 1,914 |
|
Qualitative factors |
|
| 1 |
|
|
| 339 |
|
|
| 284 |
|
|
| - |
|
|
| 8,851 |
|
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,696 |
|
|
| 1,696 |
|
Total |
| $ | 1 |
|
| $ | 778 |
|
| $ | 1,732 |
|
| $ | 1,696 |
|
| $ | 14,065 |
|
|
| September 30, 2020 |
| |||||||||||||||||
|
| 1-4 family |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| first-lien |
|
| Residential |
|
|
|
|
|
|
|
|
|
| Other |
| |||
|
| residential |
|
| construction |
|
| Commercial |
|
| Commercial |
|
| commercial |
| |||||
(In thousands) |
| mortgage |
|
| mortgage |
|
| real estate |
|
| lines of credit |
|
| and industrial |
| |||||
Specifically reserved |
| $ | 149 |
|
| $ | 0 |
|
| $ | 62 |
|
| $ | 253 |
|
| $ | 1,176 |
|
Historical loss rate |
|
| 73 |
|
|
| 0 |
|
|
| 108 |
|
|
| 90 |
|
|
| 46 |
|
Qualitative factors |
|
| 569 |
|
|
| 0 |
|
|
| 4,646 |
|
|
| 953 |
|
|
| 1,425 |
|
Total |
| $ | 791 |
|
| $ | 0 |
|
| $ | 4,816 |
|
| $ | 1,296 |
|
| $ | 2,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Home equity |
|
| Other |
|
|
|
|
|
|
|
|
| ||
|
| Tax exempt |
|
| and junior liens |
|
| consumer |
|
| Unallocated |
|
| Total |
| |||||
Specifically reserved |
| $ | 0 |
|
| $ | 142 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1,782 |
|
Historical loss rate |
|
| 0 |
|
|
| 324 |
|
|
| 842 |
|
|
| 0 |
|
|
| 1,483 |
|
Qualitative factors |
|
| 1 |
|
|
| 269 |
|
|
| 259 |
|
|
| 0 |
|
|
| 8,122 |
|
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 716 |
|
|
| 716 |
|
Total |
| $ | 1 |
|
| $ | 735 |
|
| $ | 1,101 |
|
| $ | 716 |
|
|
| 12,103 |
|
Note 8: Foreclosed Real Estate
The Company is required to disclose the carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession of the property at each reporting period. The Company had 0 foreclosed residential real estate at
(Dollars in thousands) |
| Number of |
|
| September 30, |
|
| Number of properties |
|
| December 31, |
| ||||
Foreclosed real estate |
|
| 2 |
|
| $ | 221 |
|
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 20212022 and December 31, 2020. At September 30, 2021, and December 31, 2020, the Company reported $613,000$628,000 and $185,000,$1.0 million, respectively, in residential real estate loans in the process of foreclosure.
- 39 -
Note 9: Guarantees
The Company does not issue any guarantees that would require liability recognition or disclosure, other than its standby letters of credit. Generally, all letters of credit, when issued, have expiration dates within one year. The credit risks involved
- 34 -
in issuing letters of credit is essentially the same as those that are involved in extending loan facilities to customers. The Company generally holds collateral and/or personal guarantees supporting these commitments. The Company had $2.6$2.8 million of standby letters of credit as of September 30, 2021.2022. Management believes that the proceeds obtained through a liquidation of collateral and the enforcement of guarantees would be sufficient to cover the potential amount of future payments required under the corresponding guarantees. The fair value of standby letters of credit was not significant to the Company’s consolidated financial statements.
Note 10: Fair Value Measurements
Accounting guidance related to fair value measurements and disclosures specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:
Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2 – Quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3 – Model-derived valuations in which one or more significant inputs or significant value drivers are unobservable.
An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs, minimize the use of unobservable inputs, to the extent possible, and considers counterparty credit risk in its assessment of fair value.
The Company used the following methods and significant assumptions to estimate fair value:
Investment securities: The fair values of available-for-sale and marketable equity securities are obtained from an independent third party and are based on quoted prices on nationally recognized securities exchanges where available (Level 1). If quoted prices are not available, fair values are measured by utilizing matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management made no adjustment to the fair value quotes that were received from the independent third party pricing service. Level 3 securities are assets whose fair value cannot be determined by using observable measures, such as market prices or pricing models. Level 3 assets are typically very illiquid, and fair values can only be calculated using estimates or risk-adjusted value ranges. Management applies known factors, such as currently applicable discount rates, to the valuation of those investments in order to determine fair value at the reporting date.
The Company holds two corporate investment securities with an amortized historical cost of $4.1$4.1 million and an aggregate fair market value of $4.4$4.8 million as of September 30, 2021.2022. These securities have aan aggregate valuation that is determined using published net asset values (NAV) derived by an analysis of the securities’ underlying assets. These securities are comprised primarily of broadly-diversified real estate and adjustable-rate senior secured business loansholdings and are traded in secondary markets on an infrequent basis. While these securities are redeemable at least annually through tender offers made by their respective issuers, the liquidation value of thethese securities may be below their stated NAVs and also subject to restrictions as to the amount of securities that can be redeemed at any single scheduled redemption. The Company
- 40 -
anticipates that these securities will be redeemed by their respective issuers on indeterminate future dates as a consequence of the ultimate liquidation strategies employed by the managementmanagers of these investments.portfolios.
The Company holdsheld one private equity security investment, acquired in 2022, with an aggregate value of $667,000$1.2 million at September 30, 2021,2022, valued utilizing readily available market pricingthe unit of account (Level 1) observed from active trading on major national stock exchanges.2) which includes; financial metrics for the company, specific operating key performance indicators, and market-related inputs. No income or expense has been recorded related
- 35 -
to this investment as the investment is still in early stage funding and, therefore, the investment is carried at historical cost at September 30, 2022.
Interest rate derivatives: The fair value of the interest rate derivatives, characterized as either fair value or cash flow hedges, are calculated based on a discounted cash flow model. All future floating rate cash flows are projected and both floating rate and fixed rate cash flows are discounted to the valuation date. The benchmark interest rate curve utilized for projecting cash flows and applying appropriate discount rates is built by obtaining publicly available third party market quotes for various swap maturity terms.
Impaired loans: Impaired loans are those loans in which the Company has measured impairment based on the fair value of the loan’s collateral or the discounted value of expected future cash flows. Fair value is generally determined based upon market value evaluations by third parties of the properties and/or estimates by management of working capital collateral or discounted cash flows based upon expected proceeds. These appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property), and the cost approach. Management modifies the appraised values, if needed, to take into account recent developments in the market or other factors, such as, changes in absorption rates or market conditions from the time of valuation and anticipated sales values considering management’s plans for disposition. Such modifications to the appraised values could result in lower valuations of such collateral. Estimated costs to sell are based on current amounts of disposal costs for similar assets. These measurements are classified as Level 3 within the valuation hierarchy. Impaired loans are subject to nonrecurring fair value adjustment upon initial recognition or subsequent impairment. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance.
The following tables summarize assets measured at fair value on a recurring basis as of the indicated dates, segregated by the level of valuation inputs within the hierarchy utilized to measure fair value:
|
| September 30, 2021 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| |
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury, agencies and GSEs |
| $ | 0 |
|
| $ | 35,844 |
|
| $ | 0 |
|
| $ | 35,844 |
|
State and political subdivisions |
|
| 0 |
|
|
| 28,910 |
|
|
| 0 |
|
|
| 28,910 |
|
Corporate |
|
| 0 |
|
|
| 9,753 |
|
|
| 0 |
|
|
| 9,753 |
|
Asset backed securities |
|
| 0 |
|
|
| 12,496 |
|
|
| 0 |
|
|
| 12,496 |
|
Residential mortgage-backed - US agency |
|
| 0 |
|
|
| 23,606 |
|
|
| 0 |
|
|
| 23,606 |
|
Collateralized mortgage obligations - US agency |
|
| 0 |
|
|
| 12,007 |
|
|
| 0 |
|
|
| 12,007 |
|
Collateralized mortgage obligations - Private label |
|
| 0 |
|
|
| 48,299 |
|
|
| 0 |
|
|
| 48,299 |
|
Total |
|
|
|
|
|
| 170,915 |
|
|
|
|
|
|
| 170,915 |
|
Corporate measured at NAV |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,402 |
|
Total available-for-sale securities |
| $ | 0 |
|
| $ | 170,915 |
|
| $ | 0 |
|
| $ | 175,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities |
| $ | 667 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap derivative fair value hedges |
| $ | 0 |
|
| $ | 994 |
|
| $ | 0 |
|
| $ | 994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap derivative cash flow hedges |
| $ | 0 |
|
| $ | (718 | ) |
| $ | 0 |
|
| $ | (718 | ) |
|
| September 30, 2022 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| ||||
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
US Treasury, agencies and GSEs |
| $ | - |
|
| $ | 29,480 |
|
| $ | - |
|
| $ | 29,480 |
|
State and political subdivisions |
|
| - |
|
|
| 42,725 |
|
|
| - |
|
|
| 42,725 |
|
Corporate |
|
| - |
|
|
| 7,199 |
|
|
| - |
|
|
| 7,199 |
|
Asset backed securities |
|
| - |
|
|
| 16,076 |
|
|
| - |
|
|
| 16,076 |
|
Residential mortgage-backed - US agency |
|
| - |
|
|
| 16,772 |
|
|
| - |
|
|
| 16,772 |
|
Collateralized mortgage obligations - US agency |
|
| - |
|
|
| 12,023 |
|
|
| - |
|
|
| 12,023 |
|
Collateralized mortgage obligations - Private label |
|
| - |
|
|
| 62,211 |
|
|
| - |
|
|
| 62,211 |
|
Total |
|
|
|
|
| 186,486 |
|
|
|
|
|
| 186,486 |
| ||
Equity investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common stock - financial services industry |
|
| 206 |
|
|
| - |
|
|
| - |
|
|
| 206 |
|
Other Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Corporate measured at NAV |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,814 |
|
Total available-for-sale securities |
| $ | 206 |
|
| $ | 186,486 |
|
| $ | - |
|
| $ | 191,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Marketable equity securities measured at NAV |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 1,203 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap derivative fair value hedges |
| $ | - |
|
| $ | (10,283 | ) |
| $ | - |
|
| $ | (10,283 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap derivative cash flow hedges |
| $ | - |
|
| $ | 699 |
|
| $ | - |
|
| $ | 699 |
|
- 4136 - -
|
| December 31, 2021 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| ||||
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
US Treasury, agencies and GSEs |
| $ | - |
|
| $ | 32,273 |
|
| $ | - |
|
| $ | 32,273 |
|
State and political subdivisions |
|
| - |
|
|
| 39,199 |
|
|
| - |
|
|
| 39,199 |
|
Corporate |
|
| - |
|
|
| 9,630 |
|
|
| - |
|
|
| 9,630 |
|
Asset backed securities |
|
| - |
|
|
| 13,613 |
|
|
| - |
|
|
| 13,613 |
|
Residential mortgage-backed - US agency |
|
| - |
|
|
| 22,164 |
|
|
| - |
|
|
| 22,164 |
|
Collateralized mortgage obligations - US agency |
|
| - |
|
|
| 12,285 |
|
|
| - |
|
|
| 12,285 |
|
Collateralized mortgage obligations - Private label |
|
| - |
|
|
| 56,731 |
|
|
| - |
|
|
| 56,731 |
|
Total |
|
| - |
|
|
| 185,895 |
|
|
| - |
|
|
| 185,895 |
|
Equity investment securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common stock - financial services industry |
|
| 206 |
|
|
| - |
|
|
| - |
|
|
| 206 |
|
Other Securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Corporate measured at NAV |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 4,497 |
|
Total available-for-sale securities |
| $ | 206 |
|
| $ | 185,895 |
|
| $ | - |
|
| $ | 190,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Marketable equity securities measured at NAV |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap derivative fair value hedge |
| $ | - |
|
| $ | (1,460 | ) |
| $ | - |
|
| $ | (1,460 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swap derivative cash flow hedges |
| $ | - |
|
| $ | (387 | ) |
| $ | - |
|
| $ | (387 | ) |
|
| December 31, 2020 |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| |
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Available-for-Sale Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury, agencies and GSEs |
| $ | 0 |
|
| $ | 6,416 |
|
| $ | 0 |
|
| $ | 6,416 |
|
State and political subdivisions |
|
| 0 |
|
|
| 23,753 |
|
|
| 0 |
|
|
| 23,753 |
|
Corporate |
|
| 0 |
|
|
| 9,943 |
|
|
| 0 |
|
|
| 9,943 |
|
Asset backed securities |
|
| 0 |
|
|
| 8,607 |
|
|
| 0 |
|
|
| 8,607 |
|
Residential mortgage-backed - US agency |
|
| 0 |
|
|
| 25,211 |
|
|
| 0 |
|
|
| 25,211 |
|
Collateralized mortgage obligations - US agency |
|
| 0 |
|
|
| 26,464 |
|
|
| 0 |
|
|
| 26,464 |
|
Collateralized mortgage obligations - Private label |
|
| 0 |
|
|
| 24,936 |
|
|
| 0 |
|
|
| 24,936 |
|
Total |
|
| 0 |
|
|
| 125,330 |
|
|
| 0 |
|
|
| 125,330 |
|
Corporate measured at NAV |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,725 |
|
Total available-for-sale securities |
| $ | 0 |
|
| $ | 125,330 |
|
| $ | 0 |
|
| $ | 128,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities |
| $ | 1,850 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap derivative fair value hedge |
|
|
|
|
|
| 136 |
|
|
|
|
|
|
| 136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap derivative cash flow hedges |
| $ | 0 |
|
| $ | (1,308 | ) |
| $ | 0 |
|
| $ | (1,308 | ) |
Pathfinder Bank had the following assets measured at fair value on a nonrecurring basis as of September 30, 20212022 and December 31, 2020:2021:
|
|
|
|
| September 30, 2022 |
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| ||||
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Impaired loans |
| $ | - |
|
| $ | - |
|
| $ | 2,716 |
|
| $ | 2,716 |
|
Foreclosed real estate |
| $ | - |
|
| $ | - |
|
| $ | 221 |
|
| $ | 221 |
|
|
|
|
|
| December 31, 2021 |
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| ||||
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Impaired loans |
| $ | - |
|
| $ | - |
|
| $ | 4,182 |
|
| $ | 4,182 |
|
Foreclosed real estate |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
|
|
|
|
|
| September 30, 2021 |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| |
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Impaired loans |
| $ | 0 |
|
| $ | 0 |
|
| $ | 3,836 |
|
| $ | 3,836 |
|
|
|
|
|
|
| December 31, 2020 |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| |
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
| ||||
Impaired loans |
| $ | 0 |
|
| $ | 0 |
|
| $ | 14,701 |
|
| $ | 14,701 |
|
The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which Level 3 inputs were used to determine fair value at the indicated dates.
|
| Quantitative Information about Level 3 Fair Value Measurements |
| ||
| Valuation | Unobservable | Range | ||
| Techniques |
|
| ||
| |||||
|
|
|
| (Weighted Avg.) | |
|
|
| |||
Impaired loans | Appraisal of collateral | Appraisal Adjustments | 5% - | ||
| (Sales Approach) | Costs to Sell | 7% - 14% (12%) | ||
Discounted Cash Flow |
|
|
- 37 -
|
| Quantitative Information about Level 3 Fair Value Measurements |
| ||
| Valuation | Unobservable | Range | ||
| Techniques |
|
| ||
| |||||
|
|
|
| (Weighted Avg.) | |
|
|
| |||
Impaired loans | Appraisal of collateral | Appraisal Adjustments | 5% - | ||
| (Sales Approach) | Costs to Sell | 7% - 14% (10%) | ||
Discounted Cash Flow |
|
|
- 42 -
There have been no transfers of assets into or out of any fair value measurement level during the three or nine months ended September 30, 2021.2022.
Required disclosures include fair value information of financial instruments, whether or not recognized in the consolidated statement of condition, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.
The Company has various processes and controls in place to ensure that fair value is reasonably estimated. The Company performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process.
While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective period-ends, and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.
Under FASB ASC Topic 820 for Fair Value Measurements and Disclosures, the financial assets and liabilities were valued at a price that represents the Company’s exit price or the price at which these instruments would be sold or transferred.
The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. The Company, in estimating its fair value disclosures for financial instruments, used the following methods and assumptions:
Cash and cash equivalents – The carrying amounts of these assets approximate their fair value and are classified as Level 1.
Federal Home Loan Bank stock – The carrying amount of these assets approximates their fair value and are classified as Level 2.
Net loans – For variable-rate loans that re-price frequently, fair value is based on carrying amounts. The fair value of other loans (for example, fixed-rate commercial real estate loans, mortgage loans, and commercial and industrial loans) is estimated using discounted cash flow analysis, based on interest rates currently being offered in the market for loans with similar terms to borrowers of similar credit quality. Loan value estimates include judgments based on expected prepayment rates. The measurement of the fair value of loans, including impaired loans, is classified within Level 3 of the fair value hierarchy.
- 38 -
Accrued interest receivable and payable – The carrying amount of these assets approximates their fair value and are classified as Level 1.
- 43 -
Deposits – The fair values disclosed for demand deposits (e.g., interest-bearing and noninterest-bearing checking, passbook savings and certain types of money management accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts) and are classified within Level 1 of the fair value hierarchy. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates of deposits to a schedule of aggregated expected monthly maturities on time deposits. Measurements of the fair value of time deposits are classified within Level 2 of the fair value hierarchy.
Borrowings – Fixed/variable term “bullet” structures are valued using a replacement cost of funds approach. These borrowings are discounted to the FHLBNY advance curve. Option structured borrowings’ fair values are determined by the FHLB for borrowings that include a call or conversion option. If market pricing is not available from this source, current market indications from the FHLBNY are obtained and the borrowings are discounted to the FHLBNY advance curve less an appropriate spread to adjust for the option. These measurements are classified as Level 2 within the fair value hierarchy.
Subordinated loansdebt – The Company secures quotes from its pricing service based on a discounted cash flow methodology or utilizes observations of recent highly-similar transactions which result in a Level 2 classification.
The carrying amounts and fair values of the Company’s financial instruments as of the indicated dates are presented in the following table:
|
|
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| |||||||||||||||||||
|
| Fair Value |
| Carrying |
|
| Estimated |
|
| Carrying |
|
| Estimated |
|
| Fair Value | Carrying |
| Estimated |
|
| Carrying |
| Estimated |
| ||||||||
(In thousands) |
| Hierarchy |
| Amounts |
|
| Fair Values |
|
| Amounts |
|
| Fair Values |
|
| Hierarchy | Amounts |
| Fair Values |
|
| Amounts |
| Fair Values |
| ||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| 1 |
| $ | 75,240 |
|
| $ | 75,240 |
|
| $ | 43,464 |
|
| $ | 43,464 |
|
| 1 | $ | 44,454 |
| $ | 44,454 |
|
| $ | 37,149 |
| $ | 37,149 |
|
Investment securities - available-for-sale |
| 2 |
|
| 170,915 |
|
|
| 170,915 |
|
|
| 125,330 |
|
|
| 125,330 |
|
| 2 |
| 186,486 |
| 186,486 |
|
|
| 185,895 |
| 185,895 |
| ||
Investment securities - available-for-sale |
| NAV |
|
| 4,402 |
|
|
| 4,402 |
|
|
| 2,725 |
|
|
| 2,725 |
|
| NAV |
| 4,814 |
| 4,814 |
|
|
| 4,497 |
| 4,497 |
| ||
Investment securities - marketable equity |
| 1 |
|
| 667 |
|
|
| 667 |
|
|
| 1,850 |
|
|
| 1,850 |
|
| NAV |
| 1,203 |
| 1,203 |
|
|
| 677 |
| 677 |
| ||
Investment securities - held-to-maturity |
| 2 |
|
| 161,736 |
|
|
| 164,896 |
|
|
| 171,224 |
|
|
| 174,935 |
|
| 2 |
| 195,930 |
| 184,007 |
|
|
| 160,923 |
| 162,805 |
| ||
Federal Home Loan Bank stock |
| 2 |
|
| 3,737 |
|
|
| 3,737 |
|
|
| 4,390 |
|
|
| 4,390 |
|
| 2 |
| 3,715 |
| 3,715 |
|
|
| 4,189 |
| 4,189 |
| ||
Net loans |
| 3 |
|
| 774,083 |
|
|
| 780,363 |
|
|
| 812,718 |
|
|
| 816,626 |
|
| 3 |
| 872,574 |
| 845,469 |
|
|
| 819,524 |
| 819,721 |
| ||
Accrued interest receivable |
| 1 |
|
| 4,599 |
|
|
| 4,599 |
|
|
| 4,549 |
|
|
| 4,549 |
|
| 1 |
| 5,172 |
| 5,172 |
|
|
| 4,520 |
| 4,520 |
| ||
Interest rate swap derivative fair value hedges |
| 2 |
|
| 994 |
|
|
| 994 |
|
|
| 191 |
|
|
| 191 |
|
| 2 |
| 10,283 |
| 10,283 |
|
|
| 1,460 |
| 1,460 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Demand Deposits, Savings, NOW and MMDA |
| 1 |
| $ | 701,163 |
|
| $ | 701,163 |
|
| $ | 598,683 |
|
| $ | 598,683 |
|
| 1 | $ | 695,135 |
| $ | 695,135 |
|
| $ | 694,089 |
| $ | 694,089 |
|
Time Deposits |
| 2 |
|
| 345,053 |
|
|
| 345,466 |
|
|
| 397,224 |
|
|
| 398,863 |
|
| 2 |
| 485,448 |
| 457,094 |
|
|
| 361,257 |
| 360,680 |
| ||
Borrowings |
| 2 |
|
| 67,054 |
|
|
| 67,767 |
|
|
| 82,050 |
|
|
| 84,065 |
|
| 2 |
| 65,621 |
| 62,245 |
|
|
| 77,098 |
| 76,957 |
| ||
Subordinated loans |
| 2 |
|
| 29,522 |
|
|
| 32,080 |
|
|
| 39,400 |
|
|
| 39,416 |
| |||||||||||||||
Subordinated debt |
| 2 |
| 29,689 |
| 26,769 |
|
|
| 29,563 |
| 30,627 |
| ||||||||||||||||||||
Accrued interest payable |
| 1 |
|
| 145 |
|
|
| 145 |
|
|
| 193 |
|
|
| 193 |
|
| 1 |
| 494 |
| 494 |
|
|
| 106 |
| 106 |
| ||
Interest rate swap derivative fair value hedges |
| 2 |
|
| 0 |
|
|
| 0 |
|
|
| 55 |
|
|
| 55 |
| |||||||||||||||
Interest rate swap derivative cash flow hedges |
| 2 |
|
| 718 |
|
|
| 718 |
|
|
| 1,308 |
|
|
| 1,308 |
|
| 2 |
| (699 | ) |
| (699 | ) |
|
| 387 |
| 387 |
|
- 39 -
44 -
Note 11: Interest Rate Derivatives
The Company is exposed to certain risks from both its business operations and changes in economic conditions. As part of managing interest rate risk, the Company enters into standardized interest rate derivative contracts (designated as hedging agreements) to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities. The Company designates interest rate hedging agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. Interest rate hedging agreements are generally entered into with counterparties that meet the Company's established credit standards and the agreements contain master netting, collateral and/or settlement provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material at September 30, 2021.2022. Interest rate hedging agreements are recorded at fair value as other assets or liabilities. The Company had no material derivative contracts not designated as hedging agreements at September 30, 20212022 or December 31, 2020.2021.
As a result of interest rate fluctuations, fixed-rate assets and liabilities will appreciate or depreciate in fair value. When effectively hedged, this appreciation or depreciation will generally be offset by changes in the fair value of derivative instruments that are linked to the hedged assets and liabilities. This strategy is referred to as a fair value hedge. In a fair value hedge, the fair value of the derivative (the interest rate hedging agreement) and changes in the fair value of the hedged item are recorded in the Company’s consolidated balance sheet with the corresponding gain or loss recognized in current earnings. The difference between changes in the fair value of the interest rate hedging agreements and the hedged items represents hedge ineffectiveness and is recorded as an adjustment to the interest income or interest expense of the respective hedged item.
Cash flows related to floating rate assets and liabilities will fluctuate with changes in underlying rate indices. When effectively hedged, the increases or decreases in cash flows related to the floating-rate asset or liability will generally be offset by changes in cash flows of the derivative instruments designated as a hedge. This strategy is referred to as a cash flow hedge. In a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. The ineffective portion of the derivative’s gain or loss on cash flow hedges is accounted for similar to that associated with fair value hedges.
Among the array of interest rate hedging contracts, potentially available to the Company, are interest rate swap and interest rate cap (or floor) contracts. The Company uses interest rate swaps, cap or floor contracts as part of its interest rate risk management strategy. Interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed payments over the life of the agreements without the exchange of the underlying notional amount. An interest rate cap is a type of interest rate derivative in which the buyer receives payments at the end of each contractual period in which the index interest rate exceeds the contractually agreed upon strike price rate. The purchaser of a cap contract will continue to benefit from any rise in interest rates above the strike price. Similarly, an interest rate floor is a derivative contract in which the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price. The purchaser of a floor contract will continue to benefit from any risedecrease in interest rates abovebelow the strike price.
- 40 -
The Company records various hedges in the Consolidated Statementconsolidated statements of Conditioncondition at fair value. The Company’s accounting treatment for these derivative instruments is based on the instruments hedge designation determined at the inception of each derivative instrument's contractual term. The following tables show the Company’s outstanding fair value hedges at September 30, 20212022 and December 31, 2020:2021:
- 45 -
(In thousands) |
| Carrying Amount of the Hedged Assets at |
|
| Cumulative Amount of Fair Value Hedging Gains Included in the Carrying Amount of the Hedged Assets at September 30, 2022 |
|
| Carrying Amount of the Hedged Assets at |
|
| Cumulative Amount of Fair Value Hedging Gains Included in The Carrying Amount of the Hedged Assets at December 31, 2021 |
| ||||
Line item on the balance sheet in which the hedged item is included: |
|
|
|
|
|
|
| |||||||||
Available-for-sale securities (1) |
| $ | 68,601 |
|
| $ | (8,707 | ) |
| $ | 61,808 |
|
| $ | (1,308 | ) |
Loans receivable (2) |
| $ | 36,692 |
|
| $ | (1,576 | ) |
| $ | 41,651 |
|
| $ | (152 | ) |
(In thousands) |
| Carrying Amount of the Hedged Assets at September 30, 2021 |
|
| Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets at September 30, 2021 |
|
| Carrying Amount of the Hedged Assets at December 31, 2020 |
|
| Cumulative Amount of Fair Value Hedging Adjustment Included in The Carrying Amount of the Hedged Assets at December 31, 2020 |
| ||||
Line item on the balance sheet in which the hedged item is included: |
|
|
|
|
|
|
|
|
| |||||||
Loans receivable (1) |
| $ | - |
|
| $ | - |
|
| $ | 12,944 |
|
| $ | 53 |
|
Available-for-sale securities (2) |
| $ | 52,023 |
|
| $ | (946 | ) |
| $ | 17,055 |
|
| $ | (191 | ) |
Loans receivable (3) |
| $ | 20,688 |
|
| $ | (44 | ) |
| $ | - |
|
| $ | - |
|
Interest Rate Cap (4) |
| $ | - |
|
| $ | 4 |
|
| $ | - |
|
| $ | - |
|
(2) These amounts include the amortized cost of a specific loan pool designated as the underlying asset for the hedging relationship in which the hedged item is the underlying asset's amortized cost (last layer) projected to be remaining at the end of the contractual term of the hedging instrument. The amount of the designated hedged item was $36.7 million and $41.7 million as of September 30, 2022 and December 31, 2021, respectively. At September 30, 2022, the fair value of the derivative resulted in a net asset position of $1.6 million, recorded by the Company in other assets. The Company’s participation in the fair value hedge had an immaterial effect on recorded interest income at September 30, 2022 and December 31, 2021.
|
|
|
|
|
|
|
|
The following table shows the pre-tax gains and losses of the Company’s derivatives designated as cash flow hedges in other comprehensive incomeOCI at September 30, 20212022 and December 31, 2021:
(In thousands) |
|
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Cash flow hedges: |
|
|
|
|
|
|
|
| ||
Total unamortized premium |
| $ | - |
|
| $ | 204 |
| ||
Fair market value adjustment interest rate cap |
|
| - |
|
|
| (197 | ) | ||
Total unamortized cap |
|
| - |
|
|
| 7 |
| ||
Fair market value adjustment interest rate swap |
|
| (718 | ) |
|
| (1,111 | ) | ||
Total loss in comprehensive income |
| $ | (718 | ) |
| $ | (1,308 | ) |
(In thousands) |
|
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
Fair market value adjustment interest rate swap |
| $ | 700 |
|
| $ | (387 | ) | ||
Total gain/(loss) in comprehensive income |
| $ | 700 |
|
| $ | (387 | ) |
- 46 -
The amounts of hedge ineffectiveness,effectiveness, recognized during the three and nine months endedat September 30, 20212022 and 2020December 31, 2021 for cash flow hedges werewas not material to the Company’s consolidated results of operations. A portion of, or the entire amount included in accumulated other comprehensive loss would be reclassified into current earnings should a portion of, or the entire hedge, no longer be considered effective. Management believes that the hedges will remain fully effective during the remaining term of the respective hedging contracts. The changes in the fair values of the interest rate hedging agreements primarily result from the effects of changing index interest rates.rates and the reduction of the time each quarter between the measurements date and the contractual maturity date of the hedging instrument.
The Company manages its potential credit exposure on interest rate swap transactions by entering into bilateral credit support agreements with each contractual counterparty. These agreements require collateralization of credit exposures beyond specified minimum threshold amounts. At September 30, 2022 and December 31, 2021, the Company posted cash, held in an interest-bearing refundable escrow arrangement, in the amount of $1.6$1.6 million in order to satisfy collateral requirements associated with its hedging contracts.
- 4741 - -
Note 12: Accumulated Other Comprehensive (Loss) Income (Loss)
Changes in the components of accumulated other comprehensive (loss) income (loss) (“AOCI”), net of tax, for the periods indicated are summarized in the tables below.
|
| For the three months ended September 30, 2021 |
|
| For the three months ended September 30, 2022 |
| ||||||||||||||||||||||||||||||||||
(In thousands) |
| Retirement Plans |
|
| Unrealized Gains and Losses on Available-for- Sale Securities |
|
| Unrealized Losses on Derivatives and Hedging Activities |
|
| Unrealized Loss on Securities Transferred to Held-to-Maturity |
|
| Total |
|
| Retirement |
|
| Unrealized |
| Unrealized Gain on |
| Unrealized Gain |
| Total |
| |||||||||||||
Beginning balance |
| $ | (2,055 | ) |
| $ | 1,549 |
|
| $ | (724 | ) |
| $ | (5 | ) |
| $ | (1,235 | ) |
| $ | (1,411 | ) |
| $ | (8,421 | ) |
| $ | 431 |
|
| $ | 2 |
|
| $ | (9,399 | ) |
Other comprehensive income before reclassifications |
|
| 0 |
|
|
| (359 | ) |
|
| 194 |
|
|
| 3 |
|
|
| (162 | ) | ||||||||||||||||||||
Other comprehensive (loss) income before reclassifications |
|
| - |
|
|
| (3,389 | ) |
|
| 86 |
|
|
| - |
|
|
| (3,303 | ) | ||||||||||||||||||||
Amounts reclassified from AOCI |
|
| 19 |
|
|
| (13 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 6 |
|
|
| 1 |
|
|
| 136 |
|
|
| - |
|
|
| - |
|
|
| 137 |
|
Ending balance |
| $ | (2,036 | ) |
| $ | 1,177 |
|
| $ | (530 | ) |
| $ | (2 | ) |
| $ | (1,391 | ) |
| $ | (1,410 | ) |
| $ | (11,674 | ) |
| $ | 517 |
|
| $ | 2 |
|
| $ | (12,565 | ) |
|
| For the three months ended September 30, 2021 |
| |||||||||||||||||
(In thousands) |
| Retirement |
|
| Unrealized Gain |
|
| Unrealized |
|
| Unrealized Loss |
|
| Total |
| |||||
Beginning balance |
| $ | (2,055 | ) |
| $ | 1,549 |
|
| $ | (724 | ) |
| $ | (5 | ) |
| $ | (1,235 | ) |
Other comprehensive (loss) income before reclassifications |
|
| - |
|
|
| (359 | ) |
|
| 194 |
|
|
| 3 |
|
|
| (162 | ) |
Amounts reclassified from AOCI |
|
| 19 |
|
|
| (13 | ) |
|
| - |
|
|
| - |
|
|
| 6 |
|
Ending balance |
| $ | (2,036 | ) |
| $ | 1,177 |
|
| $ | (530 | ) |
| $ | (2 | ) |
| $ | (1,391 | ) |
|
| For the nine months ended September 30, 2022 |
| |||||||||||||||||
(In thousands) |
| Retirement |
|
| Unrealized Loss on |
|
| Unrealized |
|
| Unrealized Gain |
|
| Total |
| |||||
Beginning balance |
| $ | (1,412 | ) |
| $ | 428 |
|
| $ | (286 | ) |
| $ | 2 |
|
| $ | (1,268 | ) |
Other comprehensive (loss) income before reclassifications |
|
| - |
|
|
| (12,220 | ) |
|
| 803 |
|
|
| - |
|
|
| (11,417 | ) |
Amounts reclassified from AOCI |
|
| 2 |
|
|
| 118 |
|
|
| - |
|
|
| - |
|
|
| 120 |
|
Ending balance |
| $ | (1,410 | ) |
| $ | (11,674 | ) |
| $ | 517 |
|
| $ | 2 |
|
| $ | (12,565 | ) |
|
| For the nine months ended September 30, 2021 |
| |||||||||||||||||
(In thousands) |
| Retirement |
|
| Unrealized Gain |
|
| Unrealized |
|
| Unrealized Loss |
|
| Total |
| |||||
Beginning balance |
| $ | (2,093 | ) |
| $ | 837 |
|
| $ | (966 | ) |
| $ | (14 | ) |
| $ | (2,236 | ) |
Other comprehensive income before reclassifications |
|
| - |
|
|
| 353 |
|
|
| 436 |
|
|
| 12 |
|
|
| 801 |
|
Amounts reclassified from AOCI |
|
| 57 |
|
|
| (13 | ) |
|
| - |
|
|
| - |
|
|
| 44 |
|
Ending balance |
| $ | (2,036 | ) |
| $ | 1,177 |
|
| $ | (530 | ) |
| $ | (2 | ) |
| $ | (1,391 | ) |
|
| For the three months ended September 30, 2020 |
| |||||||||||||||||
(In thousands) |
| Retirement Plans |
|
| Unrealized Gains and Losses on Available-for- Sale Securities |
|
| Unrealized Losses on Derivatives and Hedging Activities |
|
| Unrealized Loss on Securities Transferred to Held-to-Maturity |
|
| Total |
| |||||
Beginning balance |
| $ | (2,812 | ) |
| $ | (341 | ) |
| $ | (1,207 | ) |
| $ | (27 | ) |
| $ | (4,387 | ) |
Other comprehensive income before reclassifications |
|
| 0 |
|
|
| 821 |
|
|
| 91 |
|
|
| 7 |
|
|
| 919 |
|
Amounts reclassified from AOCI |
|
| 45 |
|
|
| (21 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 24 |
|
Ending balance |
| $ | (2,767 | ) |
| $ | 459 |
|
| $ | (1,116 | ) |
| $ | (20 | ) |
| $ | (3,444 | ) |
|
| For the nine months ended September 30, 2021 |
| |||||||||||||||||
(In thousands) |
| Retirement Plans |
|
| Unrealized Gains and Losses on Available-for- Sale Securities |
|
| Unrealized Losses on Derivatives and Hedging Activities |
|
| Unrealized Loss on Securities Transferred to Held-to-Maturity |
|
| Total |
| |||||
Beginning balance |
| $ | (2,093 | ) |
| $ | 837 |
|
| $ | (966 | ) |
| $ | (14 | ) |
| $ | (2,236 | ) |
Other comprehensive income before reclassifications |
|
| 0 |
|
|
| 353 |
|
|
| 436 |
|
|
| 12 |
|
|
| 801 |
|
Amounts reclassified from AOCI |
|
| 57 |
|
|
| (13 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 44 |
|
Ending balance |
| $ | (2,036 | ) |
| $ | 1,177 |
|
| $ | (530 | ) |
| $ | (2 | ) |
| $ | (1,391 | ) |
|
| For the nine months ended September 30, 2020 |
| |||||||||||||||||
(In thousands) |
| Retirement Plans |
|
| Unrealized Gains and Losses on Available-for- Sale Securities |
|
| Unrealized Losses on Derivatives and Hedging Activities |
|
| Unrealized Loss on Securities Transferred to Held-to-Maturity |
|
| Total |
| |||||
Beginning balance |
| $ | (2,717 | ) |
| $ | (216 | ) |
| $ | 0 |
|
| $ | (38 | ) |
| $ | (2,971 | ) |
Reevaluation of deferred tax asset valuation allowance (1) |
|
| (188 | ) |
|
| (15 | ) |
|
| 0 |
|
|
| (3 | ) |
|
| (206 | ) |
Other comprehensive income before reclassifications |
|
| 0 |
|
|
| 1,422 |
|
|
| (1,116 | ) |
|
| 21 |
|
|
| 327 |
|
Amounts reclassified from AOCI |
|
| 138 |
|
|
| (732 | ) |
|
| 0 |
|
|
| 0 |
|
|
| (594 | ) |
Ending balance |
| $ | (2,767 | ) |
| $ | 459 |
|
| $ | (1,116 | ) |
| $ | (20 | ) |
| $ | (3,444 | ) |
(1) In the first quarter of 2020, consistent with policy, management reviewed all facts and circumstances related to its deferred taxes and determined that based on the expected filings of future New York State tax returns, the valuation allowance created in 2019 was no longer needed. Therefore management elected to eliminate its New York State net deferred tax asset valuation allowance during the quarter ended March 31, 2020.
- 4842 - -
The following table presents the amounts reclassified out of each component of AOCI for the indicated period:
|
|
|
| Amount Reclassified |
|
| Amount Reclassified |
| |||||||||
|
|
|
| from AOCI (1) |
|
| from AOCI (1) |
| |||||||||
|
|
|
| (Unaudited) |
|
| (Unaudited) |
| |||||||||
(In thousands) |
|
|
| For the three months ended |
|
| For the nine months ended |
| |||||||||
Details about AOCI (1) components |
| Affected Line Item in the Statement of Income |
| September 30, 2022 |
|
| September 30, 2021 |
|
| September 30, 2022 |
| September 30, 2021 |
| ||||
Retirement plan items |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Retirement plan net losses |
| Salaries and employee benefits |
| $ | (1 | ) |
| $ | (26 | ) |
| $ | (2 | ) | $ | (79 | ) |
Tax effect |
| Provision for income taxes |
|
| - |
|
|
| 7 |
|
|
| 1 |
|
| 22 |
|
|
| Net (losses) income |
| $ | (1 | ) |
| $ | (19 | ) |
| $ | (1 | ) | $ | (57 | ) |
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Realized (loss) gain on sale of securities |
| Net gains on sales and redemptions |
| $ | (186 | ) |
| $ | 18 |
|
| $ | (160 | ) | $ | 18 |
|
Tax effect |
| Provision for income taxes |
|
| 50 |
|
|
| (5 | ) |
|
| 43 |
|
| (5 | ) |
|
| Net (losses) income |
| $ | (136 | ) |
| $ | 13 |
|
| $ | (117 | ) | $ | 13 |
|
|
|
|
| Amount Reclassified |
|
| Amount Reclassified |
| ||||||||||
|
|
|
| from AOCI (1) |
|
| from AOCI (1) |
| ||||||||||
|
|
|
| (Unaudited) |
|
| (Unaudited) |
| ||||||||||
(In thousands) |
|
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
Details about AOCI (1) components |
| Affected Line Item in the Statement of Income |
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||
Retirement plan items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plan net losses recognized in plan expenses (2) |
| Salaries and employee benefits |
| $ | (26 | ) |
| $ | (58 | ) |
| $ | (79 | ) |
| $ | (175 | ) |
Tax effect |
| Provision for income taxes |
|
| 7 |
|
|
| 12 |
|
|
| 22 |
|
|
| 37 |
|
|
| Net Income |
| $ | (19 | ) |
| $ | (46 | ) |
| $ | (57 | ) |
| $ | (138) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on sale of securities |
| Net gains on sales and redemptions of investment securities |
| $ | 18 |
|
| $ | 27 |
|
| $ | 18 |
|
| $ | 926 |
|
Tax effect |
| Provision for income taxes |
|
| (5 | ) |
|
| (6 | ) |
|
| (5 | ) |
|
| (194 | ) |
|
| Net Income |
| $ | 13 |
|
| $ | 21 |
|
| $ | 13 |
|
| $ | 732 |
|
|
|
|
|
See Note 5 for additional information.
- 43 -
49 -
Note 13: Noninterest Income
The Company has included the following table regarding the Company’s noninterest income for the periods presented.
|
| For the three months |
|
| For the nine months |
| ||||||||||||||||||||||||||
|
| ended September 30, |
|
| ended September 30, |
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| September 30, 2022 |
| September 30, 2021 |
| September 30, 2022 |
| September 30, 2021 |
| |||||||||||
Service fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Insufficient funds fees |
| $ | 245 |
|
| $ | 195 |
|
| $ | 643 |
|
| $ | 618 |
|
| $ | 154 |
|
| $ | 245 |
|
| $ | 406 |
|
| $ | 643 |
|
Deposit related fees |
|
| 102 |
|
|
| 100 |
|
|
| 296 |
|
|
| 272 |
|
|
| 120 |
|
|
| 102 |
|
|
| 332 |
|
|
| 296 |
|
ATM fees |
|
| 46 |
|
|
| 44 |
|
|
| 143 |
|
|
| 108 |
|
|
| 60 |
|
|
| 46 |
|
|
| 138 |
|
|
| 143 |
|
Total service fees |
|
| 393 |
|
|
| 339 |
|
|
| 1,082 |
|
|
| 998 |
|
|
| 334 |
|
|
| 393 |
|
|
| 876 |
|
|
| 1,082 |
|
Fee Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Insurance commissions |
|
| 211 |
|
|
| 215 |
|
|
| 722 |
|
|
| 734 |
|
|
| 258 |
|
|
| 211 |
|
|
| 840 |
|
|
| 722 |
|
Investment services revenue |
|
| 68 |
|
|
| 87 |
|
|
| 313 |
|
|
| 235 |
|
|
| 140 |
|
|
| 68 |
|
|
| 365 |
|
|
| 313 |
|
ATM fees surcharge |
|
| 62 |
|
|
| 57 |
|
|
| 172 |
|
|
| 167 |
|
|
| 66 |
|
|
| 62 |
|
|
| 172 |
|
|
| 172 |
|
Banking house rents collected |
|
| 61 |
|
|
| 47 |
|
|
| 187 |
|
|
| 189 |
|
|
| 70 |
|
|
| 61 |
|
|
| 172 |
|
|
| 187 |
|
Total fee income |
|
| 402 |
|
|
| 406 |
|
|
| 1,394 |
|
|
| 1,325 |
|
|
| 534 |
|
|
| 402 |
|
|
| 1,549 |
|
|
| 1,394 |
|
Card income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Debit card interchange fees |
|
| 236 |
|
|
| 209 |
|
|
| 698 |
|
|
| 577 |
|
|
| 180 |
|
|
| 236 |
|
|
| 639 |
|
|
| 698 |
|
Merchant card fees |
|
| 23 |
|
|
| 20 |
|
|
| 54 |
|
|
| 51 |
|
|
| 21 |
|
|
| 23 |
|
|
| 54 |
|
|
| 54 |
|
Total card income |
|
| 259 |
|
|
| 229 |
|
|
| 752 |
|
|
| 628 |
|
|
| 201 |
|
|
| 259 |
|
|
| 693 |
|
|
| 752 |
|
Mortgage fee income and realized gain on sale of loans and foreclosed real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Loan servicing fees |
|
| 54 |
|
|
| 90 |
|
|
| 155 |
|
|
| 218 |
|
|
| 74 |
|
|
| 54 |
|
|
| 260 |
|
|
| 155 |
|
Net gains on sales of loans and foreclosed real estate |
|
| 67 |
|
|
| 134 |
|
|
| 226 |
|
|
| 903 |
|
|
| 47 |
|
|
| 67 |
|
|
| 122 |
|
|
| 226 |
|
Total mortgage fee income and realized gain on sale of loans and foreclosed real estate |
|
| 121 |
|
|
| 224 |
|
|
| 381 |
|
|
| 1,121 |
|
|
| 121 |
|
|
| 121 |
|
|
| 382 |
|
|
| 381 |
|
Total |
|
| 1,175 |
|
|
| 1,198 |
|
|
| 3,609 |
|
|
| 4,072 |
|
|
| 1,190 |
|
|
| 1,175 |
|
|
| 3,500 |
|
|
| 3,609 |
|
Earnings and gain on bank owned life insurance |
|
| 164 |
|
|
| 133 |
|
|
| 418 |
|
|
| 355 |
|
|
| 156 |
|
|
| 164 |
|
|
| 441 |
|
|
| 418 |
|
Net gains on sales and redemptions of investment securities |
|
| 5 |
|
|
| 27 |
|
|
| 56 |
|
|
| 1,076 |
| ||||||||||||||||
Gains/(losses) on marketable equity securities |
|
| 89 |
|
|
| 118 |
|
|
| 372 |
|
|
| (798 | ) | ||||||||||||||||
Net (losses) gains on sale and redemption of investment |
|
| (198 | ) |
|
| 5 |
|
|
| (168 | ) |
|
| 56 |
| ||||||||||||||||
Gains on marketable equity securities |
|
| - |
|
|
| 89 |
|
|
| 39 |
|
|
| 372 |
| ||||||||||||||||
Net gains on sale of premises and equipment |
|
| - |
|
|
| - |
|
|
| 201 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 201 |
|
Other miscellaneous income |
|
| 113 |
|
|
| 15 |
|
|
| 169 |
|
|
| 65 |
|
|
| 13 |
|
|
| 113 |
|
|
| 248 |
|
|
| 169 |
|
Total noninterest income |
| $ | 1,546 |
|
| $ | 1,491 |
|
| $ | 4,825 |
|
| $ | 4,770 |
|
| $ | 1,161 |
|
| $ | 1,546 |
|
| $ | 4,060 |
|
| $ | 4,825 |
|
The following is a discussion of key revenues within the scope of ASC 606 guidance:
|
|
|
|
|
|
|
|
- 5044 - -
and commercial mortgage loans, sales of one-to-four family residential mortgage loans, sales of government guarantees portions of Small Business Administration loans (“SBA loans”), and sales of foreclosed real estate, and is earned as the transaction occurs.
|
Note 14: Leases
The Company has operating and finance leases for certain banking offices and land under noncancelable agreements. Our leases have remaining lease terms that vary from less than two years up to 2927 years, some of which include options to extend the leases for various renewal periods.periods. All options to renew are included in the current lease term when we believe it is reasonably certain that the renewal options will be exercised.
The components of the lease expense are as follows:
|
| For the three months ended |
|
| For the nine months ended |
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||||||||||||
(In thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2022 |
|
| September 30, 2021 |
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||||||||
Operating lease cost |
| $ | 57 |
|
| $ | 61 |
|
| $ | 170 |
|
| $ | 182 |
|
| $ | 57 |
|
| $ | 57 |
|
| $ | 170 |
|
| $ | 170 |
|
Finance lease cost |
|
| 20 |
|
|
| 20 |
|
|
| 61 |
|
|
| 60 |
|
|
| 21 |
|
|
| 20 |
|
|
| 62 |
|
|
| 61 |
|
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
(In thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||
Cash paid for amount included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
| |||||||
Operating cash flows from operating leases |
| $ | 52 |
|
| $ | 56 |
|
| $ | 155 |
|
| $ | 167 |
|
Operating cash flows from finance leases |
|
| 20 |
|
|
| 20 |
|
|
| 61 |
|
|
| 60 |
|
Financing cash flows from finance leases |
|
| 18 |
|
|
| 18 |
|
|
| 54 |
|
|
| 53 |
|
Supplemental cash flow information related to leases was as follows:
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||
(In thousands) |
| September 30, 2022 |
|
| September 30, 2021 |
|
| September 30, 2022 |
|
| September 30, 2021 |
| ||||
Cash paid for amount included in the measurement of lease liabilities: |
|
|
|
|
|
|
| |||||||||
Operating cash flows from operating leases |
| $ | 53 |
|
| $ | 52 |
|
| $ | 158 |
|
| $ | 155 |
|
Operating cash flows from finance leases |
|
| 21 |
|
|
| 20 |
|
|
| 62 |
|
|
| 61 |
|
Financing cash flows from finance leases |
|
| 19 |
|
|
| 18 |
|
|
| 55 |
|
|
| 54 |
|
- 45 -
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
| ||||||||||
(In thousands, except lease term and discount rate) |
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Operating Leases: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Operating lease right-of-use assets |
| $ | 2,170 |
|
| $ | 2,240 |
|
| $ | 2,033 |
|
| $ | 2,136 |
|
Operating lease liabilities |
| $ | 2,469 |
|
| $ | 2,525 |
|
| $ | 2,348 |
|
| $ | 2,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Finance Leases: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Financial Liability |
| $ | 594 |
|
| $ | 587 |
| ||||||||
Finance Lease Liability |
| $ | 603 |
|
| $ | 596 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Weighted Average Remaining Lease Term: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Operating Leases |
| 18.43 years |
|
| 19.08 years |
|
| 17.89 years |
| 18.29 years |
| |||||
Finance Leases |
| 27.67 years |
|
| 28.42 years |
|
| 26.67 years |
| 27.42 years |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Weighted Average Discount Rate: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Operating Leases |
|
| 3.73 | % |
|
| 3.73 | % |
|
| 3.74 | % |
|
| 3.73 | % |
Finance Leases |
|
| 13.75 | % |
|
| 13.75 | % |
|
| 13.75 | % |
|
| 13.75 | % |
Maturities of lease liabilities wereare as follows:
Twelve Months Ending September 30, |
|
|
| |
(In thousands) |
|
|
| |
2023 |
| $ | 28 |
|
2024 |
|
| 118 |
|
2025 |
|
| 118 |
|
2026 |
|
| 126 |
|
2027 |
|
| 133 |
|
Thereafter |
|
| 2,428 |
|
Total minimum lease payments |
| $ | 2,951 |
|
- 51 -
Twelve Months Ending September 30, |
|
|
|
|
(In thousands) |
|
|
|
|
2022 |
| $ | 23 |
|
2023 |
|
| 115 |
|
2024 |
|
| 118 |
|
2025 |
|
| 118 |
|
2026 |
|
| 126 |
|
Thereafter |
|
| 2,563 |
|
Total minimum lease payments |
| $ | 3,063 |
|
The Company owns certain properties that it leases to unaffiliated third parties at market rates. Lease rental income was $61,000$70,000 and $47,000$61,000 for the three months ended September 30, 20212022 and 2020,2021 respectively. Lease rental income was $187,000$172,000 and $189,000$187,000 for the nine months ended September 30, 20212022 and 2020,2021, respectively. All lease agreements, in which the Company is the lessor, are accounted for as operating leases.
Note 15: COVID-19
The World Health Organization (the “WHO”) declared COVID-19 a global pandemic on March 11, 2020. In the United States, by the end of March 2020, the rapid spread of the COVID-19 virus invoked various Federal and New York State authorities to make emergency declarations and issue executive orders to limit the spread of the disease. Measures included severe restrictions on international and domestic travel, limitations on public gatherings, implementation of social distancing and sanitization protocols, school closings, orders to shelter in place and mandates to close all non-essential businesses to the public. To varying degrees, these very substantial mandated curtailments of social and economic activity had been progressively relaxed in the United States during the first and second quarters of 2021. This relaxation of the social and economic restrictions followed the increasingly wide-spread availability of vaccines that were first made available to the most vulnerable population segments in late 2020. These vaccines are generally considered to be effective in reducing the severity of the infection, if contracted, and in slowing the rate of spread of the coronavirus. However, the percentage of unvaccinated people in the United States, and the potential for future mutations of the coronavirus, remain significant long-term public health and economic concerns.
As a result of the initial and continuing outbreak, and governmental responses thereto, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. During the most restrictive periods during the pandemic, the Company had many of its employees working remotely and significantly reduced physical customer contact with employees and other customers until the second quarter of 2021, when New York State relaxed the majority of its safety mandates. On September 30, 2021, the Bank’s offices and branches were fully accessible to the public. We will take further actions, focused on safety, as may be required in the future by government authorities or that we determine to be in the best interests of our employees, customers and business partners.
Concerns about the spread of the disease and its anticipated negative impact on economic activity severely disrupted both domestic and international financial markets, prompting the world’s central banks to inject significant amounts of monetary stimulus into their respective economies. In the United States, the Federal Reserve System’s Federal Open Market Committee swiftly cut the target Federal Funds rate to a range of 0% to 0.25%, where it remains as of the date of this filing. The reductions in the Fed funds target rate included a 50 basis point reduction in the target federal funds rate on March 3, 2020 and an additional 100 basis point reduction on March 15, 2020. In addition, the Federal Reserve initiated various market support programs to ease the stress on financial markets. This significant reduction in short-term interest rates has reduced, and will continue to reduce, the Bank’s cost of funds and interest earning-asset yields, as long as these central bank monetary policies remain in effect. The long-term effects of the current interest rate environment, resulting from government and central bank responses to the pandemic, on the Bank’s net interest margin cannot be predicted with certainty at this time. However, it is likely that a prolonged period of the current monetary policy will result in the reduction of the Company’s net interest margin in future periods, primarily as a result of declines in interest earning-asset yields over time.
- 52 -
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed into law on March 27, 2020, provided financial assistance in various forms to both businesses and consumers, including the establishment and funding of the Paycheck Protection Program (“PPP”). In addition, the CARES Act also created many directives affecting the operations of financial servicesservice providers, such as the Company, including a forbearance program for federally-backed mortgage loans and protections for borrowers from negative credit reporting due to loan accommodations related to the national emergency. The banking regulatory agencies likewise issued guidance encouraging financial institutions to work prudentlyThere were no remaining pandemic-related borrower forbearances of any type remaining in effect at September 30, 2022. At September 30, 2022, the Company's operations and business activities, including its relationships with borrowers whoits customers, most particularly loan customers, were or may be, unable to meet their contractual payment obligations because of the effects of COVID-19. The Company has worked to assist its business and consumer customers affected by COVID-19. While the CARES Act is widely-considered to have been beneficialbeing conducted in a manner that was substantially identical to the economic recovery and supportive of the Company’s business activities, the long-term effect of this legislation on the operations ofway in which the Company cannot be determined with certainty at this time.
On December 27, 2020, following passage by the United States Congress, President Donald J. Trump signed into law the Consolidated Appropriations Act, 2021 which included the Coronavirus Responseconducted its activities and Relief Supplemental Appropriations Act (“CRRSAA”). The intent of this legislation was to provide another round of Economic Impact Payments to eligible individuals and families, renew the PPP to support small businesses and their employees, ensure needed access to unemployment benefits for Americans who had lost their jobs due to COVID-19, and provide additional funding for schools, vaccine distribution, and other important sectors of the economy. While CRRSSA is widely considered to have been beneficialrelationships prior to the economic recovery and supportive of the Company’s business activities, the long-term effect of this legislation on the operations of the Company cannot be determined with certainty at this time.
On March 11, 2021, President Joseph R. Biden signed into law the American Rescue Plan Act of 2021. The intent of this legislation was to provide additional new funding for rural hospitals and health care providers for COVID-19 relief, to increase federal subsidies for COBRA coverage, and make changes to the Medicare wage index. The legislation also included provisions to bolster the nation’s COVID-19 health care response with additional resources for vaccines, treatment, personal protective equipment (PPE), testing, contact tracing and workforce development. In addition, non-health care specific provisions provide financial support for families and small businesses, and both extended and expanded support for housing, child care, food and the education system. While The American Rescue Plan Act of 2021 is expected to benefit the economic recovery and be supportive of the Company’s business activities, the effect of this legislation on the operations of the Company cannot be determined with certainty at this time.pandemic.
As of the date of this filing, a variant of the coronavirus, referred to as the “Delta” variant, has emerged in the United States and remains a significant concern in some regions and potentially, throughout the country. This variant is believed to be significantly more contagious than earlier variants of the coronavirus. Certain previously-relaxed social distancing and safety protocols have been reinstated in some areas of the country and it is possible that such protocols will be reinstated broadly in the future. The economic effects of these varying protocol reinstatement actions on the Company’s operations cannot be determined with certainty at this time.
During the most restrictive periods of the pandemic, the Bank granted loan payment deferrals to the substantial majority of commercial and consumer customers who had made requests for such accommodations. These deferrals were granted following individual discussions with each borrower and were generally for periods of 90 or 180 days at the outset. Following discussions with certain borrowers, additional loan payment deferral periods of up to 90 days were granted following the expiration of the initial 90- to 180-day deferral periods. Typically, scheduled interest payments placed into deferred status have been added to future scheduled payments and are expected to be collected in total at the original maturity date of the loan. As of September 30, 2021, the Bank had no loans on active pandemic-related deferral. At December 31, 2020, the Bank had 38 residential mortgage and consumer loans, totaling $2.7 million and 24 commercial real estate and other commercial and industrial loans, totaling $14.4 million remained in deferral status.
- 53 -
Note 16: Related Party Transactions:
In the ordinary course of business, the Company has granted loans to certain directors, executive officers and their affiliates (collectively referred to as “related parties”). None of the related party loans were classified as nonaccrual, past due, restructured, or potential problem loans at September 30, 20212022 or December 31, 2020.2021.
- 46 -
The following represents the activity associated with loans to related parties during the yearnine months ended September 30, 20212022 and the year ended December 31, 2020:2021:
|
| September 30, |
|
| December 31, |
| ||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
|
| 2022 |
|
|
| 2021 |
| ||
Balance at the beginning of the year |
| $ | 22,210 |
|
| $ | 19,301 |
|
| $ | 22,427 |
|
| $ | 22,445 |
|
Originations and related party additions |
|
| 3,298 |
|
|
| 4,899 |
|
|
| 10,716 |
|
|
| 8,007 |
|
Principal payments and related party removals |
|
| (3,104 | ) |
|
| (1,990 | ) |
|
| (4,311 | ) |
|
| (8,025 | ) |
Balance at the end of the year |
| $ | 22,404 |
|
| $ | 22,210 |
| ||||||||
Balance at the end of the period |
| $ | 28,832 |
|
| $ | 22,427 |
|
Note 17: Subsequent Events
As an integral part of the Bank’s overall balance sheet management strategies, the Bank periodically acquires diversified pools of loans and enters into loan participation agreement that are originated and serviced by unrelated third parties. On November 5, 2021, the Bank entered into a revolving commercial line participation agreement, for an amount up to $15.0 million, secured by the single corporate borrower’s accounts receivable assets. On November 8, 2021, the Bank acquired $22.3 million of broadly-diversified, secured consumer installment loans. Both of these loan asset acquisitions were collateralized by assets that are primarily located outside of the Bank’s market area.
- 54 -
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)
General
The Company is a Maryland corporation headquartered in Oswego, New York. The Company is 100% owned by public shareholders. The primary business of the Company is its investment in Pathfinder Bank (the "Bank"), a New York State chartered commercial bank, which is 100% owned by the Company. The Bank has two wholly owned operating subsidiaries, Pathfinder Risk Management Company, Inc. (“PRMC”) and Whispering Oaks Development Corp. All significant inter-company accounts and activity have been eliminated in consolidation. Although the Company owns, through its subsidiary PRMC, 51% of the membership interest in FitzGibbons Agency, LLC (“Fitzgibbons” or “Agency”), the Company is required to consolidate 100% of FitzGibbons within the consolidated financial statements. The 49% of which the Company does not own, is accounted for separately as a noncontrolling interestsinterest within the consolidated financial statements. At September 30, 2021,2022, the Company and subsidiaries had total consolidated assets of $1.26$1.4 billion, total consolidated liabilities of $1.16$1.29 billion and shareholders' equity of $106.3$107.3 million, plus noncontrolling interest of $337,000,$494,000, which represents the 49% of FitzGibbons not owned by the Company.
The following discussion reviews the Company's financial condition at September 30, 20212022 and the results of operations for the three and nine month periods ended September 30, 20212022 and 2020.2021. Operating results for the three and nine months ended September 30, 20212022 are not necessarily indicative of the results that may be expected for the year ending December 31, 20212022 or any other period.
The following material under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" is written with the presumption that the users of the interim financial statements have read, or have access to, the Company's latest audited financial statements and notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 20202021 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 202125, 2022 (“the consolidated annual financial statements”) as of December 31, 20202021 and 20192020 and for the two years then ended. Therefore, only material changes in financial condition and results of operations are discussed in the remainder of Item 2.
Statement Regarding Forward-Looking Statements
Certain statements contained herein are “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. This report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project”"believe," "expect," "intend," "anticipate," "estimate," "project" or similar expressions. The Company’s ability to predict resultsexpressions, or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effectconditional verbs, such as “will,” “would,” “should,” “could,” or “may.” These forward-looking statements are based on the operationscurrent beliefs and expectations of the CompanyCompany’s and its subsidiariesthe Bank’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s and the Bank’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. Factors that could cause such differences to exist include, but are not limited to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 55 -
|
|
|
|
In addition risks related to the risk factors enumerated above,real estate and economic environment, particularly in the continuing economic impactmarket areas in which the Company and the Bank operate; fiscal and monetary policies of the U.S. Government; inflation; changes in government regulations affecting financial institutions, including regulatory compliance costs and capital requirements; fluctuations in the adequacy of the allowance for loan losses; decreases in deposit levels necessitating increased borrowing to fund loans
- 47 -
and investments; the effects of the COVID-19 outbreak could adversely affect our financial conditionpandemic; operational risks including, but not limited to, cybersecurity, fraud and results of operations. The COVID-19 pandemic caused significant economic dislocation innatural disasters; the United States as many state and local governments ordered non-essential businesses to close and residents to shelter in place. While certain restrictions have started to ease, particularly withrisk that the recent widespread availability of novel vaccines, the pace at which the economic recovery unfolds and the sustainability of that recovery cannot be predicted with certainty at this time.
Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following additional risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. WeCompany may not be successful in findingthe implementation of its business strategy; changes in prevailing interest rates; credit risk management; asset-liability management; and integrating suitable successorsother risks described in the event of key employee loss or unavailability.Company’s filings with the Securities and Exchange Commission, which are available at the SEC’s website, www.sec.gov.
Any one or a combinationThe Company and the Bank caution prospective investors not to place undue reliance on any such forward-looking statements, which speak only as of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.
These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, thedate made. The Company does not undertake, and specifically disclaims any obligation to release publicly the result ofrevise or update any revisions that may be made to any forward-
- 56 -
lookingforward-looking statements contained in this quarterly report on Form 10-Q to reflect future events or circumstances afterdevelopments.
COVID-19 Response and the date of the statements or to reflect the occurrence of anticipated or unanticipated events.Paycheck Protection Program
COVID-19 Response
The World Health Organization (the “WHO”) declared COVID-19 a global pandemic on March 11, 2020. In the United States, by the end of March 2020, the rapid spread of the COVID-19 virus invoked various Federal and New York State authorities to make emergency declarations and issue executive orders to limit the spread of the disease. Measures included severe restrictions on international and domestic travel, limitations on public gatherings, implementation of social distancing and sanitization protocols, school closings, orders to shelter in place and mandates to close all non-essential businesses to the public. To varying degrees these very substantial mandated curtailments of social and economic activity had been progressively relaxed in the United States during the first and second quarters of 2021. This relaxation of the social and economic restrictions followed the increasingly wide-spread availability of vaccines that were first made available to the most vulnerable population segments in late 2020. These vaccines are generally considered to be effective in reducing the severity of the infection, if contracted, and in slowing the rate of spread of the coronavirus. However, the percentage of unvaccinated people in the United States, and the potential for future mutations of the coronavirus, remain significant long-term public health and economic concerns.
As a result of the initial and continuing outbreak, and governmental responses thereto, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. During the most restrictive periods during the pandemic, the Company had many of its employees working remotely and significantly reduced physical customer contact with employees and other customers until the second quarter of 2021, when New York State relaxed the majority of its safety mandates. At September 30, 2021, the Bank’s offices and branches were fully accessible to the public. We will take further actions, focused on safety, as may be required in the future by government authorities or that we determine to be in the best interests of our employees, customers and business partners.
Concerns about the spread of the disease and its anticipated negative impact on economic activity, severely disrupted both domestic and international financial markets prompting the world’s central banks to inject significant amounts of monetary stimulus into their respective economies. In the United States, the Federal Reserve System’s Federal Open Market Committee, swiftly cut the target Federal Funds rate to a range of 0% to 0.25%, where it remains as of the date of this filing. The reductions in the Fed funds target rate included a 50 basis point reduction in the target federal funds rate on March 3, 2020 and an additional 100 basis point reduction on March 15, 2020. In addition, the Federal Reserve initiated various market support programs to ease the stress on financial markets. This significant reduction in short-term interest rates has reduced, and will continue to reduce, the Bank’s cost of funds and interest earning-asset yields, as long as these central bank monetary policies remain in effect. The long-term effects of the current interest rate environment, resulting from government and central bank responses to the pandemic, on the Bank’s net interest margin cannot be predicted with certainty at this time. However, it is likely that a prolonged period of the current monetary policy will result in the reduction of the Company’s net interest margin in future periods, primarily as a result of declines in interest earning-asset yields over time.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed into law on March 27, 2020, provided financial assistance in various forms to both businesses and consumers, including the establishment and funding of the Paycheck Protection Program (“PPP”). In addition, the CARES Act also created many directives affecting the operations of financial servicesservice providers, such as the Company, including a forbearance program for federally-backed mortgage loans and protections for borrowers from negative credit reporting due to loan accommodations related to the national emergency. The banking regulatory agencies issued guidance encouraging financial institutions to work prudentlyThere were no remaining pandemic-related borrower forbearances of any type remaining in effect at September 30, 2022. At September 30, 2022, the Company's operations and business activities, including its relationships with borrowers whoits customers, most particularly loan customers, were or may be, unable to meet their contractual payment obligations because of the effects of COVID-19. The Company has worked to assist its business and consumer customers affected by COVID-19. While the CARES Act is widely-considered to have been beneficialbeing conducted in a manner that was substantially identical to the economic recovery and supportive of the Company’s business activities, the long-term effect of this legislation on the operations ofway in which the Company cannot be determined with certainty at this time.
- 57 -
On December 27, 2020, following passage by the United States Congress, President Donald J. Trump signed into law the Consolidated Appropriations Act, 2021 which included the Coronavirus Responseconducted its activities and Relief Supplemental Appropriations Act (“CRRSAA”). The intent of this legislation was to provide another round of Economic Impact Payments to eligible individuals and families, renew the PPP to support small businesses and their employees, ensure needed access to unemployment benefits for Americans who had lost their jobs due to COVID-19, and provide additional funding for schools, vaccine distribution, and other important sectors of the economy. While CRRSSA is widely-considered to have been beneficialrelationships prior to the economic recovery and supportive of the Company’s business activities, the long-term effect of this legislation on the operations of the Company cannot be determined with certainty at this time.COVID-19 pandemic.
On March 11, 2021, President Joseph R. Biden, signed into law the American Rescue Plan Act of 2021. The intent of this legislation was to provide additional new funding for rural hospitals and health care providers for COVID-19 relief, to increase federal subsidies for COBRA coverage, and make changes to the Medicare wage index. The legislation also included provisions to bolster the nation’s COVID-19 health care response with additional resources for vaccines, treatment, PPE, testing, contact tracing and workforce development. In addition, non-health care specific provisions provide financial support for families and small businesses, and both extended and expanded support for housing, child care, food and the education system. While The American Rescue Plan Act of 2021 is expected to benefit the economic recovery and be supportive of the Company’s business activities, the effect of this legislation on the operations of the Company cannot be determined with certainty at this time.
As of the date of this filing, a variant of the coronavirus, referred to as the “Delta” variant, has emerged in the United States and remains a significant concern in some regions and potentially, throughout the country. This variant is believed to be significantly more contagious than earlier variants of the coronavirus. Certain previously-relaxed social distancing and safety protocols have been reinstated in some areas of the country and it is possible that such protocols will be reinstated broadly in the future. The economic effects of these varying protocol reinstatement actions on the Company’s operations cannot be determined with certainty at this time.
During the most restrictive periods of the pandemic, the Bank granted loan payment deferrals to the substantial majority of commercial and consumer customers who had made requests for such accommodations. These deferrals were granted following individual discussions with each borrower and were generally for periods of 90 or 180 days at the outset. Following discussions with certain borrowers, additional loan payment deferral periods of up to 90 days were granted following the expiration of the initial 90- to 180-day deferral periods. Typically, scheduled interest payments placed into deferred status have been added to future scheduled payments and are expected to be collected in total at the original maturity date of the loan. As of September 30, 2021, the Bank had no loans on active pandemic-related deferral, compared to December 31, 2020, the Bank had 38 residential mortgage and consumer loans, totaling $2.7 million and 24 commercial real estate and other commercial and industrial loans, totaling $14.4 million remained in deferral status.
Paycheck Protection Program
The Bank participated in all rounds of the PPP funded by the U.S. Treasury Department and administered by the U.S. SBA pursuant to the CARES Act and subsequent legislation. PPP loans have an interest rate of 1.0% and a two-year or five-year loan term to maturity. The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and the loan proceeds are used for qualifying expenses. The PPP ended in May 2021. Information related to the Company’s PPP loans are included in the following tables:
Unaudited |
| For the three months ended |
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| For the nine months ended, |
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(In thousands, except number of loans) |
| September 30, 2021 |
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| September 30, 2020 |
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| September 30, 2021 |
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| September 30, 2020 |
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Number of PPP loans originated in the period |
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| - |
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| 25 |
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| 478 |
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| 699 |
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Funded balance of PPP loans originated in the period |
| $ | - |
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| $ | 313 |
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| $ | 36,369 |
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| $ | 75,352 |
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Number of PPP loans forgiven in the period |
| 287 |
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|
| - |
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| 636 |
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|
| - |
| ||
Average balance of PPP loans in the period |
| $ | 39,799 |
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| $ | 74,769 |
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| $ | 59,431 |
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| $ | 41,056 |
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Balance of PPP loans forgiven in the period |
| $ | 26,621 |
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| $ | - |
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| $ | 68,726 |
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| $ | - |
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Deferred PPP fee income recognized in the period |
| $ | 595 |
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| $ | 350 |
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| $ | 1,742 |
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| $ | 639 |
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Unaudited |
| For the three months ended |
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| For the nine months ended |
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(In thousands, except number of loans) |
| September 30, 2022 |
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| September 30, 2021 |
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| September 30, 2022 |
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| September 30, 2021 |
| ||||
Number of PPP loans originated in the period |
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| - |
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|
| - |
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|
| - |
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| 478 |
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Funded balance of PPP loans originated in the period |
| $ | - |
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| $ | - |
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| $ | - |
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| $ | 36,369 |
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Number of PPP loans forgiven in the period |
| 54 |
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| 287 |
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| 243 |
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| 636 |
| |
Balance of PPP loans forgiven in the period |
| $ | 4,184 |
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| $ | 26,621 |
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| $ | 12,601 |
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| $ | 68,726 |
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Deferred PPP fee income recognized in the period |
| $ | 144 |
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| $ | 595 |
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| $ | 691 |
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| $ | 1,742 |
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(In thousands) |
| September 30, 2022 |
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| September 30, 2021 |
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Unearned PPP deferred fee income at end of period |
| $ | 28 |
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| $ | 1,124 |
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(In thousands, except number of loans) |
| Number |
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| Balance |
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| ||
Total PPP loans originated since inception |
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| 1,177 |
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| $ | 111,721 |
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|
Total PPP loans forgiven since inception |
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| 1,164 |
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| $ | 111,028 |
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|
Total PPP loans remaining at September 30, 2022 |
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| 13 |
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| $ | 693 |
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|
- 5848 - -
(In thousands, except number of loans) |
| September 30, 2021 |
|
| September 30, 2020 |
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| ||
Unearned PPP deferred fee income at end of period |
| $ | 1,124 |
|
| $ | 1,823 |
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|
(In thousands, except number of loans) |
| Number |
|
| Balance |
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| ||
Total PPP loans originated since inception |
|
| 1,177 |
|
| $ | 111,721 |
|
|
Total PPP loans forgiven since inception |
|
| 759 |
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| $ | 84,428 |
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|
Total PPP loans remaining at September 30, 2021 |
|
| 418 |
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| $ | 27,293 |
|
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Application of Critical Accounting PoliciesEstimates
The Company's consolidated quarterly financial statements are prepared in accordance with accounting principles generally accepted in the United States and follow practices within the banking industry. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated quarterly financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain accounting policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Estimates, assumptions, and judgments are necessary when assets and liabilities are required to be recorded at fair value or when an asset or liability needs to be recorded contingent upon a future event. Carrying assets and liabilities at fair value inherently results in more financial statement volatility. The fair values and information used to record valuation adjustments for certain assets and liabilities are based on quoted market prices or are provided by unaffiliated third-party sources, when available. When third party information is not available, valuation adjustments are estimated in good faith by management.
The most significant accounting policies followed by the Company are presented in Note 1 to the annual audited consolidated financial statements. These policies, along with the disclosures presented in the other financial statement notes and in this discussion, provide information on how significant assets and liabilities are valued in the consolidated quarterly financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has identified the allowance for loan losses, deferred income taxes, pension obligations, the evaluation of investment securities for other than temporary impairment, the estimation of fair values for accounting and disclosure purposes, and the evaluation of goodwill for impairment to be the accounting areas that require the most subjective and complex judgments. These areas could be the most subject to revision as new information becomes available.
The allowance for loan losses represents management's estimate of probable loan losses inherent in the loan portfolio. Determining the amount of the allowance for loan losses is considered a critical accounting estimate because it requires significant judgment on the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change.
Our Allowance for Loan and Lease Losses policy establishes criteria for selecting loans to be measured for impairment based on the following:
Residential and Consumer Loans:
• All loans rated substandard or worse, on nonaccrual status, and above our total related credit (“TRC”) threshold balance of $300,000. • All Troubled Debt Restructured Loans.
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Commercial Lines and Loans, Commercial Real Estate, and Tax-exempt loans:
• All loans rated substandard or worse, on nonaccrual status, and above our TRC threshold balance of $100,000. • All Troubled Debt Restructured Loans.
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Impairment is measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses as compared to the loan carrying value. For all other loans and leases, the Company uses the general allocation methodology that establishes an allowance to estimate the probable incurred loss for each risk-rating category.
Deferred income tax assets and liabilities are determined using the liability method. Under this method, the net deferred tax asset or liability is recognized for the future tax consequences. This is attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating
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and capital loss carry forwards.carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income tax expense in the period that includes the enactment date. If current available evidence about the future raises doubt about the likelihood of a deferred tax asset being realized, a valuation allowance is established. The judgment about the level of future taxable income, including that which is considered capital, is inherently subjective and is reviewed on a continual basis as regulatory and business factors change.
Effective in January 2018, the Company adopted a modification methodology that was at the time newly made available under the New York State tax code, affecting how the Company’s state income tax liability is computed. Under this adopted methodology, management determined in the first quarter of 2019, it was unlikely that the Company would be required to pay material income taxes to New York State in future periods under then-existing income tax laws in the State. Management is continuously monitoring its future tax consequences to determine if the Company’s deferred taxes are properly stated. In the first quarter of 2020, consistent with policy, management reviewed all facts and circumstances related to its deferred taxes and determined that based on the expected filings of future New York State tax returns, the valuation allowance created in 2019 was no longer needed. Therefore management elected to eliminate its New York State net deferred tax asset valuation allowance during the quarter ended March 31, 2020.
On April 7, 2021, the New York State Legislature approved comprehensive tax legislation as part of the State’s 2022 Fiscal Year budget. The legislation includes increased taxes on businesses and high-income individuals among other tax law revisions. Other provisions include amendments to the real estate transfer tax. The legislation increases the corporate franchise tax rate to 7.25% from 6.5% for tax years beginning on or after January 1, 2021 and before January 1, 2024 for taxpayers with a business income base greater than $5.0 million. In addition, the previously scheduled phase-out of the capital base tax has been delayed. The rate of the capital base was to have been reduced to 0% starting in 2021. The legislation imposes the tax at the rate of 0.1875% for tax years beginning on or after January 1, 2021 and before January 1, 2024, with the 0% rate to take effect in 2024. Management continues to evaluate the projected impact of this newly issued New York State tax legislation on the Company’s financial condition and results of operations and believes that these provisions require an increase the Company’s income tax expense for the nine months ended September 30, 2021, thereby requiring an increase in the Company’s effective tax rate to 22.2% for the nine months ended September 30, 2021 as compared to the effective tax rate of 20.5%, for the same nine month period in 2020.
The Company’s effective tax rate typically differs from the 21% federal statutory tax rate due primarily to New York State income taxes, partially offset by tax-exempt income from specific types of investment securities and loans, bank owned life insurance, and to a much lesser degree, the utilization of low income housing tax credits. Other variances from the federal statutory federal tax rate are due to the effects of transitional adjustments related to state income taxes. In addition, the tax effects of certain incentive stock option activity may reduce the Company’s effective tax rate on a sporadic basis.
We maintain a noncontributory defined benefit pension plan covering most employees. The plan provides defined benefits based on years of service and final average salary. On May 14, 2012, we informed our employees of our decision to freeze participation and benefit accruals under the plan, primarily to reduce some of the volatility in earnings that can accompany the maintenance of a defined benefit plan. Pension and post-retirement benefit plan liabilities and expenses are based upon actuarial assumptions of future events; including fair value of plan assets, interest rates, and the length of time the Company will have to provide those benefits. The assumptions used by management are discussed in Note 14 to the consolidated annual financial statements.
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The Company carries all of its available-for-sale investments at fair value with any unrealized gains or losses reported, net of tax, as an adjustment to shareholders' equity and included in accumulated other comprehensive income (loss), except for the credit-related portion of debt securitiessecurities’ impairment losses and other-than-temporary impairment (“OTTI”) of equity securities which are charged to earnings. The Company's ability to fully realize the value of its investments in various securities, including corporate debt securities, is dependent on the underlying creditworthiness of the issuing organization. In evaluating the debt securities (both available-for-sale and held-to-maturity) portfolio for other-than-temporary impairment losses, management considers (1) if we intend to sell the security; (2) if it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) if the present value of expected cash flows is not sufficientinsufficient to recover the entire amortized cost basis. When the fair value of a held-to-maturity or available-for-sale security is less than its amortized cost basis, an assessment is made as to whether OTTI is present. The Company considers numerous factors when determining whether a potential OTTI exists and the period over which the debt security is expected to recover. The principal factors considered are (1) the length of time and the extent to which the fair value has been less than the amortized cost basis, (2) the financial condition of the issue and (guarantor, if any) and adverse conditions specifically related to the security, industry or geographic area, (3) failure of the issuer of the security to make scheduled interest or principal payments, (4) any changes to the rating of the security by a nationally recognized statistical rating organization (“NRSRO”), and (5) the presence of credit enhancements, if any, including the guarantee of the federal government or any of its agencies.
The estimation of fair value is significant to several of our assets; including available-for-sale and marketable equity investment securities, intangible assets, foreclosed real estate, and the value of loan collateral when valuing loans. These are all recorded at either fair value, or the lower of cost or fair value. Fair values are determined based on third party sources, when available. Furthermore, accounting principles generally accepted in the United States require disclosure of the fair value of financial instruments as a part of the notes to the annual audited consolidated financial statements. Fair values on our available-for-sale securities may be influenced by a number of factors;factors including market interest rates, prepayment speeds, discount rates, and the shape of yield curves.
Fair values for securities available-for-sale are obtained from unaffiliated third party pricing services. Where available, fair values are based on quoted prices on a nationally recognized securities exchange. If quoted prices are not available, fair values are measured using quoted market prices for similar benchmark securities. Management made no adjustments to the fair value quotes that were provided by the pricing sources. Fair values for marketable equity securities are based on quoted prices on a nationally recognized securities exchange for similar benchmark securities. The fair values of foreclosed real estate and the underlying collateral value of impaired loans are typically determined based on evaluations by third parties, less estimated costs to sell. When necessary, appraisals are updated to reflect changes in market conditions.
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Management performs an annual evaluation of our goodwill for possible impairment at each of our reporting units. Based on the results of the December 31, 20202021 evaluation, management has determined that the carrying value of goodwill was not impaired as of that date. Management will continuously evaluate all relevant economic and operational factors potentially affecting the Bank or the fair value of its assets, including goodwill. Should the current pandemic, or the future economic consequences thereof, require a significant and sustained change in the operations of the Bank, re-evaluations of the Bank’s goodwill valuation will be conducted on a more frequent basis. The evaluation approach is described in Note 10 of the consolidated annual financial statements. Further information on the estimation of fair values can be found in Note 22 to the consolidated annual financial statements.
Recent Events
On September 27, 2021,23, 2022, the Company announced that its Board of Directors declared a cash dividend of $0.07$0.09 per share on the Company's voting common and non-voting common stock, and a cash dividend of $0.07$0.09 per notional share for the issued warrant relating to the fiscal quarter endingended September 30, 2021.2022. The dividend will bedividends are payable to all shareholders of record on October 15, 202114, 2022 and will bewere paid on November 5, 2021.
- 6110, 2022. -
Overview and Results of Operations
The following represents the significant highlights of the Company’s operating results between the third quarter of 20212022 and the third quarter of 2020.2021.
• Net income attributable to Pathfinder Bancorp, Inc. decreased $185,000 or 5.50% to $3.2 million. • Basic and diluted earnings per voting common share were both $0.52 per share and decreased $0.04 per share from $0.56 per share. • Return on average assets decreased 14 basis points to 0.93% as the increase in average asset balance outpaced the increase in income. • Net interest income, after provision for loan losses, increased $383,000, or 4.0% to $10.1 million. Excluding the provision, net interest income increased $989,000, or 10.1%, to $10.8 million. The increase in net interest income, before provision for loan losses, was primarily due to the increase in the average balance of interest-earning assets of $114.2 million, coupled with an increase in the average yield earned on these assets of 10 basis points. These increases in interest income were partially offset by a 21 basis points increase in the average rates paid on interest-bearing liabilities. • The increase in the provision for loan losses of $606,000 was primarily due to management's decision to downgrade certain loans within a single large credit relationship. • The net interest margin for the third quarter of 2022 was 3.32%, a one basis point increase compared to 3.31% for the same quarter in 2021. • The effective income tax rate decreased 1.1% to 19.6% for the three months ended September 30, 2022 as compared to 22.1% for the same three month period in 2021. The decrease in the tax rate in the third quarter of 2022, as compared to the same quarter in 2021, was primarily related to an increase in tax exempt income derived from increased average balances invested in securities issued by state and political subdivisions.
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The following represents significant highlights of the Company’sCompany's operating results between the first nine months of 20212022 and the first nine months of 2020.2021.
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- 6251 - -
The following reflects the significant changes in financial condition between December 31, 20202021 and September 30, 2021.2022. In addition, the following reflects significant changes in asset quality metrics between September 30, 20202022 and September 30, 2021.
• Total assets increased $111.8 million, or 8.7% to $1.40 billion at September 30, 2022, as compared to December 31, 2021, primarily driven by higher investment securities balances and loan balances. • Asset quality metrics, as measured by net loan charge-offs, remained stable, in comparison to recent reporting periods. The annualized net loan charge-offs to average loans ratio was 0.03% for the third quarter of 2022, compared to 0.12% for the third quarter of 2021, and 0.12% for the fourth quarter of 2021. • Nonperforming loans to total loans increased nine basis points to 1.20% at September 30, 2022, compared to 1.11% at September 30, 2021. Nonperforming loans to total loans increased 20 basis points to 1.20% at September 30, 2022 compared to 1.00% at December 31, 2021. Correspondingly, the ratio of the allowance for loan losses to nonperforming loans was 128.3% at September 30, 2022, as compared to 160.1% at September 30, 2021, and 156.0% at December 31, 2021.
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The Company had net income of $3.2 million for the three months ended September 30, 2022 compared to net income of $3.4 million for the three months ended September 30, 2021 compared to net income of $1.5 million for the three months ended September 30, 2020.2021. The $1.9 million increase$213,000 decrease in net income was due primarily to a $1.1$762,000 increase in total interest expense, a $606,000 increase in provision for loan losses expense, a $444,000 increase in total noninterest expenses and a $385,000 decrease in total noninterest income. These were partially offset by a $1.8 million increase in total interest and dividend income and a $335,000$233,000 decrease in interest expense, a $1.6 million decrease in the provision for loan losses and a $55,000 increase in noninterest income. Offsetting the increases to net income was a $593,000 increase in noninterest expense and a $633,000 increase in income tax expense.taxes.
Net interest income before the provision for loan losses increased $1.5 million,$989,000, or 17.8%10.1%, to $9.8$10.8 million for the three months ended September 30, 20212022 as compared to $8.3$9.8 million for the same three month period in 2020.2021. The increase was primarily a result of an 18 basis point decrease in the average cost of interest-bearing liabilities between the year-over-year third quarter periods. Further, the increase was a result of increases in the average interest-earning asset balances, primarily in the loanyields of both taxable and tax-exempt investment categories, coupledsecurities portfolios, combined with an increaseincreases in the average yieldbalances of interest-earning assetsthe loan portfolio of 13$57.6 million and $74.3 million in the investment portfolios. These increases resulted in a 20 basis points increase to 3.93%4.13% in total interest-earning asset yields for the three months ended September 30, 2021 from 3.80%2022 as compared to 3.93% for the same three month period of the previous year. The increase in the average yields received on interest-earning assets in the third quarter of 2022, as compared to the same quarter in 2021, reflects generally increased rates of interest for newly funded loans and investments securities, as compared to the average yields within these portfolios, as well as increases in coupon rates for certain adjustable-rate loans and securities in the rising interest environment that has occurred in 2022. These increases in the average yield on loans during 2022, were partially offset by reduced fee recognition related to PPP loans. These increases in net interest income was enhancedwere partially offset by the recognition of deferred PPP fee income recognizeda 21 basis points increase in the period dueaverage cost of total interest-bearing liabilities in the third quarter of 2022, as compared to the increased levels of forgivenesssame quarter in 2021, combined with a $105.3 million increase in the three month ended September 30, 2021. Please referaverage balance of total interest-bearing liabilities. The increase in the average rates paid on interest-earning liabilities in the third quarter of 2022, as compared to the PPP tables abovesame quarter in 2021, reflects the generally increased rates of interest for the full impact of PPP loans on average loan yields.all financial instruments that has occurred in 2022.
The $55,000,$385,000, or 3.7%24.9%, increasedecrease in noninterest income in the quarter ended September 30, 2021,2022, as compared to the same quarterly period in 2020,2021, was primarily the result of an $86,000 increasea decrease of $203,000 in insurance agency revenue, a $54,000 increase in service charges on deposit accounts, a $31,000 increase in earnings on bank owned life insurance and a $27,000 increase in debit card interchange fees. These increases were partially offset by reductions innet gains on foreclosed real estatesales of $67,000, decreases in loan servicing fees of $36,000, decreasesinvestment securities, an $89,000 decrease in gains on marketable equity securities, of $29,000,a $59,000 decrease in service charges on deposits accounts, a $56,000 decrease in debit card interchange fees and a $45,000 decrease in insurance agency revenue. All other noninterest income categories netted to an $8,000 decrease in the gains recognized on the sales of investment securities of $22,000.
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The $593,000 increase in noninterest expense in the quarterthree months ended September 30, 2021,2022, as compared to the same quarterly period in 2020,the prior year. These decreases were partially offset by a $75,000 increase in other charges, commissions and fees.
Total noninterest expense for the third quarter of 2022 was $7.3 million, an increase of $444,000, or 6.5%, compared to $6.8 million for the same three month period in 2021. The increase was primarily thea result of an increase inhigher salaries and employee benefits expense of $572,000, or 15.8%. Other expenses and building and occupancy expenses increased $174,000 and $111,000, respectively. Partially offsetting these increases was a $201,000, or 29.3%, reduction in data processing costs, insurance agency expense, professional and other services, audits and exams costs, andexpenses, primarily the FDIC assessmentresult of $228,000, $117,000, $114,000, $103,000, $67,000, and $52,000, respectively. The increasea reduction in salaries and employee benefit expense was due to the increase in net salaries expense due to increased PPP loan originations in 2020 and the deferral of employee-related expenses in 2020ATM processing fees related to those originations.third-party vendor refunds obtained through contract
- 52 -
renegotiation activities. All other employee-related expenses increased an aggregate of $32,000noninterest expense categories netted to a $212,000 decrease in the third quarter of 2021,three months ended September 30, 2022, as compared to the same quarterly periodquarter in 2020. Data processing costs increased due to increases2021.
Management extensively reviews recent trends in internet banking costschanges in the size and processing costs. Insurance agency expense increased as a result of a general increases in personnel costs and other administrative costs related to the Agency. Professional and other services costs increased due to increased use of third party services. These increases are consistent with the Company’s customer and operational growth. The increases in audits and exams expense were primarily related to the Bank’s first year of increased internal controls testing under FDICIA requirements for institutions with assets greater than $1 billion and additional expenses for the Company as a resultcomposition of the COVID-19 pandemic. The FDIC assessment increased as a resultloan portfolio, historical loss experience, qualitative factors, and specific reserve needs on loans individually evaluated for impairment, in its determination of an increase in the average balanceadequacy of deposits, including an increase in the average balance of brokered time deposits.
allowance for loan losses. For the three months ended September 30, 2021,2022, we recorded $104,000$710,000 in provision for loan losses as compared to $1.7 million$104,000 in the same prior year three month period. This $1.6 million decreaseThe primary driver of the increased provision expense in the third quarter of 2022, as compared to the same quarter in 2021, was management's decision to downgrade certain commercial real estate loans and commercial loans within a single borrower relationship totaling $7.2 million in related credits. This relationship is under active resolution management by the Company. Additionally, the provision in the quarter ended September 30, 2022 is reflective of (1) the qualitative factors used in determining the adequacy of the allowance for loan losses, (2) the increase in the size of the loan portfolio, and (3) changes in the levels of delinquent and nonaccrual loans. The third quarter provision for loan losses was primarily reflective of improvingreflects an addition to reserves considering loan growth and asset quality metrics. The credit sensitivecredit-sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its conservative loan classification and reserve building methodologies to the analysis of these portfolios.
In comparing the year-over-year third quarter periods, the Company’s return on average assets increased 57decreased 14 basis points to 1.07%0.93% due to the combined effects of the increasedecrease in net income (the numerator in the ratio) and, offset by the increase in average assets (the denominator in the ratio). Average assets increased due to increases in average investment securities and average loans of $7.3 million, average taxable securities of $60.7$74.3 million and average tax-exempt securities of $2.3$57.6 million, respectively, in the third quarter of 2021,2022 as compared to the same quarter of 2020.2021. Average interest-bearing deposits increased $19.7$105.8 million in the third quarter of 2021,2022, as compared with the same quarter in 2020. Noninterest-bearing2021. The increase in deposits were the primary driverwas primarily due to municipal deposit inflows and outflows due to seasonal timing of growth between the comparable periods and totaled $206.2 million at September 30, 2021,tax collections, an increase of $48.3 million, or 30.6%, compared to September 30, 2020. The increases in noninterest-bearingbrokered deposits were primarily a result of the Bank’s participation in the PPP, as well as ongoingand continued growth in business banking relationships. In addition,Average MMDA accounts increased $3.5 million as compared with the Bank has seen a general increasesame quarter in the average account balance for consumer deposits consistent with similar increases generally reported throughout the industry. These increases are expected to be transitory and relate primarily to significant levels of economic stimulus combined with reduced levels of consumer spending related to the pandemic. At this time, it cannot be determined with certainty how long it will be before these deposits return to historically normal levels.2021.
The Company had net income of $8.5$9.5 million for the nine months ended September 30, 20212022 compared to net income of $5.0$8.6 million for the nine months ended September 30, 2020.2021. The $3.5 million$854,000 increase in net income was due primarily to a $2.6$1.4 million increase in interest and dividend income, a $2.2$1.2 million decrease in the provision for loan losses, a $227,000 decrease in interest expense and a $1.8 million$132,000 decrease in provision for loan losses, and a $55,000 increase in noninterest income. Offsettingincome taxes. Partially offsetting the increase in net income was ana $1.4 million increase of $2.1 million in noninterest expense and a $1.1 million increase$765,000 decrease in income tax expense.noninterest income.
Net interest income before the provision for loan losses increased $4.8$1.7 million to $28.6$30.2 million for the nine months ended September 30, 2021,2022, as compared to $23.7$28.6 million for the same nine month period in 2020. The increase was due principally2021. Interest expense decreased $227,000 to a $2.6$5.8 million or 8.1%, increase in interest and dividend income that was a result of growth in average interest-earning assets of $113.0 million compared to the prior year nine month period. Average loans for the first nine months of 2021 increased by $51.8 million, or 6.5%, over the prior year period, while the average interest yield on interest-earning assets decreased by eight basis points. The increase in interest income was enhanced by the recognition of deferred PPP fee income recognized in the period due to the increased levels of forgiveness in the three months ended September 30, 2021. Please refer to the PPP tables above for the full impact of PPP loans on average loan yields. Average interest-bearing liabilities increased by $63.5 million, or 7.1%, for the nine months ended September 30, 20212022 as compared to the prior year period; however, theperiod. The average interest rate paid on interest-bearing liabilities decreased by 39seven basis points.
- 64 -
The $55,000, or 1.2%, increase in noninterest incomepoints for the nine months ended September 30, 2021,2022 as compared to the prior year period; however, average interest-bearing liabilities increased by $55.6 million, or 5.8%. Average loans for the first nine months of 2022 increased by $20.3 million, or 2.4%, over the prior year period,while the average interest yield earned on average loans decreased by 18 basis points, resulting in a decrease of $535,000 in interest income on loans for the nine months ended September 30, 2022 as compared to the prior year period due to the loss of PPP income. Income from investment securities increased $1.9 million, or 22.0% to $8.5 million for the nine months ended September 30, 2022.
Noninterest income decreased $765,000 for the nine months ended September 30, 2022, when compared to the same nine month period in 2020 was primarily due to the $1.2 million increase in net gains on equity securities and a $201,000 increase in gains on sales of premises and equipment. Offsetting these increases were decreases of $1.0 million in net2021. Net gains on sales and redemptions of investment securities and a $677,000 decreasedecreased $224,000 when compared to the same period in net2021. Net gains on marketable equity securities decreased $333,000 and there were no gains on sale of premises and equipment when compared to the $201,000 gain in the same period in 2021. Service charges on deposit accounts, gains on sales of loans and foreclosed real estate which was primarilyand debit card interchange fees also decreased $206,000, $104,000, and $59,000, respectively, when compared to the result of the sale of $35.9 millionsame period in seasoned, conforming residential mortgage loans that was completed2021. The $206,000 decrease in January 2020.
Excluding the effects of the period over period fluctuations discussed above, all other noninterest income categories increased in the aggregate by $381,000, or 10.6%, to $4.0 millionservice charges on deposit accounts in the nine months ended September 30, 20212022, as compared with $3.6 million into the same nine month period of 2020. This period over period increasein 2021, was a result of debit card interchange fees, otherprimarily due to reductions in the Bank's service fee schedules, enacted in January 2022, based on the competitive environment within our marketplace. Other charges, commissionscommission and fees, service charges on deposit accounts,loan servicing fees, insurance agency revenue, and earnings on bank owned life insurance which increased $121,000, $98,000, $84,000, $78,000$202,000, $105,000, $32,000 and $63,000,$23,000, respectively. The net increase in these categories
- 53 -
of noninterest income during the nine months ended September 30, 2022, were in partlargely due to growth in the Company’sBank's investment services and insurance businesses, the net income effect of which was partially offset by increased strategic focus on improving recurring noninterest income. Offsetting these increases was a decrease inoperating expenses, and increased loan servicingprepayment fees of $63,000.collected.
Total noninterest expense for the first nine month period of 20212022 was $20.3$21.7 million, an increase of $2.1$1.4 million, or 11.4%6.7%, compared with $18.2$20.3 million for the prior year period. The increase was primarily a result of higher salaries and employee benefits expense of $1.6 million, or 14.9%, and was primarily comprised of a $664,000, or 8.7%, increase in noninterest expense forsalaries, a $380,000 reduction in the nine month period ended September 30, 2021,deferral of employee related expenses, a $173,000 increase in employee benefits and a $349,000 net increase in all other salaries and employee benefit expenses. The $443,000 increase in salaries was primarily due to increases in individual salaries, enacted early in 2022 and continuing through the year, as well as modest additions to staff headcount. The Company increased its salary structure where deemed appropriate in order to effectively respond to inflationary and competitive pressures within our marketplace to recruit and retain talent. The $380,000 reduction in deferred salaries was primarily due to reduced levels of PPP loan originations in 2022 as compared to the same periodprevious year. The Company originated $36.4 million in 2020, was principally driven by an increasePPP loans in the first nine months of $851,0002021 and $-0- in personnel expenses, a $354,0002022. The $139,000 increase in professional and other services, a $295,000 increase in data processing expense, a $196,000 increase in audits and exams expense, a $138,000 increase in building and occupancy expense, a $143,000 increase in FDIC assessments and a $110,000 increase in insurance agency expense. The increase in net salaries expenseemployee benefit expenses was partially the result of increased PPP loan originations in 2020 and the deferral of employee-related expenses in 2020 related to those originations. The increases in professional and other services fees, and audits and exams expense were primarily related to the Bank’s first year of increased internal controls testing under FDICIA requirements for institutions with assets greater than $1 billion and additional expenses for the Company as a result of the COVID-19 pandemic. Building and occupancy costs increased as a result of an increase in maintenance costs and depreciation expense of $168,000 and $51,000, respectively. These increases are consistent with the Company’s recent refurbishments of certain branchincreased staffing levels and administrative locations and the relative timing of certain maintenance activities. Data processing costs increased due to increases in internet banking costs and processing costs. These increases are consistent with the Company’s customer and operational growth. The FDIC assessment increased as a result of an increase in the average balance of deposits, including an increase in the average balance of brokered time deposits. Insurance agency expense increased as a result of a general increases in personnel costs and other administrative costs related to the Agency.salaries for 2022.
For the first nine months of 2021,2022, we recorded $2.1 million$871,000 in provision for loan losses as compared to $3.9$2.1 million in the same prior year nine month period. TheNotwithstanding the downgrading of a single credit relationship totaling $7.2 million in the third quarter of 2022, discussed above, the reduction in year-to-date provision expense is reflective of (1) the qualitative factors used in determining the adequacy of the allowance for loan losses, (2) the size of the loan portfolio, and (3) delinquent and nonaccrual loans. The declinedecrease in the provision for loan losses in 2021,through the third quarter of 2022, as compared to the same period in 2020,2021, was primarily related to the improvement in the qualitative factors used by the Company to determine the provision in 2021,2022, as compared to the same period in the previous year. The improvement in these qualitative factors was due to observed improvements in economic conditions during the second half of 2021 and the first half of 2022 that followed the easing of the most restrictive phases of the COVID-19 pandemic that had existed in 2020.2020 and the first half of 2021. The credit sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its conservative loan classification and reserve building methodologies to the analysis of these portfolios.monitored. Please refer to the asset quality section below for a further discussion of asset quality as it relates to the allowance for loan losses.
Return on average assets increased 32four basis points to 0.90%0.94% between the year-over-year nine month periods as the changeincrease in net income in the nine month period ended September 30, 20212022 (the numerator of the ratio) increased by a higher percentage than the rate at which average assets (the denominator of the ratio) grew during the period. Average assets increased due to increases in investment securities and the loan portfolio of $63.4 and $20.3 million, respectively, in the nine month period ended September 30, 2022 as compared to the same period of 2021. Average interest-bearing liabilities increased $55.6 million in the nine months ended September 30 2022, as compared with the same period in 2021. The increase in deposits was primarily the result of municipal deposit inflows and outflows due to seasonal timing of tax collections, an increase in brokered deposits and continued growth in business banking relationships. Average time deposits increased $24.5 million in the nine months ended September 30, 2022, as compared with the same period in 2021.
- 65 -
Net Interest Income
Net interest income is the Company's primary source of operating income for payment of operating expenses and providing for loan losses. It is the amount by which interest earned on loans, interest-earning deposits, and investment securities, exceeds the interest paid on deposits and other interest-bearing liabilities. Changes in net interest income and net interest margin result from the interaction between the volume and composition of interest-earning assets, interest-bearing liabilities, related yields, and associated funding costs.
- 54 -
The following tables set forth information concerning average interest-earning assets and interest-bearing liabilities and the average yields and rates thereon for the periods indicated. Interest income and resultant yield information in the tables has not been adjusted for tax equivalency. Averages are computed on the daily average balance for each month in the period divided by the number of days in the period. Yields and amounts earned include loan fees.fees of $389,000 and $1.4 million for the nine month periods ended September 30, 2022 and September 30, 2021, respectively. The decrease in loan fees for the year over year nine month period is primarily due to the decrease in PPP loan fee income. Nonaccrual loans have been included in interest-earning assets for purposes of these calculations.
|
| (Unaudited) |
|
| (Unaudited) |
| ||||||||||||||||||||||||||||||||||||||||||
|
| For the three months ended September 30, |
|
| For the three months ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
| 2021 |
| |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
| Average |
|
|
|
|
| Average |
| |||||||||||||
Unaudited |
| Average |
|
|
|
|
|
| Yield / |
|
| Average |
|
|
|
|
|
| Yield / |
|
| Average |
|
|
| Yield / |
| Average |
|
|
| Yield / |
| |||||||||||||||
(Dollars in thousands) |
| Balance |
|
| Interest |
|
| Cost |
|
| Balance |
|
| Interest |
|
| Cost |
|
| Balance |
| Interest |
| Cost |
| Balance |
| Interest |
| Cost |
| |||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loans |
| $ | 822,547 |
|
| $ | 9,465 |
|
|
| 4.60 | % |
| $ | 815,212 |
|
| $ | 8,810 |
|
|
| 4.32 | % |
| $ | 880,097 |
|
| $ | 9,895 |
|
|
| 4.50 | % |
| $ | 822,547 |
|
| $ | 9,465 |
|
|
| 4.60 | % |
Taxable investment securities |
|
| 317,612 |
|
|
| 2,136 |
|
|
| 2.69 | % |
|
| 256,958 |
|
|
| 1,623 |
|
|
| 2.53 | % |
|
| 363,877 |
|
|
| 3,108 |
|
|
| 3.42 | % |
|
| 317,612 |
|
|
| 2,136 |
|
|
| 2.69 | % |
Tax-exempt investment securities |
|
| 14,863 |
|
|
| 28 |
|
|
| 0.75 | % |
|
| 12,549 |
|
|
| 50 |
|
|
| 1.59 | % |
|
| 42,855 |
|
|
| 351 |
|
|
| 3.28 | % |
|
| 14,863 |
|
|
| 28 |
|
|
| 0.75 | % |
Fed funds sold and interest-earning deposits |
|
| 27,984 |
|
|
| 3 |
|
|
| 0.04 | % |
|
| 18,857 |
|
|
| 4 |
|
|
| 0.08 | % |
|
| 10,383 |
|
|
| 29 |
|
|
| 1.12 | % |
|
| 27,984 |
|
|
| 3 |
|
|
| 0.04 | % |
Total interest-earning assets |
|
| 1,183,006 |
|
|
| 11,632 |
|
|
| 3.93 | % |
|
| 1,103,576 |
|
|
| 10,487 |
|
|
| 3.80 | % |
|
| 1,297,212 |
|
|
| 13,383 |
|
|
| 4.13 | % |
|
| 1,183,006 |
|
|
| 11,632 |
|
|
| 3.93 | % |
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Other assets |
|
| 83,028 |
|
|
|
|
|
|
|
|
|
|
| 79,901 |
|
|
|
|
|
|
|
|
|
|
| 90,482 |
|
|
|
|
|
|
| 83,028 |
|
|
|
|
|
| |||||||
Allowance for loan losses |
|
| (14,794 | ) |
|
|
|
|
|
|
|
|
|
| (10,969 | ) |
|
|
|
|
|
|
|
|
|
| (13,050 | ) |
|
|
|
|
|
| (14,794 | ) |
|
|
|
|
| |||||||
Net unrealized gains/(losses) on available-for-sale securities |
|
| 2,209 |
|
|
|
|
|
|
|
|
|
|
| (206 | ) |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net unrealized (losses) gains |
|
| (10,983 | ) |
|
|
|
|
|
| 2,209 |
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total assets |
| $ | 1,253,449 |
|
|
|
|
|
|
|
|
|
| $ | 1,172,302 |
|
|
|
|
|
|
|
|
|
| $ | 1,363,661 |
|
|
|
|
|
| $ | 1,253,449 |
|
|
|
|
|
| |||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
NOW accounts |
| $ | 94,654 |
|
| $ | 81 |
|
|
| 0.34 | % |
| $ | 80,636 |
|
| $ | 45 |
|
|
| 0.22 | % |
| $ | 101,907 |
|
| $ | 85 |
|
|
| 0.33 | % |
| $ | 94,654 |
|
| $ | 81 |
|
|
| 0.34 | % |
Money management accounts |
|
| 16,583 |
|
|
| 5 |
|
|
| 0.12 | % |
|
| 16,332 |
|
|
| 4 |
|
|
| 0.10 | % |
|
| 16,097 |
|
|
| 4 |
|
|
| 0.10 | % |
|
| 16,583 |
|
|
| 5 |
|
|
| 0.12 | % |
MMDA accounts |
|
| 241,374 |
|
|
| 241 |
|
|
| 0.40 | % |
|
| 204,943 |
|
|
| 316 |
|
|
| 0.62 | % |
|
| 244,884 |
|
|
| 427 |
|
|
| 0.70 | % |
|
| 241,374 |
|
|
| 241 |
|
|
| 0.40 | % |
Savings and club accounts |
|
| 126,511 |
|
|
| 42 |
|
|
| 0.13 | % |
|
| 99,909 |
|
|
| 22 |
|
|
| 0.09 | % |
|
| 140,425 |
|
|
| 52 |
|
|
| 0.15 | % |
|
| 126,511 |
|
|
| 42 |
|
|
| 0.13 | % |
Time deposits |
|
| 358,634 |
|
|
| 785 |
|
|
| 0.88 | % |
|
| 416,190 |
|
|
| 1,229 |
|
|
| 1.18 | % |
|
| 440,227 |
|
|
| 1,339 |
|
|
| 1.22 | % |
|
| 358,634 |
|
|
| 785 |
|
|
| 0.88 | % |
Subordinated loans |
|
| 29,496 |
|
|
| 411 |
|
|
| 5.57 | % |
|
| 15,148 |
|
|
| 191 |
|
|
| 5.04 | % | ||||||||||||||||||||||||
Subordinated debt |
|
| 29,655 |
|
|
| 442 |
|
|
| 5.96 | % |
|
| 29,496 |
|
|
| 411 |
|
|
| 5.57 | % | ||||||||||||||||||||||||
Borrowings |
|
| 78,892 |
|
|
| 276 |
|
|
| 1.40 | % |
|
| 73,655 |
|
|
| 369 |
|
|
| 2.00 | % |
|
| 78,232 |
|
|
| 254 |
|
|
| 1.30 | % |
|
| 78,892 |
|
|
| 276 |
|
|
| 1.40 | % |
Total interest-bearing liabilities |
|
| 946,144 |
|
|
| 1,841 |
|
|
| 0.78 | % |
|
| 906,813 |
|
|
| 2,176 |
|
|
| 0.96 | % |
|
| 1,051,427 |
|
|
| 2,603 |
|
|
| 0.99 | % |
|
| 946,144 |
|
|
| 1,841 |
|
|
| 0.78 | % |
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Demand deposits |
|
| 189,951 |
|
|
|
|
|
|
|
|
|
|
| 158,600 |
|
|
|
|
|
|
|
|
|
|
| 189,317 |
|
|
|
|
|
|
| 189,951 |
|
|
|
|
|
| |||||||
Other liabilities |
|
| 11,441 |
|
|
|
|
|
|
|
|
|
|
| 12,567 |
|
|
|
|
|
|
|
|
|
|
| 12,248 |
|
|
|
|
|
|
| 11,441 |
|
|
|
|
|
| |||||||
Total liabilities |
|
| 1,147,536 |
|
|
|
|
|
|
|
|
|
|
| 1,077,980 |
|
|
|
|
|
|
|
|
|
|
| 1,252,992 |
|
|
|
|
|
|
| 1,147,536 |
|
|
|
|
|
| |||||||
Shareholders' equity |
|
| 105,913 |
|
|
|
|
|
|
|
|
|
|
| 94,322 |
|
|
|
|
|
|
|
|
|
|
| 110,669 |
|
|
|
|
|
|
| 105,913 |
|
|
|
|
|
| |||||||
Total liabilities & shareholders' equity |
| $ | 1,253,449 |
|
|
|
|
|
|
|
|
|
| $ | 1,172,302 |
|
|
|
|
|
|
|
|
|
| $ | 1,363,661 |
|
|
|
|
|
| $ | 1,253,449 |
|
|
|
|
|
| |||||||
Net interest income |
|
|
|
|
| $ | 9,791 |
|
|
|
|
|
|
|
|
|
| $ | 8,311 |
|
|
|
|
|
|
|
| $ | 10,780 |
|
|
|
|
|
| $ | 9,791 |
|
|
|
| |||||||
Net interest rate spread |
|
|
|
|
|
|
|
|
|
| 3.15 | % |
|
|
|
|
|
|
|
|
|
| 2.84 | % |
|
|
|
|
|
| 3.14 | % |
|
|
|
|
|
| 3.15 | % | ||||||||
Net interest margin |
|
|
|
|
|
|
|
|
|
| 3.31 | % |
|
|
|
|
|
|
|
|
|
| 3.01 | % |
|
|
|
|
|
| 3.32 | % |
|
|
|
|
|
| 3.31 | % | ||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
| 125.03 | % |
|
|
|
|
|
|
|
|
|
| 121.70 | % |
|
|
|
|
|
| 123.38 | % |
|
|
|
|
|
| 125.03 | % |
- 6655 - -
|
| For the nine months ended September 30, |
|
| For the nine months ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
| 2021 |
| |||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
| Average |
|
|
|
|
| Average |
| |||||||||||||
Unaudited |
| Average |
|
|
|
|
|
| Yield / |
|
| Average |
|
|
|
|
|
| Yield / |
|
| Average |
|
|
| Yield / |
| Average |
|
|
| Yield / |
| |||||||||||||||
(Dollars in thousands) |
| Balance |
|
| Interest |
|
| Cost |
|
| Balance |
|
| Interest |
|
| Cost |
|
| Balance |
| Interest |
| Cost |
| Balance |
| Interest |
| Cost |
| |||||||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loans |
| $ | 842,850 |
|
| $ | 28,096 |
|
|
| 4.44 | % |
| $ | 791,088 |
|
| $ | 26,884 |
|
|
| 4.53 | % |
| $ | 863,191 |
|
| $ | 27,561 |
|
|
| 4.26 | % |
| $ | 842,850 |
|
| $ | 28,096 |
|
|
| 4.44 | % |
Taxable investment securities |
|
| 310,098 |
|
|
| 6,438 |
|
|
| 2.77 | % |
|
| 245,228 |
|
|
| 4,998 |
|
|
| 2.72 | % |
|
| 348,499 |
|
|
| 7,850 |
|
|
| 3.00 | % |
|
| 310,098 |
|
|
| 6,438 |
|
|
| 2.77 | % |
Tax-exempt investment securities |
|
| 12,631 |
|
|
| 99 |
|
|
| 1.05 | % |
|
| 7,839 |
|
|
| 109 |
|
|
| 1.85 | % |
|
| 37,593 |
|
|
| 612 |
|
|
| 2.17 | % |
|
| 12,631 |
|
|
| 99 |
|
|
| 1.05 | % |
Fed funds sold and interest-earning deposits |
|
| 28,433 |
|
|
| 7 |
|
|
| 0.03 | % |
|
| 36,848 |
|
|
| 53 |
|
|
| 0.19 | % |
|
| 19,950 |
|
|
| 48 |
|
|
| 0.32 | % |
|
| 28,433 |
|
|
| 7 |
|
|
| 0.03 | % |
Total interest-earning assets |
|
| 1,194,012 |
|
|
| 34,640 |
|
|
| 3.87 | % |
|
| 1,081,003 |
|
|
| 32,044 |
| �� |
| 3.95 | % |
|
| 1,269,233 |
|
|
| 36,071 |
|
|
| 3.79 | % |
|
| 1,194,012 |
|
|
| 34,640 |
|
|
| 3.87 | % |
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Other assets |
|
| 81,779 |
|
|
|
|
|
|
|
|
|
|
| 76,726 |
|
|
|
|
|
|
|
|
|
|
| 85,652 |
|
|
|
|
|
|
| 81,779 |
|
|
|
|
|
| |||||||
Allowance for loan losses |
|
| (13,962 | ) |
|
|
|
|
|
|
|
|
|
| (9,921 | ) |
|
|
|
|
|
|
|
|
|
| (13,040 | ) |
|
|
|
|
|
| (13,962 | ) |
|
|
|
|
| |||||||
Net unrealized gains/(losses) on available for sale securities |
|
| 1,802 |
|
|
|
|
|
|
|
|
|
|
| (629 | ) |
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net unrealized (losses) gains |
|
| (7,230 | ) |
|
|
|
|
|
| 1,802 |
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total assets |
| $ | 1,263,631 |
|
|
|
|
|
|
|
|
|
| $ | 1,147,179 |
|
|
|
|
|
|
|
|
|
| $ | 1,334,615 |
|
|
|
|
|
| $ | 1,263,631 |
|
|
|
|
|
| |||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
NOW accounts |
| $ | 94,018 |
|
| $ | 212 |
|
|
| 0.30 | % |
| $ | 79,172 |
|
| $ | 109 |
|
|
| 0.18 | % |
| $ | 104,874 |
|
| $ | 234 |
|
|
| 0.30 | % |
| $ | 94,018 |
|
| $ | 212 |
|
|
| 0.30 | % |
Money management accounts |
|
| 16,059 |
|
|
| 13 |
|
|
| 0.11 | % |
|
| 15,450 |
|
|
| 14 |
|
|
| 0.12 | % |
|
| 16,212 |
|
|
| 12 |
|
|
| 0.10 | % |
|
| 16,059 |
|
|
| 13 |
|
|
| 0.11 | % |
MMDA accounts |
|
| 238,507 |
|
|
| 737 |
|
|
| 0.41 | % |
|
| 200,529 |
|
|
| 1,072 |
|
|
| 0.71 | % |
|
| 255,933 |
|
|
| 985 |
|
|
| 0.51 | % |
|
| 238,507 |
|
|
| 737 |
|
|
| 0.41 | % |
Savings and club accounts |
|
| 119,859 |
|
|
| 115 |
|
|
| 0.13 | % |
|
| 93,926 |
|
|
| 70 |
|
|
| 0.10 | % |
|
| 139,798 |
|
|
| 150 |
|
|
| 0.14 | % |
|
| 119,859 |
|
|
| 115 |
|
|
| 0.13 | % |
Time deposits |
|
| 376,724 |
|
|
| 2,748 |
|
|
| 0.97 | % |
|
| 412,625 |
|
|
| 5,111 |
|
|
| 1.65 | % |
|
| 401,297 |
|
|
| 2,625 |
|
|
| 0.87 | % |
|
| 376,724 |
|
|
| 2,748 |
|
|
| 0.97 | % |
Subordinated loans |
|
| 33,814 |
|
|
| 1,376 |
|
|
| 5.43 | % |
|
| 15,139 |
|
|
| 589 |
|
|
| 5.19 | % | ||||||||||||||||||||||||
Subordinated debt |
|
| 29,617 |
|
|
| 1,284 |
|
|
| 5.78 | % |
|
| 33,814 |
|
|
| 1,376 |
|
|
| 5.43 | % | ||||||||||||||||||||||||
Borrowings |
|
| 84,001 |
|
|
| 873 |
|
|
| 1.39 | % |
|
| 82,663 |
|
|
| 1,349 |
|
|
| 2.18 | % |
|
| 70,833 |
|
|
| 557 |
|
|
| 1.05 | % |
|
| 84,001 |
|
|
| 873 |
|
|
| 1.39 | % |
Total interest-bearing liabilities |
|
| 962,982 |
|
|
| 6,074 |
|
|
| 0.84 | % |
|
| 899,504 |
|
|
| 8,314 |
|
|
| 1.23 | % |
|
| 1,018,564 |
|
|
| 5,847 |
|
|
| 0.77 | % |
|
| 962,982 |
|
|
| 6,074 |
|
|
| 0.84 | % |
Noninterest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Demand deposits |
|
| 186,125 |
|
|
|
|
|
|
|
|
|
|
| 142,379 |
|
|
|
|
|
|
|
|
|
|
| 194,220 |
|
|
|
|
|
|
| 186,125 |
|
|
|
|
|
| |||||||
Other liabilities |
|
| 11,660 |
|
|
|
|
|
|
|
|
|
|
| 12,487 |
|
|
|
|
|
|
|
|
|
|
| 11,808 |
|
|
|
|
|
|
| 11,660 |
|
|
|
|
|
| |||||||
Total liabilities |
|
| 1,160,767 |
|
|
|
|
|
|
|
|
|
|
| 1,054,370 |
|
|
|
|
|
|
|
|
|
|
| 1,224,592 |
|
|
|
|
|
|
| 1,160,767 |
|
|
|
|
|
| |||||||
Shareholders' equity |
|
| 102,864 |
|
|
|
|
|
|
|
|
|
|
| 92,809 |
|
|
|
|
|
|
|
|
|
|
| 110,023 |
|
|
|
|
|
|
| 102,864 |
|
|
|
|
|
| |||||||
Total liabilities & shareholders' equity |
| $ | 1,263,631 |
|
|
|
|
|
|
|
|
|
| $ | 1,147,179 |
|
|
|
|
|
|
|
|
|
| $ | 1,334,615 |
|
|
|
|
|
| $ | 1,263,631 |
|
|
|
|
|
| |||||||
Net interest income |
|
|
|
|
| $ | 28,566 |
|
|
|
|
|
|
|
|
|
| $ | 23,730 |
|
|
|
|
|
|
|
| $ | 30,224 |
|
|
|
|
|
| $ | 28,566 |
|
|
|
| |||||||
Net interest rate spread |
|
|
|
|
|
|
|
|
|
| 3.03 | % |
|
|
|
|
|
|
|
|
|
| 2.72 | % |
|
|
|
|
|
| 3.02 | % |
|
|
|
|
|
| 3.03 | % | ||||||||
Net interest margin |
|
|
|
|
|
|
|
|
|
| 3.19 | % |
|
|
|
|
|
|
|
|
|
| 2.93 | % |
|
|
|
|
|
| 3.18 | % |
|
|
|
|
|
| 3.19 | % | ||||||||
Ratio of average interest-earning assets to average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
| 123.99 | % |
|
|
|
|
|
|
|
|
|
| 120.18 | % |
|
|
|
|
|
| 124.61 | % |
|
|
|
|
|
| 123.99 | % |
As indicated in the above tables,table, net interest income, before provision for loan losses, increased $1.5 million,$989,000 or 17.8%10.1%, to $9.8$10.8 million for the three months ended September 30, 20212022 as compared to $8.3$9.8 million for the same prior year period. This increase was due principally to a 20 basis points increase in the $79.4 million, or 7.2%,average yield of interest-earning assets, offset by an increase of 21 basis points on the average cost of interest-bearing liabilities. Net interest income was positively impacted by an increase in the average balance of interest-earning assets coupled with an increase of 13 basis points on the average yield earned on those assets. These positive factors on net interest income were partially offset by an increase in the average balance of interest-bearing liabilities of $39.3$114.2 million, or 4.3%9.7%. The negativepositive effect of this increase in the average balance of interest-bearing liabilities on net interest income however,interest-earning assets was partially offset by a decreasean increase of 18 basis points on the average interest rate paid on those$105.3 million in interest-bearing liabilities. In total, net interest margin increased one basis point to 3.32% for the three months ended September 30, basis points2022 as compared to 3.31%.the same prior year period. The following analysis should also be viewed in conjunction with the table below which reports the changes in net interest income attributable to rate and volume.
Interest and dividend income increased $1.1$1.8 million, or 10.9%15.1%, to $11.6$13.4 million for the three months ended September 30, 20212022 compared to $10.5$11.6 million for the same three month period in 2020. The2021. This quarter-over-quarter increase in interest income was due principally to the increase in the average yields earned on average interest-earning assets (primarily loans of 28%), which increased 13 basis points between the year-over-year third quarter periods. This increase was also due to an increase in the average balanceyield earned on interest-earning assets of interest earning assets, which increased between the year-over-year third quarter period20 basis points and was primarily driven by 7.2%. The average balance of investment securities and loans increased by $63.0 million and $7.3 million, respectively. Thean 80 basis points increase in the average yield earned on investment securities, primarily, tax-exempt securities. This increase in 2022 on the yields received from investment securities was the result of the combined effects of increasing coupons received on previously-held adjustable-rate securities and relatively higher rates of interest received on newly-purchased securities as a result of rising interest rates. These increased yields on investments securities were offset slightly by a decrease of 10 basis
- 56 -
points in the average yield earned on loans wasin the quarter ended September 30, 2022 as compared to the same quarter in 2021.
Compared to the third quarter of 2021, average loan yields decreased 10 basis points during the three months ended September 30, 2022, primarily due to the recognition ofa $451,000 reduction in deferred PPPPaycheck Protection Program (PPP) fee income recognized in the period duequarter ended September 30, 2022 as compared to
- 67 -
the same quarter in 2021. Absent the effects of PPP revenue recognition, loan yields in aggregate would have increased levels of forgiveness12 basis points from 4.31% in the three month periodmonths ended September 30, 2021. Please refer2021 to the PPP tables above4.43% for the full impact of PPP loans on average loan yields. same three month period in 2022.
Interest expense for the three months ended September 30, 2021 decreased $335,000,2022 increased $762,000, or 15.4%41.4%, to $1.8$2.6 million when compared to the same prior year period. DepositThe average cost of interest-bearing liabilities increased 21 basis points between the two periods due primarily to an increase in the average cost of time deposits and MMDA accounts, combined with an increase of $105.8 million in the average balance of interest bearing deposits. Interest expense decreased $462,000,on borrowings increased $9,000, or 28.6%1.3%, to $1.2 million$696,000 due primarily to a 2439 basis point decreasepoints increase in the annualized average rate paid on deposits to 0.55%subordinated debt for the three months ended September 30, 2021,2022 as compared to 0.79% for the three months ended September 30, 2020.prior year period. This increase was partially offset by a $19.7 million increase$660,000 decrease in the average balance of interest-bearing depositsborrowings, combined with a 10 basis points decrease as long term, higher rate borrowings matured during the same time periods. This decrease inperiod and were replaced with lower-cost overnight borrowings.
Net interest income for the average cost of deposits was primarily due to a 30 basis point decrease in the average rates paid on time deposits, during the threenine months ended September 30, 2021 as compared to the same three month period in 2020 due to the general decline in market interest rates during the third quarter of 2021.
For the nine month period ended September 30, 2021, net interest income, before the provision for loan losses, increased $4.8 million, or 20.4%, to $28.62022 was $30.2 million, compared to $23.7$28.6 million for the nine months ended September 30, 2020. Interest2021. The primary driver of the increase in net interest income was a $1.4 million or 4.1%, increase in interest and dividend income increased $2.6to $36.1 million or 8.1%,for the nine months ended September 30, 2022 compared to $34.6 million for the nine months ended September 30, 2021. Interest income on investment securities increased $1.9 million to $8.5 million for the nine months ended September 30, 2022 as compared to $6.5 million for the same prior year period. Loan income decreased $535,000, or 1.9%, for the nine months ended September 30, 2022 when compared to the same prior year period. The average yield earned on interest earning assets decreased eight basis points as compared to the same nine month period in 2021. This increase in net interest income was also due to a seven basis points decrease in the average cost of interest-bearing liabilities. The average balance of interest-earning assets increased $75.2 million for the nine months ended September 30, 2022 to $1.3 billion from $1.2 billion for the same prior year period while the average balance of interest-bearing liabilities increased $55.6 million for the nine months ended September 30, 2022 as compared to same prior year period. The net interest margin percentage decreased from 3.19% for the nine months ended September 30, 2021 from $32.0to 3.18% for the nine months ended September 30, 2022.
Interest and dividend income increased $1.4 million, or 4.1%, to $36.1 million for the nine months ended September 30, 2022 compared to $34.7 million for the same nine month period in 2020. The increase in interest income was due principally to the increase in average balances2021 primarily as a result of taxable investment securities, tax exempt investment securities and loans, which increased 26.5%, 61.1% and 6.5%, respectively, between the year-over-year nine month periods. Thea $$63.4 million increase in the average balance of securities reflected increased purchasesinvestments in 2021the nine months ended September 30, 2022, as compared to 2020. The increase in the average balance of loans reflected the Bank’s participation in the PPP, continued success in its expansion within the greater Syracuse, New York market and purchased loan activity. These increases were offset by a reduction of the average balance of federal funds sold and interest-earning deposits, which decreased 22.8% in the year over-year nine month periods. The decrease in the average balance of federal funds sold and interest-earning deposits in 2021 was primarily the result of the effects of the COVID-19 pandemic. The Bank substantially increased its on-hand liquidity in 2020 to support the potential needs of the customers and the communities it serves during thesame nine month period in 2021. Additionally, there was a 22 basis points increase in investment yields in the nine months ended September 30, 2020. This level of liquidity was not considered necessary2022, as compared to the same nine month period in 2021. The increase in interest income was partially offset by a decrease2022 in the average yieldyields received from investment securities was the result of interest-earning assetsthe combined effects of 8increasing coupons received on previously-held adjustable-rate securities and relatively higher rates of interest received on newly-purchased securities as a result of rising interest rates. The 18 basis points decline in average loan yields during the nine months ended September 30, 2022, as compared to 3.87% forthe same nine month period in 2021, was due to a variety of factors, most notably a $1.1 million reduction in deferred PPP fee income recognized in the first nine months of 2022 as compared to the same nine month period in the previous year. Absent the effects of PPP revenue recognition, loan yields in aggregate would have decreased one basis point from 4.16% in the nine months ended September 30, 2021 as compared to 4.15% for the prior yearsame nine month period. Further contributing to the increaseperiod in net interest income was a $2.2 million decrease in interest expense, primarily due to a $2.4 million decrease in deposit expense.2022.
Interest expense for the nine months ended September 30, 20212022 decreased $2.2 million,$227,000, or 26.9%3.7%, to $6.1$5.8 million as compared to $8.3$6.1 million for the nine months ended September 30, 2020.2021. The decrease in interest expense was due principally to a 39seven basis pointpoints decrease in the average rate paid on interest-bearing liabilities, to 0.84%, partially offset by a $63.5$55.6 million increase in the average balance of these liabilities. The decrease inInterest expense on time deposits decreased $123,000, while interest expense was due to a $2.6 million decrease in deposit interest expense and a $476,000 decrease in borrowings expense, offset by a $787,000 increase in subordinated loan expense.on MMDA accounts increased $248,000, or 33.6%. The average balance of interest-bearing deposits, which include brokered deposits, increased $43.5$72.9 million between the year-over-year nine month periods. The average rate paid on interest-bearing deposits decreased 46two basis points to 0.60% for the nine months ended September 30, 20212022, as compared withto the same nine month period in 2020.2021. This decrease was primarily due to a 6810 basis pointpoints decrease in the average rate paid on time deposits, during the nine months ended September 30, 20212022 as compared to the same time period in 2020.2021. The decrease
- 57 -
in the average rates paid on those deposits reflected the general decline in market interest rates duringthat occurred in last nine months of 2021 when many of the Bank's deposit liabilities were originated or acquired through brokers. Therefore, average deposit rates were lower in the nine months ended September 30, 2022 than they were in the same nine month period of 2021 due to time lag in the repricing of those deposits in 2022, despite the fact that general market rates of interest have increased significantly in the first nine months of 2021.2022. The Bank's management continues to monitor internal deposit activity and competitive market rates for deposits in an effort to effectively manage future deposit levels and the cost of deposits in the current interest rate environment. Interest expense on borrowings decreased $316,000, or 34 basis points, as higher rate advances matured and were replaced with lower-cost overnight borrowings, combined with a $13.1 million decrease in the average balance of borrowings. Interest expense on subordinated debt decreased $92,000, combined with a $4.2 million decrease in the average balance of the debt. This reduction in subordinated debt expense was offset by the increase in the average rate paid on the debt to 5.78% as compared to 5.43% in the prior year period.
- 68 -
Rate/Volume Analysis
Net interest income can also be analyzed in terms of the impact of changing interest rates on interest-earning assets and interest-bearing liabilities and changes in the volume or amount of these assets and liabilities. The following table represents the extent to which changes in interest rates and changes in the volume of interest-earning assets and interest-bearing liabilities have affected the Company’s interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (change in volume multiplied by prior rate); (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume); and (iii) total increase or decrease. Changes attributable to both rate and volume have been allocated ratably. Tax-exempt securities have not been adjusted for tax equivalency. Please refer to the PPP table in the previous section for information on PPP loans and the impact on loan income for the three and nine months ended September 30, 20212022 and 2020. 2021.
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||||||||||||||||||||||||||||
|
| 2021 vs. 2020 |
|
| 2021 vs. 2020 |
|
| 2022 vs. 2021 |
|
| 2022 vs. 2021 |
| ||||||||||||||||||||||||||||||||||||
|
| Increase/(Decrease) Due to |
|
| Increase/(Decrease) Due to |
|
| Increase/(Decrease) Due to |
|
| Increase/(Decrease) Due to |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
| Total |
|
|
|
|
| Total |
| |||||||||||||
Unaudited |
|
|
|
|
|
|
|
|
| Increase |
|
|
|
|
|
|
|
|
|
| Increase |
|
|
|
|
|
| Increase |
|
|
|
|
| Increase |
| |||||||||||||
(In thousands) |
| Volume |
|
| Rate |
|
| (Decrease) |
|
| Volume |
|
| Rate |
|
| (Decrease) |
|
| Volume |
|
| Rate |
|
| (Decrease) |
|
| Volume |
|
| Rate |
|
| (Decrease) |
| ||||||||||||
Interest Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Loans |
| $ | 79 |
|
| $ | 576 |
|
| $ | 655 |
|
| $ | 1,990 |
|
| $ | (778 | ) |
| $ | 1,212 |
|
| $ | 1,607 |
|
| $ | (1,177 | ) |
| $ | 430 |
|
| $ | 941 |
|
| $ | (1,476 | ) |
| $ | (535 | ) |
Taxable investment securities |
|
| 405 |
|
|
| 108 |
|
|
| 513 |
|
|
| 1,350 |
|
|
| 90 |
|
|
| 1,440 |
|
|
| 341 |
|
|
| 631 |
|
|
| 972 |
|
|
| 840 |
|
|
| 572 |
|
|
| 1,412 |
|
Tax-exempt investment securities |
|
| 49 |
|
|
| (71 | ) |
|
| (22 | ) |
|
| 68 |
|
|
| (78 | ) |
|
| (10 | ) |
|
| 116 |
|
|
| 207 |
|
|
| 323 |
|
|
| 333 |
|
|
| 180 |
|
|
| 513 |
|
Interest-earning deposits |
|
| 7 |
|
|
| (8 | ) |
|
| (1 | ) |
|
| (10 | ) |
|
| (36 | ) |
|
| (46 | ) |
|
| (13 | ) |
|
| 39 |
|
|
| 26 |
|
|
| (4 | ) |
|
| 45 |
|
|
| 41 |
|
Total interest income |
|
| 540 |
|
|
| 605 |
|
|
| 1,145 |
|
|
| 3,398 |
|
|
| (802 | ) |
|
| 2,596 |
|
|
| 2,051 |
|
|
| (300 | ) |
|
| 1,751 |
|
|
| 2,110 |
|
|
| (679 | ) |
|
| 1,431 |
|
Interest Expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
NOW accounts |
|
| 9 |
|
|
| 27 |
|
|
| 36 |
|
|
| 23 |
|
|
| 80 |
|
|
| 103 |
|
|
| 13 |
|
|
| (9 | ) |
|
| 4 |
|
|
| 25 |
|
|
| (3 | ) |
|
| 22 |
|
Money management accounts |
|
| - |
|
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
|
| (2 | ) |
|
| (1 | ) | ||||||||||||||||||||||||
MMDA accounts |
|
| 276 |
|
|
| (351 | ) |
|
| (75 | ) |
|
| 267 |
|
|
| (602 | ) |
|
| (335 | ) |
|
| 4 |
|
|
| 182 |
|
|
| 186 |
|
|
| 56 |
|
|
| 192 |
|
|
| 248 |
|
Savings and club accounts |
|
| 7 |
|
|
| 13 |
|
|
| 20 |
|
|
| 22 |
|
|
| 23 |
|
|
| 45 |
|
|
| 4 |
|
|
| 6 |
|
|
| 10 |
|
|
| 22 |
|
|
| 13 |
|
|
| 35 |
|
Time deposits |
|
| (155 | ) |
|
| (289 | ) |
|
| (444 | ) |
|
| (413 | ) |
|
| (1,950 | ) |
|
| (2,363 | ) |
|
| 207 |
|
|
| 347 |
|
|
| 554 |
|
|
| 241 |
|
|
| (364 | ) |
|
| (123 | ) |
Subordinated loans |
|
| 198 |
|
|
| 22 |
|
|
| 220 |
|
|
| 759 |
|
|
| 28 |
|
|
| 787 |
| ||||||||||||||||||||||||
Subordinated debt |
|
| 2 |
|
|
| 29 |
|
|
| 31 |
|
|
| (216 | ) |
|
| 124 |
|
|
| (92 | ) | ||||||||||||||||||||||||
Borrowings |
|
| 152 |
|
|
| (245 | ) |
|
| (93 | ) |
|
| 36 |
|
|
| (512 | ) |
|
| (476 | ) |
|
| (2 | ) |
|
| (20 | ) |
|
| (22 | ) |
|
| (123 | ) |
|
| (193 | ) |
|
| (316 | ) |
Total interest expense |
|
| 487 |
|
|
| (822 | ) |
|
| (335 | ) |
|
| 695 |
|
|
| (2,935 | ) |
|
| (2,240 | ) |
|
| 228 |
|
|
| 534 |
|
|
| 762 |
|
|
| 5 |
|
|
| (232 | ) |
|
| (227 | ) |
Net change in net interest income |
| $ | 53 |
|
| $ | 1,427 |
|
| $ | 1,480 |
|
| $ | 2,703 |
|
| $ | 2,133 |
|
| $ | 4,836 |
|
| $ | 1,823 |
|
| $ | (834 | ) |
| $ | 989 |
|
| $ | 2,105 |
|
| $ | (447 | ) |
| $ | 1,658 |
|
Provision for Loan Losses
We establish a provision for loan losses, which is charged to operations, at a level management believes is appropriate to absorb probable incurred credit losses in the loan portfolio. In evaluating the level of the allowance for loan losses, management considers historical loss experience, the types of loans and the amount of loans in the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events change. The provision for loan losses represents management’s estimate of the amount necessary to maintain the allowance for loan losses at an adequate level.
- 58 -
Management extensively reviews recent trends in historical losses, qualitative factors and specific reserve needs on loans individually evaluated for impairment in its determination of the adequacy of the allowance for loan losses. WeThe Company recorded $104,000$710,000 in provision for loan losses for the three month period ended September 30, 2021,2022, as compared to $1.7 million$104,000 for the three month period ended September 30, 2020. For the first nine months of 2021, we2021. We recorded $2.1 million$871,000 in provision for loan losses for the nine month period ended September 30, 2022, as compared to $3.9$2.1 million infor the same prior year nine month period.period ended September 30, 2021. The provisioning infor the three and nine months ended September 30, 2022 and 2021 and 2020 reflects management’s determination of prudent additions to reserves considering loan mix changes, concentrations of loans in certain business sectors, factors related to loan quality metrics, and continued COVID-19 related economic uncertainty. impact. The declineincrease in the provision for loan losses in 2021,the third quarter of 2022, as compared to the same three month period in 2020, was2021, primarily reflected required reserves related to the improvementyear-over-year loan growth and management's decision to downgrade certain loans within a specifically-identified commercial real estate and commercial loan credit relationship with an aggregate total related outstanding balance of $7.2 million. The $1.2 million decrease in provision for loan losses in the qualitative factors used by the Company to determine the provision
- 69 -
in 2021,nine months ended September 20, 2022, as compared to the previous year. The improvementsame nine month period in these qualitative factors was due to observed2021, primarily reflected continued improvements in overall borrower credit profiles as pandemic-related economic conditions during 2021 that followed the easing of the most restrictive phases of the COVID-19 pandemic that had existed in 2020.The credit-sensitiverestrictions were eased. Certain credit sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its conservative loan classification and reserve building methodologies to the analysis of these portfolios. Please refer to the asset quality section below for a further discussion of asset quality as it relates to the allowance for loan losses.
The Company measures delinquency based on the amount of past due loans as a percentage of total loans. The ratio of delinquent loans to total loans increased to 2.37%2.42% at September 30, 20212022 as compared to 1.85%2.14% at December 31, 2020.2021. Delinquent loans (numerator) increased $3.4decreased $3.6 million while total loan balances (denominator) decreased $37.0increased $53.5 million at September 30, 2021,2022, as compared to December 31, 2020.2021. The increase in past due loans was primarily driven by an increase of $4.4 million$649,000 in loans delinquent 30-59 days, partially offset by an $830,000 decreaseincrease of $690,000 in loans delinquent 60-89 days, and a $2.2 million increase in loans delinquent 90 or more days and over past due and a $167,000 decrease in loans delinquent 60-89 days.at September 30, 2022 as compared to December 31, 2021.
At September 30, 2021,2022, there were $18.7$21.4 million in loans past due including $8.2$5.9 million in loans 30-59 days past due, $5.2$5.3 million in loans 60-89 days past due and $5.3$10.2 million in loans 90 or more days past due. At December 31, 2020,2021, there were $15.3$17.9 million in loans past due including $3.8$5.2 million in loans 30-59 days past due, $5.4$4.6 million in loans 60-89 days past due and $6.1$8.0 million in loans 90 or more days past due.
Noninterest Income
The Company's noninterest income is primarily comprised of fees on deposit account balances and transactions, loan servicing, commissions, including insurance agency commissions, and net gains on sales of securities, loans, and foreclosed real estate.
The following table sets forth certain information on noninterest income for the periods indicated:
Unaudited |
| For the three months ended |
|
| For the nine months ended |
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| Change |
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| Change |
|
| September 30, 2022 |
| September 30, 2021 |
| Change |
|
| September 30, 2022 |
| September 30, 2021 |
| Change |
| ||||||||||||||||||||||||||||||||
Service charges on deposit accounts |
| $ | 393 |
|
| $ | 339 |
|
| $ | 54 |
|
|
| 15.9 | % |
| $ | 1,082 |
|
| $ | 998 |
|
| $ | 84 |
|
|
| 8.4 | % |
| $ | 334 |
|
| $ | 393 |
|
| $ | (59 | ) |
|
| -15.0 | % |
| $ | 876 |
|
| $ | 1,082 |
|
| $ | (206 | ) |
|
| -19.0 | % |
Earnings and gain on bank owned life insurance |
|
| 164 |
|
|
| 133 |
|
|
| 31 |
|
|
| 23.3 | % |
|
| 418 |
|
|
| 355 |
|
|
| 63 |
|
|
| 17.7 | % |
|
| 156 |
|
|
| 164 |
|
|
| (8 | ) |
|
| -4.9 | % |
|
| 441 |
|
|
| 418 |
|
|
| 23 |
|
|
| 5.5 | % |
Loan servicing fees |
|
| 54 |
|
|
| 90 |
|
|
| (36 | ) |
|
| -40.0 | % |
|
| 155 |
|
|
| 218 |
|
|
| (63 | ) |
|
| -28.9 | % |
|
| 74 |
|
|
| 54 |
|
|
| 20 |
|
|
| 37.0 | % |
|
| 260 |
|
|
| 155 |
|
|
| 105 |
|
|
| 67.7 | % |
Debit card interchange fees |
|
| 236 |
|
|
| 209 |
|
|
| 27 |
|
|
| 12.9 | % |
|
| 698 |
|
|
| 577 |
|
|
| 121 |
|
|
| 21.0 | % |
|
| 180 |
|
|
| 236 |
|
|
| (56 | ) |
|
| -23.7 | % |
|
| 639 |
|
|
| 698 |
|
|
| (59 | ) |
|
| -8.5 | % |
Insurance agency revenue |
|
| 303 |
|
|
| 217 |
|
|
| 86 |
|
|
| 39.6 | % |
|
| 817 |
|
|
| 739 |
|
|
| 78 |
|
|
| 10.6 | % |
|
| 258 |
|
|
| 303 |
|
|
| (45 | ) |
|
| -14.9 | % |
|
| 849 |
|
|
| 817 |
|
|
| 32 |
|
|
| 3.9 | % |
Other charges, commissions and fees |
|
| 235 |
|
|
| 224 |
|
|
| 11 |
|
|
| 4.9 | % |
|
| 800 |
|
|
| 702 |
|
|
| 98 |
|
|
| 14.0 | % |
|
| 310 |
|
|
| 235 |
|
|
| 75 |
|
|
| 31.9 | % |
|
| 1,002 |
|
|
| 800 |
|
|
| 202 |
|
|
| 25.3 | % |
Noninterest income before gains (losses) |
|
| 1,385 |
|
|
| 1,212 |
|
|
| 173 |
|
|
| 14.3 | % |
|
| 3,970 |
|
|
| 3,589 |
|
|
| 381 |
|
|
| 10.6 | % | ||||||||||||||||||||||||||||||||
Net gains on sales and redemptions of investment securities |
|
| 5 |
|
|
| 27 |
|
|
| (22 | ) |
|
| -81.5 | % |
|
| 56 |
|
|
| 1,076 |
|
|
| (1,020 | ) |
|
| -94.8 | % | ||||||||||||||||||||||||||||||||
Gains/(losses) on marketable equity securities |
|
| 89 |
|
|
| 118 |
|
|
| (29 | ) |
|
| -24.6 | % |
|
| 372 |
|
|
| (798 | ) |
|
| 1,170 |
|
|
| 146.6 | % | ||||||||||||||||||||||||||||||||
Net gains on sales of loans and foreclosed real estate |
|
| 67 |
|
|
| 134 |
|
|
| (67 | ) |
|
| -50.0 | % |
|
| 226 |
|
|
| 903 |
|
|
| (677 | ) |
|
| -75.0 | % | ||||||||||||||||||||||||||||||||
Gains on sale of premises and equipment |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 201 |
|
|
| - |
|
|
| 201 |
|
| >100% |
| |||||||||||||||||||||||||||||||||
Noninterest income before (losses) gains |
|
| 1,312 |
|
|
| 1,385 |
|
|
| (73 | ) |
|
| -5.3 | % |
|
| 4,067 |
|
|
| 3,970 |
|
|
| 97 |
|
|
| 2.4 | % | ||||||||||||||||||||||||||||||||
Net (losses) gains on sales of securities, fixed assets, loans and foreclosed |
|
| (151 | ) |
|
| 72 |
|
|
| (223 | ) |
|
| -309.7 | % |
|
| (46 | ) |
|
| 483 |
|
|
| (529 | ) |
|
| -109.5 | % | ||||||||||||||||||||||||||||||||
Gains on marketable equity securities |
|
| - |
|
|
| 89 |
|
|
| (89 | ) |
|
| -100.0 | % |
|
| 39 |
|
|
| 372 |
|
|
| (333 | ) |
|
| 89.5 | % | ||||||||||||||||||||||||||||||||
Total noninterest income |
| $ | 1,546 |
|
| $ | 1,491 |
|
| $ | 55 |
|
|
| 3.7 | % |
| $ | 4,825 |
|
| $ | 4,770 |
|
| $ | 55 |
|
|
| 1.2 | % |
| $ | 1,161 |
|
| $ | 1,546 |
|
| $ | (385 | ) |
|
| -24.9 | % |
| $ | 4,060 |
|
| $ | 4,825 |
|
| $ | (765 | ) |
|
| -15.9 | % |
- 59 -
Third quarter 2022 noninterest income was $1.2 million, a decrease of $385,000, or 24.9%, compared to $1.5 million for the same three month period in 2021. The $55,000, or 3.7%, increasedecrease in noninterest income, in the quarter ended September 30, 2021, as compared to the same quarterly periodquarter of the previous year was due to (1) a loss on sales and redemptions of investment securities in 2020, was primarily the resultcurrent quarter, compared to a net gain in the third quarter of an $86,000 increase2021, (2) no activity with sales of marketable equity securities in insurance agency revenue,the current quarter compared to the net gain on marketable equity securities recorded in the third quarter of 2021, and (3) a $54,000 increasedecrease in service charges for overdraft, ATM fees and insufficient funds on deposit accounts a $31,000 increase in earnings on bank owned life insurance and a $27,000 increase in debit card interchange fees. The increase in insurance revenue was a result of nonrecurring income as a result offor the Agency’s PPP loan forgiveness. Noninterest income related to deposit account fees began to return to normal levels whencurrent quarter compared to the third quarter of 2020 due to the reduced customer transactional activity levels and the Bank’s increased levels of fee waivers in response to the effects of the COVID-19 pandemic during the three months ended September 30, 2020. These increases in noninterest2021.
Noninterest income were offset by a decrease of $36,000 in loan servicing fees.
Offsetting these increases in noninterest income for the three month period, were decreases of $67,000 in gains on sales of loans and foreclosed real estate a $29,000 decrease in gains on marketable equity securities and a $22,000 decrease in gains on the sale of investment securities in the quarter ended September 30, 2021.
- 70 -
The $55,000, or 1.2%, increase in noninterest incomewas $4.1 million for the nine months ended September 30, 2021, when2022, a decrease of $765,000, or 15.9%, compared to $4.8 million for the same nine month period in 20202021. The decrease in noninterest income, as compared to the nine month period of the previous year was primarily due to the $1.2 million increase in net gains on equity securities and $201,000 increase in gains on sales of premises and equipment. Offsetting these increases weredecreases of $1.0 million in net gainsloss on sales and redemptions of investment securities, a decline in the gains on marketable securities and a $677,000 decreasereduction in net gains on the sales of loans and foreclosed real estate, which was primarily the result of the sale of $35.9 million in seasoned, conforming residential mortgage loans that was completed in January 2020.
Excluding the effects of the period over period fluctuations discussed above, all other noninterest income categories increased in the aggregate by $381,000, or 10.6%, to $4.0 million in the nine months ended September 30, 2021 as compared with $3.6 million in the same nine month period of 2020. This period over period increase in debit card interchange fees, other charges, commissions and fees, serviceservices charges on deposit accounts, insurance agency revenue, and earnings on bank owned life insurance, which increased $121,000, $98,000, $84,000, $78,000, and $63,000, respectively. The net increase in these categories of noninterest income was in part due to the Company’s increased strategic focus on improving recurring noninterest income. Offsetting these increases was a decrease in loan servicing fees of $63,000.accounts.
Noninterest Expense
The following table sets forth certain information on noninterest expense for the periods indicated:
Unaudited |
| For the three months ended |
|
|
|
| For the nine months ended |
|
| For the three months ended |
|
| For the nine months ended |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| Change |
|
| September 30, 2021 |
|
| September 30, 2020 |
|
| Change |
|
| September 30, 2022 |
| September 30, 2021 |
| Change |
|
| September 30, 2022 |
| September 30, 2021 |
| Change |
| ||||||||||||||||||||||||||||||||
Salaries and employee benefits |
| $ | 3,624 |
|
| $ | 3,396 |
|
| $ | 228 |
|
|
| 6.7 | % |
| $ | 10,466 |
|
| $ | 9,615 |
|
| $ | 851 |
|
|
| 8.9 | % |
| $ | 4,196 |
|
| $ | 3,624 |
|
| $ | 572 |
|
|
| 15.8 | % |
| $ | 12,030 |
|
| $ | 10,466 |
|
| $ | 1,564 |
|
|
| 14.9 | % |
Building and occupancy |
|
| 724 |
|
|
| 788 |
|
|
| (64 | ) |
|
| -8.1 | % |
|
| 2,387 |
|
|
| 2,249 |
|
|
| 138 |
|
|
| 6.1 | % |
|
| 835 |
|
|
| 724 |
|
|
| 111 |
|
|
| 15.3 | % |
|
| 2,491 |
|
|
| 2,387 |
|
|
| 104 |
|
|
| 4.4 | % |
Data processing |
|
| 686 |
|
|
| 569 |
|
|
| 117 |
|
|
| 20.6 | % |
|
| 2,016 |
|
|
| 1,721 |
|
|
| 295 |
|
|
| 17.1 | % |
|
| 485 |
|
|
| 686 |
|
|
| (201 | ) |
|
| -29.3 | % |
|
| 1,552 |
|
|
| 2,016 |
|
|
| (464 | ) |
|
| -23.0 | % |
Professional and other services |
|
| 385 |
|
|
| 282 |
|
|
| 103 |
|
|
| 36.5 | % |
|
| 1,253 |
|
|
| 899 |
|
|
| 354 |
|
|
| 39.4 | % |
|
| 267 |
|
|
| 385 |
|
|
| (118 | ) |
|
| -30.6 | % |
|
| 1,112 |
|
|
| 1,253 |
|
|
| (141 | ) |
|
| -11.3 | % |
Advertising |
|
| 191 |
|
|
| 236 |
|
|
| (45 | ) |
|
| -19.1 | % |
|
| 696 |
|
|
| 673 |
|
|
| 23 |
|
|
| 3.4 | % |
|
| 199 |
|
|
| 191 |
|
|
| 8 |
|
|
| 4.2 | % |
|
| 621 |
|
|
| 696 |
|
|
| (75 | ) |
|
| -10.8 | % |
FDIC assessments |
|
| 222 |
|
|
| 170 |
|
|
| 52 |
|
|
| 30.6 | % |
|
| 652 |
|
|
| 509 |
|
|
| 143 |
|
|
| 28.1 | % |
|
| 162 |
|
|
| 222 |
|
|
| (60 | ) |
|
| -27.0 | % |
|
| 606 |
|
|
| 652 |
|
|
| (46 | ) |
|
| -7.1 | % |
Audits and exams |
|
| 193 |
|
|
| 126 |
|
|
| 67 |
|
|
| 53.2 | % |
|
| 572 |
|
|
| 376 |
|
|
| 196 |
|
|
| 52.1 | % |
|
| 141 |
|
|
| 193 |
|
|
| (52 | ) |
|
| -26.9 | % |
|
| 424 |
|
|
| 572 |
|
|
| (148 | ) |
|
| -25.9 | % |
Insurance agency expense |
|
| 227 |
|
|
| 113 |
|
|
| 114 |
|
|
| 100.9 | % |
|
| 627 |
|
|
| 517 |
|
|
| 110 |
|
|
| 21.3 | % |
|
| 229 |
|
|
| 227 |
|
|
| 2 |
|
|
| 0.9 | % |
|
| 687 |
|
|
| 627 |
|
|
| 60 |
|
|
| 9.6 | % |
Community service activities |
|
| 59 |
|
|
| 44 |
|
|
| 15 |
|
|
| 34.1 | % |
|
| 181 |
|
|
| 163 |
|
|
| 18 |
|
|
| 11.0 | % |
|
| 58 |
|
|
| 59 |
|
|
| (1 | ) |
|
| -1.7 | % |
|
| 193 |
|
|
| 181 |
|
|
| 12 |
|
|
| 6.6 | % |
Foreclosed real estate expenses |
|
| 8 |
|
|
| 7 |
|
|
| 1 |
|
|
| 14.3 | % |
|
| 30 |
|
|
| 42 |
|
|
| (12 | ) |
|
| -28.6 | % |
|
| 17 |
|
|
| 8 |
|
|
| 9 |
|
|
| 112.5 | % |
|
| 57 |
|
|
| 30 |
|
|
| 27 |
|
|
| 90.0 | % |
Other expenses |
|
| 504 |
|
|
| 499 |
|
|
| 5 |
|
|
| 1.0 | % |
|
| 1,424 |
|
|
| 1,469 |
|
|
| (45 | ) |
|
| -3.1 | % |
|
| 678 |
|
|
| 504 |
|
|
| 174 |
|
|
| 34.5 | % |
|
| 1,892 |
|
|
| 1,424 |
|
|
| 468 |
|
|
| 32.9 | % |
Total noninterest expenses |
| $ | 6,823 |
|
| $ | 6,230 |
|
| $ | 593 |
|
|
| 9.5 | % |
| $ | 20,304 |
|
| $ | 18,233 |
|
| $ | 2,071 |
|
|
| 11.4 | % |
| $ | 7,267 |
|
| $ | 6,823 |
|
| $ | 444 |
|
|
| 6.5 | % |
| $ | 21,665 |
|
| $ | 20,304 |
|
| $ | 1,361 |
|
|
| 6.7 | % |
Total noninterest expense for the third quarter of 2022 was $7.3 million, an increase of $444,000, or 6.5%, compared to $6.8 million for the third quarter of 2021. The $593,000,increase was primarily a result of higher salaries and employee benefits expense of $572,000, or 9.5%15.8%, and a net decrease of $128,000, or 4.0%, in all other expense categories. The $572,000 increase in noninterestsalaries and benefits expense betweenfor the year-over-year third quarter periodsthree months ended September 30, 2022 was principallyprimarily due to increases in individual staff salaries and commissions and other compensation expenses paid related to increased levels of insurance and investment services activities. Additionally, salaries and benefits expenses increased due to additions to staff headcount concentrated primarily in the loan servicing areas and within the Bank's branch system. Staffing increases in the Bank's branch system were made in anticipation of the imminent opening of the Bank's eleventh branch. During 2022, the Company increased its salary structure where it was deemed appropriate in order to effectively respond to inflationary and competitive pressures within our marketplace to recruit and retain talent.
Total noninterest expense for the nine month period of 2022 was $21.7 million, an increase of $1.4 million, or 6.7%, compared with $20.3 million for the prior year period. The increase was primarily a result of higher salaries and employee benefits expense of $1.6 million, or 14.9%, that was primarily comprised of a $1.0 million, or 10.7%, increase in salaries, a $379,000 reduction in the level of deferred employee-related expenses related to loan origination volume declines following the cessation of the PPP, a $136,000 increase in employee benefits and a $85,000 net increase in all other salaries and employee benefit data processing expenses, insurance agency expense, professional and other services expense, other expenses, audits and exams and the FDIC assessment, which was partially offset by decreases in building and occupancy expenses and advertising expenses.
The detail of the components of the overall$1.0 million increase in noninterestsalaries expense is as follows:
|
|
|
|
|
|
|
|
- 71 -
|
|
|
|
|
|
The $2.1 million, or 11.4%, increase in noninterest expenses between the nine month periodmonths ended September 30, 20212022 was primarily due to increases in individual salaries, enacted early in 2022 and continuing through the year, as well as additions to staff headcount primarily in the loan servicing areas and within the Bank's branch system, as discussed above. Additionally, under generally accepted accounting principles (GAAP), certain direct costs related to loan originations are deferred and recorded as an adjustment to yield over the life of the loan. The $379,000 reduction in the total deferred employee related expenses in the nine months ended September 30, 2022, as compared to the same nine month period in the prior year2021, was principallyprimarily due to the termination of the PPP loan program in 2021, which returned loan origination volume to normalized levels. The $136,000 increase in employee
- 60 -
benefit expenses is consistent with increased staffing levels and additionally reflects increases in almost all categories of noninterest expense as explained below:per-employee benefit costs, including health insurance premiums.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2021,2022, the Bank serviced 505511 residential mortgage loans in the aggregate amount of $51.9$52.5 million that have been sold on a non-recourse basis to FNMA. FNMA is the only unrelated third-party that has acquired loans originated by the Bank. On an infrequent basis, loans previously sold to FNMA that subsequently default may be found to have underwriting defects that place the loans out of compliance with the representations and warranties made by the Bank. This can occur at any time while the loan is outstanding. In such cases, the Bank is required to repurchase the defaulted loans from FNMA. Repurchase losses sustained by the Bank include all costs incurred by FNMA as part of the foreclosure process, including items such as delinquent property taxes and legal fees. No such claims against the Bank were made by FNMA in the three or nine month periods ended in either September 30, 20212022 or September 30, 2020.2021. Management continues to monitor the underwriting standards applied to all residential mortgage loan originations and subsequent sales through its quality control processes and considers these occurrences and their related expenses to be isolated instances.
- 72 -
Income Tax Expense
During the most restrictive periods following the inception
Income tax expense decreased $233,000 to $772,000, with an effective tax rate of the COVID-19 pandemic, which began in March 2020, the Company experienced material declines in substantially all forms of noninterest expenses. These reductions in noninterest expenses were the result of the curtailment or elimination of a significant portion of non-critically-essential business and business development activities during that time. These activities were reduced or eliminated19.6%, for the duration of the substantial restrictions imposed by governmental officials and as a consequence of the internal safety and social distancing protocols initiated by the Company and/or its customers. Accordingly, as the Company progressively returned to less restricted operations, noninterest expenses progressively returned to the levels considered by its management to be prudent for the effective long-term management of the Company. Management has elected to provide a supplemental comparison between 2021 noninterest expenses and the same three and nine month periods in 2019, which were the most recent three and nine month periods not affected by the pandemic. The following table details the components of noninterest expense for the three and nine monthsquarter ended September 30, 2021 and 2019:
Unaudited |
| For the three months ended |
|
| For the nine months ended, |
| ||||||||||||||||||||||||||
(Dollars in thousands) |
| September 30, 2021 |
|
| September 30, 2019 |
|
| Change |
|
| September 30, 2021 |
|
| September 30, 2019 |
|
| Change |
| ||||||||||||||
Salaries and employee benefits |
| $ | 3,624 |
|
| $ | 3,275 |
|
| $ | 349 |
|
|
| 10.7 | % |
| $ | 10,466 |
|
| $ | 10,379 |
|
| $ | 87 |
|
|
| 0.8 | % |
Building and occupancy |
|
| 724 |
|
|
| 699 |
|
|
| 25 |
|
|
| 3.6 | % |
|
| 2,387 |
|
|
| 1,986 |
|
|
| 401 |
|
|
| 20.2 | % |
Data processing |
|
| 686 |
|
|
| 587 |
|
|
| 99 |
|
|
| 16.9 | % |
|
| 2,016 |
|
|
| 1,749 |
|
|
| 267 |
|
|
| 15.3 | % |
Professional and other services |
|
| 385 |
|
|
| 352 |
|
|
| 33 |
|
|
| 9.4 | % |
|
| 1,253 |
|
|
| 1,068 |
|
|
| 185 |
|
|
| 17.3 | % |
Advertising |
|
| 191 |
|
|
| 238 |
|
|
| (47 | ) |
|
| -19.7 | % |
|
| 696 |
|
|
| 719 |
|
|
| (23 | ) |
|
| -3.2 | % |
FDIC assessments |
|
| 222 |
|
|
| 130 |
|
|
| 92 |
|
|
| 70.8 | % |
|
| 652 |
|
|
| 371 |
|
|
| 281 |
|
|
| 75.7 | % |
Audits and exams |
|
| 193 |
|
|
| 104 |
|
|
| 89 |
|
|
| 85.6 | % |
|
| 572 |
|
|
| 304 |
|
|
| 268 |
|
|
| 88.2 | % |
Insurance agency expense |
|
| 227 |
|
|
| 190 |
|
|
| 37 |
|
|
| 19.5 | % |
|
| 627 |
|
|
| 618 |
|
|
| 9 |
|
|
| 1.5 | % |
Community service activities |
|
| 59 |
|
|
| 110 |
|
|
| (51 | ) |
|
| -46.4 | % |
|
| 181 |
|
|
| 392 |
|
|
| (211 | ) |
|
| -53.8 | % |
Foreclosed real estate expenses |
|
| 8 |
|
|
| 28 |
|
|
| (20 | ) |
|
| -71.4 | % |
|
| 30 |
|
|
| 324 |
|
|
| (294 | ) |
|
| -90.7 | % |
Other expenses |
|
| 504 |
|
|
| 569 |
|
|
| (65 | ) |
|
| -11.4 | % |
|
| 1,424 |
|
|
| 1,622 |
|
|
| (198 | ) |
|
| -12.2 | % |
Total noninterest expenses |
| $ | 6,823 |
|
| $ | 6,282 |
|
| $ | 541 |
|
|
| 8.6 | % |
| $ | 20,304 |
|
| $ | 19,532 |
|
| $ | 772 |
|
|
| 4.0 | % |
Income Tax Expense
Income tax expense increased $633,0002022, as compared to $1.0 million with an effective tax rate of 23.2%, for the quarter ended September 30, 2021, as compared to $372,000, with an effective tax rate of 20.7%, for the same three month period in 2020.2021. The increasereduction in income tax expense infor the current quarter ended September 30, 2022, as compared to the same quarter in 2020,2021, was primarily attributabledriven by the aforementioned decrease in the effective tax rate, combined with a decrease of $446,000 in recorded net income. The effective income tax rate decreased 3.6% to 19.6% for the three months ended September 30, 2022 as compared to 23.2% for the same three month period in 2021. The decrease in the tax rate in the third quarter of 2022, as compared to the year-over-year thirdsame quarter in 2021, was primarily related to an increase in pre-tax net income. tax exempt income derived from increased average balances of investment securities issued by state and political subdivisions.
Income tax expense increased $1.1decreased $132,000 to $2.3 million, with an effective tax rate of 22.2%19.4%, for the nine months ended September 30, 20212022, as compared to $1.3$2.4 million with an effective tax rate of 20.5%22.0%, for the same nine month period in 2020.2021. The federal statutory rate applied to pretax income was 21% for each of the three and nine month periods ended September 30, 2021 and 2020.
Effectivedecrease in January 2018, the Company adopted a modification methodology that was at the time newly made available under the New York State tax code, affecting how the Company’s state income tax liability is computed. Under this adopted methodology, management determined in the first quarter of 2019, it was unlikely that the Company would be required to pay material income taxes to New York State in future periods under then-existingexpense and effective income tax laws in the State. Management is continuously monitoring its future tax consequences to determine if the Company’s deferred taxes are properly stated. In the first quarter of 2020, consistent with policy, management reviewed all facts and circumstances related to its deferred taxes and determined that based on the expected filings of future New York State tax returns, the valuation allowance created in 2019 was no longer needed. Therefore management elected to eliminate its New York State net deferred tax asset valuation allowance during the quarter ended March 31, 2020.
On April 7, 2021, the New York State Legislature approved comprehensive tax legislation as part of the State’s 2022 Fiscal Year budget. The legislation includes increased taxes on businesses and high-income individuals among other tax law revisions. Other provisions include amendments to the real estate transfer tax. The legislation increases the corporate franchise tax rate to 7.25% from 6.5% for tax years beginning on or after January 1, 2021 and before January 1, 2024 for taxpayers with a business income base greater than $5.0 million. In addition, the previously scheduled phase-out of the capital base tax has been delayed. The rate of the capital base was to have been reduced to 0% starting in 2021. The legislation imposes the tax at the rate of 0.1875% for tax years beginning on or after January 1, 2021 and before January
- 73 -
1, 2024, with the 0% rate to take effect in 2024. Management continues to evaluate the projected impact of this newly issued New York State tax legislation on the Company’s financial condition and results of operations and believes that these provisions require an increase the Company’s income tax expense for the nine months ended September 30, 2021, thereby requiring an increase in the Company’s effective tax rate to 22.2% for the nine months ended September 30, 20212022, as compared to the effective tax rate of 20.5%, for the same nine month period in 2020. 2021, was primarily driven by the increase in tax exempt interest on securities.
The Company’s effectivetax liability is a function of the 21% statutory federal tax rate, typically differs from the 21% federal statutory tax rate due primarily tolevel of pretax income, the varying effects of New York State income taxes, and is partially offsetreduced by tax-exempt income from specific types of investment securities and loans, bank owned life insurance, and, to a much lesser degree, the utilization of low income housing tax credits. Other variances from the federal statutory federal tax rate are due to the effects of transitional adjustments related to state income taxes. In addition, the tax effects of certain incentive stock option activity may reduce the Company’s effective tax rate on a sporadic basis.
Earnings per Share
Basic and diluted earnings per Voting share were $0.56$0.52 per share for the third quarter of 2021,2022, as compared to $0.25$0.56 per basic and diluted Voting share for the same quarter of 2020.
2021. Basic and diluted earnings per Series A Non-Voting share were $1.43$0.52 per share for the third quarter of 2022, as compared to $0.56 per basic and diluted Series A Non-Voting share for the same quarter of 2021.
Basic and diluted earnings per Voting share were $1.55 per share for the nine month period ended September 30, 2021,2022, as compared to $0.85$1.43 for the same period year period. Basic and diluted earnings per Series A Non-Voting share were $1.55 for the nine month period ended September 30, 2022, as compared to $1.43 for the same prior year period. The increase in earnings per share between these two periods was due to the increase in net income between these two time periods. Further information on earnings per share can be found in Note 3 of this Form 10-Q.
- 61 -
Changes in Financial Condition
Assets
Total assets increased $34.8$111.8 million, or 2.8%8.7%, to $1.26$1.40 billion at September 30, 20212022 as compared to $1.23$1.29 billion at December 31, 2020.2021. This increase was due primarily to increases in loans and investment securities and cash and cash equivalents.securities.
Investment securities increased $36.6 million, or 12.1%, to $337.9Loans totaled $886.2 million at September 30, 2021, as2022, an increase of $53.7 million compared to $301.3$832.5 million at December 31, 2020,2021, primarily due to increases of $48.9 million in commercial real estate loans, $4.3 million in commercial business loans and $13.1 million in residential real estate loans. These increases were offset by a $12.8 million decrease in total consumer loans.
Investment securities, including investment in FHLB-NY stock, increased $36.0 million, or 10.1%, to $392.4 million at September 30, 2022, as compared to $356.4 million at December 31, 2021, due principally to purchases of securities during the first nine months of 2021,2022, that were partially offset by sales and redemptions of securities.
Cashsecurities totaling $50.3 million and cash equivalents totaled $75.2unrealized losses of $15.8 million an increasein the portion of $31.8 million compared to $43.5 million at December 31, 2020. Thisthe investment portfolio characterized as available-for-sale as a result of the increase in cash and equivalents corresponded tomarket interest rates through the $50.3 million increase in deposits during the nine months ended September 30, 2021. third quarter of 2022.
These increases were partially offset by a decrease in loans. Total loans of $788.1 million declined by $37.3 million, or 4.5%, compared with $825.5 million at December 31, 2020. The decrease was primarily the result of a decrease of $31.7 million in commercial loans between these two dates, partially offset by increases in residential mortgage loans of $9.3 million. The decrease in commercial loans was a direct result of PPP loan forgiveness.
Liabilities
Liabilities
Total liabilities increased $25.8$114.6 million, or 2.3%9.8%, to $1.16$1.29 billion at September 30, 20212022, compared to $1.13$1.17 billion at December 31, 2020.2021. Deposits increased $50.3$125.2 million, or 5.1%11.9%, to $1.04$1.18 billion at September 30, 2021,2022, compared to $995.9 million$1.06 billion at December 31, 2020. Noninterest-bearing2021. Interest-bearing deposits, primarily time deposits acquired through various broker channels, were the primary driver of growth between the comparable periodsdates and totaled $206.2$993.4 million at September 30, 2021,2022, an increase of $44.2$130.0 million, or 27.2%,15.1% from the 20202021 year end. The increases in noninterest-bearing deposits were primarily a result of the Bank’s participation in the PPP, as well as ongoing growth in business banking relationships. In addition, the Bank has seen a general increase in the average account balance for consumer deposits consistent with similar increases generally reported throughout the industry. These increases are expected to be transitory and relate primarily to significant levels of economic stimulus combined with reduced levels of consumer spending related to the pandemic. At this time, it cannot be determined with certainty how long it will be before these deposits return to historically normal levels.
- 74 -
Borrowed funds balances from the FHLB-NY decreased $15.0$11.5 million, or 18.3%14.9%, to $67.1$65.6 million at September 30, 20212022 from $82.1$77.1 million at December 31, 20202021 as the Bank primarily used excessnet incoming deposit cash flows to repay borrowings.borrowings at their scheduled maturity dates.
Shareholders’ Equity
The Company’sTotal shareholders’ equity exclusive of the noncontrolling interest, increased $8.9 million, or 9.1%, to $106.3was $107.3 million at September 30, 2021, from $97.52022, a decrease of $3.0 million, as compared to $110.3 million at December 31, 2020. This increase2021. The $3.0 million decline in shareholders' equity was principallyprimarily due to a $7.2an increase of $11.3 million in accumulated other comprehensive loss, due to unrealized temporary losses on investment securities categorized as available-for-sale, and $740,000 in declared dividend distributions, partially offset by an increase in retained earnings an $845,000for the nine months ended September 30, 2022 of $7.6 million, or 12.5%.
The $11.3 million tax-effected increase in accumulated other comprehensive income, a $669,000loss from December 31, 2021 to September 30, 2022, was primarily due to the decline in the fair value of the Company's available-for-sale investment securities portfolio during that period. The available-for-sale investment securities portfolio, with an aggregate amortized historical cost of $191.5 million, had an aggregate fair value that was less than its aggregate amortized historical cost by $15.8 million, or 8.25%, at September 30, 2022. The available-for-sale investment securities portfolio, with an aggregate amortized historical cost of $190.6 million, had an aggregate fair value that exceeded its aggregate amortized historical cost by $579,000, or 0.30%, at December 31, 2021. The resultant $15.2 million total decline in the fair value of the available-for-sale investment portfolio's aggregate fair value relative to its aggregate amortized historical cost, in the nine months ended September 30, 2022, was due to the significant increase in additional paidgeneral interest rates that occurred in capital,that period and a $135,000 increase in ESOP shares. The increase in retained earnings resulted from $8.5 million in net income recorded indid not represent any other-than-temporary impairment within the first nine months of 2021. Partially offsetting this increase in retained earnings were $940,000 for cash dividends declared on our common stock, $194,000 for cash dividends declared on our Non-Voting common stock, $97,000 for cash dividends declared on our former preferred stock, $26,000 for cash dividends declared on our issued warrant, and $65,000 in cumulative effect of our affiliate capital allocation Comprehensive income increased primarily as the result of increases in the unrealized gain on the available-for sale investment portfolio during the 2021 nine month period. . at September 30, 2022.
Non-Voting Common Stock Issued Capital
During the second quarter of 2021, the Company converted 1,380,283, or 100%, of its previously-outstanding shares of Series B Convertible Perpetual Preferred Stock to an equal number of newly-created Series A Non-Voting Common Stock. Neither the previously-issued Series B Perpetual Preferred Stock, nor the newly-issued Series A Non-Voting Common Stock had, or will have, dividend or liquidation preference over the Company’s existing Voting Common Stock. Holders of the new Series A Non-Voting Common Stock will be entitled to receive dividends, if and when declared by the Company’s Board of Directors, in the same per share amount as paid on the Company’s Voting Common Stock.
Capital
Capital adequacy is evaluated primarily by the use of ratios which measure capital against total assets, as well as against total assets that are weighted based on defined risk characteristics. The Company’s goal is to maintain a strong capital position, consistent with the risk profile of its banking operations. This strong capital position serves to support growth and expansion activities while at the same time exceeding regulatory standards. At September 30, 2021,2022, the Bank met the
- 62 -
regulatory definition of a “well-capitalized” institution, i.e. a leverage capital ratio exceeding 5%, a Tier 1 risk-based capital ratio exceeding 8%, Tier 1 common equity exceeding 6.5%, and a total risk-based capital ratio exceeding 10%.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The buffer is separate from the capital ratios required under the Prompt Corrective Actions (“PCA”) standards. In order to avoid these restrictions, the capital conservation buffer effectively increases the minimum levels of the following capital to risk-weighted assets ratios: (1) Core Capital, (2) Total Capital and (3) Common Equity. At September 30, 2021,2022, the Bank exceeded all regulatory required minimum capital ratios, including the capital buffer requirements.
As a result of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies developed a “Community Bank Leverage Ratio” (the ratio of a bank's tier 1 capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The federal banking agencies may consider a financial institution's risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies have set the Community Bank Leverage Ratio at 9%. Pursuant to the CARES Act, the federal banking agencies in April 2020 issued interim final rules to set the Community Bank Leverage Ratio at 8% beginning in the second quarter of 2020 through the end of 2020. Beginning in 2021, the Community Bank Leverage Ratio increased to 8.5% for the calendar year. Community banks will have until January 1, 2022, before the Community Bank Leverage Ratio requirement will return to 9%. A financial institution can
- 75 -
elect to be subject to this new definition. The Bank did not elect to become subject to the Community Bank Leverage Ratio.
Pathfinder Bank’s capital amounts and ratios as of the indicated dates are presented in the following tables:table:
|
| Actual |
|
| Minimum For Capital Adequacy Purposes |
|
| Minimum To Be "Well-Capitalized" Under Prompt Corrective Provisions |
|
| Minimum For Capital Adequacy with Buffer |
|
| Actual |
|
| Minimum For |
|
| Minimum To Be |
|
| Minimum For |
| ||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) |
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| ||||||||||||||||
As of September 30, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
As of September 30, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total Core Capital (to Risk-Weighted Assets) |
| $ | 124,366 |
|
|
| 15.42 | % |
| $ | 64,508 |
|
|
| 8.00 | % |
| $ | 80,635 |
|
|
| 10.00 | % |
| $ | 84,667 |
|
|
| 10.50 | % |
| $ | 141,354 |
|
|
| 14.69 | % |
| $ | 76,993 |
|
|
| 8.00 | % |
| $ | 96,241 |
|
|
| 10.00 | % |
| $ | 101,053 |
|
|
| 10.50 | % |
Tier 1 Capital (to Risk-Weighted Assets) |
| $ | 114,237 |
|
|
| 14.17 | % |
| $ | 48,381 |
|
|
| 6.00 | % |
| $ | 64,508 |
|
|
| 8.00 | % |
| $ | 68,540 |
|
|
| 8.50 | % |
| $ | 129,304 |
|
|
| 13.44 | % |
| $ | 57,744 |
|
|
| 6.00 | % |
| $ | 76,993 |
|
|
| 8.00 | % |
| $ | 81,805 |
|
|
| 8.50 | % |
Tier 1 Common Equity (to Risk-Weighted Assets) |
| $ | 114,237 |
|
|
| 14.17 | % |
| $ | 36,286 |
|
|
| 4.50 | % |
| $ | 52,413 |
|
|
| 6.50 | % |
| $ | 56,445 |
|
|
| 7.00 | % |
| $ | 129,304 |
|
|
| 13.44 | % |
| $ | 43,308 |
|
|
| 4.50 | % |
| $ | 62,556 |
|
|
| 6.50 | % |
| $ | 67,368 |
|
|
| 7.00 | % |
Tier 1 Capital (to Assets) |
| $ | 114,237 |
|
|
| 9.21 | % |
| $ | 49,621 |
|
|
| 4.00 | % |
| $ | 62,026 |
|
|
| 5.00 | % |
| $ | 62,026 |
|
|
| 5.00 | % |
| $ | 129,304 |
|
|
| 9.48 | % |
| $ | 54,576 |
|
|
| 4.00 | % |
| $ | 68,220 |
|
|
| 5.00 | % |
| $ | 68,220 |
|
|
| 5.00 | % |
As of December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Total Core Capital (to Risk-Weighted Assets) |
| $ | 115,289 |
|
|
| 13.13 | % |
| $ | 70,270 |
|
|
| 8.00 | % |
| $ | 87,838 |
|
|
| 10.00 | % |
| $ | 92,230 |
|
|
| 10.50 | % |
| $ | 129,166 |
|
|
| 15.19 | % |
| $ | 68,013 |
|
|
| 8.00 | % |
| $ | 85,016 |
|
|
| 10.00 | % |
| $ | 89,266 |
|
|
| 10.50 | % |
Tier 1 Capital (to Risk-Weighted Assets) |
| $ | 104,287 |
|
|
| 11.87 | % |
| $ | 52,703 |
|
|
| 6.00 | % |
| $ | 70,270 |
|
|
| 8.00 | % |
| $ | 74,662 |
|
|
| 8.50 | % |
| $ | 118,511 |
|
|
| 13.94 | % |
| $ | 51,009 |
|
|
| 6.00 | % |
| $ | 68,013 |
|
|
| 8.00 | % |
| $ | 72,263 |
|
|
| 8.50 | % |
Tier 1 Common Equity (to Risk-Weighted Assets) |
| $ | 104,287 |
|
|
| 11.87 | % |
| $ | 39,527 |
|
|
| 4.50 | % |
| $ | 57,095 |
|
|
| 6.50 | % |
| $ | 61,487 |
|
|
| 7.00 | % |
| $ | 118,511 |
|
|
| 13.94 | % |
| $ | 38,257 |
|
|
| 4.50 | % |
| $ | 55,260 |
|
|
| 6.50 | % |
| $ | 59,511 |
|
|
| 7.00 | % |
Tier 1 Capital (to Assets) |
| $ | 104,287 |
|
|
| 8.63 | % |
| $ | 48,314 |
|
|
| 4.00 | % |
| $ | 60,392 |
|
|
| 5.00 | % |
| $ | 60,392 |
|
|
| 5.00 | % |
| $ | 118,511 |
|
|
| 9.52 | % |
| $ | 49,804 |
|
|
| 4.00 | % |
| $ | 62,255 |
|
|
| 5.00 | % |
| $ | 62,255 |
|
|
| 5.00 | % |
- 76 -
Non-GAAP Financial Measures
Regulation G, a rule adopted by the Securities and Exchange Commission (SEC), applies to certain SEC filings, including earnings releases, made by registered companies that contain “non-GAAP financial measures.” GAAP is generally accepted accounting principles in the United States of America. Under Regulation G, companies making public disclosures containing non-GAAP financial measures must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure (if a comparable GAAP measure exists) and a statement of the Company’s reasons for utilizing the non-GAAP financial measure as part of its financial disclosures. The SEC has exempted from the definition of “non-GAAP financial measures” certain commonly used financial measures that are not based on GAAP. When these exempted measures are included in public disclosures, supplemental information is not required. Financial institutions like the Company and its subsidiary bank are subject to an array of bank regulatory capital measures that are financial in nature but are not based on GAAP. The Company follows industry practice in disclosing its financial condition under these various regulatory capital measures, including period-end regulatory capital ratios for its subsidiary bank, in its periodic reports filed with the SEC. The Company provides, below, an explanation of the calculations, as supplemental information, for non-GAAP measures included in the consolidated annual financial statements. In addition, the Company provides a reconciliation of its subsidiary bank’s disclosed regulatory capital measures, below.
| September 30, |
|
| December 31, |
|
| ||
(Dollars in thousands) | 2021 |
|
| 2020 |
|
| ||
Regulatory Capital Ratios (Bank Only) |
|
|
|
|
|
|
|
|
Total capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
Total equity (GAAP) | $ | 117,503 |
|
| $ | 106,720 |
|
|
Goodwill |
| (4,536 | ) |
|
| (4,536 | ) |
|
Intangible assets |
| (121 | ) |
|
| (133 | ) |
|
Addback: Accumulated other comprehensive income |
| 1,391 |
|
|
| 2,236 |
|
|
Total Tier 1 Capital | $ | 114,237 |
|
| $ | 104,287 |
|
|
Allowance for loan and lease losses |
| 10,129 |
|
|
| 11,002 |
|
|
Total Tier 2 Capital | $ | 10,129 |
|
| $ | 11,002 |
|
|
Total Tier 1 plus Tier 2 Capital (numerator) | $ | 124,366 |
|
| $ | 115,289 |
|
|
Risk-weighted assets (denominator) |
| 806,353 |
|
|
| 878,380 |
|
|
Total core capital to risk-weighted assets |
| 15.42 |
| % |
| 13.13 |
| % |
|
|
|
|
|
|
|
|
|
Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
Total Tier 1 capital (numerator) | $ | 114,237 |
|
| $ | 104,287 |
|
|
Risk-weighted assets (denominator) |
| 806,353 |
|
|
| 878,380 |
|
|
Total capital to risk-weighted assets |
| 14.17 |
| % |
| 11.87 |
| % |
|
|
|
|
|
|
|
|
|
Tier 1 capital (to adjusted assets) |
|
|
|
|
|
|
|
|
Total Tier 1 capital (numerator) | $ | 114,237 |
|
| $ | 104,287 |
|
|
Total average assets |
| 1,245,173 |
|
|
| 1,212,512 |
|
|
Goodwill |
| (4,536 | ) |
|
| (4,536 | ) |
|
Intangible assets |
| (121 | ) |
|
| (133 | ) |
|
Adjusted assets (denominator) | $ | 1,240,516 |
|
| $ | 1,207,843 |
|
|
Total capital to adjusted assets |
| 9.21 |
| % |
| 8.63 |
| % |
|
|
|
|
|
|
|
|
|
Tier 1 Common Equity (to risk-weighted assets) |
|
|
|
|
|
|
|
|
Total Tier 1 capital (numerator) | $ | 114,237 |
|
| $ | 104,287 |
|
|
Risk-weighted assets (denominator) |
| 806,353 |
|
|
| 878,380 |
|
|
Total Tier 1 Common Equity to risk-weighted assets |
| 14.17 |
| % |
| 11.87 |
| % |
- 7763 - -
| September 30, |
|
| December 31, |
|
| ||
(Dollars in thousands) | 2022 |
|
| 2021 |
|
| ||
Regulatory Capital Ratios (Bank only) |
|
|
|
|
|
| ||
Total capital (to risk-weighted assets) |
|
|
|
|
|
| ||
Total equity (GAAP) | $ | 121,380 |
|
| $ | 121,896 |
|
|
Goodwill |
| (4,536 | ) |
|
| (4,536 | ) |
|
Intangible assets |
| (105 | ) |
|
| (117 | ) |
|
Addback: Accumulated other comprehensive income |
| 12,565 |
|
|
| 1,268 |
|
|
Total Tier 1 Capital | $ | 129,304 |
|
| $ | 118,511 |
|
|
Allowance for loan and lease losses |
| 12,050 |
|
|
| 10,655 |
|
|
Total Tier 2 Capital | $ | 12,050 |
|
| $ | 10,655 |
|
|
Total Tier 1 plus Tier 2 Capital (numerator) | $ | 141,354 |
|
| $ | 129,166 |
|
|
Risk-weighted assets (denominator) |
| 962,407 |
|
|
| 850,157 |
|
|
Total core capital to risk-weighted assets |
| 14.69 |
| % |
| 15.19 |
| % |
|
|
|
|
|
|
| ||
Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
| ||
Total Tier 1 capital (numerator) | $ | 129,304 |
|
| $ | 118,511 |
|
|
Risk-weighted assets (denominator) |
| 962,407 |
|
|
| 850,157 |
|
|
Total capital to risk-weighted assets |
| 13.44 |
| % |
| 13.94 |
| % |
|
|
|
|
|
|
| ||
Tier 1 capital (to adjusted assets) |
|
|
|
|
|
| ||
Total Tier 1 capital (numerator) | $ | 129,304 |
|
| $ | 118,511 |
|
|
Total average assets |
| 1,369,039 |
|
|
| 1,249,752 |
|
|
Goodwill |
| (4,536 | ) |
|
| (4,536 | ) |
|
Intangible assets |
| (105 | ) |
|
| (117 | ) |
|
Adjusted assets (denominator) | $ | 1,364,398 |
|
| $ | 1,245,099 |
|
|
Total capital to adjusted assets |
| 9.48 |
| % |
| 9.52 |
| % |
|
|
|
|
|
|
| ||
Tier 1 Common Equity (to risk-weighted assets) |
|
|
|
|
|
| ||
Total Tier 1 capital (numerator) | $ | 129,304 |
|
| $ | 118,511 |
|
|
Risk-weighted assets (denominator) |
| 962,407 |
|
|
| 850,157 |
|
|
Total Tier 1 Common Equity to risk-weighted assets |
| 13.44 |
| % |
| 13.94 |
| % |
Loan and Asset Quality and Allowance for Loan Losses
The following table represents information concerning the aggregate amount of non-performing assetsnon-accrual loans at the indicated dates:
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| September 30, |
| December 31, |
| September 30, |
| ||||||||
(Dollars In thousands) |
| 2021 |
|
| 2020 |
|
| 2020 |
|
| 2022 |
| 2021 |
| 2021 |
| ||||||||
Nonaccrual loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial and commercial real estate loans |
| $ | 5,666 |
|
| $ | 17,978 |
|
| $ | 11,208 |
|
| $ | 8,201 |
|
| $ | 6,297 |
|
| $ | 5,666 |
|
Consumer |
|
| 1,289 |
|
|
| 747 |
|
|
| 576 |
|
|
| 1,576 |
|
|
| 1,104 |
|
|
| 1,289 |
|
Residential mortgage loans |
|
| 1,830 |
|
|
| 2,608 |
|
|
| 1,452 |
|
|
| 848 |
|
|
| 891 |
|
|
| 1,830 |
|
Total nonaccrual loans |
|
| 8,785 |
|
|
| 21,333 |
|
|
| 13,236 |
|
|
| 10,625 |
|
|
| 8,292 |
|
|
| 8,785 |
|
Total nonperforming loans |
|
| 8,785 |
|
|
| 21,333 |
|
|
| 13,236 |
|
|
| 10,625 |
|
|
| 8,292 |
|
|
| 8,785 |
|
Foreclosed real estate |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 221 |
|
|
| - |
|
|
| - |
|
Total nonperforming assets |
| $ | 8,785 |
|
| $ | 21,333 |
|
| $ | 13,236 |
|
| $ | 10,846 |
|
| $ | 8,292 |
|
| $ | 8,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Accruing troubled debt restructurings |
| $ | 5,302 |
|
| $ | 3,554 |
|
| $ | 1,999 |
|
| $ | 3,716 |
|
| $ | 3,605 |
|
| $ | 5,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nonperforming loans to total loans |
|
| 1.11 | % |
|
| 2.58 | % |
|
| 1.61 | % |
|
| 1.22 | % |
|
| 1.00 | % |
|
| 1.11 | % |
Nonperforming assets to total assets |
|
| 0.70 | % |
|
| 1.74 | % |
|
| 1.10 | % |
|
| 0.78 | % |
|
| 0.65 | % |
|
| 0.70 | % |
Nonperforming assets include nonaccrual loans, nonaccrual troubled debt restructurings (“TDR”), and foreclosed real estate (‘‘FRE”). The Company generally places a loan on nonaccrual status and ceases accruing interest when loan payment performance is deemed unsatisfactory and the loan is past due 90 days or more. There are no loans that are past due 90 days or more and still accruing interest. Loans are considered modified in a TDR when, due to a borrower’s financial difficulties, the Company makes a concession(s) to the borrower that it would not otherwise consider. These modifications may include, among others, an extension of the term of the loan, and granting a period when interest-only payments can be made, with the principal payments made over the remaining term of the loan or at maturity. TDRs are included in the above table
- 64 -
within the categories of nonaccrual loans or accruing TDRs. There were nofive TDR loans in nonaccrual status at September 30, 2021. 2022 totaling $1.8 million.
Pursuant to the CARES Act, financial institutions have the option to temporarily suspend certain requirements under U.S. generally accepted accounting principles related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19. This provision allows a financial institution the option to not apply the guidance on accounting for troubled debt restructurings to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) January 1, 2022 or (ii) 60 days after the end of the COVID-19 national emergency. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Bank elected to adopt these provisions of the CARES Act.
As indicated in the table above, nonperforming assets at September 30, 20212022 were $8.8$10.8 million, and were $12.5$2.5 million lowerhigher than the $21.3$8.3 million reported at December 31, 2020, due2021 and $2.0 million higher than the reported $8.8 million at September 30, 2021. The increase in the nonperforming loan portfolio on September 30, 2022, as compared to December 31, 2021, was primarily to a decreasethe result of $12.3the placement of $1.8 million in nonperforming commercial andinto nonaccrual status of certain loans within one large commercial real estate loansloan and commercial loan relationship with a $778,000 decrease in nonperforming residential real estate loans.total related outstanding amount of $7.2 million. This decrease was partially offset by an increase of $542,000 in nonperforming consumer loans.relationship is under active resolution management at September 30, 2022.
Fair values for commercial FRE are initially recorded based on market value evaluations by third parties, less costs to sell (“initial cost basis”). On a prospective basis, residential FRE assets will be initially recorded at the lower of the net amount of loan receivable or the real estate’s fair value less costs to sell. Any write-downs required when the related loan receivable is exchanged for the underlying real estate collateral at the time of transfer to FRE are charged to the allowance for loan losses. Values are derived from appraisals, similar to impaired loans, of underlying collateral or discounted cash flow analysis. Subsequent to foreclosure, valuations are updated periodically and assets are marked to current fair value, not to exceed the initial cost basis for the FRE property.
- 78 -
The allowance for loan losses represents management’s estimate of the probable losses inherent in the loan portfolio as of the date of the statement of condition. The allowance for loan losses was $14.1$13.6 million and $12.8$12.9 million at September 30, 20212022 and December 31, 2020,2021, respectively. The ratio of the allowance for loan losses to total loans increased 23 basis points to 1.78%remained consistent at 1.54% as of September 30, 2021 from2022 when compared to 1.55% at December 31, 2020.2021. Management performs a quarterly evaluation of the allowance for loan losses based on quantitative and qualitative factors and has determined that the current level of the allowance for loan losses is adequate to absorb the losses in the loan portfolio as of September 30, 2021.2022.
The Company considers a loan impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan. The measurement of impaired loans is generally based upon the fair value of the collateral, with a portion of the impaired loans measured based upon the present value of future cash flows discounted at the historical effective interest rate. A specific reserve is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of the majority of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals or broker price opinions. When a loan is determined to be impaired, the Bank will reevaluate the collateral which secures the loan. For real estate, the Company will obtain a new appraisal or broker’s opinion whichever is considered to provide the most accurate value in the event of sale. An evaluation of equipment held as collateral will be obtained from a firm able to provide such an evaluation. Collateral will be inspected not less than annually for all impaired loans and will be reevaluated not less than every two years. Appraised values and broker opinion values are discounted due to the market’s perception of a reduced price of Bank-owned property and the Bank’s desire to sell the property more quickly to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.
At September 30, 20212022 and December 31, 2020,2021, the Company had $11.2$17.7 million and $22.8$11.4 million in loans, respectively, which were deemed to be impaired, having established specific reserves of $1.6$4.2 million and $2.8$1.9 million, respectively, on these loans. The decrease$5.7 million increase in impaired loans between these two dates was primarily driven by decreasesthe result of $5.5 million, $4.9 million, $769,000,the placement into nonaccrual status of a group of loans within one large commercial loan and $701,000, in impaired commercial real estate loans, commercial and industrial loans, commercial lines of credit and residential real estate loans, respectively. The $1.2 million decrease in specific reserves for impaired loans at September 30, 2021 as compared to December 31, 2020 was primarily due to a $869,000 decrease in specific reserves for other commercial lines of credit. borrower relationship.
Management has identified potential credit problems which may result in the borrowers not being able to comply with the current loan repayment terms and which may result in those loans being included in future impaired loan reporting. Potential problem loans totaled $37.4$42.6 million as of September 30, 2021, an increase2022, a decrease of $14.2$1.1 million, or 61.4%2.5%, as compared to $23.2$43.7 million at December 31, 2020.2021. These loans have been internally classified as special mention, substandard, or doubtful, yet are not currently considered impaired.
- 65 -
Appraisals are obtained at the time a real estate secured loan is originated. For commercial real estate held as collateral, the property is inspected every two years.
In the normal course of business, the Bank has infrequently soldsells residential mortgage loans and has infrequently sold participation interests in commercial loans. As is typical in the industry, the Bank makes certain representations and warranties to the buyer.buyers of these loans or loan participations. The Bank maintains a quality control program for closed loans and considers the risks and uncertainties associated with potential repurchase requirements to be minimal.
The future performance of the Company’s loan portfolios with respect to credit losses will be highly dependent upon the coursecourse and duration, both nationally and within the Company’s market area, of the public health and economic factors related to the pandemic, as well as the concentrations in the Company’s loan portfolio. Concentrations of loans within a portfolio that are made to a single borrower, to a related group of borrowers, or to a limited number of industries, are generally considered to be additional risk factors in estimating future credit losses. Therefore, the Company monitors all of its credit relationships to ensure that the total loan amounts extended to one borrower, or to a related group of borrowers, does not exceed the maximum permissible levels defined by applicable regulation or the Company’s generally more restrictive internal policy limits.
- 79 -
Loans to a single borrower, or to a related group of borrowers, are referred to as related credits. Total related credits encompass all related or affiliated borrower loan balances, including available unused lines of credit, for both personal and business loans. At September 30, 2021, the Company had 26 total related credit relationships, comprised of 231 individual loans, with outstanding balances in excess of $5.0 million. These total related credits ranged from $5.0 million to $15.0 million at September 30, 2021 with outstanding principal balances of $182.5 million and unfunded commitments of $38.1 million with an aggregate total related credit of $220.6 million. Of the $220.6 million in total related credits, $206.4 million was secured by various collateral assets, primarily commercial real estate, $8.7 million was unsecured, and $5.5 million were PPP loans.Liquidity
- 80 -
In addition, the future credit-related performance of a loan portfolio generally depends upon the types of loans within the portfolio, concentrations by type of loan and the quality of the collateral securing the loans. The following table details the Company's loan portfolio by collateral type within major categories as of September 30, 2021:
(Dollars in thousands) |
| Balance |
|
| Number of Loans |
|
| Average Loan Balance |
|
| Minimum/ Maximum Loan Balance |
|
| Allowance for Loan Losses |
|
| Percent of Total Loans |
| ||||||||||
Residential Mortgage Loans |
| $ | 243,067 |
|
|
| 2,117 |
|
| $ | 115 |
|
| $ | 0 |
| - | $ | 1,529 |
|
| $ | 916 |
|
|
| 31 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mixed Use |
| $ | 43,989 |
|
|
| 57 |
|
| $ | 772 |
|
| $ | 33 |
| - | $ | 6,200 |
|
| $ | 828 |
|
|
| 6 | % |
Multi-Family Residential |
|
| 38,291 |
|
|
| 59 |
|
|
| 649 |
|
|
| 23 |
| - |
| 6,239 |
|
|
| 721 |
|
|
| 5 | % |
Hotels and Motels |
|
| 35,320 |
|
|
| 10 |
|
|
| 3,532 |
|
|
| 321 |
| - |
| 11,500 |
|
|
| 665 |
|
|
| 4 | % |
Office |
|
| 32,673 |
|
|
| 62 |
|
|
| 527 |
|
|
| 3 |
| - |
| 4,772 |
|
|
| 615 |
|
|
| 4 | % |
Retail |
|
| 24,146 |
|
|
| 48 |
|
|
| 503 |
|
|
| 30 |
| - |
| 5,060 |
|
|
| 455 |
|
|
| 3 | % |
1-4 Family Residential |
|
| 19,891 |
|
|
| 157 |
|
|
| 127 |
|
|
| 0 |
| - |
| 1,193 |
|
|
| 374 |
|
|
| 3 | % |
Automobile Dealership |
|
| 16,639 |
|
|
| 10 |
|
|
| 1,664 |
|
|
| 163 |
| - |
| 6,641 |
|
|
| 313 |
|
|
| 2 | % |
Skilled Nursing Facility |
|
| 12,068 |
|
|
| 14 |
|
|
| 862 |
|
|
| 16 |
| - |
| 3,150 |
|
|
| 227 |
|
|
| 2 | % |
Recreation/ Golf Course/ Marina |
|
| 11,847 |
|
|
| 2 |
|
|
| 5,924 |
|
|
| 3,800 |
| - |
| 8,048 |
|
|
| 223 |
|
|
| 2 | % |
|
|
| 7,132 |
|
|
| 12 |
|
|
| 594 |
|
|
| 69 |
| - |
| 2,632 |
|
|
| 134 |
|
|
| 1 | % |
Manufacturing/Industrial |
|
| 6,701 |
|
|
| 17 |
|
|
| 394 |
|
|
| 55 |
| - |
| 1,389 |
|
|
| 126 |
|
|
| 1 | % |
Restaurant |
|
| 6,462 |
|
|
| 24 |
|
|
| 269 |
|
|
| 40 |
| - |
| 1,210 |
|
|
| 122 |
|
|
| 1 | % |
Automobile Repair |
|
| 4,619 |
|
|
| 12 |
|
|
| 385 |
|
|
| 40 |
| - |
| 2,266 |
|
|
| 87 |
|
|
| 0 | % |
Hospitals |
|
| 4,036 |
|
|
| 8 |
|
|
| 505 |
|
|
| 65 |
| - |
| 2,000 |
|
|
| 76 |
|
|
| 0 | % |
Not-For-Profit & Community Service Real Estate |
|
| 4,002 |
|
|
| 3 |
|
|
| 1,334 |
|
|
| 76 |
| - |
| 3,105 |
|
|
| 75 |
|
|
| 1 | % |
Land |
|
| 3,391 |
|
|
| 3 |
|
|
| 1,130 |
|
|
| 104 |
| - |
| 1,739 |
|
|
| 64 |
|
|
| 0 | % |
All Other |
|
| 6,485 |
|
|
| 30 |
|
|
| 216 |
|
|
| 8 |
| - |
| 737 |
|
|
| 122 |
|
|
| 0 | % |
Total Commercial Real Estate Loans |
| $ | 277,692 |
|
|
| 528 |
|
| $ | 526 |
|
|
|
|
|
|
|
|
|
| $ | 5,227 |
|
|
| 35 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Term Loans |
| $ | 57,487 |
|
|
| 367 |
|
| $ | 157 |
|
| $ | - |
| - | $ | 4,485 |
|
| $ | 1,651 |
|
|
| 7 | % |
Unsecured Term Loans |
|
| 14,755 |
|
|
| 106 |
|
|
| 139 |
|
|
| 1 |
| - |
| 2,244 |
|
|
| 424 |
|
|
| 2 | % |
Secured Lines of Credit |
|
| 47,775 |
|
|
| 262 |
|
|
| 182 |
|
|
| - |
| - |
| 6,821 |
|
|
| 1,372 |
|
|
| 6 | % |
Unsecured Lines of Credit |
|
| 9,352 |
|
|
| 141 |
|
|
| 66 |
|
|
| - |
| - |
| 3,000 |
|
|
| 269 |
|
|
| 1 | % |
Total Commercial and Industrial Loans |
| $ | 129,369 |
|
|
| 876 |
|
| $ | 148 |
|
|
|
|
|
|
|
|
|
| $ | 3,715 |
|
|
| 16 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Exempt Loans |
| $ | 5,956 |
|
|
| 20 |
|
| $ | 298 |
|
| $ | 6 |
| - | $ | 2,248 |
|
| $ | 1 |
|
|
| 1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paycheck Protection Loans |
| $ | 27,293 |
|
|
| 418 |
|
| $ | 65 |
|
| $ | 0 |
| - | $ | 870 |
|
| $ | - |
|
|
| 3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Equity Lines of Credit |
| $ | 32,989 |
|
|
| 922 |
|
| $ | 36 |
|
| $ | - |
| - | $ | 504 |
|
| $ | 778 |
|
|
| 4 | % |
Vehicle |
|
| 20,552 |
|
|
| 1,440 |
|
|
| 14 |
|
|
| 0 |
| - |
| 439 |
|
|
| 485 |
|
|
| 3 | % |
Consumer Secured |
|
| 23,409 |
|
|
| 838 |
|
|
| 28 |
|
|
| 1 |
| - |
| 113 |
|
|
| 553 |
|
|
| 3 | % |
Consumer Unsecured |
|
| 27,011 |
|
|
| 4,346 |
|
|
| 6 |
|
|
| - |
| - |
| 95 |
|
|
| 638 |
|
|
| 3 | % |
All Others |
|
| 2,380 |
|
|
| 1,109 |
|
|
| 2 |
|
|
| - |
| - |
| 460 |
|
|
| 56 |
|
|
| 0 | % |
Total Consumer Loans |
| $ | 106,340 |
|
|
| 8,655 |
|
| $ | 12 |
|
|
|
|
|
|
|
|
|
| $ | 2,510 |
|
|
| 13 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred loan fees |
|
| (1,569 | ) |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
Unallocated allowance for loan losses |
|
| - |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
| 1,696 |
|
|
| - |
|
Total Loans |
| $ | 788,148 |
|
|
| 12,614 |
|
| $ | 62 |
|
|
|
|
|
|
|
|
|
| $ | 14,065 |
|
|
| 100 | % |
- 81 -
Liquidity
Liquidity management involves the Company’s ability to generate cash or otherwise obtain funds at reasonable rates to support asset growth, meet deposit withdrawals, maintain reserve requirements, and otherwise operate the Company on an ongoing basis. The Company's primary sources of funds are deposits, borrowed funds, amortization and prepayment of loans and maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company manages the pricing of deposits to maintain a desired deposit composition and balance. In addition, the Company invests excess funds in short-term interest-earning and other assets, which provide liquidity to meet lending requirements.
The Company's liquidity has been enhanced by its ability to borrow from the Federal Home Loan Bank of New York (“FHLBNY”), whose competitive advance programs and lines of credit provide the Company with a safe, reliable, and convenient source of funds. A significant decrease in deposits in the future could result in the Company having to seek other sources of funds for liquidity purposes. Such sources could include, but are not limited to, additional borrowings, brokered deposits, negotiated time deposits, the sale of "available-for-sale" investment securities, the sale of securitized loans, or the sale of whole loans. Such actions could result in higher interest expense and/or losses on the sale of securities or loans.
Through the first nine months of 2021,2022, as indicated in the consolidated statement of cash flows, the Company reported net cash flow from operating activities of $15.7$12.2 million and net cash outflow of $8.4$117.4 million related to investing activities. The net cash outflow from investing activities primarily was due to a $37.6$61.4 million increase in net investment activity, a $54.6 million increase in net loan activity and a $5.8$1.4 million net increase in all other investing activities in aggregate, partially offset by a net $35.1 million decrease in loan balances.aggregate. The Company reported net cash flows from financing activities of $24.5$112.5 million generated principally by increased customer and brokered deposit balances of $91.2$145.9 million, partially offset by ay decreased brokered deposit balances of $40.9a $11.5 million decrease in net borrowings, a $20.7 million decrease in time deposits, and an aggregate decrease in net cash of $66.8 million$400,000 from all other financing sources, including dividends paid to common voting and preferrednon-voting shareholders and warrants of $1.2$1.5 million.
The Company has a number of existing credit facilities available to it. At September 30, 2021,2022, total credit available to the Company under the existing lines of credit was approximately $145.9$141.6 million at FHLBNY, the Federal Reserve Bank, and two other correspondent banks. As of September 30, 2021,2022, the Company had $67.1$65.6 million of the available lines of credit utilized on its existing lines of credit with $78.8$76.0 million available.
The Asset Liability Management Committee of the Company is responsible for implementing the policies and guidelines for the maintenance of prudent levels of liquidity. As of September 30, 2021,2022, management reported to the Board of Directors that the Company is in compliance with its liquidity policy guidelines.
- 66 -
Off-Balance Sheet Arrangements
The Company is also a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. At September 30, 2021,2022, the Company had $190.2$234.5 million in outstanding commitments to extend credit and standby letters of credit.
Item 3 – Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information relating to this item.
Item 4 – Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”) (the Company’s principal executive officer and principal financial officer), management conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021.2022. The term “disclosure controls and procedures,” under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information
- 82 -
required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures as of September 30, 2021,2022, our CEO and CFO concluded that solely as a result of the material weaknesses in internal control over financial reporting described below, which continued to exist as of September 30, 2021, our disclosure controls and procedures were not effective as of September 30, 2021.that date.
Previously Disclosed Material Weakness
The Company disclosed in Item 8 – Financial Statements and Supplementary Data in its Annual Report on Form 10-K for the year ended December 31, 2020 two areas that, under applicable SEC accounting rules, each constituted a “material weakness.” The first material weakness identified ineffectiveness in the controls related to Related Party (as defined in applicable regulations) transactions that included procedural and documentary deficiencies related to underwriting risk ratings and the completeness of borrower reviews. The second identified area of material weakness related to loan authorization, disbursement and file maintenance controls. As a result of the material weaknesses described above, management has concluded that, as of September 30, 2021, our internal control over financial reporting was not effective.
Management’s Financial Reporting Remediation Initiatives
In order to remediate the material weakness related to transactions with Related Parties, management has commenced to initiate enhanced training programs and revise internal operating procedures designed to identify, summarize and monitor all such transactions and relationships.
In order to remediate the material weakness related to loan authorization, disbursement and file maintenance controls, management has commenced the redesign of specific processes and controls associated with each of the loan operations and will increase staffing levels where appropriate, improve training, increase the use of certain automated productivity tools, and install enhanced process oversight and functional controls to ensure that these internal controls are effective.
Management is committed to maintaining a strong internal control environment and believes these remediation efforts will result in an improvement in existing controls. Management anticipates that the new controls, as implemented and when tested for a sufficient period of time, will remediate the material weaknesses. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address control deficiencies or modify certain activities of the remediation measures described above.
Changes in Internal Control over Financial Reporting
There were no changes made in our internal controls during the quarter ended September 30, 20212022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.reporting.
- 8367 - -
PART II – OTHER INFORMATION
Item 1 – Legal Proceedings
At September 30, 2021,2022, the Company is not currently a named party in a legal proceeding, the outcome of which would have a material and adverse effect on the financial condition or results of operations of the Company.
Item 1A – Risk Factors
A smaller reporting company is not required to provide the information relating to this item.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
Period |
| Total Number of Shares Purchased (1) |
|
| Average Price Paid
|
|
| Total Number of
|
|
| Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs |
| ||||||||
July 1, 2020 through July 31, 2020 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 74,292 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
August 1, 2020 through August 31, 2020 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 74,292 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
September 1, 2020 through September 30, 2020 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 74,292 |
|
Item 3 – Defaults Upon Senior Securities
None
Item 4 – Mine Safety Disclosures
Not applicable
Item 5 – Other Information
None
Item 6 – Exhibits
Exhibit No. | Description |
|
|
31.1 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer |
32 | Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer |
101 | Interactive data files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements tagged as blocks of text. |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
- 8468 - -
SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PATHFINDER BANCORP, INC.
(registrant)
November | /s/ |
| |
|
|
| |
| President and Chief Executive Officer |
| |
|
|
| |
November |
|
| |
| Walter F. Rusnak |
| |
| Senior Vice President, Chief Financial Officer |
|
- 8569 - -