Fentura Financial, Inc. Announces First Quarter 2021 Earnings


Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with the March 31, 2021 presentation.

Figure 1

Stock Performance Five-Year Total Return

Stock Performance Five-Year Total Return

Stock Performance Five-Year Total Return

FENTON, Mich., May 03, 2021 (GLOBE NEWSWIRE) — Fentura Financial, Inc. (OTCQX: FETM) announces quarterly results of net income of $4,656 for the three month period ended March 31, 2021.

Ronald Justice, President and CEO, stated “I am pleased with Fentura’s strong operating results for the first quarter of 2021. Continued outstanding residential mortgage loan activity, new business loans and core funding levels contributed to solid earnings and strong core balance sheet growth. Asset quality metrics remain strong and COVID-19 related payment deferrals significantly declined as borrowers resumed regular payments. While we continue to navigate the challenges presented by the COVID-19 pandemic, our team remains committed to our mission and we are well positioned and optimistic about our future.”

Following is a discussion of the Corporation’s financial performance as of, and for the three month period ended March 31, 2021. At the end of this document is a list of abbreviations and acronyms.

Results of Operations
The following table outlines the Corporation’s QTD results of operations and provides certain performance measures as of, and for the three month periods ended:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

INCOME STATEMENT DATA

Interest income

$

11,919

$

11,624

$

12,070

$

11,215

$

11,070

Interest expense

676

972

1,189

1,618

2,145

Net interest income

11,243

10,652

10,881

9,597

8,925

Provision for loan losses

212

982

1,109

2,001

1,542

Noninterest income

3,854

4,676

5,159

5,292

4,513

Noninterest expenses

9,031

10,971

8,218

7,809

7,686

Federal income tax expense

1,198

642

1,377

1,036

858

Net income

$

4,656

$

2,733

$

5,336

$

4,043

$

3,352

PER SHARE

Earnings

$

1.00

$

0.58

$

1.14

$

0.87

$

0.72

Dividends

$

0.080

$

0.075

$

0.075

$

0.075

$

0.075

Tangible book value(1)

$

24.68

$

23.88

$

23.50

$

22.44

$

21.56

Quoted market value

High

$

24.75

$

22.25

$

17.99

$

18.95

$

26.00

Low

$

21.90

$

16.93

$

16.80

$

14.90

$

12.55

Close(1)

$

23.30

$

22.00

$

16.93

$

17.35

$

15.50

PERFORMANCE RATIOS

Return on average assets

1.50

%

0.84

%

1.68

%

1.35

%

1.28

%

Return on average shareholders’ equity

15.86

%

9.27

%

18.86

%

15.20

%

13.01

%

Return on average tangible shareholders’ equity

16.38

%

9.58

%

19.54

%

15.79

%

13.54

%

Efficiency ratio

59.82

%

71.57

%

51.23

%

52.45

%

57.20

%

Yield on earning assets (FTE)

4.01

%

3.75

%

3.97

%

3.94

%

4.47

%

Rate on interest bearing liabilities

0.37

%

0.50

%

0.63

%

0.91

%

1.28

%

Net interest margin to earning assets (FTE)

3.79

%

3.44

%

3.58

%

3.37

%

3.61

%

BALANCE SHEET DATA(1)

Total investment securities

$

89,772

$

76,111

$

78,179

$

75,526

$

76,312

Gross loans

$

1,028,117

$

1,066,562

$

1,060,885

$

1,044,564

$

865,577

Total assets

$

1,302,794

$

1,251,446

$

1,284,845

$

1,237,694

$

1,071,180

Total deposits

$

1,122,508

$

1,071,976

$

1,061,470

$

1,018,287

$

883,837

Borrowed funds

$

49,000

$

49,000

$

96,217

$

96,217

$

71,500

Total shareholders’ equity

$

119,059

$

115,868

$

114,081

$

108,969

$

104,828

Net loans to total deposits

90.60

%

98.48

%

98.99

%

101.70

%

97.11

%

Common shares outstanding

4,673,932

4,694,275

4,691,142

4,680,920

4,675,499

QTD BALANCE SHEET AVERAGES

Total assets

$

1,259,119

$

1,288,199

$

1,264,105

$

1,200,966

$

1,049,245

Earning assets

$

1,206,411

$

1,235,895

$

1,210,274

$

1,146,941

$

997,089

Interest bearing liabilities

$

735,159

$

773,132

$

750,281

$

711,500

$

672,564

Total shareholders’ equity

$

119,034

$

117,263

$

112,565

$

106,998

$

103,646

Total tangible shareholders’ equity

$

115,298

$

113,444

$

108,655

$

102,999

$

99,558

Earned common shares outstanding

4,664,893

4,682,063

4,673,629

4,664,946

4,659,279

Unvested stock grants

21,922

14,208

14,208

14,208

13,481

Total common shares outstanding

4,686,815

4,696,271

4,687,837

4,679,154

4,672,760

ASSET QUALITY(1)

Nonperforming loans to gross loans

0.79

%

0.75

%

0.07

%

0.10

%

0.10

%

Nonperforming assets to total assets

0.62

%

0.64

%

0.06

%

0.08

%

0.12

%

Allowance for loan losses to gross loans

1.08

%

1.02

%

0.95

%

0.86

%

0.84

%

Allowance for loan losses to gross loans, net of PPP loans

1.23

%

1.23

%

1.19

%

1.07

%

0.84

%

CAPITAL RATIOS(1)

Total capital to risk weighted assets

15.02

%

15.14

%

15.57

%

15.06

%

14.44

%

Tier 1 capital to risk weighted assets

13.84

%

13.93

%

14.40

%

14.00

%

13.58

%

CET1 capital to risk weighted assets

12.34

%

12.38

%

12.77

%

12.34

%

11.92

%

Tier 1 leverage ratio

10.31

%

9.80

%

9.86

%

9.91

%

10.97

%

(1)At end of period

The following table outlines the Corporation’s YTD results of operations and provides certain performance measures as of, and for the three month periods ended:

3/31/2021

3/31/2020

3/31/2019

3/31/2018

3/31/2017

INCOME STATEMENT DATA

Interest income

$

11,919

$

11,070

$

10,437

$

8,379

$

6,427

Interest expense

676

2,145

2,090

1,031

687

Net interest income

11,243

8,925

8,347

7,348

5,740

Provision for loan losses

212

1,542

213

275

Noninterest income

3,854

4,513

1,522

1,801

1,234

Noninterest expenses

9,031

7,686

6,509

6,279

5,095

Federal income tax expense

1,198

858

633

521

592

Net income

$

4,656

$

3,352

$

2,514

$

2,074

$

1,287

PER SHARE

Earnings

$

1.00

$

0.72

$

0.54

$

0.57

$

0.35

Dividends

$

0.080

$

0.075

$

0.070

$

0.060

$

0.050

Tangible book value(1)

$

24.68

$

21.56

$

18.88

$

15.27

$

12.86

Quoted market value

High

$

24.75

$

26.00

$

21.00

$

20.19

$

18.25

Low

$

21.90

$

12.55

$

20.05

$

18.88

$

15.10

Close(1)

$

23.30

$

15.50

$

20.89

$

19.75

$

18.00

PERFORMANCE RATIOS

Return on average assets

1.50

%

1.28

%

1.09

%

1.07

%

0.73

%

Return on average shareholders’ equity

15.86

%

13.01

%

11.09

%

13.99

%

10.19

%

Return on average tangible shareholders’ equity

16.38

%

13.54

%

11.66

%

15.28

%

10.63

%

Efficiency ratio

59.82

%

57.20

%

65.95

%

68.63

%

73.06

%

Yield on earning assets (FTE)

4.01

%

4.47

%

4.77

%

4.51

%

4.19

%

Rate on interest bearing liabilities

0.37

%

1.28

%

1.40

%

0.83

%

0.55

%

Net interest margin to earning assets (FTE)

3.79

%

3.61

%

3.81

%

3.90

%

3.74

%

BALANCE SHEET DATA(1)

Total investment securities

$

89,772

$

76,312

$

82,222

$

49,608

$

72,472

Gross loans

$

1,028,117

$

865,577

$

809,863

$

686,140

$

554,415

Total assets

$

1,302,794

$

1,071,180

$

946,172

$

789,943

$

730,636

Total deposits

$

1,122,508

$

883,837

$

789,533

$

683,775

$

630,055

Borrowed funds

$

49,000

$

71,500

$

59,000

$

44,600

$

45,000

Total shareholders’ equity

$

119,059

$

104,828

$

92,236

$

60,621

$

51,816

Net loans to total deposits

90.60

%

97.11

%

101.97

%

99.80

%

87.54

%

Common shares outstanding

4,673,932

4,675,499

4,647,978

3,635,098

3,620,964

YTD BALANCE SHEET AVERAGES

Total assets

$

1,259,119

$

1,049,245

$

934,078

$

789,391

$

716,998

Earning assets

$

1,206,411

$

997,089

$

887,974

$

755,281

$

613,904

Interest bearing liabilities

$

735,159

$

672,564

$

604,973

$

505,174

$

499,636

Total shareholders’ equity

$

119,034

$

103,646

$

91,964

$

60,107

$

51,241

Total tangible shareholders’ equity

$

115,298

$

99,558

$

87,430

$

55,041

$

49,104

Earned common shares outstanding

4,664,893

4,659,279

4,635,255

3,633,093

3,677,143

Unvested stock grants

21,922

13,481

9,788

Total common shares outstanding

4,686,815

4,672,760

4,645,043

3,633,093

3,677,143

ASSET QUALITY(1)

Nonperforming loans to gross loans

0.79

%

0.10

%

0.11

%

0.10

%

0.33

%

Nonperforming assets to total assets

0.62

%

0.12

%

0.09

%

0.10

%

0.28

%

Allowance for loan losses to gross loans

1.08

%

0.84

%

0.59

%

0.54

%

0.52

%

Allowance for loan losses to gross loans, net of PPP loans

1.23

%

0.84

%

0.59

%

0.54

%

0.52

%

CAPITAL RATIOS(1)

Total capital to risk weighted assets

15.02

%

14.44

%

14.01

%

11.03

%

11.72

%

Tier 1 capital to risk weighted assets

13.84

%

13.58

%

13.38

%

10.48

%

11.20

%

CET1 capital to risk weighted assets

12.34

%

11.92

%

11.55

%

8.41

%

8.65

%

Tier 1 leverage ratio

10.31

%

10.97

%

11.00

%

9.01

%

8.60

%

(1)At end of period

Income Statement Breakdown and Analysis

Quarter to Date

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

GAAP net income

$

4,656

$

2,733

$

5,336

$

4,043

$

3,352

Acquisition related items (net of tax)

Accretion on purchased loans

(151

)

(82

)

(144

)

(110

)

(180

)

Amortization of core deposit intangibles

54

71

72

71

71

Amortization on acquired time deposits

2

5

5

5

5

Total acquisition related items (net of tax)

(95

)

(6

)

(67

)

(34

)

(104

)

Other nonrecurring items (net of tax)

FHLB prepayment penalties

1,507

Change in fair value of equity investment due to acquisition transaction

(578

)

Change in fair value of mortgage banking instruments

(448

)

Interest writeoff from loan transferred to nonaccrual

265

Net gain from COLI death benefit

(173

)

Prepayment penalties collected

(17

)

(97

)

(16

)

(12

)

(36

)

Mortgage servicing rights (reduction of) impairment

(188

)

(176

)

191

173

Total other nonrecurring items (net of tax)

(17

)

1,487

(192

)

6

(889

)

Adjusted net income from operations

$

4,544

$

4,214

$

5,077

$

4,015

$

2,359

GAAP net interest income

$

11,243

$

10,652

$

10,881

$

9,597

$

8,925

Accretion on purchased loans

(191

)

(104

)

(182

)

(139

)

(228

)

Interest writeoff from loan transferred to nonaccrual

335

Prepayment penalties collected

(21

)

(123

)

(20

)

(15

)

(46

)

Amortization on acquired time deposits

3

6

6

6

6

Adjusted net interest income

$

11,034

$

10,766

$

10,685

$

9,449

$

8,657

PERFORMANCE RATIOS

Based on adjusted net income from operations

Earnings per share

$

0.97

$

0.90

$

1.09

$

0.86

$

0.51

Return on average assets

1.46

%

1.30

%

1.60

%

1.34

%

0.90

%

Return on average shareholders’ equity

15.48

%

14.30

%

17.94

%

15.09

%

9.15

%

Return on average tangible shareholders’ equity

15.98

%

14.78

%

18.59

%

15.68

%

9.53

%

Efficiency ratio

60.20

%

59.02

%

52.03

%

52.12

%

62.83

%

Based on adjusted net interest income

Yield on earning assets (FTE)

3.94

%

3.78

%

3.91

%

3.89

%

4.39

%

Rate on interest bearing liabilities

0.37

%

0.50

%

0.63

%

0.92

%

1.29

%

Net interest margin to earning assets (FTE)

3.71

%

3.47

%

3.52

%

3.32

%

3.52

%

To effectively compare core operating results from period to period, the impact of acquisition related items and other nonrecurring items have been isolated.

Year to Date March 31

Variance

2021

2020

Amount

%

GAAP net income

$

4,656

$

3,352

$

1,304

38.90

%

Acquisition related items (net of tax)

Accretion on purchased loans

(151

)

(180

)

29

(16.11

%

Amortization of core deposit intangibles

54

71

(17

)

(23.94

)

%

Amortization on acquired time deposits

2

5

(3

)

(60.00

)

%

Total acquisition related items (net of tax)

(95

)

(104

)

9

(8.65

)

%

Other nonrecurring items (net of tax)

FHLB prepayment penalties

%

Change in fair value of equity investment due to acquisition transaction

(578

)

578

(100.00

)

%

Change in fair value of mortgage banking instruments

(448

)

448

(100.00

)

%

Interest writeoff from loan transferred to nonaccrual

%

Net gain from COLI death benefit

%

Prepayment penalties collected

(17

)

(36

)

19

(52.78

)

%

Mortgage servicing rights (reduction of) impairment

173

(173

)

(100.00

)

%

Total other nonrecurring items (net of tax)

(17

)

(889

)

872

(98.09

)

%

Adjusted net income from operations

$

4,544

$

2,359

$

2,185

92.62

%

GAAP net interest income

$

11,243

$

8,925

$

2,318

25.97

%

Accretion on purchased loans

(191

)

(228

)

37

(16.23

)

%

Interest writeoff from loan transferred to nonaccrual

%

Prepayment penalties collected

(21

)

(46

)

25

(54.35

)

%

Amortization on acquired time deposits

3

6

(3

)

(50.00

)

%

Adjusted net interest income

$

11,034

$

8,657

$

2,377

27.46

%

PERFORMANCE RATIOS

Based on adjusted net income from operations

Earnings per share

$

0.97

$

0.51

$

0.46

90.20

%

Return on average assets

1.46

%

0.90

%

0.56

%

Return on average shareholders’ equity

15.48

%

9.15

%

6.33

%

Return on average tangible shareholders’ equity

15.98

%

9.53

%

6.45

%

Efficiency ratio

60.20

%

62.83

%

(2.63

)

%

Based on adjusted net interest income

Yield on earning assets (FTE)

3.94

%

4.39

%

(0.45

)

%

Rate on interest bearing liabilities

0.37

%

1.29

%

(0.92

)

%

Net interest margin to earning assets (FTE)

3.71

%

3.52

%

0.19

%

To effectively compare core operating results from period to period, the impact of acquisition related items and other nonrecurring items have been isolated.

Average Balances, Interest Rate, and Net Interest Income

The following tables present the daily average amount outstanding for each major category of interest earning assets, nonearning assets, interest bearing liabilities, and noninterest bearing liabilities. These tables also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a FTE basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances.

Three Months Ended

March 31, 2021

December 31, 2020

March 31, 2020

Average Balance

Tax Equivalent Interest

Average Yield / Rate

Average Balance

Tax Equivalent Interest

Average Yield / Rate

Average Balance

Tax Equivalent Interest

Average Yield / Rate

Interest earning assets

Total loans

$

1,074,096

$

11,598

4.38

%

$

1,099,779

$

11,268

4.08

%

$

878,813

$

10,481

4.80

%

Taxable investment securities

58,859

202

1.39

%

62,866

238

1.51

%

56,963

353

2.49

%

Nontaxable investment securities

17,165

105

2.48

%

16,047

103

2.55

%

10,532

81

3.09

%

Federal funds sold

%

%

33,588

116

1.39

%

Interest earning cash and cash equivalents

52,803

11

0.08

%

53,715

15

0.11

%

14,043

26

0.74

%

Federal Home Loan Bank stock

3,488

25

2.91

%

3,488

22

2.51

%

3,150

30

3.83

%

Total earning assets

1,206,411

11,941

4.01

%

1,235,895

11,646

3.75

%

997,089

11,087

4.47

%

Nonearning assets

Allowance for loan losses

(11,143

)

(10,375

)

(5,821

)

Fixed assets

15,757

15,465

15,538

Accrued income and other assets

48,094

47,214

42,439

Total assets

$

1,259,119

$

1,288,199

$

1,049,245

Interest bearing liabilities

Interest bearing demand deposits

$

206,565

$

121

0.24

%

$

218,627

$

128

0.23

%

$

170,598

$

475

1.12

%

Savings deposits

310,830

109

0.14

%

291,856

114

0.16

%

231,188

199

0.35

%

Time deposits

168,764

291

0.70

%

179,076

407

0.90

%

205,485

1,053

2.06

%

Borrowed funds

49,000

155

1.28

%

83,573

323

1.54

%

65,293

418

2.57

%

Total interest bearing liabilities

735,159

676

0.37

%

773,132

972

0.50

%

672,564

2,145

1.28

%

Noninterest bearing liabilities

Noninterest bearing deposits

393,751

385,032

264,699

Accrued interest and other liabilities

11,175

12,772

8,336

Shareholders’ equity

119,034

117,263

103,646

Total liabilities and shareholders’ equity

$

1,259,119

$

1,288,199

$

1,049,245

Net interest income (FTE)

$

11,265

$

10,674

$

8,942

Net interest margin to earning assets (FTE)

3.79

%

3.44

%

3.61

%

Net Interest Income

Net interest income is the amount by which interest income on earning assets exceeds the interest expenses on interest bearing liabilities. Net interest income, which includes loan fees, is influenced by changes in the balance and mix of assets and liabilities and market interest rates. The Corporation exerts some control over these factors; however, FRB monetary policy and competition have a significant impact. For analytical purposes, net interest income is adjusted to a FTE basis by adding the income tax savings from interest on tax exempt loans, and nontaxable investment securities, thus making year-to-year comparisons more meaningful.

Volume and Rate Variance Analysis

The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For the purpose of this table, changes in interest due to volume and rate were determined as follows:

Volume – change in volume multiplied by the previous period’s rate.
Rate – change in the FTE rate multiplied by the previous period’s volume.

The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Three Months Ended

Three Months Ended

March 31, 2021

March 31, 2021

Compared To

Compared To

December 31, 2020

March 31, 2020

Increase (Decrease) Due to

Increase (Decrease) Due to

Volume

Rate

Net

Volume

Rate

Net

Changes in interest income

Total loans

$

(1,511

)

$

1,841

$

330

$

6,098

$

(4,981

)

$

1,117

Taxable investment securities

(16

)

(20

)

(36

)

77

(228

)

(151

)

Nontaxable investment securities

17

(15

)

2

116

(92

)

24

Federal funds sold

(58

)

(58

)

(116

)

Interest earning cash and cash equivalents

(4

)

(4

)

129

(144

)

(15

)

Federal Home Loan Bank stock

3

3

16

(21

)

(5

)

Total changes in interest income

(1,510

)

1,805

295

6,378

(5,524

)

854

Changes in interest expense

Interest bearing demand deposits

(29

)

22

(7

)

560

(914

)

(354

)

Savings deposits

38

(43

)

(5

)

321

(411

)

(90

)

Time deposits

(24

)

(92

)

(116

)

(162

)

(600

)

(762

)

Borrowed funds

(119

)

(49

)

(168

)

(87

)

(176

)

(263

)

Total changes in interest expense

(134

)

(162

)

(296

)

632

(2,101

)

(1,469

)

Net change in net interest income (FTE)

$

(1,376

)

$

1,967

$

591

$

5,746

$

(3,423

)

$

2,323

Average Yield/Rate for the Three Month Periods Ended

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Total earning assets

4.01

%

3.75

%

3.97

%

3.94

%

4.47

%

Total interest bearing liabilities

0.37

%

0.50

%

0.63

%

0.91

%

1.28

%

Net interest margin to earning assets (FTE)

3.79

%

3.44

%

3.58

%

3.37

%

3.61

%

Quarter to Date Net Interest Income (FTE)

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Interest income

$

11,919

$

11,624

$

12,070

$

11,215

$

11,070

FTE adjustment

22

22

21

18

17

Total interest income (FTE)

11,941

11,646

12,091

11,233

11,087

Total interest expense

676

972

1,189

1,618

2,145

Net interest income (FTE)

$

11,265

$

10,674

$

10,902

$

9,615

$

8,942

Noninterest Income

Quarter to Date

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Net gain on sales of mortgage loans

$

1,845

$

2,545

$

3,064

$

3,869

$

1,803

Trust and investment services

468

445

464

321

389

ATM and debit card income

448

437

460

394

355

PPP referral fees

351

Mortgage servicing fees

335

325

293

270

262

Service charges on deposit accounts

166

194

177

119

219

Net mortgage servicing rights income

138

509

559

(163

)

(50

)

Net gain on sales of commercial loans

668

Net gain from corporate owned life insurance death benefit

173

Change in fair value of equity investments

(19

)

(3

)

2

7

749

Other income and fees

122

224

140

302

118

Total noninterest income

$

3,854

$

4,676

$

5,159

$

5,292

$

4,513

Residential mortgage operations

$

2,318

$

3,379

$

3,916

$

3,976

$

2,015

Year to Date March 31

Variance

2021

2020

Amount

%

Net gain on sales of mortgage loans

$

1,845

$

1,803

$

42

2.33

%

Trust and investment services

468

389

79

20.31

%

ATM and debit card income

448

355

93

26.20

%

PPP referral fees

351

351

%

Mortgage servicing fees

335

262

73

27.86

%

Service charges on deposit accounts

166

219

(53

)

(24.20

)

%

Net mortgage servicing rights income

138

(50

)

188

(376.00

)

%

Net gain on sales of commercial loans

668

(668

)

(100.00

)

%

Net gain from corporate owned life insurance death benefit

%

Change in fair value of equity investments

(19

)

749

(768

)

(102.54

)

%

Other income and fees

122

118

4

3.39

%

Total noninterest income

$

3,854

$

4,513

$

(659

)

(14.60

)

%

Residential mortgage operations

$

2,318

$

2,015

303

15.04

%

Residential Mortgage Operations

Net gain on sales of mortgage loans represents the income earned on the sale of residential mortgage loans into the secondary market. Throughout 2020, the interest rate environment was advantageous for residential mortgage originations and refinancing, resulting in record gains. Although many consumers continue to face uncertainty related to the overall impact of the COVID-19 pandemic, residential mortgage originations and refinancing activity was robust throughout 2020 and into the first quarter of 2021. Through March 31, 2021, home values continue to rise primarily due to inventory shortages.

Mortgage servicing fees includes the fees earned for servicing loans that have been sold into the secondary market. The increase in mortgage servicing fees is directly related to the increase in the size of the serviced portfolio. Mortgage servicing fees are expected to increase throughout the remainder of 2021 as the Corporation continues to add to the serviced portfolio.

Net mortgage servicing rights income represents income generated from the capitalization of mortgage servicing rights, net of amortization and impairment. In each of the first two quarters of 2020, the Corporation recognized impairments in its servicing portfolio as a direct result of the low interest rate environment and record level of refinancing activity. During the third and fourth quarters of 2020 these impairments had recovered. The Corporation expects net mortgage servicing rights income to continue to increase as the Corporation adds to the serviced portfolio.

Throughout the remainder of 2021, overall revenues from residential mortgage operations (net gain from sale of mortgage loans, mortgage servicing fees, and net mortgage servicing rights income) are not expected to reach the elevated levels experienced during 2020 due to the constrained housing inventory and rising interest rates.

All Other Noninterest Income

Trust and investment services includes income the Corporation earned from contracts with customers to manage assets for investment and/or to transact on their accounts. Income generated from trust services has remained stable from fiduciary fees for estate settlement services and portfolio management. Revenue from wealth management has increased due to strong demand from customers for annuities and long-term care insurance products. Both the trust services and wealth management programs are subject to market fluctuations and interest rate changes. Trust and investment services income is expected to increase modestly throughout 2021.

ATM and debit card income represents fees earned on ATM and debit card transactions. The Corporation expects these fees to increase modestly throughout 2021.

PPP referral fees represents the income earned from the second round of the PPP loan program through the SBA. During the first quarter of 2021, the SBA began processing applications for a second round of PPP loans. The Corporation utilized a third-party vendor to process applications and fund these loans. The Corporation is generating referral fee income for the second round of the PPP loan program. The second round of the PPP loan program ends May 31, 2021. The Corporation expects to earn a nominal amount of PPP referral fees during the second quarter of 2021.

Service charges on deposit accounts includes fees earned from deposit customers for transaction-based, account maintenance and overdraft services. The year-over-year decrease in service charges on deposit accounts is primarily due to a temporary reduction in fees charged due to the COVID-19 pandemic. Service charges on deposit accounts are expected to approximate current levels throughout 2021.

Net gain on sales of commercial loans represents the income earned from the sale of commercial loans into the secondary market. During the first quarter of 2020, the Corporation sold the guaranteed portion of one SBA loan and one USDA loan. The Corporation does not expect to receive any gains from the sale of commercial loans in 2021.

Net gain from corporate owned life insurance death benefit is recognized in the event of the death of an insured individual. The death of an insured individual occurred in the second quarter of 2020. The Corporation does not expect to receive any gains from COLI death benefits in 2021.

Change in fair value of equity investments represents the income earned on equities held in the Corporation’s investment portfolio. During the first quarter of 2020, the Corporation recorded a $732 gain from an equity investment in a financial institution that was sold. The Corporation does not anticipate any significant changes in fair value from equity sales in the foreseeable future.

Other income and fees includes miscellaneous other income items, none of which are individually significant. Other income and fees are expected to approximate current levels throughout 2021.

Noninterest Expenses

Quarter to Date

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Total compensation

$

5,004

$

4,958

$

4,531

$

4,252

$

4,248

Furniture and equipment

637

607

614

618

610

Professional services

624

938

524

571

522

Data processing

509

501

503

535

442

Occupancy

495

475

491

435

476

Loan and collection

406

359

292

229

162

Advertising and promotional

284

184

284

255

252

FDIC insurance premiums

155

59

55

59

55

ATM and debit card

122

125

109

92

108

Telephone and communication

94

64

91

86

96

Amortization of core deposit intangibles

68

90

91

90

90

FHLB prepayment penalty

1,907

Other general and administrative

633

704

633

587

625

Total noninterest expenses

$

9,031

$

10,971

$

8,218

$

7,809

$

7,686

Year to Date March 31

Variance

2021

2020

Amount

%

Total compensation

$

5,004

$

4,248

$

756

17.80

%

Furniture and equipment

637

610

27

4.43

%

Professional services

624

522

102

19.54

%

Data processing

509

442

67

15.16

%

Occupancy

495

476

19

3.99

%

Loan and collection

406

162

244

150.62

%

Advertising and promotional

284

252

32

12.70

%

FDIC insurance premiums

155

55

100

181.82

%

ATM and debit card

122

108

14

12.96

%

Telephone and communication

94

96

(2

)

(2.08

)

%

Amortization of core deposit intangibles

68

90

(22

)

(24.44

)

%

FHLB prepayment penalty

%

Other general and administrative

633

625

8

1.28

%

Total noninterest expenses

$

9,031

$

7,686

$

1,345

17.50

%

Total compensation includes salaries, commissions and incentives, employee benefits, and payroll taxes. Total compensation has increased due to annual merit increases and an increase in commissions and incentives paid. Fluctuations in commissions and incentives are primarily driven by residential mortgage originations, which can vary significantly from period to period, however, commissions are expected to decline throughout 2021 as mortgage originations decline.

Furniture and equipment and occupancy expenses primarily consist of depreciation, repairs and maintenance, property taxes, utilities, insurance, certain service contracts, and other related items. These expenses are expected to increase with the size and complexity of the Corporation.

Professional services include expenses relating to third-party professional services. These services include, but are not limited to, regulatory, auditing, consulting, and legal. These expenses are expected to increase in future periods to ensure compliance with audit and regulatory requirements.

Data processing primarily includes the expenses relating to the Corporation’s core data processor. These expenses are expected to increase throughout 2021 with the size and complexity of the Corporation.
Loan and collection includes expenses related to the origination and collection of loans. The increase in expenses throughout 2020 and into the first quarter of 2021 is a direct result of increased loan volume due to the low interest rate environment created by the Federal Reserve Bank’s response to the COVID-19 pandemic. Loan and collection expenses will likely moderate throughout the remainder of 2021, due to diminishing residential mortgage refinancing demand.

Advertising and promotional includes the Corporation’s media costs and any donations or sponsorships made on behalf of the Corporation. The annual increase in expenses is a direct result of the Corporation enhancing its marketing efforts to attract new and expand existing customer loan and deposit accounts. In addition to traditional marketing strategies, the Corporation rolled out a new branding strategy in 2020, which resulted in elevated advertising and promotional expenses. Total advertising and promotional expenses are expected to increase in 2021 due to the growth of the Corporation.

FDIC insurance premiums typically fluctuate based on the size of the Corporation’s balance sheet, capital position, overall risk profile, and examination ratings. FDIC insurance premiums are expected to increase throughout the remainder of 2021 primarily due to the Corporation’s growth in total assets.

ATM and debit card expenses fluctuate based on customer and non-customer utilization of ATMs and customer debit card volumes. The Corporation expects these fees to increase modestly throughout 2021.

Telephone and communication includes expenses relating to the Corporation’s communication systems. These expenses are expected to increase throughout 2021 primarily due to the growth of the Corporation.

Amortization of core deposit intangibles relates to the core deposits acquired from Community Bancorp, Inc. on December 31, 2016 and is expected to continue to decline as the core deposit intangible is being amortized based on the sum-of-years-digits method.

During the fourth quarter of 2020, the Corporation paid off three Federal Home Loan Bank borrowings, totaling $30,000. The Corporation incurred a one-time early payoff fee in the amount $1,907. The payoff was executed to enhance net interest income and net interest margins in each of the next three years. The weighted average rate of the three FHLB borrowings was 2.17%. As a result of the early payoffs, the Corporation is expected to reduce interest expense by approximately $660 during 2021.

Other general and administrative includes miscellaneous other expense items, none of which are typically significant. Other general and administrative expenses are expected to approximate current levels into the foreseeable future.

Balance Sheet Breakdown and Analysis

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

ASSETS

Cash and cash equivalents

$

121,477

$

46,757

$

75,032

$

35,190

$

71,140

Total investment securities

89,772

76,111

78,179

75,526

76,312

Residential mortgage loans held-for-sale, at fair value

26,322

27,306

34,833

46,354

21,154

Gross loans

1,028,117

1,066,562

1,060,885

1,044,564

865,577

Less allowance for loan losses

11,100

10,900

10,100

8,991

7,250

Net loans

1,017,017

1,055,662

1,050,785

1,035,573

858,327

All other assets

48,206

45,610

46,016

45,051

44,247

Total assets

$

1,302,794

$

1,251,446

$

1,284,845

$

1,237,694

$

1,071,180

LIABILITIES AND SHAREHOLDERS’ EQUITY

Total deposits

$

1,122,508

$

1,071,976

$

1,061,470

$

1,018,287

$

883,837

Total borrowed funds

49,000

49,000

96,217

96,217

71,500

Accrued interest payable and other liabilities

12,227

14,602

13,077

14,221

11,015

Total liabilities

1,183,735

1,135,578

1,170,764

1,128,725

966,352

Total shareholders’ equity

119,059

115,868

114,081

108,969

104,828

Total liabilities and shareholders’ equity

$

1,302,794

$

1,251,446

$

1,284,845

$

1,237,694

$

1,071,180

3/31/2021 vs 12/31/2020

3/31/2021 vs 3/31/2020

Variance

Variance

Amount

%

Amount

%

ASSETS

Cash and cash equivalents

$

74,720

159.80

%

$

50,337

70.76

%

Total investment securities

13,661

17.95

%

13,460

17.64

%

Residential mortgage loans held-for-sale, at fair value

(984

)

(3.60

)

%

5,168

24.43

%

Gross loans

(38,445

)

(3.60

)

%

162,540

18.78

%

Less allowance for loan losses

200

1.83

%

3,850

53.10

%

Net loans

(38,645

)

(3.66

)

%

158,690

18.49

%

All other assets

2,596

5.69

%

3,959

8.95

%

Total assets

$

51,348

4.10

%

$

231,614

21.62

%

LIABILITIES AND SHAREHOLDERS’ EQUITY

Total deposits

$

50,532

4.71

%

$

238,671

27.00

%

Total borrowed funds

%

(22,500

)

(31.47

)

%

Accrued interest payable and other liabilities

(2,375

)

(16.26

)

%

1,212

11.00

%

Total liabilities

48,157

2.18

%

217,383

11.75

%

Total shareholders’ equity

3,191

2.75

%

14,231

13.58

%

Total liabilities and shareholders’ equity

$

51,348

4.10

%

$

231,614

21.62

%

Cash and cash equivalents

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Cash and cash equivalents

Noninterest bearing

$

25,698

$

23,102

$

22,108

$

20,369

$

33,312

Interest bearing

95,779

23,655

52,924

14,821

37,828

Federal funds sold

Cash and cash equivalents

$

121,477

$

46,757

$

75,032

$

35,190

$

71,140

3/31/2021 vs 12/31/2020

3/31/2021 vs 3/31/2020

Variance

Variance

Amount

%

Amount

%

Cash and cash equivalents

Noninterest bearing

$

2,596

11.24

%

$

(7,614

)

(22.86

)%

Interest bearing

72,124

304.90

%

57,951

153.20

%

Federal funds sold

%

%

Cash and cash equivalents

$

74,720

159.80

%

$

50,337

70.76

%

Cash and cash equivalents, which is comprised of cash and due from banks and federal funds sold, fluctuate from period to period based on loan demand and variances in deposit accounts. In recent periods, the Corporation has experienced an inflow of customer deposits resulting in historically high levels of cash and cash equivalents. The increase in interest bearing cash in the first quarter of 2021 is primarily due to funds received from the SBA for forgiveness of PPP loans. The Corporation expects cash and cash equivalents to remain elevated over the remainder of the year due to additional forgiveness of outstanding PPP loans and the current interest rate environment.

Primary and secondary liquidity sources

While the Corporation continues to maintain a strong liquidity position, it is important to monitor all liquidity sources. The following table outlines the Corporation’s primary and secondary sources of liquidity as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Cash and cash equivalents

$

121,477

$

46,757

$

75,032

$

35,190

$

71,140

Unpledged investment securities

76,384

59,025

58,739

52,647

51,889

FHLB borrowing availability

140,000

140,000

97,500

97,500

42,500

Federal funds purchased lines of credit

21,500

21,500

21,500

21,500

17,500

Funds available through the Fed Discount Window

10,000

10,000

10,000

10,000

10,000

PPPLF

122,583

177,845

206,343

202,184

Total liquidity sources

$

491,944

$

455,127

$

469,114

$

419,021

$

193,029

Total investment securities

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Available-for-sale

U.S. Government and federal agency

$

5,942

$

7,935

$

19,311

$

21,339

$

23,610

State and municipal

17,080

15,768

15,729

14,115

10,657

Mortgage backed residential

32,135

19,101

20,886

12,335

10,176

Certificates of deposit

4,932

5,180

5,921

6,665

8,644

Collateralized mortgage obligations – agencies

25,505

23,110

11,141

15,736

18,288

Unrealized gain/(loss) on available-for-sale securities

1,117

1,932

2,099

2,242

1,735

Total available-for-sale

86,711

73,026

75,087

72,432

73,110

Held-to-maturity state and municipal

1,968

1,973

1,977

1,981

2,091

Equity securities

1,093

1,112

1,115

1,113

1,111

Total investment securities

$

89,772

$

76,111

$

78,179

$

75,526

$

76,312

3/31/2021 vs 12/31/2020

3/31/2021 vs 3/31/2020

Variance

Variance

Amount

%

Amount

%

Available-for-sale

U.S. Government and federal agency

$

(1,993

)

(25.12

)

%

$

(17,668

)

(74.83

)

%

State and municipal

1,312

8.32

%

6,423

60.27

%

Mortgage backed residential

13,034

68.24

%

21,959

215.79

%

Certificates of deposit

(248

)

(4.79

)

%

(3,712

)

(42.94

)

%

Collateralized mortgage obligations – agencies

2,395

10.36

%

7,217

39.46

%

Unrealized gain/(loss) on available-for-sale securities

(815

)

(42.18

)

%

(618

)

(35.62

)

%

Total available-for-sale

13,685

18.74

%

13,601

18.60

%

Held-to-maturity state and municipal

(5

)

(0.25

)

%

(123

)

(5.88

)

%

Equity securities

(19

)

(1.71

)

%

(18

)

(1.62

)

%

Total investment securities

$

13,661

17.95

%

$

13,460

17.64

%

The amortized cost and fair value of AFS investment securities as of March 31, 2021 were as follows:

Maturing

Due in One Year or Less

After One Year But Within Five Years

After Five Years But Within Ten Years

After Ten Years

Securities with Variable Monthly Payments or Noncontractual Maturities

Total

U.S. Government and federal agency

$

4,975

$

967

$

$

$

$

5,942

State and municipal

3,239

5,952

6,005

1,884

17,080

Mortgage backed residential

32,135

32,135

Certificates of deposit

1,726

3,206

4,932

Collateralized mortgage obligations – agencies

25,505

25,505

Total amortized cost

$

9,940

$

10,125

$

6,005

$

1,884

$

57,640

$

85,594

Fair value

$

10,125

$

10,728

$

6,066

$

2,110

$

57,682

$

86,711

The amortized cost and fair value of HTM investment securities as of March 31, 2021 were as follows:

Maturing

Due in One Year or Less

After One Year But Within Five Years

After Five Years But Within Ten Years

After Ten Years

Securities with Variable Monthly Payments or Noncontractual Maturities

Total

State and municipal

$

783

$

805

$

380

$

$

$

1,968

Fair value

$

792

$

840

$

400

$

$

$

2,032

During the first quarter of 2021, the the Corporation expanded its investment portfolio to generate additional interest income. Total investment securities are expected to continue to grow throughout 2021 as management expects deposits to continue to grow at historically high levels while competition for quality loans remains robust. The following table summarizes information as of March 31, 2021 for investment securities purchased YTD:

Book Value

Fully Taxable
Equivalent Weighted
Average Yield

U.S. Government and federal agency

$

%

State and municipal

1,360

0.96

%

Collateralized mortgage obligations – agencies

4,906

1.08

%

Certificates of deposit

%

Mortgage backed residential

15,328

1.52

%

Held-to-maturity state and municipal

%

Total

$

21,594

1.38

%

Residential mortgage loans held-for-sale, at fair value

Loans HFS represent the fair value of loans that have been committed to be sold to the secondary market, but have not yet been delivered. The level of loans HFS fluctuates based on loan demand as well as the timing of loan deliveries to the secondary market.

Loans and allowance for loan losses

The following tables outline the composition and changes in the loan portfolio as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Commercial

$

183,276

$

241,424

$

271,113

$

260,440

$

67,731

Commercial real estate

541,428

517,054

483,275

469,039

462,561

Total commercial loans

724,704

758,478

754,388

729,479

530,292

Residential mortgage

258,333

262,770

261,375

268,295

285,392

Home equity

40,205

39,900

39,456

40,114

43,222

Total residential real estate loans

298,538

302,670

300,831

308,409

328,614

Consumer

4,875

5,414

5,666

6,676

6,671

Gross loans

1,028,117

1,066,562

1,060,885

1,044,564

865,577

Allowance for loan losses

(11,100

)

(10,900

)

(10,100

)

(8,991

)

(7,250

)

Loans, net

$

1,017,017

$

1,055,662

$

1,050,785

$

1,035,573

$

858,327

3/31/2021 vs 12/31/2020

3/31/2021 vs 3/31/2020

Variance

Variance

Amount

%

Amount

%

Commercial

$

(58,148

)

(24.09

)%

$

115,545

170.59

%

Commercial real estate

24,374

4.71

%

78,867

17.05

%

Total commercial loans

(33,774

)

(4.45

)%

194,412

36.66

%

Residential mortgage

(4,437

)

(1.69

)%

(27,059

)

(9.48

)%

Home equity

305

0.76

%

(3,017

)

(6.98

)%

Total residential real estate loans

(4,132

)

(1.37

)%

(30,076

)

(9.15

)%

Consumer

(539

)

(9.96

)%

(1,796

)

(26.92

)%

Gross loans

(38,445

)

(3.60

)%

162,540

18.78

%

Allowance for loan losses

(200

)

1.83

%

(3,850

)

53.10

%

Loans, net

$

(38,645

)

(3.66

)%

$

158,690

18.49

%

The following table presents historical loan balances by portfolio segment and impairment evaluation as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Loans collectively evaluated for impairment

Commercial

$

183,203

$

241,424

$

271,113

$

260,440

$

67,731

Commercial real estate

532,294

508,182

481,071

465,749

460,903

Residential mortgage

257,543

262,017

260,665

267,632

284,662

Home equity

40,141

39,874

39,456

40,114

43,222

Consumer

4,875

5,412

5,663

6,673

6,666

Subtotal

1,018,056

1,056,909

1,057,968

1,040,608

863,184

Loans individually evaluated for impairment

Commercial

73

Commercial real estate

9,134

8,872

2,204

3,290

1,658

Residential mortgage

790

753

710

663

730

Home equity

64

26

Consumer

2

3

3

5

Subtotal

10,061

9,653

2,917

3,956

2,393

Gross Loans

$

1,028,117

$

1,066,562

$

1,060,885

$

1,044,564

$

865,577

The following table presents historical allowance for loan losses allocations by portfolio segment and impairment evaluation as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Loans collectively evaluated for impairment

Commercial

$

626

$

673

$

633

$

536

$

479

Commercial real estate

6,026

5,602

5,152

4,595

3,655

Residential mortgage

3,280

3,480

3,479

3,278

2,607

Home equity

453

440

438

372

298

Consumer

92

97

101

102

89

Subtotal

10,477

10,292

9,803

8,883

7,128

Loans individually evaluated for impairment

Commercial

Commercial real estate

619

602

289

100

111

Residential mortgage

4

4

5

5

6

Home equity

Consumer

2

3

3

5

Subtotal

623

608

297

108

122

Allowance for loan losses

$

11,100

$

10,900

$

10,100

$

8,991

$

7,250

Commercial

$

626

$

673

$

633

$

536

$

479

Commercial real estate

6,645

6,204

5,441

4,695

3,766

Residential mortgage

3,284

3,484

3,484

3,283

2,613

Home equity

453

440

438

372

298

Consumer

92

99

104

105

94

Allowance for loan losses

$

11,100

$

10,900

$

10,100

$

8,991

$

7,250

The following table summarizes the Corporation’s current, past due, and nonaccrual loans as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Accruing interest

Current

$

1,018,343

$

1,057,404

$

1,058,437

$

1,042,589

$

862,581

Past due 30-89 days

1,636

1,165

1,703

948

2,152

Past due 90 days or more

120

50

86

361

166

Total accruing interest

1,020,099

1,058,619

1,060,226

1,043,898

864,899

Nonaccrual

8,018

7,943

659

666

678

Total loans

$

1,028,117

$

1,066,562

$

1,060,885

$

1,044,564

$

865,577

Total loans past due and in nonaccrual status

$

9,774

$

9,158

$

2,448

$

1,975

$

2,996

The following table summarizes the Corporation’s nonperforming assets as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Nonaccrual loans

$

8,018

$

7,943

$

659

$

666

$

678

Accruing loans past due 90 days or more

120

50

86

361

166

Total nonperforming loans

8,138

7,993

745

1,027

844

Other real estate owned

400

Total nonperforming assets

$

8,138

$

7,993

$

745

$

1,027

$

1,244

The following table summarizes the Corporation’s primary asset quality measures as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Nonperforming loans to gross loans

0.79

%

0.75

%

0.07

%

0.10

%

0.10

%

Nonperforming assets to total assets

0.62

%

0.64

%

0.06

%

0.08

%

0.12

%

Allowance for loan losses to gross loans

1.08

%

1.02

%

0.95

%

0.86

%

0.84

%

Allowance for loan losses to gross loans, less PPP loans

1.23

%

1.23

%

1.19

%

1.07

%

0.84

%

During the fourth quarter of 2020, the Corporation transferred one commercial real estate loan with an outstanding principal balance of $7,214 to nonaccrual. The underlying collateral for this loan is an extended stay hotel. The hotel’s current cash flow is insufficient to service the debt in accordance with the contractual terms of the note and, as such, the loan continues to be on payment deferrals. A specific reserve has been established for the estimated collateral deficiency (based on a current appraisal), net of a 70% USDA guarantee.

The following table summarizes the balance of net unamortized discounts on purchased loans as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Net unamortized discount on purchased loans

$

580

$

773

$

877

$

1,058

$

1,233

The following table summarizes the balance of PPP loans included in commercial loans as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Outstanding PPP loans

$

122,583

$

177,845

$

211,060

$

206,901

$

Despite historically strong credit quality indicators, there continues to be significant uncertainty surrounding the overall impact of the COVID-19 pandemic on the loan portfolio. This uncertainty resulted in the Corporation increasing the ALLL by $3,850, or 53.10%, since March 31, 2020. Management will continue to monitor the loan portfolio to ensure that the ALLL remains appropriate.

The following table summarizes the average loan size as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Commercial

$

206

$

169

$

166

$

171

$

214

Commercial real estate

727

707

672

654

644

Total commercial loans

444

351

321

325

513

Residential mortgage

183

182

180

177

194

Home equity

46

45

45

45

46

Total residential real estate loans

131

130

129

128

137

Consumer

22

22

22

25

26

Gross loans

$

249

$

226

$

215

$

213

$

234

COVID-19, CARES Act and SBA activity

The communities which the Corporation serves are not immune to the fallout of the COVID-19 pandemic. The Corporation has committed significant efforts to work with customers through temporary loan modifications and participation in the PPP loan program through the SBA.

The Corporation considered the modification type on a loan-by-loan basis. Most modifications for loans held within the Corporation’s loan portfolio resulted in the deferment of principal and interest payments for 6 months or less.

The Corporation also provides a variety of accommodations for loans that the Corporation services for FHLMC including providing mortgage forbearance for up to 12 months, waiving assessments of penalties and late fees, halting foreclosure actions and evictions, and offering loan modification options that lower payments or keep payments the same after the forbearance period.

As outlined in the following table, the majority of the Corporation’s portfolio and serviced loans have returned to normal principal and interest payments. The balance of those loans with deferrals are actively monitored and specific reserves have been established where appropriate.

The table below outlines the active COVID-19 related loan modifications as of March 31, 2021:

Number of
Modifications

Outstanding
Balance

% of Portfolio

Commercial

3

$

1,507

0.82

%

Commercial real estate

5

10,506

1.94

%

Total commercial loan modifications

8

12,013

1.66

%

Portfolio residential mortgage loans

6

928

0.36

%

Home equity

1

21

0.05

%

Total residential real estate loan modifications

7

949

0.32

%

Consumer

%

Total portfolio modifications

15

$

12,962

1.26

%

Residential mortgage loans serviced for FHLMC

32

$

7,002

1.29

%

The accommodation industry was particularly impacted by the COVID-19 pandemic. Due to executive action put in place by the government, including stay-at-home orders and travel restrictions, hotel occupancy rates were reduced drastically. The Corporation has 18 commercial loans in its portfolio in the accommodation industry with a book balance of $20,033. Of these loans, approximately 53% are government-backed by guarantees from either the SBA or USDA.

The Corporation was extremely active in participating in the PPP loan program. The Corporation funded 1,370 loans totaling $216,205. During the fourth quarter of 2020, the SBA began processing PPP forgiveness applications, which reduced the outstanding balance of PPP loans to $122,583 as of March 31, 2021. As of March 31, 2021, the Corporation received forgiveness payments for 721 PPP loans from the SBA.
The Corporation generated $6,799 in fees from the SBA through the PPP loan program. The income is being recognized over the life of the PPP loans (24 to 60 months) based on the level yield method. As of March 31, 2021, the Corporation has recognized $5,337 in income, with $1,462 remaining as unearned income.

During the first quarter of 2021, the SBA began processing applications for a second round of PPP loans. The Corporation is utilizing a third-party for the processing of applications and funding of these loans. The Corporation is generating referral fee income for the second round of the PPP loan program. As of March 31, 2021, the Corporation generated $351 in referral fees.

All other assets

The following tables outline the composition and changes in other assets as of:

3/31/2021

12/31/2020

9/30/2020

6/30/2020

3/31/2020

Premises and equipment, net

$

15,969

$

15,461

$

15,267

$

15,323

$

15,533

Corporate owned life insurance

10,354

10,291

10,225

10,115

10,380

Accrued interest receivable

5,451

5,068

5,645

5,266

3,124

Mortgage servicing rights

5,023

4,885

4,376

3,816

3,980

Federal Home Loan Bank stock

3,488

3,488

3,488

3,488

3,150

Goodwill

3,219

3,219

3,219

3,219

3,219

Right-of-use assets

1,139

364

387

409

432