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EVBN Evans Bancorp

Filed: 3 May 21, 3:31pm

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.


INDEX

EVANS BANCORP, INC. AND SUBSIDIARIES

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


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


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

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


 

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)

-

Issued 7,279 shares in stock option exercises

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)

-

Issued 9,329 shares in stock option exercises

50 

54 

Balance, March 31, 2021

$

2,716 

$

76,673 

$

92,117 

$

(4,532)

$

166,974 

See Notes to Unaudited Consolidated Financial Statements

 


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


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


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.


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.

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.

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.


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 

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.


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)


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

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.

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 


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 

-

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 

14 

17 

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.


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


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


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 

-

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 

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 

$

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 

Consumer and other

-

-

-

-

-

Total impaired loans

$

20,213 

$

22,246 

$

-

$

20,619 

$

34 

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 

Home equities

109 

109 

11 

109 

-

Consumer and other

-

-

-

-

-

Total impaired loans

$

10,568 

$

10,863 

$

2,501 

$

10,346 

$

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 

$

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 

Home equities

1,619 

1,842 

11 

1,828 

Consumer and other

-

-

-

-

-

Total impaired loans

$

30,781 

$

33,109 

$

2,501 

$

30,965 

$

36 


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 

$

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 

Consumer and other

-

Total impaired loans

$

9,390 

$

9,614 

$

1,547 

$

9,549 

$

89 

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

-

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 

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:

Combination of concessions

-

-

-

56 

56 

Commercial Real Estate & Construction

-

-