Evans Bancorp (EVBN) 10-Q 2021 Q1 Quarterly report

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended March 31, 2021

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to ______

Commission file number 001-35021

EVANS BANCORP, INC.

(Exact name of registrant as specified in its charter)

New York 16-1332767

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

6460 Main St. Williamsville, NY 14221

(Address of principal executive offices) (Zip Code)

(716) 926-2000

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed

since last report)

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, $0.50 par value	EVBN	NYSE American

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 x No ¨

Indicate by check mark whether the registrant has submitted electronically every 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 x 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 the 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 x	Smaller reporting company x
Emerging growth company ¨

If an emerging growth company, indicate by checkmark 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 x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.50 par value, 5,433,604 shares as of April 29, 2021.

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INDEX

EVANS BANCORP, INC. AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION		PAGE
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets – March 31, 2021 and December 31, 2020	1
	Unaudited Consolidated Statements of Income – Three months ended March 31, 2021 and 2020	2
	Unaudited Consolidated Statements of Comprehensive Income – Three months ended March 31, 2021 and 2020	3
	Unaudited Consolidated Statements of Changes in Stockholders’ Equity – Three months ended March 31, 2021 and 2020	4
	Unaudited Consolidated Statements of Cash Flows – Three months ended March 31, 2021 and 2020	5
	Notes to Unaudited Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4.	Controls and Procedures	45
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosure	46
Item 5.	Other Information	46
Item 6.	Exhibits	47
	Signatures	48

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2021 AND DECEMBER 31, 2020
(in thousands, except share and per share amounts)
	March 31,		December 31,
	2021		2020
ASSETS
Cash and due from banks	$	10,562	$	13,702
Interest-bearing deposits at banks		105,658		83,902
Securities:
Available for sale, at fair value (amortized cost: $192,352 at March 31, 2021;		190,338		162,396
$159,157 at December 31, 2020)
Held to maturity, at amortized cost (fair value: $4,697 at March 31, 2021;		4,674		4,204
$4,271 at December 31, 2020)
Federal Home Loan Bank common stock, at cost		3,551		3,470
Federal Reserve Bank common stock, at cost		2,782		2,323
Loans, net of allowance for loan losses of $20,701 at March 31, 2021
and $20,415 at December 31, 2020		1,726,527		1,673,379
Properties and equipment, net of accumulated depreciation of $20,436 at March 31, 2021
and $19,963 at December 31, 2020		19,065		19,305
Goodwill		12,713		12,713
Intangible assets		2,104		2,238
Bank-owned life insurance		34,152		33,989
Operating lease right-of-use asset		5,058		5,282
Other assets		27,081		27,212
TOTAL ASSETS	$	2,144,265	$	2,044,115
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand	$	486,386	$	436,157
NOW		238,769		230,751
Savings		924,781		825,947
Time		222,002		278,554
Total deposits		1,871,938		1,771,409
Securities sold under agreement to repurchase		5,682		4,093
Other borrowings		41,699		44,698
Operating lease liability		5,463		5,694
Other liabilities		21,612		18,444
Subordinated debt		30,897		30,872
Total liabilities		1,977,291		1,875,210
STOCKHOLDERS' EQUITY:
Common stock, $0.50 par value, 10,000,000 shares authorized; 5,428,993
and 5,411,384 shares issued at March 31, 2021 and December 31, 2020,
respectively, and 5,428,993 and 5,411,384 outstanding at March 31, 2021
and December 31, 2020, respectively		2,716		2,708
Capital surplus		76,673		76,394
Retained earnings		92,117		90,522
Accumulated other comprehensive income (loss), net of tax		(4,532)		(719)
Total stockholders' equity		166,974		168,905
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,144,265	$	2,044,115
See Notes to Unaudited Consolidated Financial Statements

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1

EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(in thousands, except share and per share amounts)
	Three Months Ended March 31,
	2021		2020
INTEREST INCOME
Loans	$	17,066	$	14,546
Interest-bearing deposits at banks		16		181
Securities:
Taxable		832		1,049
Non-taxable		56		47
Total interest income		17,970		15,823
INTEREST EXPENSE
Deposits		886		2,876
Other borrowings		88		47
Subordinated debt		399		124
Total interest expense		1,373		3,047
NET INTEREST INCOME		16,597		12,776
PROVISION FOR LOAN LOSSES		313		2,999
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		16,284		9,777
NON-INTEREST INCOME
Deposit service charges		572		628
Insurance service and fees		2,502		2,425
Gain on loans sold		-		51
Bank-owned life insurance		163		160
Loss on tax credit investment		-		(2,475)
Refundable state historic tax credit		-		1,857
Interchange fee income		490		382
Other		839		310
Total non-interest income		4,566		3,338
NON-INTEREST EXPENSE
Salaries and employee benefits		9,044		7,797
Occupancy		1,187		861
Advertising and public relations		263		269
Professional services		959		914
Technology and communications		1,264		1,096
Amortization of intangibles		135		130
FDIC insurance		300		179
Merger-related		-		460
Other		1,213		1,164
Total non-interest expense		14,365		12,870
INCOME BEFORE INCOME TAXES		6,485		245
INCOME TAX PROVISION		1,633		41
NET INCOME	$	4,852	$	204
Net income per common share-basic	$	0.89	$	0.04
Net income per common share-diluted	$	0.89	$	0.04
Weighted average number of common shares outstanding		5,421,837		4,936,947
Weighted average number of diluted shares outstanding		5,463,674		4,992,214
See Notes to Unaudited Consolidated Financial Statements

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2

EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(in thousands)
	Three Months Ended March 31,
		2021		2020
NET INCOME		$	4,852	$	204
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:
Unrealized (loss) gain on available-for-sale securities			(3,889)		1,835
Defined benefit pension plans:
Amortization of prior service cost			6		5
Amortization of actuarial loss			70		82
Total			76		87
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX			(3,813)		1,922
COMPREHENSIVE INCOME		$	1,039	$	2,126
See Notes to Unaudited Consolidated Financial Statements

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3

EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(in thousands, except share and per share amounts)
							Accumulated
							Other
	Common		Capital		Retained		Comprehensive
	Stock		Surplus		Earnings		Loss		Total
Balance, December 31, 2019	$	2,467	$	63,302	$	85,267	$	(2,583)	$	148,453
Net Income						204				204
Other comprehensive income								1,922		1,922
Cash dividends ($0.58 per common share)						(2,867)				(2,867)
Stock compensation expense				257						257
Reissued 310 restricted shares										-
Issued 5,930 restricted shares, net of forfeitures		3		(3)						-
Issued 7,279 shares in stock option exercises		4		123						127
Balance, March 31, 2020	$	2,474	$	63,679	$	82,604	$	(661)	$	148,096
Balance, December 31, 2020	$	2,708	$	76,394	$	90,522	$	(719)	$	168,905
Net Income						4,852				4,852
Other comprehensive income								(3,813)		(3,813)
Cash dividends ($0.60 per common share)						(3,257)				(3,257)
Stock compensation expense				233						233
Issued 8,280 restricted shares, net of forfeitures		4		(4)						-
Issued 9,329 shares in stock option exercises		4		50						54
Balance, March 31, 2021	$	2,716	$	76,673	$	92,117	$	(4,532)	$	166,974
See Notes to Unaudited Consolidated Financial Statements

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4

EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(in thousands)
	Three Months Ended March 31,
		2021		2020
OPERATING ACTIVITIES:
Interest received	$	17,080	$	15,968
Fees received		5,183		4,113
Interest paid		(1,790)		(2,248)
Cash paid to employees and vendors		(15,000)		(11,362)
Income taxes paid		(187)		(103)
Proceeds from sale of loans held for sale		-		3,739
Originations of loans held for sale		-		(3,335)
Net cash provided by operating activities		5,286		6,772
INVESTING ACTIVITIES:
Available for sales securities:
Purchases		(40,301)		(46,322)
Proceeds from sales, maturities, calls, and payments		6,421		17,430
Held to maturity securities:
Purchases		(515)		(511)
Proceeds from maturities, calls, and payments		45		50
Additions to properties and equipment		(233)		(491)
Purchase of tax credit investment		-		(3,116)
Net cash used in acquisitions		-		(683)
Sale of other real estate		129		-
Net increase in loans		(51,764)		(20,449)
Net cash used in investing activities		(86,218)		(54,092)
FINANCING ACTIVITIES:
Proceeds from short-term borrowings, net		897		147
Repayments from long-term borrowings, net		(2,131)		-
Net increase in deposits		100,728		60,157
Issuance of common stock		54		127
Net cash provided by financing activities		99,548		60,431
Net increase in cash and cash equivalents		18,616		13,111
CASH AND CASH EQUIVALENTS:
Beginning of period		97,604		38,857
End of period	$	116,220	$	51,968
See Notes to Unaudited Consolidated Financial Statements

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5

EVANS BANCORP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(in thousands)
	Three Months Ended March 31,
		2021		2020
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income	$	4,852	$	204
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		440		538
Deferred tax benefit		(1,971)		(1,001)
Provision for loan losses		313		2,999
Loss on tax credit investment		-		2,475
Changes in refundable state historic tax credit		-		(1,857)
Loss on sales of assets		22		-
Gain on loans sold		-		(51)
Stock compensation expense		233		257
Proceeds from sale of loans held for sale		-		3,739
Originations of loans held for sale		-		(3,335)
Changes in assets and liabilities affecting cash flow:
Other assets		(1,553)		(225)
Other liabilities		2,950		3,029
NET CASH PROVIDED BY OPERATING ACTIVITIES	$	5,286	$	6,772
See Notes to Unaudited Consolidated Financial Statements

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6

EVANS BANCORP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTH PERIODS ENDED MARCH 31, 2021 AND 2020

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies followed by Evans Bancorp, Inc. (the “Company”), a financial holding company, and its 2 direct, wholly-owned subsidiaries: (i) Evans Bank, National Association (the “Bank”), and the Bank’s subsidiaries, Evans National Leasing, Inc. (“ENL”), and Evans National Holding Corp. (“ENHC”); and (ii) Evans National Financial Services, LLC (“ENFS”), and ENFS’s subsidiary, The Evans Agency, LLC (“TEA”), and TEA’s subsidiaries, Frontier Claims Services, Inc. (“FCS”) and ENB Associates Inc. (“ENBA”), in the preparation of the accompanying interim unaudited consolidated financial statements conform with U.S. generally accepted accounting principles (“GAAP”) and with general practice within the industries in which it operates. Except as the context otherwise requires, the Company and its direct and indirect subsidiaries are collectively referred to in this report as the “Company.”

The Financial Accounting Standards Board (“FASB”) establishes changes to GAAP in the form of accounting standards updates (“ASUs”) to the FASB Accounting Standards Codification. The Company considers the applicability and impact of all ASUs when they are issued by FASB. ASUs adopted by the Company during the current fiscal year are not expected to have a material impact on the Company’s consolidated financial position, results of operations, cash flows or disclosures.

The results of operations for the three month period ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year.

The accompanying unaudited consolidated financial statements should be read in conjunction with the Audited Consolidated Financial Statements and the Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “10-K”). There have been no significant changes to the Company’s significant accounting policies as disclosed in Note 1 to the 10-K.

COVID-19 – Risks & Uncertainties

The Company’s operations and financial results have been significantly impacted by the COVID-19 pandemic. The spread of COVID-19 has caused significant economic disruption throughout the United States as state and local governments issued stay at home orders and temporarily closed non-essential businesses. The full financial impact from the pandemic is unknown at this time, however prolonged disruption may adversely impact several industries within the Company's geographic footprint and impair the ability of the Company’s customers to fulfill their contractual obligations to the Company. This could cause the Company to experience a material adverse effect on business operations, asset valuations, financial condition and results of operations. Material adverse impacts may include all or a combination of valuation impairments on the Company’s intangible assets, investments, loans and mortgage servicing rights.

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7

2. ACQUISITIONS

On May 1, 2020, the Company completed the acquisition of FSB Bancorp, Inc., a Maryland corporation and the parent holding company of Fairport Savings Bank (“FSB”). On that date, FSB was merged into Evans Bank, a wholly owned banking subsidiary of the Company. At the time of closing, FSB had $321.7 million in total assets, including $272.1 million in net loans receivable and $21.4 million in securities, and $293.1 million in total liabilities, including $237.7 million in deposits and $50.6 million in borrowings. FSB operated 5 banking offices in New York at the date of acquisition. After application of the election, allocation and proration procedures contained in the merger agreement, the Company paid $17.1 million in cash and issued 422,475 shares of Evans Bancorp, Inc. common stock in exchange for all of the shares of common stock of FSB Bancorp, Inc. outstanding at the time of the acquisition. The $11.7 million fair value of the shares issued as part of the consideration paid for FSB was determined on the basis of the closing market price of the Company’s shares on April 30, 2020.

The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting. Management engaged a third-party specialist to develop the fair value estimate of certain FSB’s assets and liabilities as of the acquisition date. The assets and liabilities, both tangible and intangible were recorded at their fair values as of May 1, 2020. The application of the acquisition method of accounting resulted in the recognition of goodwill of $1.8 million and a core deposit intangible of $0.2 million. Goodwill arising from the acquisition consisted largely of synergies and the cost savings resulting from the combining of the operations of the companies and is not tax deductible.
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8

The Company recorded the assets acquired and liabilities assumed through the merger at fair value as summarized in the following table:

		As Recorded		Fair Value			As Recorded
		by FSB		Adjustments			at Acquisition
				(in thousands)
Cash and due from banks	$	1,978	$	-		$	1,978
Interest-bearing deposit at banks		9,339		-			9,339
Securities		21,371		106	(a)		21,477
FHLB Stock		2,614		-			2,614
Loans receivable		273,869		(2,484)	(b)		271,385
Allowance for loan losses		(1,706)		1,706	(c)		-
Premises and equipment		2,303		(56)	(d)		2,247
Intangible assets		-		166	(e)		166
Bank owned life insurance		3,891		-			3,891
Operating lease right-of-use asset		2,020		374	(f)		2,394
Other assets		6,033		1,640	(g)		7,673
Total assets acquired	$	321,712	$	1,452		$	323,164
Deposits		237,688		1,485	(h)		239,173
Other borrowed funds		50,597		1,929	(i)		52,526
Operating lease liability		2,217		176	(j)		2,393
Other liabilities		2,557		(573)	(k)		1,984
Total liabilities assumed	$	293,059	$	3,017		$	296,076
Net assets acquired							27,088
Purchase price							28,856
Goodwill recorded in merger						$	1,768

Explanation of certain fair value related adjustments:

(a)Represents the fair value adjustments on investment securities.

(b)Represents the fair value adjustments on the net book value of loans, which includes an interest rate mark and credit mark adjustment and the write-off of deferred fees/costs and premiums.

(c)Represents the elimination of FSB’s allowance for loan losses.

(d)Represents the fair value adjustments to reflect the fair value of land and buildings and premises and equipment, which will be amortized on a straight-line basis over the estimated useful lives of the individual assets.

(e)Represents the intangible assets recorded to reflect the fair value of core deposits. The core deposit asset was recorded as an identifiable intangible asset and will be amortized on an accelerated basis over the estimated average life of the deposit base.

(f)Represents the fair value adjustments on operating lease right of use assets.

(g)Represents an adjustment to other assets acquired. The largest adjustment was to net deferred tax assets resulting from the fair value adjustments related to the acquired assets, liabilities assumed and identifiable intangible assets recorded.

(h)Represents fair value adjustments on time deposits, which will be treated as a reduction of interest expense over the remaining term of the time deposits.

(i)Represents the fair value adjustments on FHLB borrowings, which will be treated as a decrease to interest expense over the life of the borrowings.

(j)Represents the fair value adjustments on operating lease liabilities.

(k)Represents an adjustment to other liabilities assumed.

9

The fair value of loans acquired from FSB were estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans. There was no carryover of FSB’s allowance for loan losses associated with the loans that were acquired, as the loans were initially recorded at fair value on the date of the FSB merger.

The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately 10 years and the amortization is based on dollar weighted deposit runoff on an annualized basis.

Goodwill is not amortized for book purposes; however, it is reviewed at least annually for impairment and is not deductible for tax purposes.

The fair value of land and buildings was estimated using appraisals. Acquired equipment was not material. Buildings are amortized over their estimated useful lives of approximately 39 years. Improvements and equipment are amortized or depreciated over their estimated useful lives ranging up to 10 years.

The fair value of retail demand and interest bearing deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. The fair value of time deposits was estimated by discounting the contractual future cash flows using market rates offered for time deposits of similar remaining maturities.

Other borrowed funds include borrowings from the Federal Home Loan Bank (“FHLB”). The fair value of these borrowings was estimated by discounting the contractual future cash flows using FHLB rates offered of similar maturities.

Direct acquisition and other charges incurred in connection with the FSB merger were expensed as incurred and totaled $0.5 million for the three months ended March 31, 2020. These expenses were recorded in merger-related expense on the consolidated statements of income. There were 0 merger-related expenses during the three months ended March 31, 2021.

The following table presents selected unaudited pro forma financial information reflecting the FSB merger assuming it was completed as of January 1, 2020. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the FSB merger actually been completed at the beginning of the periods presented, nor does it indicate future results for any other interim or full year period. The unaudited pro forma information is based on the actual financial statements of the Company for the periods presented, and on the actual financial statements of FSB for the three months ended March 31, 2020.

	Three months ended
	March 31, 2020
	(in thousands)
Net interest income after provision	$	12,000
Non-interest income		3,751
Non-interest expense		14,944
Net income		620

The unaudited supplemental pro forma information for the three months ended March 31, 2020 set forth above reflects adjustments related to (a) purchase accounting fair value adjustments; (b) amortization of core deposit; and (c) adjustments to interest income and expense due to amortization of premiums and accretion of discounts. Direct merger-related expenses incurred in the three months ended March 31, 2020 are assumed to have occurred prior to January 1, 2020. Furthermore, the unaudited supplemental pro forma information does not reflect management’s estimate of any revenue enhancement opportunities or anticipated potential cost savings.

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10

3. SECURITIES

The amortized cost of securities and their approximate fair value at March 31, 2021 and December 31, 2020 were as follows:

	March 31, 2021
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. treasuries and government agencies	$	75,224	$	418	$	(2,946)	$	72,696
States and political subdivisions		7,164		133		(3)		7,294
Total debt securities		82,388		551		(2,949)		79,990
Mortgage-backed securities:
FNMA		38,045		533		(508)		38,070
FHLMC		7,443		97		(145)		7,395
GNMA		5,726		45		(60)		5,711
SBA		20,197		411		(98)		20,510
CMO		38,553		556		(447)		38,662
Total mortgage-backed securities		109,964		1,642		(1,258)		110,348
Total securities designated as available for sale	$	192,352	$	2,193	$	(4,207)	$	190,338
Held to Maturity:
Debt securities
States and political subdivisions	$	4,674	$	30	$	(7)	$	4,697
Total securities designated as held to maturity	$	4,674	$	30	$	(7)	$	4,697

	December 31, 2020
	(in thousands)
	Amortized		Unrealized				Fair
	Cost		Gains		Losses		Value
Available for Sale:
Debt securities:
U.S. treasuries and government agencies	$	67,619	$	731	$	(252)	$	68,098
States and political subdivisions		7,362		169		(7)		7,524
Total debt securities		74,981		900		(259)		75,622
Mortgage-backed securities:
FNMA		24,265		654		(50)		24,869
FHLMC		3,739		111		(1)		3,849
GNMA		2,006		58		(1)		2,063
SBA		20,949		914		(33)		21,830
CMO		33,217		946		-		34,163
Total mortgage-backed securities		84,176		2,683		(85)		86,774
Total securities designated as available for sale	$	159,157	$	3,583	$	(344)	$	162,396
Held to Maturity:
Debt securities
States and political subdivisions	$	4,204	$	67	$	-	$	4,271
Total securities designated as held to maturity	$	4,204	$	67	$	-	$	4,271

11

Available for sale securities with a total fair value of $164 million and $135 million at March 31, 2021 and December 31, 2020, respectively, were pledged as collateral to secure public deposits and for other purposes required or permitted by law.

The scheduled maturities of debt and mortgage-backed securities at March 31, 2021 are summarized below. All maturity amounts are contractual maturities. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations with or without call premiums.

	March 31, 2021
	Amortized		Estimated
	cost		fair value
	(in thousands)
Debt securities available for sale:
Due in one year or less	$	1,779	$	1,781
Due after one year through five years		7,995		8,163
Due after five years through ten years		35,125		35,104
Due after ten years		37,489		34,942
		82,388		79,990
Mortgage-backed securities
available for sale		109,964		110,348
Total	$	192,352	$	190,338
Debt securities held to maturity:
Due in one year or less	$	3,738	$	3,741
Due after one year through five years		448		471
Due after five years through ten years		45		47
Due after ten years		443		438
Total	$	4,674	$	4,697

Contractual maturities of the Company’s mortgage-backed securities generally exceed ten years; however, the effective lives may be significantly shorter due to prepayments of the underlying loans and due to the nature of these securities.

There were 0 gross realized gains or losses from sales of investment securities for the three month periods ended March 31, 2021 and 2020. Information regarding unrealized losses within the Company’s available for sale securities at March 31, 2021 and December 31, 2020 is summarized below. The securities are primarily U.S. government-guaranteed agency securities or municipal securities.

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12

	March 31, 2021
		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. treasuries and government agencies	$	50,680	$	(2,946)	$	-	$	-	$	50,680	$	(2,946)
States and political subdivisions		205		(3)		-		-		205		(3)
Total debt securities		50,885		(2,949)		-		-		50,885		(2,949)
Mortgage-backed securities:
FNMA		20,847		(507)		27		(1)		20,874		(508)
FHLMC		4,045		(145)		-		-		4,045		(145)
GNMA		4,083		(60)		-		-		4,083		(60)
SBA		4,257		(65)		1,377		(33)		5,634		(98)
CMO		14,166		(447)		-		-		14,166		(447)
Total mortgage-backed securities		47,398		(1,224)		1,404		(34)		48,802		(1,258)
Held to Maturity:
Debt securities:
States and political subdivisions		361		(7)		-		-		361		(7)
Total temporarily impaired
securities	$	98,644	$	(4,180)	$	1,404	$	(34)	$	100,048	$	(4,214)
	December 31, 2020
		Less than 12 months				12 months or longer				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Losses		Value		Losses		Value		Losses
		(in thousands)
Available for Sale:
Debt securities:
U.S. treasuries and government agencies	$	33,801	$	(252)	$	-	$	-	$	33,801	$	(252)
States and political subdivisions		207		(1)		180		(6)		387		(7)
Total debt securities		34,008		(253)		180		(6)		34,188		(259)
Mortgage-backed securities:
FNMA		3,354		(39)		1,391		(11)		4,745		(50)
FHLMC		182		(1)		-		-		182		(1)
GNMA		154		(1)		-		-		154		(1)
SBA		-		-		1,392		(33)		1,392		(33)
CMO		121		-		-		-		121		-
Total mortgage-backed securities		3,811		(41)		2,783		(44)		6,594		(85)
Held to Maturity:
Debt securities:
States and political subdivisions		-		-		-		-		-		-
Total temporarily impaired
securities	$	37,819	$	(294)	$	2,963	$	(50)	$	40,782	$	(344)

‎

13

Management has assessed the securities available for sale in an unrealized loss position at March 31, 2021 and December 31, 2020 and determined the decline in fair value below amortized cost to be temporary. In making this determination, management considered the period of time the securities were in a loss position, the percentage decline in comparison to the securities’ amortized cost, and the financial condition of the issuer (primarily government or government-sponsored enterprises). In addition, management does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost. Management believes the decline in fair value is primarily related to market interest rate fluctuations and not to the credit deterioration of the individual issuers.

The Company has 0t recorded any other-than-temporary impairment (“OTTI”) charges during the three months ended March 31, 2021 and did 0t record any OTTI charges during 2020. The credit worthiness of the Company’s securities portfolio is largely reliant on the ability of U.S. government sponsored agencies such as Federal Home Loan Bank (“FHLB”), Federal National Mortgage Association (“FNMA”), Government National Mortgage Association (“GNMA”), and Federal Home Loan Mortgage Corporation (“FHLMC”), and municipalities throughout New York State to meet their obligations. In addition, dysfunctional markets could materially alter the liquidity, interest rate, and pricing risk of the portfolio. The stable past performance is not a guarantee for similar performance of the Company’s securities portfolio in future periods.

4. LOANS AND THE ALLOWANCE FOR LOAN LOSSES

Loan Portfolio Composition

The following table presents selected information on the composition of the Company’s loan portfolio as of the dates indicated:

	March 31, 2021		December 31, 2020
Mortgage loans on real estate:	(in thousands)
Residential mortgages	$	375,253	$	365,351
Commercial and multi-family		721,658		706,276
Construction-Residential		5,632		7,509
Construction-Commercial		118,080		106,559
Home equities		82,450		82,602
Total real estate loans		1,303,073		1,268,297
Commercial and industrial loans		450,961		430,350
Consumer and other loans		678		151
Unaccreted yield adjustments*		(7,484)		(5,004)
Total gross loans		1,747,228		1,693,794
Allowance for loan losses		(20,701)		(20,415)
Loans, net	$	1,726,527	$	1,673,379

* Includes net premiums and discounts on acquired loans and net deferred fees and costs on loans originated, including $6.9 million and $4.6 million of PPP fees at March 31, 2021 and December 31, 2020, respectively.

On March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) established a loan program administered through the U.S. Small Business Administration (“SBA”), referred to as the Paycheck Protection Program (“PPP”). PPP loans are 100% guaranteed by the SBA and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. These loans carry a fixed rate of 1.00% and a term of two years (loans made before June 5, 2020) or five years (loans made on or after June 5, 2020), if not forgiven, in whole or in part. Payments are deferred until either the date on which the SBA remits the amount of forgiveness proceeds to the lender or the date that is 10 months after the last day of the covered period if the borrower does not apply for forgiveness within that 10 month period. At March 31, 2021, the Company had originated PPP loans totaling $292 million, included in commercial and industrial loans. As of March 31, 2021, $55 million in PPP loans had received SBA forgiveness. PPP loans did not impact the Company’s allowance for loan loss as a result of the SBA guarantees. Fees collected from the SBA for these loans totaled $11.5 million as of March 31, 2021, including $4.1 million collected in the three month period ended March 31, 2021. These fees are deferred and amortized into interest income over the contractual period of the loan. Upon SBA forgiveness or sale of a PPP loan, unamortized fees are then recognized into interest income. In the three month period ended March 31, 2021 the total amount of PPP fees recognized into interest income was $1.7 million.

In connection with the FSB acquisition, the Company acquired $271 million in total loans, primarily residential real estate loans. At March 31, 2021, the outstanding principal balance and the carrying amount of acquired credit-impaired loans totaled $0.8 million. The Company is not recording interest on the acquired credit-impaired loans due to the uncertainty of the cash flows relating to such loans. There was less than $0.1 million of valuation allowances for specifically identified impairment attributable to acquired credit-impaired

14

loans at March 31, 2021. At December 31, 2020, the outstanding principal balance and carrying amount of acquired credit-impaired loans totaled $0.9 million and $0.8 million, respectively.

Also in connection with the FSB acquisition, the Company acquired a loan serving portfolio of $107 million in principal balances in which residential real estate loans were sold to FHLMC and the servicing rights are retained by the Company. NaN loans were sold to FHLMC by the Company during the three months periods ending March 31, 2021 and 2020.

The Company may also sell certain fixed rate residential mortgages to FNMA while maintaining the servicing rights for those mortgages. In the three month period ended March 31, 2021, the Company did not sell mortgages to FNMA. In the three month period ended March 31, 2020, the Company sold mortgages to FNMA totaling $3.7 million.

At March 31, 2021 and December 31, 2020, the Company had loan servicing portfolio principal balances of $158 million and $171 million, respectively, upon which it earned servicing fees. The fair value of the mortgage servicing rights for that portfolio was $1.1 million and $0.9 million at March 31, 2021 and December 31, 2020, respectively. At March 31, 2021 there were 0 residential mortgages held for sale. At December 31, 2020 there were $0.8 million in residential mortgages held for sale.

There were $643 million and $630 million in residential and commercial mortgage loans pledged to FHLBNY to serve as collateral for potential borrowings as of March 31, 2021 and December 31, 2020, respectively.

Disclosures related to the basis for accounting for loans, the method for recognizing interest income on loans, the policy for placing loans on nonaccrual status and the subsequent recording of payments and resuming accrual of interest, the policy for determining past due status, a description of the Company’s accounting policies and methodology used to estimate the allowance for loan losses, the policy for charging-off loans, the accounting policies for impaired loans, the accounting policy for loans acquired in a business combination, and more descriptive information on the Company’s credit risk ratings are all contained in the Notes to the Audited Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Credit Quality Indicators

The Company monitors the credit risk in its loan portfolio by reviewing certain credit quality indicators (“CQI”). The primary CQI for the commercial mortgage and commercial and industrial portfolios is the individual loan’s credit risk rating. The following list provides a description of the credit risk ratings that are used internally by the Bank when assessing the adequacy of its allowance for loan losses:

Acceptable or better

Watch

Special Mention

Substandard

Doubtful

Loss

“Special mention” and “substandard” loans are weaker credits with a higher risk of loss and are categorized as “criticized” assets.

The Company’s consumer loans, including residential mortgages and home equities, are not individually risk rated or reviewed in the Company’s loan review process. Unlike commercial customers, consumer loan customers are not required to provide the Company with updated financial information. Consumer loans also carry smaller balances. Given the lack of updated information after the initial underwriting of the loan and small size of individual loans, the Company uses delinquency status as the primary credit quality indicator for consumer loans. However, once a consumer loan is identified as impaired, it is individually evaluated for impairment.

The Company continues to evaluate its loan portfolio in response to the economic impact of the COVID-19 pandemic on its clients. The increase in the watch category during 2020 was a result of the Company reclassifying all commercial loans that received a deferral into the watch or criticized categories. As the loans continue to pay as contracted the Company will reassess the watch classification. During the third quarter of 2020, the Company identified a well-defined weakness in the hotel industry and classified the loans to clients within that industry as substandard. As of March 31, 2021, the Company’s hotel loan portfolio was $82 million, or approximately 6.3% of total commercial loans. Total criticized assets were $154 million at March 31, 2021 and $140 million at the end of the 2020.

15

The following tables provide data, at the class level, of credit quality indicators of certain loans for the dates specified:

March 31, 2021
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
Acceptable or better	$	69,738	$	369,883	$	439,621	$	352,836
Watch		16,541		254,897		271,438		72,927
Special Mention		2,842		25,261		28,103		12,261
Substandard		28,959		71,617		100,576		12,937
Doubtful/Loss		-		-		-		-
Total	$	118,080	$	721,658	$	839,738	$	450,961
December 31, 2020
(in thousands)
Corporate Credit Exposure – By Credit Rating	Commercial Real Estate Construction		Commercial and Multi-Family Mortgages		Total Commercial Real Estate		Commercial and Industrial
Acceptable or better	$	59,020	$	317,854	$	376,874	$	314,322
Watch		17,218		300,061		317,279		95,117
Special Mention		2,041		17,656		19,697		6,555
Substandard		28,280		70,705		98,985		14,356
Doubtful/Loss		-		-		-		-
Total	$	106,559	$	706,276	$	812,835	$	430,350

‎

16

Past Due Loans

The following tables provide an analysis of the age of the recorded investment in loans that are past due as of the dates indicated:

March 31, 2021
(in thousands)
		Current							Non-accruing		Total
		Balance	30-59 days		60-89 days		90+ days		Loans		Balance
Commercial and industrial	$	435,191	$	10,021	$	52	$	-	$	5,697	$	450,961
Residential real estate:
Residential		367,490		4,320		-		-		3,443		375,253
Construction		5,278		354		-		-		-		5,632
Commercial real estate:
Commercial		681,899		24,614		-		117		15,028		721,658
Construction		108,005		6,502		-		-		3,573		118,080
Home equities		80,895		260		74		-		1,221		82,450
Consumer and other		656		15		6		1		-		678
Total Loans	$	1,679,414	$	46,086	$	132	$	118	$	28,962	$	1,754,712

Note: Loan balances do not include $(7.5) million of unaccreted yield adjustments as of March 31, 2021.

December 31, 2020
(in thousands)
		Current							Non-accruing		Total
		Balance	30-59 days		60-89 days		90+ days		Loans		Balance
Commercial and industrial	$	419,409	$	4,240	$	122	$	94	$	6,485	$	430,350
Residential real estate:
Residential		357,135		4,156		1,262		109		2,689		365,351
Construction		7,509		-		-		-		-		7,509
Commercial real estate:
Commercial		667,426		20,024		4,166		-		14,660		706,276
Construction		94,030		5,616		4,062		-		2,851		106,559
Home equities		80,044		744		604		14		1,196		82,602
Consumer and other		111		6		14		17		3		151
Total Loans	$	1,625,664	$	34,786	$	10,230	$	234	$	27,884	$	1,698,798

Note: Loan balances do not include $(5.0) million of unaccreted yield adjustments as of December 31, 2020.

‎

17

Allowance for loan losses

The following tables present the activity in the allowance for loan losses according to portfolio segment for the three month periods ended March 31, 2021 and 2020.

March 31, 2021
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan			(in thousands)
losses:
Beginning balance	$	4,882	$	13,249	$	45	$	1,658		581	$	20,415
Charge-offs		-		-		(60)		-		-		(60)
Recoveries		21		-		12		-		-		33
Provision (Credit)		(513)		819		60		51		(104)		313
Ending balance	$	4,390	$	14,068	$	57	$	1,709	$	477	$	20,701

*Includes construction loans

March 31, 2020
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan			(in thousands)
losses:
Beginning balance	$	4,547	$	9,005	$	155	$	1,071	$	397	$	15,175
Charge-offs		(17)		-		(15)		(29)		(4)		(65)
Recoveries		32		-		16		-		-		48
Provision (Credit)		1,013		1,583		(65)		376		92		2,999
Ending balance	$	5,575	$	10,588	$	91	$	1,418	$	485	$	18,157

* Includes construction loans

‎

18

The following table presents the allocation of the allowance for loan losses according to portfolio segment summarized on the basis of the Company’s impairment methodology as of March 31, 2021 and December 31, 2020:

March 31, 2021
(in thousands)
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Ending balance:
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	28	$	-	$	28
Individually evaluated for impairment		1,190		1,272		-		-		11		2,473
Collectively evaluated for impairment		3,200		12,796		57		1,681		466		18,200
Total	$	4,390	$	14,068	$	57	$	1,709	$	477	$	20,701
Loans:
Ending balance:
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	839	$	-	$	839
Individually evaluated for impairment		5,697		19,088		-		3,620		1,619		30,024
Collectively evaluated for impairment		445,264		820,650		678		376,426		80,831		1,723,849
Total	$	450,961	$	839,738	$	678	$	380,885	$	82,450	$	1,754,712

Note: Loan balances do not include $(7.5) million of unaccreted yield adjustments as of March 31, 2021.

* Includes construction loans

‎

19

December 31, 2020
(in thousands)
	Commercial and Industrial		Commercial Real Estate Mortgages*		Consumer and Other		Residential Mortgages*		Home Equities		Total
Allowance for loan
losses:
Ending balance:
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	-	$	-	$	-
Individually evaluated for impairment		994		539		3		-		11		1,547
Collectively evaluated for impairment		3,888		12,710		42		1,658		570		18,868
Total	$	4,882	$	13,249	$	45	$	1,658	$	581	$	20,415
Loans:
Ending balance:
Loans acquired with deteriorated credit quality	$	-	$	-	$	-	$	860	$	-	$	860
Individually evaluated for impairment		6,485		18,004		3		2,874		1,624		28,990
Collectively evaluated for impairment		423,865		794,831		148		369,126		80,978		1,668,948
Total	$	430,350	$	812,835	$	151	$	372,860	$	82,602	$	1,698,798

Note: Loan balances do not include $(5.0) million of unaccreted yield adjustments as of December 31, 2020.

* Includes construction loans

Impaired Loans

The following tables provide data, at the class level, for impaired loans as of the dates indicated:

		At March 31, 2021
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,234	$	1,402	$	-	$	1,344	$	3
Residential real estate:
Residential		3,613		3,967		-		4,542		17
Construction		-		-		-		-		-
Commercial real estate:
Commercial		12,572		13,792		-		11,929		12
Construction		1,284		1,352		-		1,085		-
Home equities		1,510		1,733		-		1,719		2
Consumer and other		-		-		-		-		-
Total impaired loans	$	20,213	$	22,246	$	-	$	20,619	$	34

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		At March 31, 2021
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	4,463	$	4,655	$	1,190	$	4,139	$	-
Residential real estate:
Residential		764		853		28		627		-
Construction		-		-		-		-		-
Commercial real estate:
Commercial		2,943		2,953		153		2,943		-
Construction		2,289		2,293		1,119		2,528		2
Home equities		109		109		11		109		-
Consumer and other		-		-		-		-		-
Total impaired loans	$	10,568	$	10,863	$	2,501	$	10,346	$	2

		At March 31, 2021
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	5,697	$	6,057	$	1,190	$	5,483	$	3
Residential real estate:
Residential		4,377		4,820		28		5,169		17
Construction		-		-		-		-		-
Commercial real estate:
Commercial		15,515		16,745		153		14,872		12
Construction		3,573		3,645		1,119		3,613		2
Home equities		1,619		1,842		11		1,828		2
Consumer and other		-		-		-		-		-
Total impaired loans	$	30,781	$	33,109	$	2,501	$	30,965	$	36

‎

21

		At December 31, 2020
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:		(in thousands)
Commercial and industrial	$	1,706	$	1,947	$	-	$	1,952	$	8
Residential real estate:
Residential		3,703		4,069		-		3,754		60
Construction		-		-		-		-		-
Commercial real estate:
Commercial		12,210		12,840		-		12,397		209
Construction		1,295		1,352		-		1,315		-
Home equities		1,515		1,741		-		1,565		23
Consumer and other		-		-		-		-		-
Total impaired loans	$	20,429	$	21,949	$	-	$	20,983	$	300

		At December 31, 2020
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:		(in thousands)
Commercial and industrial	$	4,779	$	4,993	$	994	$	4,938	$	25
Residential real estate:
Residential		-		-		-		-		-
Construction		-		-		-		-		-
Commercial real estate:
Commercial		2,943		2,953		153		2,943		10
Construction		1,556		1,556		386		1,556		53
Home equities		109		109		11		109		1
Consumer and other		3		3		3		3		-
Total impaired loans	$	9,390	$	9,614	$	1,547	$	9,549	$	89

22

		At December 31, 2020
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Total:		(in thousands)
Commercial and industrial	$	6,485	$	6,940	$	994	$	6,890	$	33
Residential real estate:
Residential		3,703		4,069		-		3,754		60
Construction		-		-		-		-		-
Commercial real estate:
Commercial		15,153		15,793		153		15,340		219
Construction		2,851		2,908		386		2,871		53
Home equities		1,624		1,850		11		1,674		24
Consumer and other		3		3		3		3		-
Total impaired loans	$	29,819	$	31,563	$	1,547	$	30,532	$	389

Troubled debt restructurings

The following tables summarize the loans that were classified as troubled debt restructurings (“TDRs”) as of the dates indicated:

		March 31, 2021
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,472	$	1,472	$	-	$	309
Residential real estate:
Residential		1,652		637		1,015		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		3,367		2,880		487		-
Construction		-		-		-		-
Home equities		518		120		398		-
Consumer and other		-		-		-		-
Total TDR loans	$	7,009	$	5,109	$	1,900	$	309

23

		December 31, 2020
		(in thousands)
		Total		Nonaccruing		Accruing		Related Allowance
Commercial and industrial	$	1,722	$	1,722	$	-	$	370
Residential real estate:
Residential		1,632		587		1,045		-
Construction		-		-		-		-
Commercial real estate:
Commercial and multi-family		3,408		2,915		493		-
Construction		-		-		-		-
Home equities		552		124		428		-
Consumer and other		-		-		-		-
Total TDR loans	$	7,314	$	5,348	$	1,966	$	370

Any TDR that is placed on non-accrual is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable. All of the Company’s restructurings were allowed in an effort to maximize its ability to collect on loans where borrowers were experiencing financial difficulty.

The reserve for a TDR is based upon the present value of the future expected cash flows discounted at the loan’s original effective interest rate or upon the fair value of the collateral less costs to sell, if the loan is deemed collateral dependent. This reserve methodology is used because all TDR loans are considered impaired.

The Company’s TDRs have various agreements that involve deferral of principal payments, or interest-only payments, for a period (usually 12 months or less) to allow the borrower time to improve cash flow or sell the property. Other common concessions leading to the designation of a TDR are lines of credit that are termed-out and/or extensions of maturities at rates that are less than the prevailing market rates given the risk profile of the borrower.

In late March 2020, federal banking regulators issued guidance that modifications made to a borrower affected by the COVID-19 pandemic and governmental shutdown orders do not need to be identified as a TDR if the loan was current at the time a modification plan was implemented. The CARES Act also addressed COVID-19 related modifications and specified that such modifications made on loans that were current as of December 31, 2019 are not TDRs. The Company had applied this guidance and during 2020 had made 381 modifications of commercial loans with principal balances totaling $368 million, and approximately 298 modifications of consumer loans with principal balances totaling $37 million. COVID-19 related modifications made during the three months ended March 31, 2021 were not material.

The following tables present TDR activity by the type of concession granted to the borrower for the three periods ended March 31, 2021 and 2020:

	Three months ended March 31, 2021					Three months ended March 31, 2020
	(Recorded Investment in thousands)					(Recorded Investment in thousands)
Troubled Debt Restructurings by Type of Concession	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial and Industrial	-	$	-	$	-	-	$	-	$	-
Residential Real Estate & Construction: