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2 02 1 A N N UA L R E P O R T
Cristy Sprankle, Kish Bank
AVP and Branch Manager
FRONT, LEFT: Dan Coffman,
Owner, Valley Construction
FRONT, RIGHT: Dr. Samantha
Nguyen; Dr. Scott Geiger; and
Alta Corman-Wolf, Kish Bank
VP and Residential Lender
Contents
3
Chairman’s Letter
to the Shareholders
10
Financial Highlights
11
Independent Auditor’s Report
13
Financial Statements
18
Notes to Consolidated
Financial Statements
62
Board of Directors and Officers
Connecting current performance
and long-term strategy.
As we look back on 2021, at no time has the connection between
current performance and long-term strategy been more powerfully
displayed. While the focus of this report is very much on financial
outcomes produced during the year, placing 2021 results in the
context of prior years also affords us the opportunity to connect
earnings with Kish’s overall strategic positioning. We have placed
a very intentional focus on our business plan—one that has been
pursued and cultivated over time.
Kish’s long-term mission is to achieve
Kish Bancorp’s robust
success and sustainability through
financial performance
performance that delivers for our
for 2021 was especially
customers, communities, team members,
compelling given the difficult
and shareholders. If we fail in our
and rapidly changing
efforts to deliver to any one of these
COVID-19 environment.
constituencies, we become less likely
However, earnings, which
to achieve long-term sustainability. In
have been consistently
support of this mission, for the past
expanding at a sustained
decade, the Kish strategic plan has
double-digit rate in recent
William P. Hayes
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE
OFFICER
focused on profitable growth, digital
years, rose by a strong 22.9%
transformation in parallel with traditional
over the prior year to finish 2021
delivery, building a knowledgeable,
at $9.988 million. These record results
information-driven and motivated team
produced return on shareholders’ equity
of professionals, collaborative leadership,
(ROE) of 14.1%, assuring that Kish will
and healthy and sustainable communities.
continue to rank in the top 200 publicly-
All of this anchored in the belief that
traded community banks in the U.S.
through these efforts, we will make the
based on a 3-year rolling average of
lives of our customers, communities,
that ROE measure. These rankings are
and team members better. To that
published annually by American Banker
end, achieving financial performance
magazine. The sustained earnings growth
that builds sustainability is the means
supported a year-end dividend increase
by which we will endure to deliver on
of more than 10%.
this promise. With that said, it is very
reaffirming to report the exceptional
financial results achieved in 2021.
At the core of the dramatic revenue
expansion in 2021 was the continued
Chairman’s Letter to the Shareholders
3
“We were referred to Alta by our
realtors and we cannot say enough
about her customer service,
attention to detail, and efficiency.
She worked after-hours to get us
a loan quickly in order to buy a
house in a very competitive market.
She made the loan process simple.”
Dr. Scott Geiger & Dr. Samantha Nguyen
pictured with Alta Corman-Wolf, Kish Bank VP
and Residential Lender
acquisition of new client relationships
businesses to shift their entire banking
combined with the delivery of life-
sustaining services to business and
relationship to Kish. Additionally, our
expansion into counties contiguous to
consumer relationships. While business
our traditional markets yielded beneficial
and consumer lending drove much
of the relationship expansion, it was
new relationships as well. Finally,
and perhaps most dramatically, the
growth across all of Kish’s business units
commercial real estate lending team
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that rounded out the successful results
for 2021.
The key driver of expanded revenues
was lending. Both commercial and
mortgage lending achieved extraordinary
results that dramatically elevated
earnings and earning assets that will
continue to contribute to income over
time. Our team of residential mortgage
originators and underwriters, many
of whom continued to work remotely
throughout the year, finished 2021 with
another record year. Realtors referring
in northeastern Ohio produced
impressive growth throughout
2021 with the production of
$77 million in outstanding
commercial loans. Ken
Goetz and Gary Wimer,
accomplished and highly
experienced commercial
real estate development
lenders in that market,
are featured on this page.
Bank wide, total loans
outstanding grew year
homebuyers to Kish have become the
over year by $113 million to
single greatest source of new business
$878.7 million, or 14.75%. This
because they have come to rely on Kish’s
total belied the additional lending
mortgage bankers for fast, flexible, and
activity necessary to make up for the
“We are pleased
with our growing
momentum serving
the commercial real
estate lending needs
in Ohio and western
Pennsylvania under
the Kish name.”
Gary Wimer and Ken Goetz
Kish Bank Sr. VPs and Managing
Directors - Ohio
responsive service. These strengths
were particularly important given the
seller's market that developed during
net reduction in PPP loans of $32 million
securities, which rose by $50 million from
in 2021. Forgiven PPP loans aside, new
the prior year. It is interesting to note
loans outstanding rose by $145 million in
that the last two years stand in sharp
the year and the necessity of being able
2021 and went a long way to employing
contrast with prior years when the loan
to make offers and then close quickly.
the surge in customer deposits driven by
to deposit ratio approached 100% and
The testimonials of Centre County Drs.
government stimulus programs. While
we were beginning to identify sources of
Geiger and Nguyen (left) attest to the
government stimulus programs were a
funding for additional loan growth. The
value of the mortgage lending expertise
major source of new deposits in 2021,
combined impact of the dramatic rise in
at Kish that has been so carefully and
the year was also marked by the influx of
loans and deposits produced an overall
purposefully developed over the years.
new core deposit accounts. On top of a
increase in the Corporation’s total assets,
Commercial lending at Kish achieved
record loan outstandings in 2021.
Our capacity to pivot quickly from
traditional lending to provide business-
sustaining Paycheck Protection Program
(PPP) loans motivated a number of
year of strong inflows in 2020 and with
which ended the period at $1.233 billion,
growth of $125 million in 2021, deposits
an increase of $126.2 million, or 11.40%,
breached the $1 billion threshold for the
compared to total assets of $1.107 billion
first time. In addition to funding loan
as of December 31, 2020. The balanced
growth, growing core deposits facilitated
growth in loans and deposits ensured
the purchase of additional investment
that net interest income, which grew
4
5
Chairman’s Letter to the Shareholders
Chairman’s Letter to the Shareholders
“My brother referred me to John
Massie for a loan in Belleville over
twenty years ago. John helped
me get started and I told him
if Kish ever opened a branch in
Huntingdon, I would move my
accounts there… and I’ve been
there ever since. During one of my
banking visits, I was introduced to
Kish Insurance, and now I have my
personal and business insurance
with them too.”
Dan Coffman, Owner, Valley Construction
by 13.45%, would keep pace with asset
unit. Kish Travel was formed in 2000 and
expansion and preserve the expansion of
it was five years ago that we acquired a
net interest income.
The stories of new customers migrating
to Kish are myriad, but one of the best
examples came from a new customer in
a new market. Liz Burke, President and
CEO of Burke & Company, LLC d.b.a.
S. P. McCarl & Company of Altoona (left),
speaks compellingly of her move to Kish.
Her observations feature the importance
of her relationship manager, Bob Bilger,
benefits consulting group. The synergies
and opportunities between our lines of
business present themselves in everyday
interactions, which is how longtime bank
customer, Dan Coffman, owner of Valley
Construction in Huntingdon County
(right), came to also be a Kish Insurance
client.
Kish Insurance, Kish Financial Solutions,
and Kish Benefits Consulting all
who joined Kish in late 2020. Bob is
performed convincingly in the difficult
a seasoned lender with a great focus
COVID-19 environment. Kish Insurance, in
on his clients. It is stories like this that
the first full year of operation following
capture the essence of Kish’s success in
the integration of Sausman Insurance
2021 and underscore why there is such
Agency of Mifflintown, saw revenues
optimism regarding new opportunities in
climb by 23.5% to $2.7 million, while
new and existing markets. The COVID-19
wealth management revenues climbed
pandemic presented an opportunity
for Kish to rise to the occasion and
demonstrate that there truly is a
19.3% to $2.1 million. Kish Benefits
Consulting achieved more modest
growth given the challenges to business
difference between competitor banks,
development caused by the pandemic,
both large and small, and Kish.
Although revenue from core banking
activities was a major driver of success,
a discussion of 2021 results requires
that we give ample credit to growth
in the contribution from our non-
bank units. The focus on growing our
noninterest income sources has been a
strategic priority for more than twenty
years. It was in the late ‘90s that Kish
acquired its first property and casualty
insurance agency, began providing
wealth management services through
the formation of investment advisory
and trust units, and began to sharpen our
focus on creating a mortgage banking
with revenues climbing 7.2% to $642
thousand. Unfortunately, Kish Travel
remained in the COVID-19 doldrums
for the second straight year. Mortgage
banking continued its torrid pace by
contributing $2.6 million in revenue
from the sale of secondary market
mortgage loans, up $113 thousand from
2020. These compelling results all speak
for themselves, but we have selected
the observations of a Kish Benefits
Consulting client, Chief Andre French
of the Mifflin County Regional Police
(featured on the next page), to share
his perspective on doing business with a
Kish non-bank unit.
“My working relationship with Bob
has been very important to the
success of the company over the
past decade and his partnership is
very appreciated by myself and our
team. When Bob made the move to
Kish, I was confident that he would
only do so if they offered superior
customer service and products.
We did our own due diligence and
found that Kish was the right fit
for us. We are excited that Kish
is growing in our area and look
forward to our new partnership.”
Liz Burke, President and CEO, Burke & Company, LLC
d.b.a. S. P. McCarl & Company
pictured with Bob Bilger, Kish Bank
Sr. VP and Market Leader
6
7
Chairman’s Letter to the Shareholders
Chairman’s Letter to the Shareholders
“I appreciate so many aspects of
Kish Benefits Consulting, but it is the
people that make the difference. I
have a direct line of communication
with them and when I have a need, I
simply ask. My issues are important to
them and they treat me like I am their
only client. They provide the highest
standard of service to MCRPD, while
acknowledging that every cent we
have is a hard earned tax dollar.”
Andre French, Chief of Police, Mifflin County
Regional Police Department
pictured with Danan Sharer, Kish Benefits
Consulting Senior Account Manager
The stories featured in this report
speak volumes of the critical role
that relationship managers play in
Kish’s continued success. As stated
on the front cover, Kish’s impressive
growth and financial performance is
truly “powered by people.” As other
banks close branches and abandon
customers to online-only channels, it
is Kish’s people that continue to drive
relationship acquisition and customer
satisfaction. The people-focused culture
at Kish clearly differentiates the Kish
experience from that of our competitors.
Although we have invested heavily in
digital delivery in recent years and have
seen the implementation of numerous
strategic initiatives designed to move
us dramatically forward on the path
to a fully digital experience, our focus
has been to develop a human-enabled
digital experience. The “Twin Rails”
strategy discussed in previous years
(above), have each shared their
perspectives that powerfully validate
the Corporation’s strategic “people
powered” focus on our customers.
The 2021 Annual Report contains the
full details of Kish Bancorp’s financial
results for the year. You are encouraged
to read the full report, bearing in mind
that behind the impressive financial
“In the Client Solutions Center, our
customers are our priority. Our
goal is to assist customers via
technology while making them feel
that they have still received the
best, personalized service. A shared
client focus sets Kish apart from
other companies.”
Kristen Shoemaker, Kish Bank Client Solutions Manager
recognizes that the human connection
results achieved in 2021, there is a team
must continue at very high levels in
parallel with the advanced digital access
expected by our clients. As we evolve in
of skilled and passionately motivated
people who believe deeply that they
can make the lives of our customers,
a digital world, we can never lose sight of
communities, and fellow team members
the fact that is has been our people who
better by what they do. Because this
have driven Kish’s success. To that end, I
has been accomplished so successfully,
refer you to the views offered by two of
they have made the lives of Kish Bancorp
our managers who play an important role
shareholders better as well.
every day in the lives of our customers
and team members. Cristy Sprankle,
Manager of Kish’s South Atherton
and Allen Street branches in State
College and 2021 Employee of the Year
(opposite, right), and Kristen Shoemaker,
Client Solutions Manager based at the
new Kish Innovation Center in Reedsville
Sincerely,
William P. Hayes
Chairman of the Board
and Chief Executive Officer
“Kish employees are empowered
critical thinkers. We believe in
learning that never stops, and
continually think of ways to improve
our customer experience. It’s not
about what we can’t do, it’s about
what we can do to help our clients
without creating stumbling blocks.”
Cristy Sprankle, Kish Bank AVP and Branch Manager
8
9
Chairman’s Letter to the Shareholders
Chairman’s Letter to the Shareholders
FOR THE YEAR
Net Income
Net Income Before Taxes
Total Dividends Declared
AT YEAR END (in $000s)
Total Assets
Total Loans (Net)
Total Deposits
Stockholders’ Equity
Loan Loss Reserve
Net Loan Losses (Recoveries)
RATIO ANALYSIS
Return on Average Assets*
Return on Average Equity*
Dividend Declared/Net Income
Loans/Deposits
Primary Capital/Total Assets
Total Capital/Risk Weighted Assets
Loan Loss Reserve/Loans
Net Loan Losses to Total Loans (Net)
PER SHARE DATA
Basic Earnings
Fully Diluted Earnings
Dividends Paid
Equity (Book Value)
Equity Plus Loan Loss Reserve
2021
9,881,340
$
2020
8,039,287
$
2019
7,006,914
$
2018
6,029,683
$
$
11,232,900
9,278,885
7,903,452
2,988,353
2,804,384
2,585,444
6,670,247
2,396,453
2017
4,139,770
5,141,399
2,301,564
$
1,232,779
$
1,106,609
$
918,309
$
850,508
$
811,192
868,153
1,002,645
77,100
10,560
(9)
0.85%
14.08%
30.24%
86.59%
7.11%
12.78%
1.20%
0.00%
3.88
3.76
1.14
29.39
33.42
$
755,960
877,796
69,962
9,771
(4)
0.79%
12.90%
34.88%
86.12%
7.21%
12.32%
1.28%
0.00%
679,519
710,226
64,352
7,499
(467)
0.79%
11.56%
36.90%
95.68%
7.82%
11.86%
1.09%
(0.07%)
630,440
682,350
59,728
6,642
10
0.72%
10.71%
39.74%
92.39%
7.80%
11.95%
1.04%
0.00%
569,010
653,687
56,339
5,698
913
0.54%
7.45%
55.60%
87.05%
7.65%
11.65%
0.99%
0.17%
$
3.20
$
3.12
1.08
26.93
30.69
$
2.80
2.70
1.00
24.90
27.80
$
2.44
2.35
0.94
23.41
26.01
1.69
1.67
0.92
22.50
24.77
Average Shares Outstanding (#)
2,622,947
2,597,978
2,499,536
2,499,673
2,459,168
Net Income (in millions)
Earnings & Dividends (per share)
Stock Valuation (per share)
Board of Directors and Stockholders
Kish Bancorp, Inc.
Opinion
We have audited the accompanying consolidated
financial statements of Kish Bancorp, Inc. and its
subsidiaries (the “Company”), which comprise
the consolidated balance sheets as of December
the design, implementation, and maintenance of
internal control relevant to the preparation and fair
presentation of financial statements that are free
from material misstatement, whether due to fraud
or error.
31, 2021 and 2020; the related consolidated
In preparing the financial statements, management
statements of income, comprehensive income,
is required to evaluate whether there are conditions
changes in stockholders’ equity, and cash flows for
or events, considered in the aggregate, that raise
the years then ended; and the related notes to the
substantial doubt about the Company’s ability to
consolidated financial statements (collectively, the
continue as a going concern within one year after
financial statements).
In our opinion, the accompanying financial
the date that the financial statements are issued or
available to be issued.
statements present fairly, in all material respects, the
Auditor’s Responsibilities for the Audit of the
financial position of the Company as of December
31, 2021 and 2020, and the results of its operations
and its cash flows for the years then ended, in
accordance with accounting principles generally
accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with
auditing standards generally accepted in the United
States of America (GAAS). Our responsibilities
under those standards are further described in
the Auditor’s Responsibilities for the Audit of the
Financial Statements section of our report. We are
required to be independent of the Company and to
meet our other ethical responsibilities, in accordance
with the relevant ethical requirements relating to our
audits. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Responsibilities of Management for the Financial
Statements
Management is responsible for the preparation
and fair presentation of the financial statements in
accordance with accounting principles generally
accepted in the United States of America, and for
Financial Statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a
high level of assurance but is not absolute assurance
and, therefore, is not a guarantee that an audit
conducted in accordance with GAAS will always
detect a material misstatement when it exists.
The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or
the override of internal control. Misstatements
are considered material if there is a substantial
likelihood that, individually or in the aggregate, they
would influence the judgment made by a reasonable
user based on the financial statements.
In performing an audit in accordance with GAAS, we:
• Exercise professional judgment and maintain
professional skepticism throughout the audit.
• Identify and assess the risks of material
misstatement of the financial statements, whether
* Due to fluctuations in the mark to market valuation for investment securities, these are not included in the totals for average assets and average equity.
10
11
Financial Highlights
Independent Auditor’s Report
due to fraud or error, and design and perform
not express an opinion or any form of assurance
audit procedures responsive to those risks. Such
thereon.
procedures include examining, on a test basis,
evidence regarding the amounts and disclosures
in the financial statements.
In connection with our audit of the financial
statements, our responsibility is to read the other
information and consider whether a material
• Obtain an understanding of internal control
inconsistency exists between the other information
relevant to the audit in order to design
and the financial statements, or whether the other
audit procedures that are appropriate in the
information otherwise appears to be materially
circumstances, but not for the purpose of
misstated. If, based on the work performed, we
expressing an opinion on the effectiveness of the
conclude that an uncorrected material misstatement
Company’s internal control. Accordingly, no such
opinion is expressed.
of the other information exists, we are required to
describe it in our report.
Cranberry Township, Pennsylvania
March 7, 2022
S.R. Snodgrass, P.C.
2009 Mackenzie Way, Suite 340
Cranberry Township, Pennsylvania 16066
Phone: 724-934-0344 • Fax: 724-934-0345
• Evaluate the appropriateness of accounting
policies used and the reasonableness of
significant accounting estimates made by
management, as well as evaluate the overall
presentation of the financial statements.
• Conclude whether, in our judgment, there are
conditions or events, considered in the aggregate,
that raise substantial doubt about the Company’s
ability to continue as a going concern for a
reasonable period of time.
We are required to communicate with those
charged with governance regarding, among other
matters, the planned scope and timing of the
audit, significant audit findings, and certain internal
control-related matters that we identified during
the audit.
Other Information Included in the Annual Report
Management is responsible for the other information
included in the annual report. The other information
comprises the Chairman’s Letter to the Shareholders
and Financial Highlights but does not include
the financial statements and our auditor's report
thereon. Our opinion on the financial statements
does not cover the other information, and we do
KISH BANCORP, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
Cash and due from banks
Interest-bearing deposits with other institutions
Cash and cash equivalents
Certificates of deposit in other financial institutions
Investment securities available for sale, at fair value
Investment securities held to maturity, fair value of $10,125,458
and $11,158,435
Equity securities
Loans held for sale
Loans
Less allowance for loan losses
Net loans
Premises and equipment, net
Goodwill
Regulatory stock
Bank-owned life insurance
Accrued interest and other assets
TOTAL ASSETS
LIABILITIES
Deposits:
Noninterest-bearing
Interest-bearing demand
Savings
Money market
Time
Total deposits
Short-term borrowings
Other borrowings
Accrued interest and other liabilities
TOTAL LIABILITIES
STOCKHOLDERS' EQUITY
December 31,
2021
2020
$
7,006,334 $
86,755,383
93,761,717
12,442,465
117,223,023
129,665,488
245,000
178,747,138
490,000
128,037,046
9,777,862
2,693,580
3,255,070
878,713,345
10,559,852
868,153,493
11,023,499
2,132,287
5,666,999
765,730,956
9,770,563
755,960,393
24,268,706
3,560,942
6,875,100
16,236,506
22,692,322
$ 1,232,778,795 $ 1,106,609,288
25,578,343
3,560,942
5,968,700
23,780,368
17,256,582
$
177,079,925 $
81,754,614
116,688,640
365,815,741
261,306,427
1,002,645,347
135,621,817
70,550,356
91,167,858
328,846,611
251,609,787
877,796,429
67,433,957
67,184,620
18,415,231
1,155,679,155
69,360,211
64,656,810
24,833,601
1,036,647,051
Preferred stock, $.50 par value; 500,000 shares authorized,
no shares issued and outstanding
Common stock, $.50 par value; 8,000,000 shares authorized,
2,697,500 shares issued; 2,630,682 and 2,603,040 shares outstanding
at December 31, 2021 and 2020, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost (66,818 and 94,460 shares at December 31,
2021 and 2020, respectively)
TOTAL STOCKHOLDERS' EQUITY
-
-
1,348,750
2,885,343
76,432,206
(1,572,533 )
(1,994,126 )
77,099,640
1,348,750
2,703,924
69,539,219
(1,009,136 )
(2,620,520 )
69,962,237
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 1,232,778,795 $ 1,106,609,288
See accompanying notes to consolidated financial statements.
12
Independent Auditor’s Report
Financial Statements
2
13
KISH BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
KISH BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Net income
Other comprehensive income (loss)
Securities available for sale:
Year Ended December 31,
2020
2021
8,039,287
9,881,340 $
$
Change in unrealized holding gains (losses) on
available for sale securities
Tax effect
Change in unrealized gains (losses) related to cash flow hedges
Tax effect
Reclassification adjustment for net investment
securities gains realized in net income
Tax effect
Total other comprehensive income (loss)
(3,841,990 )
806,818
3,141,412
(659,697 )
(12,582 )
2,642
(563,397 )
3,133,307
(657,993 )
(3,045,609 )
639,578
(80,903 )
16,990
5,370
Total comprehensive income
$
9,317,943 $
8,044,657
See accompanying notes to the consolidated financial statements.
INTEREST AND DIVIDEND INCOME
Interest and fees on loans:
Taxable
Exempt from federal income tax
Interest and dividends on investment securities:
Taxable
Exempt from federal income tax
Interest-bearing deposits with other institutions
Other dividend income
Total interest and dividend income
INTEREST EXPENSE
Deposits
Short-term borrowings
Other borrowings
Total interest expense
NET INTEREST INCOME
Provision for loan losses
Year Ended December 31,
2020
2021
$
34,194,495 $
1,271,421
33,850,246
1,309,814
3,121,595
266,146
117,397
630,944
39,601,998
2,861,943
26,332
3,324,818
6,213,093
33,388,905
780,000
2,880,753
436,694
206,080
769,576
39,453,163
5,321,683
84,843
2,938,290
8,344,816
31,108,347
2,267,500
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
32,608,905
28,840,847
NONINTEREST INCOME
Service fees on deposit accounts
Investment securities gains, net
Equity securities gains (losses), net
Gain on sale of loans
Earnings on bank-owned life insurance
Insurance commissions
Travel agency commissions
Wealth management
Benefit management
Other
Total noninterest income
NONINTEREST EXPENSE
Salaries and employee benefits
Occupancy and equipment
Data processing
Professional fees
Advertising
Federal deposit insurance
Pennsylvania shares tax
Other
Total noninterest expense
Income before income taxes
Income tax expense
NET INCOME
EARNINGS PER SHARE
Basic
Diluted
See accompanying notes to the consolidated financial statements.
1,812,855
12,582
261,581
2,458,769
901,766
2,683,236
98,266
2,123,702
642,224
350,864
11,345,845
19,932,494
4,055,767
2,046,888
641,903
348,401
725,000
740,344
4,231,053
32,721,850
11,232,900
1,351,560
1,580,854
80,903
(313,055 )
2,424,082
485,614
2,173,549
87,837
1,780,460
598,997
1,223,451
10,122,692
17,983,683
3,055,611
2,167,218
572,625
398,380
500,000
664,625
4,342,512
29,684,654
9,278,885
1,239,598
$
9,881,340 $
8,039,287
$
$
3.88 $
3.76 $
3.20
3.12
14
3
4
15
Financial Statements
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KISH BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOW
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$
9,881,340 $
8,039,287
Year Ended December 31,
2021
2020
Provision for loan losses
Investment securities gains, net
Equity security (gains) losses
Proceeds from sale of loans held for sale
Origination of loans held for sale
Gain on sales of loans
Depreciation, amortization, and accretion
Deferred income taxes
Increase in accrued interest receivable
(Decrease) increase in accrued interest payable
Earnings on bank-owned life insurance
Gain on sale of other assets
Impairment loss on other assets
Non-cash compensation - equity awards
Other, net
Net cash provided by operating activities
INVESTING ACTIVITIES
Maturities of certificates of deposit
Bank owned life insurance:
Purchases
Benefit proceeds
Investment securities available for sale:
Proceeds from repayments and maturities
Purchases
Purchases of investment held to maturity
Purchases of equity securities
Increase in loans, net
Purchase of regulatory stock
Redemption of regulatory stock
Purchase of premises and equipment
Proceeds from sale of other assets
Net cash used for investing activities
FINANCING ACTIVITIES
Increase in deposits, net
(Decrease) increase in short-term borrowings, net
Proceeds from other borrowings
Repayments of other borrowings
Purchases of treasury stock
Proceeds from sale of treasury stock
Exercise of stock options
Cash dividends
Net cash provided by financing activities
Increase (decrease) in cash and cash equivalents
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest on deposits and borrowings
Income taxes
SUPPLEMENTAL DISCLOSURE OF NON-CASH CASH FLOW INFORMATION
Right of use assets and lease liability
See accompanying notes to consolidated financial statements.
$
$
780,000
(12,582 )
(261,581 )
64,671,378
(59,800,680 )
(2,458,769 )
1,947,006
(483,336 )
(14,566 )
(461,890 )
(901,766 )
(17,869 )
500,000
645,444
2,915,995
16,928,124
2,267,500
(80,903 )
313,055
51,499,353
(51,277,394 )
(2,424,082 )
1,264,142
(666,073 )
(198,448 )
(512,129 )
(485,614 )
-
-
607,370
(837,756 )
7,508,308
245,000
984,000
(7,300,000 )
460,748
33,168,687
(84,560,068 )
(2,250,000 )
(299,712 )
(112,973,100 )
(93,400 )
999,800
(2,903,840 )
49,500
(175,456,385 )
124,848,918
(1,926,254 )
19,340,308
(16,812,498 )
(514,492 )
851,674
(174,813 )
(2,988,353 )
122,624,490
(35,903,771 )
129,665,488
93,761,717 $
-
-
62,650,078
(60,320,838 )
-
(750,000 )
(78,709,100 )
(1,025,400 )
1,065,300
(9,723,327 )
-
(85,829,287 )
167,570,809
22,620,190
1,824,236
(17,196,674 )
(753,388 )
699,630
(184,042 )
(2,804,385 )
171,776,376
93,455,397
36,210,091
129,665,488
6,729,860 $
1,925,000
9,003,543
1,950,000
150,062
149,739
Financial Statements
Financial Statements
6
17
5
16
KISH BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment Securities (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Presentation
Kish Bancorp, Inc. (the “Company”) is a diversified financial services organization whose principal
activity is the ownership and management of its subsidiaries, Kish Bank (the “Bank”), Kish Travel
Services, Inc., and the Bank’s subsidiaries, Tri-Valley Properties, LLC, Kish Agency, Inc., and Kish
Equities, LLC. The Company generates commercial and industrial, agricultural, commercial mortgage,
residential real estate, and consumer loans and deposit services to its customers located primarily in central
Pennsylvania and the surrounding areas. The Bank operates under a Pennsylvania Department of Banking
and Securities bank charter and provides full banking services. Deposits are insured by the Federal Deposit
Insurance Corporation (“FDIC”) to the extent provided by law. Kish Agency, Inc. provides insurance
products and services. Kish Travel Services, Inc. is a Pennsylvania business established to provide travel
services to its customers. Kish Equities, LLC is a subsidiary established to hold investments in equity
securities.
Securities are evaluated at least on a quarterly basis and more frequently when economic or market
conditions warrant such an evaluation to determine whether a decline in their value is other than temporary.
For debt securities, management considers whether the present value of cash flows expected to be collected
are less than the security’s amortized cost basis (the difference defined as the credit loss), the magnitude
and duration of the decline, the reasons underlying the decline and the Company’s intent to sell the security
or whether it is more likely than not that the Company would be required to sell the security before its
anticipated recovery in fair value, to determine whether the loss in value is other than temporary. Once a
decline in value is determined to be other than temporary, if the investor does not intend to sell the security,
and it is more likely than not that it will not be required to sell the security before recovery of the security’s
amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining
difference between fair value and amortized cost (the difference defined as the non-credit portion) is
recognized in other comprehensive income, net of applicable taxes. Otherwise, the entire difference
between fair value and amortized cost is charged to earnings.
Equity Securities
The consolidated financial statements include the accounts of Kish Bancorp, Inc. and its subsidiaries, Kish
Bank and Kish Travel Services, Inc., after elimination of all significant intercompany transactions.
Equity securities are held at fair value. Holding gains and losses are recorded in noninterest income.
Dividends are recognized as income when earned.
The accounting principles followed by the Company and the methods of applying these principles conform
to U.S. generally accepted accounting principles (“GAAP”) and to general practice within the banking
industry. Management is required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities as of the Consolidated Balance Sheet
date and revenues and expenses for that period. Actual results could differ from those estimates.
Investment Securities
Investment securities are classified at the time of purchase, based on management’s intention and ability,
as securities held to maturity, available for sale, or trading. Debt securities acquired with the intent and
ability to hold to maturity are stated at cost, adjusted for amortization of premium and accretion of discount,
which are computed using the interest method and recognized as adjustments of interest income. Debt
securities which are held principally as a source of liquidity are classified as available for sale. Unrealized
holding gains and losses for available for sale securities are reported as a separate component of
stockholders’ equity, net of tax, until realized. Realized security gains and losses are computed using the
specific identification method. Debt securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading securities and reported at fair value, with unrealized
gains and losses included in current earnings. The Company does not have trading securities as of
December 31, 2021 and 2020. Interest and dividends on investment securities is recognized as income
when earned.
Regulatory Stock
Common stock of the Federal Home Loan Bank (“FHLB”) of Pittsburgh represents ownership in an
institution that is wholly owned by other financial institutions. These equity securities are accounted for
at cost and are shown separately on the Consolidated Balance Sheet as regulatory stock.
The Bank is a member of the FHLB and, as such, is required to maintain a minimum investment in stock
of the FHLB that varies with the level of advances outstanding with the FHLB. The stock is bought from
and sold to the FHLB based upon its $100 par value. The stock does not have a readily determinable fair
value and, as such, is classified as restricted stock, carried at cost and evaluated by management. The
stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing
temporary declines. The determination of whether the par value will ultimately be recovered is influenced
by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared
with the capital stock amount and the length of time this situation has persisted; (b) commitments by the
FHLB to make payments required by law or regulation and the level of such payments in relation to the
operating performance; (c) the impact of legislative and regulatory changes on the customer base of the
FHLB; and (d) the liquidity position of the FHLB. Management evaluated the stock and concluded that
the stock was not impaired for the periods presented herein.
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or
payoff generally are reported at their principal amount, net of the allowance for loan losses and deferred
origination fees or costs. Interest on loans is recognized as income when earned on the accrual method.
Generally, the policy has been to stop accruing interest on loans when it is determined that a reasonable
doubt exists as to the collectibility of additional interest. Interest previously accrued but deemed
uncollectible is deducted from current interest income. Payments received on nonaccrual loans are
recorded as income or applied against principal according to management’s judgment as to the
collectibility of such principal. Nonaccrual loans will generally be put back on accrual status after
demonstrating six consecutive months of no delinquency.
18
7
8
19
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans (Continued)
Allowance for Loan Losses (Continued)
The allowance for loan losses is established through provisions for loan losses charged against income.
Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent
recoveries, if any, are credited to the allowance.
Loan origination fees and certain direct loan origination costs are being deferred and the net amount
amortized is accounted for as an adjustment of the related loan’s yield. Management is amortizing these
amounts over the contractual life of the related loans using the level yield method.
In general, fixed rate, permanent residential mortgage loans originated by the Bank are held for sale and
are carried in the aggregate at the lower of cost or fair value. The Bank sells these loans to various other
financial institutions. Currently, the Bank retains the servicing of those loans sold to the FHLB and releases
the servicing of loans sold to all other institutions.
Allowance for Loan Losses
The allowance for loan losses represents the amount that management estimates is adequate to provide for
probable losses inherent in its loan portfolio as of the Consolidated Balance Sheet date. The allowance
method is used in providing for loan losses. Accordingly, all loan losses are charged to the allowance, and
all recoveries are credited to it. The allowance for loan losses is established through a provision for loan
losses charged to operations. The provision for loan losses is based on management’s periodic evaluation
of individual loans, economic factors, past loan loss experience, changes in the composition and volume
of the portfolio, and other relevant factors. The estimates used in determining the adequacy of the
allowance for loan losses, including the amounts and timing of future cash flows expected on impaired
loans, are particularly susceptible to change in the near term.
Impaired loans are those for which it is probable the Company will not be able to collect all amounts due
according to the contractual terms of the loan agreement. The Company evaluates commercial and
industrial, agricultural, state and political subdivisions, commercial real estate, and all troubled debt
restructuring loans for possible impairment. Consumer and residential real estate loans are also evaluated
if part of a commercial lending relationship. The Company individually evaluates such loans for
impairment and does not aggregate loans by major risk classifications. The definition of “impaired loans”
is not the same as the definition of “nonaccrual loans,” although the two categories overlap. Factors
considered by management in determining impairment include payment status and collateral value. The
amount of impairment for these types of loans is determined by the difference between the present value
of the expected cash flows related to the loan using the original interest rate and its recorded value, or as a
practical expedient in the case of collateralized loans, the difference between the fair value of the collateral
and the recorded amount of the loans. When foreclosure is probable, impairment is measured based on the
fair value of the collateral.
Mortgage loans secured by one-to-four family properties and all consumer loans are large groups of
smaller-balance homogeneous loans and are measured for impairment collectively. Loans that experience
insignificant payment delays, which are defined as 90 days or less, generally are not classified as impaired.
Management determines the significance of payment delays on a case-by-case basis taking into
consideration all circumstances concerning the loan, the creditworthiness and payment history of the
borrower, the length of the payment delay, and the amount of shortfall in relation to the principal and
interest owed.
In addition to the allowance for loan losses, the Company also estimates probable losses related to
unfunded lending commitments, such as letters of credit, financial guarantees, and unfunded loan
commitments. Unfunded lending commitments are subject to individual reviews and are analyzed and
segregated by risk according to the Company’s internal risk rating scale. These risk classifications, in
conjunction with an analysis of historical loss experience, current economic conditions, performance trends
within specific portfolio segments, and any other pertinent information, result in the estimation of the
reserve for unfunded lending commitments. Provision for credit losses related to the loan portfolio and
unfunded lending commitments are reported in the Consolidated Statement of Income.
Premises and Equipment
Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated useful lives of the related assets,
which range from 3 to 7 years for furniture, fixtures, and equipment, and 31 to 39½ years for building
premises. Leasehold improvements are depreciated over shorter of the term of the lease or useful life.
Expenditures for maintenance and repairs are charged against income as incurred. Costs of major additions
and improvements are capitalized.
Goodwill
The Company accounts for goodwill using a two-step process for testing the impairment of goodwill on at
least an annual basis. This approach could cause more volatility in the Company’s reported net income
because impairment losses, if any, could occur irregularly and in varying amounts.
Bank-Owned Life Insurance (“BOLI”)
The Company purchased life insurance policies on certain key employees. BOLI is recorded at its cash
surrender value, or the amount that can be realized.
Real Estate Owned
Real estate acquired by foreclosure is included with other assets on the Consolidated Balance Sheet at the
lower of the recorded investment in the property or its fair value less estimated costs of sale. Prior to
foreclosure, the value of the underlying collateral is written down by a charge to the allowance for loan
losses if necessary. Any subsequent write-downs are charged against operating expenses. Operating
expenses of such properties, net of related income and losses on their disposition, are included in other
noninterest expense.
Treasury Stock
Treasury stock is carried at cost. Sales are determined by the first-in, first-out method.
Advertising Costs
Advertising costs are expensed as the costs are incurred.
20
9
10
21
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Transfer of Assets
The Company and its subsidiaries file a consolidated federal income tax return. Deferred tax assets and
liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred
tax assets or liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the provision for income taxes.
Earnings Per Share
The Company provides dual presentation of basic and diluted earnings per share. Basic earnings per share
are calculated utilizing net income as reported in the numerator and average shares outstanding in the
denominator. The computation of diluted earnings per share differs in that the dilutive effects of any stock
options and restricted stock awards are adjusted in the denominator. Treasury shares are not deemed
outstanding for earnings per share calculations.
Stock Options
For purposes of computing stock compensation expense, the Company estimated the fair values of stock
options using the Black-Scholes option-pricing model. The model requires the use of subjective
assumptions that can materially affect fair value estimates. The fair value of each option is amortized into
compensation expense on a straight-line basis between the grant date for the option and each vesting date.
The fair value of each stock option granted was estimated using the following weighted-average
assumptions:
Grant
Year
2021
2020
Expected
Dividend
Yield
3.63 %
3.94 %
Risk-Free
Interest Rate
1.19 %
0.47 %
Expected
Volatility
26.88 %
25.91 %
Expected
Life (in Years)
6.0
6.0
The weighted-average fair value of each stock option granted for 2021 and 2020 was $5.03 and $3.63,
respectively.
Mortgage Servicing Rights (“MSRs”)
The Company has agreements for the express purpose of selling loans in the secondary market. The
Company retains servicing rights for certain loans. Originated MSRs are recorded by allocating total costs
incurred between the loan and servicing rights based on their relative fair values. MSRs are amortized in
proportion to the estimated servicing income over the estimated life of the servicing portfolio. The
Company performs an impairment review of the MSRs and recognizes impairment through a valuation
account. MSRs are a component of accrued interest and other assets on the Consolidated Balance Sheet.
Gains and losses on sales of loans are recognized at settlement dates and are determined by the difference
between the sales proceeds and the carrying value of the loans. All sales are made with limited recourse.
For the years ended December 31, 2021 and 2020, the Company recorded gross servicing rights of
$336,339 and $426,527, respectively, with a reserve for impairment of $161,951 and $226,221,
respectively.
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from
the Company; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage
of that right) to pledge or exchange the transferred assets; and (3) the Company does not maintain effective
control over the transferred assets through an agreement to repurchase them before their maturity.
Cash Flow Information
The Company has defined cash and cash equivalents as those amounts included in the balance sheet
captions “Cash and due from banks” and “Interest-bearing deposits with other institutions” that have
original maturities of less than 90 days.
Reclassification of Comparative Amounts
Certain items previously reported have been reclassified to conform to the current year’s format. Such
reclassifications did not affect net income or stockholders’ equity.
Derivatives and Hedging Activities
The Company engages in a number of business activities that are vulnerable to interest rate risk. The
associated variability in cash flows related to interest rate risk may impact the results of operations of the
Company. The Company’s hedging objective is to reduce, to the extent possible, unpredictable cash flows
associated with interest rate risk, via approved hedging strategies, related to business strategies and
business objectives.
All derivatives are recorded on the Consolidated Balance Sheet at fair value. The accounting for changes
in the fair value of derivatives depends on whether the Company has elected to designate a derivative in a
hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the
criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the
exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular
risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as
a hedge of the exposure to variability in expected future cash flows, or other types of forecasted
transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of
the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the
fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the
earnings effect of the hedged forecasted transactions in a cash flow hedge.
Changes in the fair value of derivatives designated as fair value hedges are recorded in earnings, together
and in the same income statement line item with changes in the fair value of the related hedged item.
Changes in the fair value of derivatives designated as cash flow hedges are recorded in accumulated other
comprehensive income (loss) and are reclassified into the line item in the income statement in which the
hedged item is recorded and in the same period in which the hedged item affects earnings. Hedge
ineffectiveness and gains and losses on the excluded component of a derivative in assessing hedge
effectiveness are recorded in earnings.
22
11
12
23
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Recent Accounting Pronouncements
The Company’s revenue is comprised of net interest income on financial assets and liabilities, and
noninterest income. Under FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from
Contracts with Customers, management determined that net interest income on financial assets and
liabilities and certain components of noninterest income resulting from investment securities gains, loan
servicing, gains on sales of loans, earnings on bank owned life insurance, gains on sales of mortgage loans,
and gains on sales of securities available for sale are accounted for under other U.S. GAAP standards and
are not within the scope of ASC Topic 606.
Descriptions of revenue-generating activities reported in our Consolidated Statement of Income that are
within the scope of Topic 606 include:
Insurance and travel agency commissions
Service fee income on deposit accounts
Trust and investment advisory fees
Benefit management consulting income
ATM and debit card transaction fees
Loan servicing fees
Wire transfer fees
Safe deposit box rentals
Non-transaction-based fees such as account maintenance fees, monthly statement fees, loan servicing fees
and safe deposit box rentals are considered to be provided to the customer under short-term contracts with
ongoing renewals. Revenue for these non-transaction-based fees is earned on a monthly basis, representing
the period over which the Company satisfies the performance obligations. Transaction-based fees such as
non-sufficient fund charges, stop payment charges, and wire fees are recognized at the time the transaction
is executed, as the contract duration does not extend beyond the service performed.
The Company earns fees from ATM transaction fees and debit card transaction fees from cardholder
transactions conducted through third party payment network providers which consist of interchange fees
earned from the payment networks as a debit card issuer. These fees are recognized when the transaction
occurs and are settled on a daily or monthly basis.
Revenues from trust and investment advisory services are generally recognized on a monthly basis and are
typically based on a percentage of the customer's assets under management or based on investment
solutions that are implemented for the customer.
Commission income from insurance and travel services is recognized as the performance obligation is
satisfied, either over the contract policy period or as sales commissions are received when the performance
obligation period does not extend beyond the sales transaction event.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of
Credit Losses on Financial Instruments, which changes the impairment model for most financial assets.
This Update is intended to improve financial reporting by requiring timelier recording of credit losses on
loans and other financial instruments held by financial institutions and other organizations. The underlying
premise of the Update is that financial assets measured at amortized cost should be presented at the net
amount expected to be collected, through an allowance for credit losses that is deducted from the amortized
cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses
that are expected to occur over the remaining life of a financial asset. The income statement will be affected
for the measurement of credit losses for newly recognized financial assets, as well as the expected increases
or decreases of expected credit losses that have taken place during the period. With certain exceptions,
transition to the new requirements will be through a cumulative-effect adjustment to opening retained
earnings as of the beginning of the first reporting period in which the guidance is adopted. This Update is
effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal
years. We expect to recognize a one-time cumulative-effect adjustment to the allowance for loan losses
as of the beginning of the first reporting period in which the new standard is effective but cannot yet
determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on
the consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the
Effects of Reference Rate Reform on Financial Reporting, to provide temporary optional expedients and
exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the
financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates
to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply
certain modification accounting requirements to contracts affected by what the guidance calls “reference
rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the
contracts at the modification date or reassess a previous accounting determination. Also, entities can elect
various optional expedients that would allow them to continue applying hedge accounting for hedging
relationships affected by reference rate reform if certain criteria are met and can make a one-time election
to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference
rate reform. The amendments in this ASU are effective for all entities upon issuance. It is too early to
predict whether a new rate index replacement and the adoption of the ASU will have a material impact on
the Company’s financial statements.
24
13
14
25
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
2. EARNINGS PER SHARE
3.
INVESTMENT SECURITIES
There are no convertible securities that would affect the numerator in calculating basic and diluted earnings
per share; therefore, net income as presented on the Consolidated Statement of Income will be used as the
numerator. The following table sets forth the composition of the weighted-average common shares
(denominator) used in the basic and diluted earnings per share computation.
The amortized cost, gross unrealized gains and losses, and fair value of investment securities are as follows:
Gross
2021
Gross
2021
2020
Weighted-average common shares issued
2,697,500 2,697,500
Weighted-average treasury stock shares
(74,553 )
(99,522 )
Weighted-average unvested restricted stock awards
(78,857 )
(82,595 )
Basic weighted-average shares outstanding
2,544,090 2,515,383
Dilutive effect of outstanding restricted stock awards
39,581
37,365
Dilutive effect of outstanding stock options
43,260
23,407
Diluted weighted-average shares outstanding
2,626,931 2,576,155
For the year ended December 31, 2021, the Company excluded from the computation of diluted weighted-
average shares the impact of 41,425 options to purchase shares of the Company’s common stock and 500
shares of restricted stock, as the effect would have been anti-dilutive.
For the year ended December 31, 2020, the Company excluded from the computation of diluted weighted-
average shares the impact of 114,021 options to purchase shares of the Company’s common stock, and
850 shares of restricted stock, as the effect would have been anti-dilutive.
Available for Sale:
U.S. treasury securities
U.S. government agency securities
Obligations of states and political
subdivisions
Corporate securities
Mortgage-backed securities in
government-sponsored entities
Total Available for Sale
Held to Maturity:
Corporate Securities
Available for Sale:
U.S. treasury securities
U.S. government agency securities
Obligations of states and political
subdivisions
Corporate securities
Mortgage-backed securities in
government-sponsored entities
Total Available for Sale
Held to Maturity:
Corporate Securities
Amortized Unrealized Unrealized
Cost
Gains
Losses
Fair
Value
$ 4,884,412 $
- $ 4,926,520
53,310,247 249,330 (936,051 ) 52,623,526
42,108 $
42,315,974
8,576,994 127,400
637,321 (370,663 ) 42,582,632
(19,185 ) 8,685,209
70,156,873
497,411 (725,033 ) 69,929,251
$ 179,244,500 $ 1,553,570 $ (2,050,932 ) $ 178,747,138
$ 9,777,862 $ 359,778 $
(12,182 ) $ 10,125,458
Gross
2020
Gross
Amortized Unrealized Unrealized
Cost
Gains
Losses
Fair
Value
$ 2,006,566 $
37,974 $
26,216,418 652,364
- $ 2,044,540
(9,135 ) 26,859,647
44,701,805
1,187,094
13,209,467 282,784
(84,068 ) 45,804,831
(505 ) 13,491,746
38,545,580
(49,251 ) 39,836,282
$ 124,679,836 $ 3,500,169 $ (142,959 ) $ 128,037,046
1,339,953
$ 11,023,499 $ 145,127 $
(10,191 ) $ 11,158,435
26
15
16
27
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
3.
INVESTMENT SECURITIES (Continued)
3.
INVESTMENT SECURITIES (Continued)
The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment
category and length of time that the individual securities have been in a continuous unrealized loss position,
at December 31, 2021 and 2020.
The amortized cost and fair value of debt securities at December 31, 2021, by contractual maturity, are
shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or without call or prepayment
penalties.
Less than Twelve
Months
2021
Twelve Months or
Greater
Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
$ 20,975,310 $ (371,738 ) $ 17,288,237 $ (564,313 ) $ 38,263,547 $ (936,051 )
11,834,656 (138,817 ) 5,583,509 (231,846 ) 17,418,165 (370,663 )
(19,185 )
481,040
(18,960 )
980,815
499,775
(225 )
Available for Sale:
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
41,729,261 (607,970 ) 1,901,420 (117,063 ) 43,630,681 (725,033 )
Total Available for Sale $ 75,039,002 $ (1,118,750 ) $ 25,254,206 $ (932,182 ) $ 100,293,208 $ (2,050,932 )
Held to Maturity:
Corporate Securities
$ 1,237,818 $
(12,182 ) $
- $
- $ 1,237,818 $
(12,182 )
Less than Twelve
Months
2020
Twelve Months or
Greater
Total
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Available for Sale:
U.S. government agency
securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities
in government-sponsored
entities
$ 6,152,860 $
(9,135 ) $
6,211,972
499,495
(84,068 )
(505 )
(49,251 )
Total Available for Sale $ 14,835,160 $ (142,959 ) $
1,970,833
Held to Maturity:
Corporate Securities
$ 3,763,308 $
(10,191 ) $
- $
-
-
-
- $
- $
- $ 6,152,860 $
(9,135 )
- 6,211,972
499,495
-
(84,068 )
(505 )
- 1,970,833
(49,251 )
- $ 14,835,160 $ (142,959 )
- $ 3,763,308 $
(10,191 )
Available for Sale
Held to Maturity
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
$ 13,005,131 $ 13,114,750 $ 1,009,101 $ 1,010,270
1,002,250
7,612,938
500,000
33,130,088
52,863,011
79,639,289
32,861,597
53,336,744
80,041,028
1,000,000
7,268,761
500,000
Total
$ 179,244,500 $ 178,747,138 $ 9,777,862 $ 10,125,458
Investment securities with a carrying value of $133,085,381 and $112,227,920 at December 31, 2021 and
2020, respectively, were pledged to secure deposits and other purposes as required by law.
The following is a summary of proceeds received, gross gains, and gross losses realized on the sale and
calls of investment securities available for sale for the years ended December 31:
2021
2020
Proceeds from sales
Proceeds from calls
Gross gains
Gross losses
$
- $
3,564,556
12,582
-
-
17,384,109
80,903
-
Equity Securities
The Company recognized changes in fair value of equity securities in equity securities gains (losses), net.
The following is a summary of unrealized and realized gains and losses recognized in net income on equity
securities during the years ended December 31, 2021 and 2020:
Net gains (losses) recognized in equity securities during the year
Less: Net gains realized on sale of equity securities during the year
Unrealized gains (losses) recognized in equity securities
2020
2021
$ 261,581 $ (313,055 )
-
$ 261,581 $ (313,055 )
-
The Company had 78 investment securities, consisting of 23 U.S. government obligations and direct
obligations of U.S. government agencies, 23 obligations of states and political subdivisions, 4 different
corporate securities, and 28 mortgage-backed securities that were in unrealized loss positions at December
31, 2021. Because the decline in market value is attributable to changes in interest rates and not credit
quality, and because the Company does not intend to sell the investments and it is not more likely than not
that the Company will be required to sell the investments before recovery of their amortized cost basis or
par value, which may be maturity, the Company does not consider those investments to be other-than-
temporarily impaired at December 31, 2021.
28
17
18
29
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
4. LOANS
4. LOANS (Continued)
Major classifications of loans are summarized as follows at December 31:
COVID-19 Loan Forbearance Programs (Continued)
Commercial real estate
Commercial and industrial
Agricultural
State and political subdivisions
Consumer
Residential real estate
Less allowance for loan losses
Net loans
2021
2020
$ 385,694,921 $ 291,727,044
126,181,773
118,901,198
27,608,446
30,749,635
41,967,923
38,831,785
5,628,425
16,191,648
272,617,345
288,344,158
765,730,956
878,713,345
10,559,852
9,770,563
$ 868,153,493 $ 755,960,393
Mortgage loans serviced by the Company for others amounted to $34,542,424 and $43,354,290 at
December 31, 2021 and 2020, respectively.
The Company grants residential, commercial, and consumer loans to customers throughout its trade area,
which is concentrated in central Pennsylvania. Such loans are subject to, at origination, credit risk
assessment by management following the Company’s lending policy. Although the Company has a
diversified loan portfolio at December 31, 2021 and 2020, a substantial portion of its debtors’ ability to
honor their loan agreements is dependent upon the economic stability of its immediate trade area.
Paycheck Protection Program
During 2021 and 2020, the Company participated in the Paycheck Protection Program (“PPP”),
administered directly by the U.S. SBA. The PPP provides loans to small businesses who were affected by
economic conditions as a result of COVID-19, to provide cash flow assistance to employers who maintain
their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities
and interest on existing debt during the COVID-19 emergency. As of December 31, 2021 and 2020, the
Company had outstanding PPP loan principal balances of $9,881,292 and $43,367,158, respectively. The
loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that
the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of
up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention
and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the
SBA to the Company. PPP loans are included in the Commercial and Industrial category.
In accordance with the SBA terms and conditions on these PPP loans, the Company received fees
associated with the processing of these loans of approximately $2.2 million and $3.2 million during 2021
and 2020, respectively. Upon funding of the loans, these fees were deferred and amortized as earned as
adjustments to yield in accordance with FASB ASC 310-20-25-2. Deferred PPP fee income of $256,211
and $827,099 was included in loans receivable at December 31, 2021 and 2020, respectively.
COVID-19 Loan Forbearance Programs
Section 4013 of the CARES Act provides that banks may elect not to categorize a loan modification as a
TDR if the loan modification is (1) related to COVID-19; (2) executed on a loan that was not more than
30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (A)
60 days after the date on which the national emergency concerning the novel coronavirus disease (COVID–
19) outbreak declared by the President on March 13, 2020, under the National Emergencies Act terminates,
or (B) December 31, 2020.
On April 7, 2020, federal banking regulators issued a revised interagency statement that included guidance
on their approach for the accounting of loan modifications in light of the economic impact of the COVID-
19 pandemic. The guidance interprets current accounting standards and indicates that a lender can
conclude that a borrower is not experiencing financial difficulty if short-term modifications are made in
response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other
delays in payment that are insignificant related to the loans in which the borrower is less than 30 days past
due on its contractual payments at the time a modification program is implemented.
According to the Interagency Statement on Loan Modifications and Reporting for Financial Institutions
Working with Customers Affected by the Coronavirus (Revised) issued by the federal bank regulatory
agencies on April 7, 2020, short-term loan modifications not otherwise eligible under Section 4013 that
are made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief
are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee
waivers, extensions of repayment terms, or other delays in payment that are insignificant.
During 2021, no customers requested loan payment deferrals or payments of interest only. As of December
31, 2021, 6 loans remain in deferral status, with outstanding balances totaling approximately $1.1 million.
In accordance with Section 4013 of the CARES Act and the interagency guidance issued on April 7, 2020,
these short-term deferrals are not considered troubled debt restructurings.
In addition, the risk-rating on COVID-19 modified loans did not change, and these loans will not be
considered past due until after the deferral period is over and scheduled payments resume. The credit
quality of these loans will be reevaluated after the deferral period ends.
Loans to Officers and Directors
In the normal course of business, loans are extended to directors, executive officers, and their associates.
A summary of loan activity for those directors, executive officers, and their associates with loan balances
in excess of $60,000 for the years ended December 31, 2021, and 2020, is as follows:
Balance
2019
Additions Collected
Additions Collected
2021
Amounts
Balance
2020
Amounts Balance
$ 18,696,862 $ 3,392,844 $ (13,568,549 ) $ 8,521,157 $ 1,678,032 $ (2,822,835 ) $ 7,376,354
Loan amounts collected during 2020 includes $10,649,715 for six loans to an individual who was no longer
a director as of December 31, 2020.
30
19
20
31
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
5. ALLOWANCE FOR LOAN LOSSES
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Management has an established methodology to determine the adequacy of the allowance for loan losses
that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance
for loan losses, the Company has segmented certain loans in the portfolio by product type. Loans are
segmented into the following pools: commercial real estate loans, commercial and industrial loans,
agricultural loans, state and political subdivision loans, consumer loans, and residential real estate loans.
Historical loss percentages for each risk category are calculated and used as the basis for calculating
allowance allocations. These historical loss percentages are calculated over a five-year period for all
portfolio segments. Certain qualitative factors are then added to the historical loss percentages to get the
adjusted factor to be applied to non-classified loans.
The following qualitative factors are analyzed to determine allocations for non-classified loans for each
portfolio segment:
Changes in lending policies and procedures
Changes in economic and business conditions
Changes in nature and volume of the loan portfolio
Changes in lending staff experience and ability
Changes in past-due loans, nonaccrual loans, and classified loans
Changes in credit risk management
Changes in underlying value of collateral-dependent loans
Levels of credit concentrations
Effects of external factors, such as legal and regulatory requirements
These qualitative factors are reviewed each quarter and adjusted based upon relevant changes within the
Bank’s operating environment. During 2020 the emergence of the novel coronavirus (“COVID-19”)
pandemic caused significant disruption to local and national economies, with adverse effects evident across
a wide range of industries including banking and financial services. Management considered the broad
potential effects and financial uncertainties posed by the COVID-19 environment when assessing the
qualitative factors used in evaluating risk exposures within our loan pools. In response, during the second
quarter of 2020 management increased the qualitative factor related to “changes in economic and business
conditions” across all loan pools other than our loan pool representing loans to state and political
subdivisions. The largest factor increases were applied to the commercial real estate loan pool, reflecting
the downturn already evident in hotel and restaurant business. Factor increases were applied to the
commercial real estate loan pool as well as the commercial and industrial loan pool as local unemployment
rates began to show substantial increases, and in consideration of the loans collateralized by assets of
borrowers in the hospitality and real estate businesses, among others. Additionally, due to the wide-
ranging economic uncertainties resulting from the current COVID-19 environment, management
determined a general increase in loss reserves across the entire loan portfolio was appropriate during 2020.
With economic conditions improving in 2021 following the COVID-19 economic uncertainties of 2020,
management made downward adjustments to certain qualitative risk factors, restoring the factors to those
in place prior to the cautionary increases made in 2020. Downward factor adjustments to the residential
real estate, consumer, and agricultural loan pools were supported by lack of evidence of deterioration to
the quality of these loan groups, with no appreciable increase in defaults or performance of the loans during
2021. Downward adjustments to the risk factor representing “changes in underlying value of collateral
dependent loans” were applied to the commercial real estate and certain commercial and industrial loans,
supported by the performance of the loan groups and strong local real estate market conditions.
We consider commercial real estate loans, commercial and industrial loans, agricultural loans, and
consumer loans to be riskier than one-to-four family residential mortgage loans. Commercial real estate
loans entail significant additional credit risks compared to one-to-four family residential mortgage loans,
as they involve large loan balances concentrated with single borrowers or groups of related borrowers. In
addition, the payment experience on loans secured by income-producing properties typically depends on
the successful operation of the related real estate project and/or business operation of the borrower who is
also the primary occupant, and thus may be subject to a greater extent to adverse conditions in the real
estate market and in the general economy. Commercial and industrial loans, along with agricultural loans,
involve a higher risk of default than residential mortgage loans of like duration since their repayment is
generally dependent on the successful operation of the borrower’s business and the sufficiency of
collateral, if any.
Repayment of agricultural loans can also be impacted by fluctuations in commodity prices. Although a
customer’s ability to repay for both one-to-four family residential mortgage loans and consumer loans is
highly dependent on the local economy, especially employment levels, consumer loans as a group
generally present a higher degree of risk because of the nature of collateral, if any. State and political
subdivision loans carry the lowest risk, as most state and political subdivision loans are either backed by
the full taxing authority of a municipality or the revenue of a municipal authority.
The following tables present, by portfolio segment, the changes in the allowance for loan losses and the
recorded investment in loans as of and for the years ended December 31:
Commercial
and
Commercial
Real Estate Industrial
Agricultural
2021
State and
Political
Subdivisions Consumer
Residential
Real Estate Unallocated
Total
Allowance for
loan losses:
Beginning balance
Charge-offs
Recoveries
Provision
$ 4,300,914 $ 1,163,561 $
-
11,235
958,056
-
4,112
349,027
320,794 $
-
-
4,952
190,954 $
-
-
(14,269 )
57,154 $ 1,871,288 $ 1,865,898 $ 9,770,563
(11,202 )
(1,202 )
20,491
5,144
780,000
(14,544 )
-
-
(603,211 )
(10,000 )
-
99,989
Ending balance
$ 5,270,205 $ 1,516,700 $
325,746 $
176,685 $
46,552 $ 1,961,277 $ 1,262,687 $ 10,559,852
Ending balance
individually
evaluated for
impairment
Ending balance
collectively
evaluated for
impairment
Loans:
Individually
evaluated for
impairment
Collectively
evaluated for
impairment
Ending balance
$
22,224 $
250,050 $
44,087 $
- $
5,989 $
133,886 $
- $
456,236
5,247,981 1,266,650
281,659
176,685
40,563
1,827,391 1,262,687 10,103,616
$ 5,270,205 $ 1,516,700 $
325,746 $
176,685 $
46,552 $ 1,961,277 $ 1,262,687 $ 10,559,852
$
254,364 $
860,865 $
288,518 $
- $
5,989 $ 1,317,154
$ 2,726,890
385,440,557 118,040,333
30,461,117
38,831,785 16,185,659
287,027,004
875,986,455
$ 385,694,921 $ 118,901,198 $ 30,749,635 $ 38,831,785 $ 16,191,648 $ 288,344,158
$ 878,713,345
32
21
22
33
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
5. ALLOWANCE FOR LOAN LOSSES (Continued)
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Commercial
Real Estate
and
Industrial
Allowance for
loan losses:
Commercial
State and
Political
Agricultural Subdivisions Consumer
2020
Residential
Real Estate Unallocated
Total
Credit Quality Information (Continued)
The Company’s internally-assigned grades are as follows:
Beginning balance
Charge-offs
Recoveries
Provision
$ 2,753,352 $ 1,434,140 $
(5,236 )
11,000
(276,343 )
-
2,640
1,544,922
517,523 $
-
-
(196,729 )
167,108 $
-
-
23,846
71,358 $ 1,684,940 $
-
(20,531 )
5,333
10,455
181,015
(4,128 )
870,981 $ 7,499,402
(25,767 )
29,428
994,917 2,267,500
-
-
Ending balance
$ 4,300,914 $ 1,163,561 $
320,794 $
190,954 $
57,154 $ 1,871,288 $ 1,865,898 $ 9,770,563
Pass loans are loans which are protected by the current net worth and paying capacity of the obligor or by
the value of the underlying collateral. Special Mention loans are loans where a potential weakness or risk
exists, which could cause a more serious problem if not corrected. Substandard loans are loans that have
a well-defined weakness based on objective evidence and are characterized by the distinct possibility that
the Company will sustain some loss if the deficiencies are not corrected. Doubtful loans have all the
weaknesses inherent in a substandard asset and these weaknesses make collection or liquidation in full
highly questionable and improbable, based on existing circumstances. Finally, loans classified as Loss are
considered uncollectible, or of such value that continuance as an asset is not warranted.
Ending balance
individually
evaluated for
impairment
Ending balance
collectively
evaluated for
impairment
Loans:
Individually
evaluated for
impairment
Collectively
evaluated for
impairment
Ending balance
$
25,378 $
38,546 $
50,056 $
- $
2,742 $
36,803 $
- $
153,525
2021
4,275,536
1,125,015
270,738
190,954
54,412
1,834,485 1,865,898 9,617,038
$ 4,300,914 $ 1,163,561 $
320,794 $
190,954 $
57,154 $ 1,871,288 $ 1,865,898 $ 9,770,563
$
307,637 $
193,672 $
313,444 $
- $
2,742 $
658,170
$ 1,475,665
291,419,407
125,988,101 27,295,002 41,967,923 5,625,683
271,959,175
$ 291,727,044 $ 126,181,773 $ 27,608,446 $ 41,967,923 $ 5,628,425 $ 272,617,345
764,255,291
$ 765,730,956
Commercial
and
State and
Political
Commercial
Real Estate Industrial Agricultural Subdivisions
Total
Pass
Special Mention
Substandard
Doubtful
Total
$ 376,729,845 $ 112,872,779 $ 30,662,188 $ 38,831,785 $ 559,096,597
- 14,007,652
8,949,282 5,058,370
828,911
-
828,911
-
244,379
-
141,138
15,794
$ 385,694,921 $ 118,901,198 $ 30,749,635 $ 38,831,785 $ 574,177,539
-
-
87,447
2020
Commercial
and
State and
Political
Commercial
Real Estate Industrial Agricultural Subdivisions
Total
From 2020 to 2021, our reserve requirement by loan pool for Commercial Real Estate had a net increase
of approximately $1.0 million, due to increases in outstanding loan balances, offset by decreases to certain
qualitative factors in response to improved economic conditions in 2021 compared to 2020 relating to the
impact of the COVID-19 environment. Reserves for Residential Real Estate increased approximately $0.1
million due to specific reserves for individually evaluated loans. Reserves for Commercial and Industrial
loans increased during 2021 by approximately $0.4 million, due to increases in outstanding loan balances
and increased specific reserves for individually evaluated impaired loans. At December 31, 2021 and
2020, the loan pool for Commercial and Industrial includes outstanding PPP loans of approximately $9.9
million and $43.4 million, respectively, for which the qualitative risk factors used for calculating reserves
are substantially lower due to the unique loan principal forgiveness and SBA loan guarantee features of
the PPP loan program.
Credit Quality Information
The following tables represent the commercial credit exposures by internally-assigned grades for the years
ended December 31, 2021 and 2020, respectively. The grading analysis estimates the capability of the
borrower to repay the contractual obligations under the loan agreements as scheduled or at all. The
Company’s internal credit risk grading system is based on experiences with similarly graded loans.
Pass
Special Mention
Substandard
Doubtful
Total
$ 285,972,827 $ 122,513,801 $ 27,133,299 $ 41,967,923 $ 477,587,850
- 2,976,440
1,553,853 1,422,587
- 6,642,190
4,182,555 2,082,635
278,706
-
162,750
$ 291,727,044 $ 126,181,773 $ 27,608,446 $ 41,967,923 $ 487,485,186
-
377,000
98,147
17,809
34
23
24
35
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
5. ALLOWANCE FOR LOAN LOSSES (Continued)
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Credit Quality Information (Continued)
Age Analysis of Past Due Loans by Class (Continued)
For consumer and residential real estate loans, the Company evaluates credit quality based on whether the
loan is considered performing or nonperforming. Nonperforming loans are those loans past due 90 days
or more and loans on nonaccrual. The following tables present the balances of consumer and residential
real estate loans by classes of loan portfolio based on payment performance as of December 31:
Consumer
2021
Residential
Real Estate
Total
Performing
Nonperforming
Total
$ 16,185,659 $ 287,625,716 $ 303,811,375
724,431
$ 16,191,648 $ 288,344,158 $ 304,535,806
718,442
5,989
Consumer
2020
Residential
Real Estate
Total
Performing
Nonperforming
Total
$
$
Age Analysis of Past Due Loans by Class
5,625,683 $ 271,830,618 $ 277,456,301
789,469
5,628,425 $ 272,617,345 $ 278,245,770
786,727
2,742
The following are tables which show the aging analysis of past due loans as of December 31:
2021
30-59
Days
Past Due Past Due Past Due Past Due Current
90 Days or
Greater
60-89
Days
Total
Total
Loans
90 Days
and
Accruing
$
- $
- $
15,794 $
15,794 $ 385,679,127 $ 385,694,921 $
67,725
162,058
141,138
370,921
118,530,277
118,901,198
-
-
87,447
87,447 30,662,188 30,749,635
-
-
-
-
-
-
-
41,322 409,445 718,442 1,169,209 287,174,949 288,344,158 326,690
$ 109,047 $ 571,503 $ 968,810 $ 1,649,360 $ 877,063,985 $ 878,713,345 $ 326,690
- 38,831,785 38,831,785
5,989 16,185,659 16,191,648
-
5,989
-
-
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total
30-59
Days
Past Due Past Due Past Due Past Due Current
90 Days or
Greater
60-89
Days
Total
Total
Loans
90 Days
and
Accruing
2020
$
- $ 107,880 $
17,809 $ 125,689 $ 291,601,355 $ 291,727,044 $
-
375,747
61,561
165,288
602,596
125,579,177
126,181,773
-
-
98,147
98,147 27,510,299 27,608,446
2,538
-
-
7,326
-
-
71,751 225,109 786,727 1,083,587 271,533,758 272,617,345 469,989
$ 454,824 $ 394,550 $ 1,070,713 $ 1,920,087 $ 763,810,869 $ 765,730,956 $ 472,527
- 41,967,923 41,967,923
10,068 5,618,357 5,628,425
-
2,742
-
-
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total
Consumer mortgage loans held by the Company in the process of foreclosure amounted to $303,674 and
$287,307 as of December 31, 2021 and 2020, respectively.
Impaired Loans
Management considers commercial real estate loans, commercial and industrial loans, agricultural loans,
and state and political subdivision loans which are 90 days or more past due to be impaired. After
becoming 90 days or more past due, these categories of loans are measured for impairment. Any consumer
and residential real estate loans related to these delinquent loans are also considered to be impaired.
Troubled debt restructurings are measured for impairment at the time of restructuring. These loans are
analyzed to determine if it is probable that all amounts will not be collected according to the contractual
terms of the loan agreement. If management determines that the fair value of the impaired loan is less than
the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs, and
unamortized premium or discount), impairment is recognized through a provision or through a charge to
the allowance for loan losses.
36
25
26
37
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
5. ALLOWANCE FOR LOAN LOSSES (Continued)
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Impaired Loans (Continued)
Impaired Loans (Continued)
The following tables include the recorded investment and unpaid principal balances for impaired loans
with the associated allowance amount as of December 31:
2021
Unpaid
Recorded Principal Related
Investment Balance
Average
Recorded
Interest
Income
Allowance Investment Recognized
With no related allowance
recorded:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
$
- $
- $
141,138
141,138
63,933
63,933
-
-
97,773
-
-
97,773
- $
-
-
-
-
-
- $
-
67,466
-
-
227,776
302,844
302,844
-
295,242
-
-
-
-
-
-
-
With an allowance recorded:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
254,364
254,364
22,224
277,669
15,898
719,727
224,585
719,727
224,585
250,050
44,087
695,390
231,991
11,081
8,341
-
5,989
1,219,381 1,219,381
-
5,989
-
5,989
133,886
-
2,754
644,639
-
-
18,121
2,424,046 2,424,046
456,236 1,852,443
53,441
254,364
254,364
22,224
277,669
15,898
860,865
288,518
860,865
288,518
250,050
44,087
695,390
299,457
11,081
8,341
-
5,989
1,317,154 1,317,154
-
5,989
-
5,989
133,886
-
2,754
872,415
-
-
18,121
Total
$ 2,726,890 $ 2,726,890 $
456,236 $ 2,147,685 $
53,441
Unpaid
Recorded Principal Related
Investment Balance
Average
Recorded
Interest
Income
Allowance Investment Recognized
2020
$
17,809 $
17,809 $
- $
15,745 $
152,641
152,641
72,662
72,662
-
-
126,983
6,055
-
-
-
-
-
406,999
-
-
406,999
-
-
-
-
-
348,900
-
-
9,712
650,111
650,111
-
497,683
9,712
289,828
289,828
25,378
309,394
19,032
41,031
240,782
41,031
240,782
38,546
50,056
46,721
280,410
1,521
11,236
-
2,742
251,171
-
2,742
251,171
-
2,742
36,803
-
4,600
198,358
-
-
10,162
825,554
825,554
153,525
839,483
41,951
307,637
307,637
25,378
325,139
19,032
193,672
313,444
193,672
313,444
38,546
50,056
173,704
286,465
1,521
11,236
-
2,742
658,170
-
2,742
658,170
-
2,742
36,803
-
4,600
547,258
-
-
19,874
With no related allowance
recorded:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
With an allowance recorded:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total:
Commercial real estate
Commercial and
industrial
Agricultural
State and political
subdivisions
Consumer
Residential real estate
Total
$ 1,475,665 $ 1,475,665 $
153,525 $ 1,337,166 $
51,663
Nonaccrual Loans
Loans are considered nonaccrual upon reaching 90 days of delinquency even though the Company may be
receiving partial payments of interest and partial repayments of principal on such loans. When a loan is
placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income.
Interest income that would have been recorded on nonaccrual loans in accordance with their original terms
totaled approximately $34,300 in 2021 and $40,600 in 2020.
38
27
28
39
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
5. ALLOWANCE FOR LOAN LOSSES (Continued)
6.
PREMISES AND EQUIPMENT
Nonaccrual Loans (Continued)
Major classifications of premises and equipment are summarized as follows:
The following table includes the loan balances on nonaccrual status as of December 31:
Commercial real estate
Commercial and industrial
Agricultural
Consumer
Residential real estate
Total
Troubled Debt Restructuring (TDR’s)
2021
2020
$ 15,794 $ 17,809
141,138 162,750
98,147
2,742
391,752 316,738
$ 642,120 $ 598,186
87,447
5,989
The Company’s loan portfolio also includes certain loans that have been modified in a troubled debt
restructuring, where economic concessions have been granted to borrowers who have experienced or are
expected to experience financial difficulties. These concessions typically result from the Company’s loss
mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of
principal, forbearance, or other actions.
When the Company modifies a loan, management evaluates any possible impairment based on the present
value of expected future cash flows, discounted at the contractual interest rate of the original loan
agreement. If management determines that the value of the modified loan is less than the recorded
investment in the loan, impairment is recognized either through a charge-off to the allowance or a specific
reserve. As of December 31, 2021 and 2020, specific reserve allocations of $283,715 and $107,860,
respectively, had been established against the troubled debt restructurings and no charge-offs for the
troubled debt restructurings were required.
There were no loans modified in a troubled debt restructuring from January 1, 2019 through December 31,
2020, that subsequently defaulted (i.e., 90 days or more past due following a modification) during the years
ended December 31, 2021 and 2020, respectively.
Loan modifications considered troubled debt restructurings completed during the year ended December
31, 2021 consist of eleven commercial loans and a residential real estate loan, all with a single borrower.
The Company’s outstanding recorded investment in the loans at the time of the restructuring was $207,291
and $709,393, for the commercial loans and the real estate loan, respectively. Modifications include
changes to the loan maturity dates, and interest only payments for a number of the commercial loans. The
Company’s outstanding recorded investment amount in these loans was not changed by the TDR
modifications.
Loan modifications considered troubled debt restructurings completed during the year ended December
31, 2020 consist of one commercial loan and one residential real estate loan. The Company’s outstanding
recorded investment in the loans at the time of the restructuring was $30,922 and $108,688, for the
commercial loan and the real estate loan, respectively. The Company’s outstanding recorded investment
amount in these loans was not changed by the TDR modifications.
Land and land improvements
Buildings and leasehold improvements
Buildings - construction in progress
Furniture, fixtures, and equipment
Less accumulated depreciation
Total
2021
2020
$ 2,394,918 $ 2,394,918
30,278,415 19,334,135
911,279 9,882,297
9,168,725 8,541,569
42,753,337 40,152,919
17,174,994 15,884,213
$ 25,578,343 $ 24,268,706
Depreciation charged to operations was $1,397,013 in 2021 and $1,090,106 in 2020.
7. GOODWILL
As of December 31, 2021 and 2020, goodwill had a gross carrying amount of $4,174,955, and accumulated
amortization of $614,013 for a net carrying value of $3,560,942. The carrying amount of goodwill was
tested for impairment in the fourth quarter, after the annual forecasting process. There was no impairment
for the years ended December 31, 2021 and 2020.
Insurance Agency Acquisition
During 2020 the Company completed the acquisition of a property and casualty insurance agency located
in Juniata County. The acquisition included the current book of business, assets and liabilities of the
agency, and the real estate where the agency office is located. Goodwill increased by $1,717,243 during
2020, representing the residual of the acquisition price of the agency after allocation of the purchase price
to identified assets and assumed liabilities.
8. DEPOSITS
The scheduled maturities of time deposits approximate the following:
Year Ending
December 31,
2022
2023
2024
2025
2026
Thereafter
Amount
154,799,816
85,639,154
8,096,286
7,534,862
3,751,949
1,484,360
261,306,427
$
$
The aggregate of all time deposit accounts of $250,000 or more amounted to $78,736,718 and $52,704,946
at December 31, 2021 and 2020, respectively. There were no brokered deposits as of December 31, 2021
or 2020. As of December 31, 2021, there was one individual depositor with a deposit account balance in
excess of 5% of total deposits, in the amount of approximately $51.2 million. As of December 31, 2020,
there were no individual depositors with balances in excess of 5% of total deposits.
40
29
30
41
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
9.
SHORT-TERM BORROWINGS
10. OTHER BORROWINGS (Continued)
Short-term borrowings include overnight repurchase agreements through the FHLB, federal funds
purchased, and repurchase agreements with customers. The outstanding balances and related information
for short-term borrowings are summarized as follows:
Balance at year-end
Average balance outstanding
Maximum month-end balance
Weighted-average rate at year-end
Weighted-average rate during the year
2021
2020
$ 67,433,957 $ 69,360,211
61,364,033 62,163,630
74,291,791 69,360,211
0.28 %
0.33 %
0.45 %
0.17 %
The collateral pledged on the repurchase agreements by the remaining contractual maturity of the
repurchase agreements in the Consolidated Balance Sheet as of years ended December 31, 2021 and 2020,
is presented in the following table.
Remaining
Contractual Maturity
Overnight and Continuous
December 31, December 31,
2021
2020
Securities of U.S. Government Agencies, U.S. Treasuries, and
obligations of state and political subdivisions pledged, fair value $
Repurchase agreements
6,620,013 $
874,393
4,116,853
1,151,378
10. OTHER BORROWINGS
The following table sets forth information concerning other borrowings:
Description
Maturity Range
To
From
Weighted-
Average
Interest
Rate
Stated Interest
Rate Range
To
From
At December 31,
2021
2020
01/13/21 08/04/26
Fixed rate
02/03/21 07/15/24
Fixed rate amortizing
05/10/21 05/10/21
Mid-term repos
Subordinated debt
08/25/24 03/03/26
Junior subordinated debt 03/17/35 11/23/35
2.29 %
1.66
2.75
4.25
1.94
1.49 %
1.33
2.75
4.00
1.66
2.68 % $ 29,737,000 $ 37,534,000
5,356,810
1.81
3,135,000
2.75
12,445,000
4.75
6,186,000
2.22
3,381,698
-
27,879,922
6,186,000
$ 67,184,620 $ 64,656,810
Maturities of other borrowings at December 31, 2021, are summarized as follows:
Year Ending
December 31,
2022
2023
2024
2025
2026
2027 and after
$
$
Amount
12,916,000
9,736,120
5,984,579
3,359,000
1,123,000
34,065,921
67,184,620
Weighted-
Average Rate
2.18 %
2.16
2.34
2.50
2.01
3.83
3.04
Borrowing capacity consists of credit arrangements with the FHLB. FHLB borrowings are subject to
annual renewal, incur no service charges, and are secured by a blanket security agreement on certain
investment and mortgage-backed securities, outstanding residential mortgages, and the Bank’s investment
in FHLB stock. As of December 31, 2021, the Bank’s maximum borrowing capacity with the FHLB was
approximately $456.4 million.
The Bank may request a Federal Reserve Advance secured by acceptable collateral. The Bank’s maximum
borrowing capacity with the Federal Reserve Bank as of December 31, 2021 is approximately $63.4
million.
The Bank maintains a $10.0 million, $10.0 million, and $5.0 million federal funds line of credit with three
other financial institutions. The Bank maintains a $750,000 Letter of Credit Facility with a financial
institution. The Bank did not have outstanding borrowings related to these lines of credit at December 31,
2021.
In 2014, the Company formed a special purpose entity (“Entity”) to issue $3,093,000 of fixed/floating rate
subordinated debt securities with a stated maturity of March 17, 2035. The rate on these securities is
determined quarterly and floats based on three-month LIBOR plus 2.00 percent. The Entity may redeem
them, in whole or in part, at face value on or after March 17, 2010. The Company borrowed the proceeds
from the Entity in the form of a $3,093,000 note payable, which is included in the liabilities section of the
Company’s Consolidated Balance Sheet.
In 2015, the Company formed an additional special purpose entity to issue $3,093,000 of fixed/floating
rate subordinated debt securities with a stated maturity of November 23, 2035. These securities had a fixed
rate of 6.11 percent until November 23, 2015, at which time the rate converted to floating, is determined
quarterly, and floats based on three-month LIBOR plus 1.50 percent. The Entity may redeem them, in
whole or in part, at face value on or after November 23, 2010. The Company borrowed the proceeds from
the Entity in the form of a $3,093,000 note payable, which is included in the liabilities section of the
Company’s Consolidated Balance Sheet.
In 2020, the Company issued $8,097,000 of fixed rate subordinated capital notes with stated maturities of
June 23, 2030 through April 1, 2031. These securities bear a fixed annual rate of 4.75 percent. The
Company may redeem them, in whole or in part, at face value on or after June 23, 2025. These borrowings
are included in the liabilities section of the Company’s Consolidated Balance Sheet.
42
31
32
43
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
10. OTHER BORROWINGS (Continued)
11. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
In 2021, the Company issued $20,000,000 of fixed rate subordinated capital notes with a stated maturity
of April 7, 2031. The fixed securities bear an annual rate of 4.00 percent. The Company may redeem
them, in whole or in part, at face value on or after April 7, 2026. These borrowings are included in the
liabilities section of the Company’s Consolidated Balance Sheet.
The Company’s minority interests in these entities were recorded at the initial investment amount and are
included in the accrued interest and other assets on the Consolidated Balance Sheet. These entities are not
consolidated as part of the Company’s consolidated financial statements.
11. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic
conditions. The Company principally manages its exposures to a wide variety of business and operational
risks through management of its core business activities. The Company manages economic risks, including
interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets
and liabilities and through the use of derivative financial instruments. Specifically, the Company enters
into derivative financial instruments to manage exposures that arise from business activities that result in
the receipt or payment of future known and uncertain cash amounts, the value of which are determined by
interest rates. The Company’s derivative financial instruments are used to manage differences in the
amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected
cash payments principally related to certain variable rate borrowings. The Company also has interest rate
derivatives that result from a service provided to certain qualifying customers and, therefore, are not used
to manage interest rate risk in the Company’s assets or liabilities. The Company manages a matched book
with respect to its derivative instruments in order to minimize its net risk exposure resulting from such
transactions.
The Company has contracted with a third party to engage pay-fixed interest rate swap contracts and the
outstanding as of December 31, 2021, is being utilized to hedge $65.0 million in floating rate debt. At
December 31, 2021 and 2020, the information pertaining to outstanding interest rate swap agreements is
as follows:
Notional amount
Weighted-average pay rate
Receive rate
Weighted-average maturity in years
Unrealized loss relating to interest rate swaps
2021
2020
$ 135,687,424
$ 120,518,422
3.09 %
2.99 %
1 or 3-Month
Libor
5.9
1 or 3-Month
Libor
6.5
(1,563,261 )
(4,634,000 )
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate derivatives are to add stability to interest income and
expense and to manage its exposure to interest rate movements. To accomplish this objective, the
Company has entered into interest rate swaps as part of its interest rate risk management strategy. These
interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts
from a counterparty in exchange for the Company making fixed interest payments. As of December 31,
2021, the Company had six interest rate swaps with a notional of $65.0 million associated with the
Company’s cash outflows associated with various floating-rate amounts.
For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the
derivative is initially reported in other comprehensive income (outside of earnings), net of tax, and
subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective
portion of changes in the fair value of the derivative is recognized directly in earnings. The Company
assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the
derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The
Company did not recognize any hedge ineffectiveness in earnings during the period ended December 31,
2021. Amounts reported in accumulated other comprehensive income related to derivatives will be
reclassified to interest expense as interest payments are made on the Company’s variable-rate liabilities.
During the next twelve months, the Company estimates that $0 will be reclassified as an increase in interest
expense.
Credit-Risk-Related Contingent Features
The Company has agreements with certain of its derivative counterparties that contain the following
provisions:
if the Company defaults on any of its indebtedness, including default where repayment of the
indebtedness has not been accelerated by the lender, then the Company could also be declared in
default on its derivative obligations;
if the Company fails to maintain its status as a well/adequately capitalized institution, then the
counterparty could terminate the derivative positions, and the Company would be required to settle its
obligations under the agreements;
if the Company fails to maintain a specified minimum leverage ratio, then the Company could be
declared in default on its derivative obligations.
At December 31, 2021, the fair value of derivatives in a net liability position, which includes accrued
interest and any credit valuation adjustments related to these agreements, was $1,563,261. At
December 31, 2021, the Company had required cash collateral with certain of its derivative counterparties
in the amount of $3,970,299 and was not holding cash collateral of certain derivative counterparties. If
the Company had breached any of the above provisions at December 31, 2021, it would have been required
to settle its obligations under the agreements at termination value and would have been required to pay any
additional amounts due in excess of amounts previously posted as collateral with the respective
counterparty.
44
33
34
45
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
11. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
11. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
Fair Values of Derivative Instruments on the Balance Sheet
Derivative Instruments (Continued)
The following table presents the fair values of derivative instruments in the consolidated balance sheet:
Assets
Liabilities
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Fair
Value
Other assets
$
2,277,931 Other liabilities $
(3,841,192 )
Other assets
$
5,074,982 Other liabilities $
(9,709,582 )
December 31, 2021
Interest rate derivatives
December 31, 2020
Interest rate derivatives
Derivative Instruments
The Company enters into interest rate swaps that allow our commercial loan customers to effectively
convert a variable-rate commercial loan agreement to a fixed-rate loan agreement. Under these
agreements, the Company enters into a variable-rate loan agreement with a customer in addition to an
interest rate swap agreement, which serves to effectively swap the customer’s variable-rate into a fixed-
rate. The Company then enters into a swap agreement with a third party in order to economically hedge
its exposure through the customer agreement.
Although the Company has determined that the majority of the inputs used to value its derivatives fall
within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives
may use Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by
itself and its counterparties. However, at December 31, 2021, the Company has assessed the significance
of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has
determined they are not significant. As a result, the Company has determined that its derivative valuations
in their entirety are classified in Level 2 of the fair value hierarchy.
Notional Amount
December 31,
2021
2020
$ 6,000,000 $ 6,000,000
22,000,000 22,000,000
22,000,000 22,000,000
10,000,000 10,000,000
5,000,000 5,000,000
Interest
Rate
Paid
Fixed
Fixed
Fixed
Fixed
Fixed
Interest
Rate
Received
Fair Value
December 31,
2021
2020
3 Mo. Libor
3 Mo. Libor
3 Mo. Libor
3 Mo. Libor
3 Mo. Libor
$ (151,818 ) $ (354,829 )
(427,551 ) (1,330,524 )
(627,802 ) (1,728,609 )
(450,122 ) (1,039,595 )
94,032 (181,043 )
$ 65,000,000 $ 65,000,000
$ (1,563,261 ) $ (4,634,600 )
$ 9,100,000 $ 9,100,000 1 Mo. Libor + Margin
9,266,000 9,266,000 1 Mo. Libor + Margin
1,026,388
972,564 1 Mo. Libor + Margin
10,470,000 10,379,025 1 Mo. Libor + Margin
19,902,036 19,629,449 1 Mo. Libor + Margin
17,203,000 2,500,000 1 Mo. Libor + Margin
3,720,000 3,671,384 1 Mo. Libor + Margin
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
$ 70,687,424 $ 55,518,422
(12,933 )
$ 559,467 $ 1,051,004
783,043 1,364,263
7,303
416,196 1,010,039
523,823 1,616,774
44,509
197,103
(18,910 )
(188,768 )
$ 2,277,931 $ 5,074,982
Cash flow interest
rate swap
Maturing in 2024
Maturing in 2025
Maturing in 2026
Maturing in 2027
Maturing in 2030
Customer interest
rate swap
Maturing in 2025
Maturing in 2026
Maturing in 2027
Maturing in 2029
Maturing in 2030
Maturing in 2031
Maturing in 2035
Third party interest
rate swap
Maturing in 2025
Maturing in 2026
Maturing in 2027
Maturing in 2029
Maturing in 2030
Maturing in 2031
Maturing in 2035
$ 9,100,000 $ 9,100,000
9,266,000 9,266,000
1,026,388
972,564
10,470,000 10,379,025
19,902,036 19,629,449
17,203,000 2,500,000
3,720,000 3,671,384
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
1 Mo. Libor + Margin $ (559,467 ) $ (1,051,004 )
1 Mo. Libor + Margin (783,043 ) (1,364,263 )
1 Mo. Libor + Margin
(7,303 )
1 Mo. Libor + Margin (416,196 ) (1,010,039 )
1 Mo. Libor + Margin (523,823 ) (1,616,774 )
(44,509 )
1 Mo. Libor + Margin (197,103 )
18,910
1 Mo. Libor + Margin 188,768
12,933
$ 70,687,424 $ 55,518,422
$ (2,277,931 ) $ (5,074,982 )
46
35
36
47
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
12.
INCOME TAXES
12.
INCOME TAXES (Continued)
The provision for federal income taxes for the years ended December 31, 2021 and 2020, consists of:
The reconciliation between the federal statutory rate and the Company’s effective consolidated income tax
rate is as follows:
Current
Deferred
$
2021
1,834,896 $
(483,336 )
2020
1,905,671
(666,073 )
Total provision
$
1,351,560 $
1,239,598
The tax effects of deductible and taxable temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020, are as follows:
2021
2020
Deferred tax assets:
$
Allowance for loan losses
Deferred compensation
Deferred incentive credits
Core deposit intangible assets
Asset valuation allowances
Employee compensation accruals
Nonaccrual interest receivable
Unrealized loss on swaps - balance sheet hedge
Unrealized loss on available-for-sale securities
Fair value adjustment - equity securities
Partnerships
Lease liability
Capital loss carryforward
Other
Deferred tax assets
Deferred tax liabilities:
Premises and equipment
Goodwill
Deferred loan fees
Partnerships
Unrealized gain on available-for-sale securities
Fair value adjustment - equity securities
Right of use asset
Other
Deferred tax liabilities
2,217,569 $
445,183
231,723
-
74,594
289,464
8,961
313,569
104,445
-
77,367
953,122
804
1,174
4,717,975
546,798
378,674
92,236
-
-
131,643
935,252
-
2,084,603
2,051,818
370,849
-
17,159
88,091
363,688
10,233
973,266
-
22,765
-
979,312
-
1,174
4,878,355
605,522
369,342
80,213
48,058
705,015
99,465
967,121
3,346
2,878,082
Net deferred tax assets
$
2,633,372 $
2,000,273
No valuation allowance was established at December 31, 2021 and 2020, in view of the Company’s ability
to carryback taxes paid in previous years and certain tax strategies, coupled with the anticipated future
taxable income as evidenced by the Company’s earnings potential.
Provision at statutory rate
Tax-exempt interest
Life insurance income
Investment tax credits
Other
Income tax expense and
effective rate
2021
% of
Pretax
2020
% of
Pretax
Amount
$ 2,358,909
(322,889 )
(135,336 )
(329,442 )
(219,681 )
Income
21.0 %
(2.9 )
(1.2 )
(2.9 )
(2.0 )
Amount
$ 1,948,566
(366,767 )
(64,568 )
(329,442 )
51,809
Income
21.0 %
(4.0 )
(0.7 )
(3.6 )
0.6
$ 1,351,560
12.0 %
$ 1,239,598
13.3 %
The Company prescribes a recognition threshold and a measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from
tax positions should be recognized in the financial statements only when it is more likely than not that the
tax position will be sustained upon examination by the appropriate taxing authority that would have full
knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition
threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized
upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition
threshold should be recognized in the first subsequent financial reporting period in which that threshold is
met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition
threshold should be derecognized in the first subsequent financial reporting period in which that threshold
is no longer met.
There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The
Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the
provision for income taxes in the Consolidated Statement of Income. The Company’s federal and state
income tax returns for taxable years through 2017 have been closed for purposes of examination by the
Internal Revenue Service and the Pennsylvania Department of Revenue.
13. EMPLOYEE BENEFITS
Savings Plan
The Bank maintains a qualified 401(k) salary reduction and profit sharing plan that covers substantially all
employees. Under the plan, employees make voluntary, pretax contributions to their accounts, and the
Bank contributions to the plan are at the discretion of the Board of Directors. Contributions by the Bank
charged to operations were $491,112 and $445,991 for the years ended December 31, 2021 and 2020,
respectively. The fair value of plan assets includes $3,207,662 and $2,374,480 pertaining to the value of
the Company’s common stock that is held by the plan as of December 31, 2021 and 2020, respectively.
48
37
38
49
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
13. EMPLOYEE BENEFITS (Continued)
Deferred Compensation Plan
13. EMPLOYEE BENEFITS (Continued)
Stock Option Plan
The Company has a nonqualified deferred compensation plan that allows directors and senior executives
to defer fees and salaries. Outstanding balances under this arrangement as of December 31, 2021 and
2020, were $2,119,917 and $1,765,947, respectively, and are reported as “Other liabilities” on the
Consolidated Balance Sheet. Expenses related to this plan were $240,839 and $200,445 for the years
ended December 31, 2021 and 2020, respectively.
Restricted Stock Plan
The Company maintains a Restricted Stock Plan (the “Plan”). Employees and board members are eligible
to receive awards of restricted stock based upon performance-related requirements. Awards granted under
the Plan are in the form of the Company’s common stock and are subject to certain vesting requirements
including continuous employment or service with the Company. Since inception of the Plan in 1988, the
Company has authorized share pools totaling 480,000 shares of the Company’s common stock to the plan.
The Plan has a remaining available share pool of 210,247 shares and 226,565 shares as of December 31,
2021 and 2020, respectively. The Plan assists the Company in attracting, retaining, and motivating
employees and non-employee directors to make substantial contributions to the success of the Company
and to increase the emphasis on the use of equity as a key component of compensation.
Compensation expense recognized related to restricted stock awards was $515,935 and $518,842 for the
years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, unrecognized
compensation cost related to restricted stock awards was $1,101,417, which is expected to be recognized
over a weighted average life of 2.96 years.
The following is a summary of the status of the Company’s outstanding restricted stock awards as of
December 31, 2021 and 2020, and changes therein during the years then ended:
Shares of
Restricted
Stock
Outstanding
Weighted-
Average
Grant Date
Fair Value
Outstanding at December 31, 2019
Granted
Released from Restrictions
Forfeited
Outstanding at December 31, 2020
Granted
Released from Restrictions
Forfeited
Outstanding at December 31, 2021
81,920 $
18,458
(19,059 )
(215 )
81,104
18,160
(24,236 )
(1,842 )
73,186 $
26.13
25.94
21.80
29.20
27.10
30.34
23.64
30.00
28.98
The Company has a stock option plan available for granting stock-based compensation awards to
employees and board members. The Company authorized a share pool of 760,000 shares of the Company’s
common stock for granting incentive stock options and non-qualified stock option awards. The stock
option plan has a remaining available share pool of 149,527 and 185,509 shares as of December 31, 2021
and 2020, respectively. The exercise price for the purchase of shares subject to a stock option may not be
less than 100 percent of the fair market value of the shares covered by the option on the date of the grant.
The term of stock options will not exceed ten years from the date of grant. Options granted are primarily
vested evenly over a three-year period from the grant date. Compensation expense recognized related to
stock option awards was $129,509 and $88,528 for the years ended December 31, 2021 and 2020,
respectively. As of December 31, 2021, unrecognized compensation cost related to stock option awards
was $227,393, which is expected to be recognized over a weighted-average life of 1.97 years.
The following table presents share data related to the outstanding option awards:
Incentive Stock Options
Weighted-
Average
Exercise
Price
Options
Outstanding
128,769 $
32,893
(15,438 )
(666 )
145,558
34,500
(11,140 )
(4,301 )
25.79
26.03
19.80
29.23
26.46
30.41
23.24
29.88
Outstanding, December 31, 2019
Granted
Exercised
Forfeited/Expired
Outstanding, December 31, 2020
Granted
Exercised
Forfeited/Expired
Non-Qualified Stock
Options
Weighted-
Average
Exercise
Price
21.73
25.96
19.32
28.15
22.65
30.05
22.54
28.87
Options
Outstanding
77,225 $
8,312
(14,988 )
(1,135 )
69,414
8,415
(7,545 )
(2,632 )
Outstanding, December 31, 2021
164,617 $
27.42
67,652 $
23.34
Exercisable at December 31, 2021
98,444 $
26.24
54,218 $
21.95
50
39
40
51
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
13. EMPLOYEE BENEFITS (Continued)
Stock Option Plan (Continued)
Option awards outstanding and exercisable as of December 31, 2021:
Incentive Stock Options
Expiration
Date
Exercise
Price
Share
Awards
Outstanding
Share
Awards
Exercisable
Remaining
Contractual
Life (years)
04/02/22
04/01/23
04/01/24
04/01/25
03/30/26
10/31/26
12/12/26
04/03/27
04/02/28
04/01/29
04/03/30
12/01/30
04/03/31
10/01/31
15.00
16.63
18.25
19.48
22.00
22.40
22.38
27.00
29.63
31.60
25.65
30.00
30.05
38.25
4,000
6,100
3,222
6,568
7,900
1,000
1,000
9,650
28,600
31,684
28,293
2,900
32,200
1,500
164,617
4,000
6,100
3,222
6,568
7,900
1,000
1,000
9,650
28,600
20,891
8,547
966
-
-
98,444
0.25
1.25
2.25
3.25
4.24
4.83
4.95
5.25
6.25
7.25
8.25
8.92
9.25
9.75
Non-Qualified Stock Options
Expiration
Date
Exercise
Price
Share
Awards
Outstanding
Share
Awards
Exercisable
Remaining
Contractual
Life (years)
$
04/02/22
04/01/23
04/01/24
04/01/25
03/30/26
10/31/26
12/12/26
04/03/27
04/02/28
04/01/29
04/03/30
10/28/30
04/03/31
15.00
16.63
18.25
19.75
22.00
22.40
22.38
27.00
29.63
31.60
25.65
28.25
30.05
5,000
5,980
4,182
8,004
11,392
1,000
1,000
11,478
1,600
3,580
5,711
1,000
7,725
67,652
5,000
5,980
4,182
8,004
11,392
1,000
1,000
11,478
1,600
2,120
2,129
333
-
54,218
0.25
1.25
2.25
3.25
4.24
4.83
4.95
5.25
6.25
7.25
8.25
8.82
9.25
14. COMMITMENTS
In the normal course of business, there are outstanding commitments and contingent liabilities such as
commitments to extend credit, financial guarantees, and letters of credit that are not reflected in the
accompanying consolidated financial statements. The Company does not anticipate any losses as a result
of these transactions. These instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the Consolidated Balance Sheet.
The contract or notional amounts of those instruments reflect the extent of involvement the Company has
in the particular classes of financial instruments that consisted of the following:
Commitments to extend credit
Standby letters of credit
Total
2021
2020
$ 300,005,656 $ 202,620,543
5,365,456
4,330,165
$ 304,335,821 $ 207,985,999
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily represent future cash
requirements.
Standby letters of credit represent conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. These instruments are issued primarily to support bid or
performance-related contracts. The coverage period for these instruments is typically a one-year period,
with an annual renewal option subject to prior approval by management. Fees earned from the issuance
of these letters are recognized upon expiration of the commitment period. For secured letters of credit, the
collateral is typically Bank deposit instruments or real estate.
Lease Commitments
The Company leases office space and real estate for its bank branches with terms ranging from two years
to eighteen years. The Company’s leases are classified as operating leases. In accordance with ASC 842,
operating lease agreements are required to be recognized on the consolidated balance sheet as a right-of-
use (ROU) asset and a corresponding lease liability. A combined ROU asset balance of $4,453,581 and
$4,605,388 related to these operating leases is included in Accrued Interest and Other Assets on the
consolidated balance sheet as of December 31, 2021 and 2020, respectively. A combined lease liability of
$4,538,678 and $4,663,391 related to these operating leases is included in Accrued Interest and Other
Liabilities on the consolidated balance sheet as of December 31, 2021 and 2020, respectively.
52
41
42
53
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
14. COMMITMENTS (Continued)
Lease Commitments (Continued)
Maturities of our lease liabilities for all operating leases for each of the next five years and thereafter are
as follows:
$
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: imputed interest
Present value of lease liabilities $
Operating Lease
Payments
421,907
432,071
441,244
419,273
343,861
3,714,512
5,772,868
1,234,190
4,538,678
The calculated amount of the lease liability in the preceding table is impacted by the length of the lease
term and the discount rate used to present value the minimum lease payments. The Company’s lease
agreement includes one or more options to renew at the Company’s discretion. If at lease inception the
Company considers the exercising of a renewal option to be reasonably certain, the Company will include
the extended term in the calculation of the ROU asset and lease liability. Regarding the discount rate,
Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As
most of our leases do not provide an implicit rate, we use the fully collateralized FHLB borrowing rate,
commensurate with the lease terms based on the information available at the lease commencement date in
determining the present value of the lease payments.
Our combined operating leases have a weighted-average discount rate of 3.25% and 3.31%, and a
weighted-average remaining lease term of 14.2 years and 15.4 years as of December 31, 2021 and 2020,
respectively.
Contingent Liabilities
The Company from time to time may be a party in various legal actions from the normal course of business
activities. Management believes the liability, if any, arising from such actions will not have a material
adverse effect on the Company’s financial position.
15. REGULATORY RESTRICTIONS
Loans
Federal law prevents the Company from borrowing from the Bank unless the loans are secured by specific
obligations. Further, such secured loans are limited in amount to 10 percent of the Bank’s common stock
and capital surplus. There were no such borrowings by the Company during 2021 and 2020.
Dividends
The Pennsylvania Banking Code restricts the availability of capital surplus for dividend purposes. At
December 31, 2021, the Bank had a capital surplus of $5,723,535 which was not available for distribution
to the Company as dividends.
16. REGULATORY CAPITAL
Federal regulations require the Company and the Bank to maintain minimum amounts of capital.
Specifically, each is required to maintain certain minimum dollar amounts and ratios of Total Tier I and
Common Equity Tier 1 capital to risk-weighted assets and of Tier I capital to average total assets.
In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act
(“FDICIA”) established five capital categories ranging from “well capitalized” to “critically
undercapitalized.” Should any institution fail to meet the requirements to be considered “adequately
capitalized,” it would become subject to a series of increasingly restrictive regulatory actions.
As of December 31, 2021 and 2020, the FDIC categorized the Company and the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be classified as a well capitalized
financial institution, Total risk-based, Common Equity Tier I, Tier I risk-based, and Tier I leverage capital
ratios must be at least 10 percent, 6.50 percent, 8 percent, and 5 percent, respectively.
The Company’s actual capital ratios are presented in the following table that shows the Company met all
regulatory capital requirements:
Total capital
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Common Equity Tier I
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Tier I capital
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Tier I capital
(to average assets)
Actual
For capital adequacy purposes
To be well capitalized
2021
2020
Amount
Ratio
Amount
Ratio
$ 121,077,636 12.78 %
75,773,784 8.00
94,717,230 10.00
$ 95,279,053 12.32 %
61,874,268 8.00
77,342,835 10.00
$ 76,227,523 8.05 %
42,622,753 4.50
61,566,199 6.50
$ 68,158,230 8.81 %
34,804,276 4.50
50,272,842 6.50
$ 82,227,523 8.68 %
56,830,338 6.00
75,773,784 8.00
$ 74,158,230 9.59 %
46,405,701 6.00
61,874,268 8.00
$ 82,227,523 6.69 %
49,198,771 4.00
61,498,463 5.00
$ 74,158,230 7.01 %
42,342,062 4.00
52,927,578 5.00
54
43
44
55
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
16. REGULATORY CAPITAL (Continued)
17. FAIR VALUE MEASUREMENTS (Continued)
The Bank’s actual capital ratios are presented in the following table which shows the Bank met all
regulatory capital requirements:
Total capital
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Common Equity Tier I
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Tier I capital
(to risk-weighted assets)
Actual
For capital adequacy purposes
To be well capitalized
Tier I capital
(to average assets)
Actual
For capital adequacy purposes
To be well capitalized
2021
2020
Amount
Ratio
Amount
Ratio
$ 102,659,040 10.87 %
75,581,493 8.00
94,476,866 10.00
$ 94,267,202 12.17 %
61,988,287 8.00
77,485,359 10.00
$ 91,905,928 9.73 %
42,514,590 4.50
61,409,963 6.50
$ 84,303,378 10.88 %
34,868,411 4.50
50,365,483 6.50
$ 91,905,928 9.73 %
56,686,120 6.00
75,581,493 8.00
$ 84,303,378 10.88 %
46,491,215 6.00
61,988,287 8.00
$ 91,905,928 7.53 %
48,840,828 4.00
61,051,035 5.00
$ 84,303,378 7.97 %
42,296,429 4.00
52,870,536 5.00
17. FAIR VALUE MEASUREMENTS
The following disclosures show the hierarchical disclosure framework associated with the level of pricing
observations utilized in measuring assets and liabilities at fair value. The three broad levels of pricing
observations are as follows:
Level I:
Level II:
Quoted prices are available in active markets for identical assets or liabilities as of the
reported date.
Pricing inputs are other than the quoted prices in active markets, which are either directly
or indirectly observable as of the reported date. The nature of these assets and liabilities
includes items for which quoted prices are available but traded less frequently and items
that are fair-valued using other financial instruments, the parameters of which can be
directly observed.
Level III:
Valuations derived from valuation techniques in which one or more significant inputs or
significant value drivers are unobservable.
This hierarchy requires the use of observable market data when available.
The following tables present the assets and liabilities reported on the Consolidated Balance Sheet at their
fair value on a recurring basis as of December 31, 2021 and 2020, by level within the fair value hierarchy.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.
Investment and equity securities at fair
value:
U.S. treasury securities
U.S. government agency securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities in
government-sponsored entities
Equity securities
Level I
Level II
Level III
Total
December 31, 2021
$
- $ 4,926,520 $
- 52,623,526
- $ 4,926,520
- 52,623,526
-
42,582,632
- 8,685,209
-
42,582,632
- 8,685,209
-
69,929,251
2,693,580
-
69,929,251
-
- 2,693,580
Total
$ 2,693,580 $ 178,747,138 $
- $ 181,440,718
Derivatives at fair value: (1)
Assets
Liabilities
$
$
- $ 2,277,931 $
- $ (3,841,192 ) $
- $ 2,277,931
- $ (3,841,192 )
Investment and equity securities at fair
value:
U.S. treasury securities
U.S. government agency securities
Obligations of states and
political subdivisions
Corporate securities
Mortgage-backed securities in
government-sponsored entities
Equity securities
Level I
Level II
Level III
Total
December 31, 2020
$
- $ 2,044,540 $
- 26,859,647
- $ 2,044,540
- 26,859,647
45,804,831
-
- 13,491,746
45,804,831
-
- 13,491,746
-
39,836,282
2,132,287
-
-
39,836,282
- 2,132,287
Total
$ 2,132,287 $ 128,037,046 $
- $ 130,169,333
Derivatives at fair value: (1)
Assets
Liabilities
$
$
- $ 5,074,982 $
- $ (9,775,453 ) $
- $ 5,074,982
- $ (9,775,453 )
(1) Derivative assets and liabilities at fair value are included in our Consolidated Balance Sheet in
Accrued interest and other assets and Accrued interest and other liabilities, respectively.
56
45
46
57
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
17. FAIR VALUE MEASUREMENTS (Continued)
Investment Securities
17. FAIR VALUE MEASUREMENTS (Continued)
Mortgage Servicing Rights (Continued)
The fair market value of investment securities is equal to the available quoted market price. If no quoted
market price is available, fair value is estimated using the quoted market price for similar securities. Fair
value for certain held to maturity securities were determined utilizing discounted cash flow models, due to
the absence of a current market to provide reliable market quotes for the instruments.
Impaired Loans
The Company has measured impairment on loans generally based on the fair value of the loan’s collateral
on a non-recurring basis. Fair value is generally determined based upon independent third-party appraisals
of the properties. In some cases, management may adjust the appraised value due to the age of the
appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was
completed. Additionally, management makes estimates about expected costs to sell the property which
are also included in the net realizable value. If the fair value of the collateral dependent loan is less than
the carrying amount of the loan, a specific reserve for the loan is made in the allowance for loan losses, or
a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and
the loan is included in the table above as a Level III measurement.
Derivatives
Derivative instruments are recorded at fair value based upon commercially reasonable industry and market
practices for valuing similar financial instruments. Certain inputs to the credit valuation models may be
based on assumptions and best estimates that are not readily observable in the marketplace. Valuations do
not reflect trading costs or counterparty charges that could apply if positions are terminated.
Mortgage Servicing Rights
Mortgage servicing rights are accounted for under the amortization method and are adjusted to the lower
of aggregate cost or estimated fair value on a semi-annual basis or more frequently as deemed
appropriate. Fair value is estimated by projecting and discounting future cash flows. Various assumptions
including future cash flows, market discount rates, expected prepayment rates, servicing costs, and other
factors are used in the valuation of mortgage servicing rights.
The following tables present the assets measured on a nonrecurring basis on the Consolidated Balance
Sheet at their fair value as of December 31, 2021 and 2020, by level within the fair value hierarchy.
Impaired loans that are collateral dependent are written down to fair value through the establishment of
specific reserves. Techniques used to value the collateral that secure the impaired loans include: quoted
market prices for identical assets classified as Level I inputs and observable inputs employed by certified
appraisers for similar assets classified as Level II inputs. In cases where valuation techniques included
inputs that are unobservable and are based on estimates and assumptions developed by management based
on the best information available under each circumstance, the asset valuation is classified as Level III
input. Other real estate owned is measured at fair value, less cost to sell at the date of foreclosure.
Valuations are periodically performed by management and the assets are carried at the lower of carrying
amount, or fair value less cost to sell. The fair value for mortgage servicing rights is estimated by
discounting contractual cash flows and adjusting for prepayment estimates. Discount rates are based upon
rates generally charged for such loans with similar characteristics.
Assets:
Impaired loans
Mortgage servicing rights
Assets:
Impaired loans
Mortgage servicing rights
Level I
Level II
Level III Total
December 31, 2021
$
- $
-
- $ 2,270,654 $ 2,270,654
- 174,388 174,388
Level I
Level II
Level III Total
December 31, 2020
$
- $
-
- $ 1,322,140 $ 1,322,140
- 200,306 200,306
The following tables provide a listing of significant unobservable inputs used in the fair value measurement
process for items valued utilizing Level III techniques as of December 31, 2021 and 2020.
Valuation
December 31, 2021
Impaired loans
Fair Value Techniques Unobservable Inputs
$ 1,643,180
Discount Rate
Discounted
Cash Flows
Range
4.50% - 10.00% discount
Weighted Average (5.02%)
Impaired loans
$ 627,474
Property
appraisals
Management discount
for property type and
recent market volatility
0.00% - 100.00% discount
Weighted Average (19.59%)
Mortgage servicing
rights
$ 174,388
Discounted
cash flows
Discount rate
1.77 - 2.47% discount
Weighted Average (2.12%)
Prepayment speeds
1.98 - 2.58 prepayment
factor
Weighted Average (2.23%)
Valuation
December 31, 2020
Impaired loans
Fair Value Techniques Unobservable Inputs
$ 660,932
Discount Rate
Discounted
Cash Flows
Range
4.00% - 8.50% discount
Weighted Average (5.18%)
Impaired loans
$ 661,209
Property
appraisals
Management discount
for property type and
recent market volatility
15.00% - 100.00% discount
Weighted Average (28.93%)
Mortgage servicing
rights
$ 200,306
Discounted
cash flows
Discount rate
2.68 - 3.28% discount
Weighted Average (2.98%)
Prepayment speeds
1.47 - 2.99 prepayment
factor
Weighted Average (1.83%)
58
47
48
59
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
18. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
19. ACCUMULATED OTHER COMPREHENSIVE INCOME
The estimated fair values of the Company’s financial instruments not required to be measured or reported
at fair value at December 31, 2021 and 2020, are as follows:
The following table presents the changes in accumulated other comprehensive income (loss) by component
net of tax for the year ended December 31, 2021 and 2020:
Carrying
Value
Fair
Value
2021
Level
I
Level
II
Level
III
Financial assets:
Investment securities
held to maturity
Net loans
Financial liabilities:
Deposits
Other borrowings
Financial assets:
Investment securities
held to maturity
Net loans
Financial liabilities:
Deposits
Other borrowings
9,777,862 $
$
868,153,493
10,125,458 $
859,246,857
- $ 10,125,458 $
-
-
859,246,857
-
$ 1,002,645,347 $ 1,002,584,511 $ 741,338,920 $
67,184,620
66,483,805
-
- $ 261,245,591
66,483,805
-
Carrying
Value
Fair
Value
2020
Level
I
Level
II
Level
III
$ 11,023,499 $ 11,158,436 $
755,960,393
756,802,249
- $ 11,158,436 $
-
-
756,802,249
-
$ 877,796,429 $ 879,819,942 $ 626,186,642 $
64,656,810
66,159,726
-
- $ 253,633,300
66,159,726
-
As of December 31, 2021 and 2020, for cash and cash equivalents, certificates of deposits, loans held for
sale, regulatory stock, bank-owned life insurance, accrued interest receivable, short-term borrowings, and
accrued interest payable, the carrying value is a reasonable estimate of fair value.
Net Unrealized
Gains
on Investment
Securities
Cash Flow
Hedges
Total
Accumulated other comprehensive
income (loss), December 31, 2019
Other comprehensive income before
reclassification
Amounts reclassified from
accumulated other comprehensive loss
Amounts from change to AOCI
related to cash flow hedges
Accumulated other comprehensive
loss, December 31, 2020
Other comprehensive loss before
reclassification
Amounts reclassified from
accumulated other comprehensive loss
Amounts from change to AOCI
related to cash flow hedges
Accumulated other comprehensive
loss, December 31, 2021
$
240,796 $
(1,255,302 ) $
(1,014,506 )
2,475,314
-
2,475,314
(63,913 )
-
(63,913 )
-
(2,406,031 )
(2,406,031 )
$
2,652,197 $
(3,661,333 ) $
(1,009,136 )
(3,035,172 )
-
(3,035,172 )
(9,940 )
-
(9,940 )
-
2,481,715
2,481,715
$
(392,915 ) $
(1,179,618 ) $
(1,572,533 )
The following table presents significant amounts reclassified out of each component of accumulated other
comprehensive loss for the year ended December 31, 2021 and 2020:
Amount Reclassified
from Accumulated
Other Comprehensive
Income
Affected Line Item
in the Consolidated
Statement of Income where
Net Income is Presented
$
$
$
$
12,582
(2,642 )
Investment securities gains, net
Income tax expense
9,940
80,903
(16,990 )
Investment securities gains, net
Income tax expense
63,913
Unrealized gains on investment
securities, December 31, 2021
Unrealized gains on investment
securities, December 31, 2020
20. SUBSEQUENT EVENTS
Management has reviewed events occurring through March 7, 2022, the date the financial statements
were issued, and no additional subsequent events occurred requiring accrual or disclosure.
60
49
50
61
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
The Board of Directors of Kish Bancorp, Inc.
William P. Hayes
Chairman
Paul G. Howes
Vice Chairman
Eric J. Barron
Member
William L. Dancy
Member
Michael K. Halloran*
Member
Gregory T. Hayes
Member
William S. Lake
Member
Kathleen L. Rhine
Member
Paul H. Silvis
Member
James A. Troha
Member
Frances V. Vaughn
Member
George V. Woskob
Member
Vincenzo Evola, Jr., Member
Clarissa J. Goodling, Member
Maxwell R. Manbeck, Member
Robert J. Rowles, Member
Anita K. Rudy, Member
MIFFLIN COUNTY REGIONAL
BOARD
Christina Calkins-Mazur, Member
Susan L. Cannon, Member
William L. Dancy, Member
Michael K. Halloran, Member
Melinda K. Kenepp, Member
William S. Lake, Member
Harvard K. McCardle, Member
Alan J. Metzler, Member
John Pannizzo, Member
James L. Shilling, Jr., Member
KISH BANK EXECUTIVE OFFICERS
William P. Hayes, Chairman and Chief
Executive Officer
Gregory T. Hayes, President and Chief
Operating Officer
Mark J. Cvrkel, Executive Vice President,
Chief Financial Officer
Robert S. McMinn, Executive Vice
President, General Counsel
Richard A. Sarfert, Executive Vice
President, Chief Lending Officer
KISH BANK SENIOR OFFICERS
Douglas C. Baxter, Senior Vice President,
Accounting and Controls Director
Robert L. Bilger, Senior Vice President,
Market Leader
Kimberly A. Bubb, Senior Vice President,
Director of Operations and Technology
Peter D. Collins, Senior Vice President,
Senior Portfolio Manager and
Commercial Lender
Wade E. Curry, LUTCF, Senior Vice
President, Investment Services
Terra L. Decker, Senior Vice President, Risk
Officer
Kevin D. Rimmey, Senior Vice President,
Senior Credit Officer
Suzanne M. White, Senior Vice President,
Chief Administrative Services and
Organizational Development Officer
Jeffrey D. Wilson, Senior Vice President,
CEO of Kish Agency
Mark E. Yerger, Senior Vice President,
Chief Information Officer
Gary L. Wimer, Senior Vice President,
Managing Director - Ohio
Allan F. Bills, Vice President, Finance
Reporting and Analytics Manager
Tina M. Collins, Vice President, Controller
Alta Corman-Wolf, Vice President,
Residential Lender
Beth N. Metz Gilmore, Vice President,
Human Resources Manager
Roxanne R. Greising, Vice President,
Director of Credit Administration
Jeffrey A. Gum, Vice President, Managing
Director of Kish Benefits Consulting
Allana L. Hartung, Vice President,
Commercial Relationship Manager
Jeffrey T. Hayes, Vice President, Financial
Advisor
Matthew D. Heaps, Vice President,
Commercial, Relationship Manager
Edward M. Henderson, Vice President,
Wealth Advisor and Trust Officer
Ashley L. Henry, Vice President, Lending
Services Manager
Terry P. Horner, Vice President, Business
Development Officer
Garen M. Jenco, Vice President, Client
Experience
Holly A. Johnson, Vice President,
Mortgage Banking Manager
Marsha K. Kuhns, Vice President,
Residential Lender
John Q. Massie, Vice President,
Commercial Relationship Manager
Seth J. Napikoski, Vice President,
Commercial Relationship Manager
Peter K. Ort, Vice President, Branch
Manager
Kenneth M. Goetz, Senior Vice President,
Melissa K. Royer, Vice President, Technical
Managing Director - Ohio
Advisor
Kristie R. McKnight, Senior Vice President,
Middle Market Relationship Manager
Cheryl E. Shope, Vice President,
Residential Lender
Thomas Minichiello, III, Senior Vice
President, Director of Retail Banking
Amy M. Muchler, Senior Vice President,
Onboarding and Auditing Manager
Denise F. Quinn, Senior Vice President,
Middle Market Relationship Manager
Wendy S. Strohecker, Vice President, Bank
Operations Manager
N. Robert Sunday, III, Vice President,
Compliance Officer
Penny L. Zesiger, Vice President,
Residential Lender
BOARD OF DIRECTORS OF
KISH BANK
William P. Hayes, Chairman
Paul G. Howes, Vice Chairman
William L. Dancy, Member
Michael K. Halloran, Member*
Gregory T. Hayes, Member
William S. Lake, Member
Kathleen L. Rhine, Member
Paul H. Silvis, Member
James A. Troha, Member
Frances V. Vaughn, Member
George V. Woskob, Member
BLAIR COUNTY REGIONAL
BOARD
Maryann Joyce Bistline, Member
Elizabeth M. Burke, Member
George C. Ferris, II, Member
James P. Foreman, Member
Robert G. Okonak, Jr., Member
Randolph W. Tarpey, Member
William D. Thompson, III, Member
CENTRE COUNTY REGIONAL
BOARD
A. Christian Baum, Member
Adam R. Fernsler, Member
H. Amos Goodall, Jr., Member
Paul G. Howes, Member
Oscar W. Johnston, Member
Michael J. Krentzman, Member
Maureen L. Mulvihill, Member
Kathleen L. Rhine, Member
Paul H. Silvis, Member
George V. Woskob, Member
Brandon M. Zlupko, Member
HUNTINGDON COUNTY
REGIONAL BOARD
Wayne A. Hearn, Member
James J. Lakso, Member
Pamela F. Prosser, Member
Burgess A. Smith, Member
Delmont R. Sunderland, Member
Angela D. Thompson, Member
Douglas A. Tietjens, Member
James A. Troha, Member
Frances V. Vaughn, Member
JUNIATA COUNTY REGIONAL
BOARD
Philip D. Bomberger, Member
Jeffrey N. Brown, Member
Ronald N. Colledge, Member
* Appointed at the January 2022 Board meeting.
62
63
Board of Directors and Officers
Board of Directors and Officers
4255 EAST MAIN STREET, BELLEVILLE, PA 17004 | 1-800-981-5474 | KISHBANK.COM