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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2022

or

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

For the transition period from                      to                    

Commission File Number: 001-40711

Orange County Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Delaware

26-1135778

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

212 Dolson Avenue

Middletown, New York 10940

(Address of Principal Executive Offices)

(845) 341-5000

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading symbol

Name of Exchange on which registered

Common Stock, par value $0.50 per share

OBT

The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes     No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  

As of May 10, 2022, there were 5,633,459 shares of the registrant’s common stock outstanding.

Table of Contents

TABLE OF CONTENTS

    

    

Page

Part I

Financial Information

Item 1.

Financial Statements

3

Condensed Consolidated Statements of Condition as of March 31, 2022 and December 31, 2021 (Unaudited)

3

Condensed Consolidated Statements of Income for the three months ended March 31, 2022 and 2021 (Unaudited)

4

Condensed Consolidated Statements of Comprehensive Income/(Loss) for the three months ended March 31, 2022 and 2021 (Unaudited)

5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (Unaudited)

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited)

7

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

43

Item 4.

Controls and Procedures

43

Part II

Other Information

Item 1.

Legal Proceedings

43

Item 1A.

Risk Factors

43

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 3.

Defaults Upon Senior Securities

43

Item 4.

Mine Safety Disclosures

43

Item 5.

Other Information

43

Item 6.

Exhibits

44

Exhibit Index

44

Signatures

45

2

Table of Contents

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONDITION

(UNAUDITED)

(Dollar amounts in thousands except per share data)

    

March 31, 2022

    

December 31, 2021

ASSETS

Cash and due from banks

$

356,326

$

306,179

Investment securities – available-for-sale

 

504,141

 

464,797

Restricted investment in bank stocks

 

2,774

 

2,217

Loans

 

1,334,436

 

1,291,428

Allowance for loan losses

 

(18,427)

 

(17,661)

Loans, net

 

1,316,009

 

1,273,767

Premises and equipment, net

 

14,306

 

14,601

Accrued interest receivable

 

6,713

 

6,643

Bank owned life insurance

 

39,746

 

39,513

Goodwill

 

5,359

 

5,359

Intangible assets

 

1,606

 

1,678

Other assets

 

34,083

 

27,829

TOTAL ASSETS

$

2,281,063

$

2,142,583

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits:

Noninterest bearing

$

726,695

$

701,645

Interest bearing

 

1,346,992

 

1,212,739

Total deposits

 

2,073,687

 

1,914,384

Note payable

 

3,000

 

3,000

Subordinated notes, net of issuance costs

 

19,394

 

19,376

Accrued expenses and other liabilities

 

20,433

 

22,987

TOTAL LIABILITIES

 

2,116,514

 

1,959,747

STOCKHOLDERS’ EQUITY

Common stock, $0.50 par value; 15,000,000 shares authorized; 5,683,304 issued; 5,633,459 and 5,637,376 outstanding, at March 31, 2022 and December 31, 2021, respectively

 

2,842

 

2,842

Surplus

 

119,900

 

119,825

Retained Earnings

 

69,146

 

64,941

Accumulated other comprehensive income (loss), net of taxes

 

(25,842)

 

(3,443)

Treasury stock, at cost; 49,845 and 45,928 shares at March 31, 2022 and December 31, 2021, respectively

 

(1,497)

 

(1,329)

TOTAL STOCKHOLDERS’ EQUITY

 

164,549

 

182,836

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

2,281,063

$

2,142,583

See accompanying notes to unaudited condensed consolidated financial statements.

3

Table of Contents

ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(Dollar amounts in thousands except per share data)

Three Months Ended

March 31, 

2022

    

2021

INTEREST INCOME

  

 

  

Interest and fees on loans

$

15,005

$

13,228

Interest on investment securities:

Taxable

 

1,638

 

1,127

Tax exempt

 

482

 

363

Interest on Federal funds sold and other

 

145

 

44

TOTAL INTEREST INCOME

 

17,270

 

14,762

INTEREST EXPENSE

Savings and NOW accounts

 

570

 

592

Time deposits

 

88

 

158

Note payable

 

42

 

42

Subordinated notes

 

231

 

230

TOTAL INTEREST EXPENSE

 

931

 

1,022

NET INTEREST INCOME

 

16,339

 

13,740

Provision for loan losses

 

923

 

66

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

 

15,416

 

13,674

NONINTEREST INCOME

Service charges on deposit accounts

 

168

 

175

Trust income

 

1,170

 

1,124

Investment advisory income

 

1,201

 

1,176

Earnings on bank owned life insurance

 

233

 

171

Other

 

233

 

246

TOTAL NONINTEREST INCOME

 

3,005

 

2,892

NONINTEREST EXPENSE

Salaries

 

5,269

 

4,547

Employee benefits

 

1,401

 

1,126

Occupancy expense

 

1,223

 

965

Professional fees

 

879

 

907

Directors’ fees and expenses

 

345

 

242

Computer software expense

 

1,116

 

1,058

FDIC assessment

 

309

 

289

Advertising expenses

 

190

 

283

Advisor expenses related to trust income

 

138

 

121

Telephone expenses

 

175

 

133

Intangible amortization

 

71

 

71

Other

 

705

 

574

TOTAL NONINTEREST EXPENSE

 

11,821

 

10,316

Income before income taxes

 

6,600

 

6,250

Provision for income taxes

 

1,270

 

1,225

NET INCOME

$

5,330

$

5,025

Basic and diluted earnings per share

$

0.95

$

1.12

Weighted average shares outstanding

 

5,634,667

 

4,483,139

See accompanying notes to unaudited condensed consolidated financial statements.

4

Table of Contents

ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(UNAUDITED)

(Dollar amounts in thousands except per share data)

Three Months Ended

March 31, 

2022

    

2021

Net Income

$

5,330

$

5,025

Other comprehensive income/loss:

Unrealized gains/losses on securities:

Unrealized holding gains/(losses) arising during the period

 

(28,600)

 

(5,538)

Reclassification adjustment for (gains)/losses included in net income

 

 

Tax effect

 

(6,006)

 

(1,162)

Net of tax

 

(22,594)

 

(4,376)

Defined benefit pension plans:

Net gain arising during the period

 

240

 

Reclassification adjustment for amortization of prior service cost and net gains included in net periodic pension cost

 

(7)

 

Tax effect

 

49

 

Net of tax

 

198

 

Deferred compensation liability:

Unrealized loss

 

(4)

 

(3)

Tax effect

 

(1)

 

(1)

Net of tax

 

(3)

 

(2)

Total other comprehensive income/(loss)

 

(22,399)

 

(4,378)

Total comprehensive income

$

(17,069)

$

647

See accompanying notes to unaudited condensed consolidated financial statements.

5

Table of Contents

ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(UNAUDITED)

(Dollar amounts in thousands except per share data)

    

    

Accumulated Other

    

Common

Retained 

Comprehensive

Treasury 

Stock

    

Surplus

    

Earnings

Income (Loss)

Stock

    

Total

Balance, January 1, 2021

$

2,266

$

85,111

$

47,683

$

1,819

$

(1,456)

$

135,423

Net income

 

 

 

5,025

 

 

 

5,025

Other comprehensive loss, net of taxes

 

 

 

 

(4,378)

 

 

(4,378)

Cash dividends declared ($0.20 per share)

 

 

 

(890)

 

 

 

(890)

Issue of restricted stock (15,162 shares)

 

 

(436)

 

 

 

436

 

Treasury stock purchased (9,695 shares)

 

 

 

 

 

(269)

 

(269)

Restricted stock expense

 

 

100

 

 

 

 

100

Stock-based compensation (2,404 shares)

 

 

(1)

 

 

 

71

 

70

Balance, March 31, 2021

$

2,266

$

84,774

$

51,818

$

(2,559)

$

(1,218)

$

135,081

Balance, January 1, 2022

$

2,842

$

119,825

$

64,941

$

(3,443)

$

(1,329)

$

182,836

Net income

 

 

 

5,330

 

 

 

5,330

Other comprehensive loss, net of taxes

 

 

 

 

(22,399)

 

 

(22,399)

Cash dividends declared ($0.20 per share)

 

 

 

(1,125)

 

 

 

(1,125)

Treasury stock purchased (4,617 shares)

 

 

 

 

 

(189)

 

(189)

Restricted stock expense

 

 

67

 

 

 

 

67

Stock-based compensation (700 shares)

 

 

8

 

 

 

21

 

29

Balance, March 31, 2022

$

2,842

$

119,900

$

69,146

$

(25,842)

$

(1,497)

$

164,549

See accompanying notes to unaudited condensed consolidated financial statements.

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ORANGE COUNTY BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Dollar amounts in thousands except per share data)

    

Three Months Ended

March 31, 

    

2022

    

2021

Cash flows from operating activities

 

  

 

  

Net income

$

5,330

 

$

5,025

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses

 

923

 

66

Depreciation

 

376

 

327

Accretion on loans

 

(1,232)

 

(1,184)

Amortization of intangibles

 

71

 

71

Amortization of subordinated notes issuance costs

18

17

Restricted stock expense

 

67

 

100

Stock-based compensation

 

29

 

70

Net amortization of investment premiums

 

447

 

524

Earnings on bank owned life insurance

 

(233)

 

(171)

Net change in:

Accrued interest receivable

 

(69)

 

(1,024)

Other assets

 

(50)

 

(1,293)

Other liabilities

 

(2,557)

 

(124)

Net cash from operating activities

 

3,120

 

2,404

Cash flows from investing activities

Purchases of investment securities available-for-sale

 

(85,270)

 

(68,980)

Proceeds from sales and paydowns of investment securities available-for-sale

 

16,461

 

28,094

Proceeds from maturities and calls of investment securities available-for-sale

 

418

 

5,557

(Purchase) proceeds of restricted investment in bank stocks

(558)

(303)

Loans Purchased

 

 

(3,025)

Net increase in loans

 

(41,932)

 

(74,636)

Additions to premises and equipment

 

(81)

 

(358)

Net cash used by investing activities

 

(110,962)

 

(113,651)

Cash flows from financing activities

Net increase in deposits

 

159,303

 

244,265

Cash dividends paid

 

(1,125)

 

(890)

Purchases of treasury stock

 

(189)

 

(269)

Net cash from financing activities

 

157,989

 

243,106

Net change in cash and cash equivalents

 

50,147

 

131,859

Beginning cash and cash equivalents

 

306,179

 

121,232

Ending cash and cash equivalents

$

356,326

$

253,091

Supplemental cash flow information:

Interest paid

 

1,135

 

1,246

Income taxes paid

 

9

 

15

Supplemental noncash disclosures:

Lease liabilities arising from obtaining right-of-use assets

 

2,873

 

2,974

 

See accompanying notes to unaudited condensed consolidated financial statements.

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ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

Note 1 — Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation: The unaudited consolidated financial statements include Orange County Bancorp, Inc., a Delaware bank holding company (“Orange County Bancorp”) and its wholly owned subsidiaries: Orange Bank & Trust Company, a New York trust company (the “Bank”) and Hudson Valley Investment Advisors (“HVIA”), a Registered Investment Advisor, together referred to as the “Company.” Intercompany transactions and balances are eliminated in consolidation.

The Company provides commercial and consumer banking services to individuals, small businesses and local municipal governments as well as trust and investment services through the Bank and HVIA. The Company is headquartered in Middletown, New York, with eight locations in Orange County, New York, seven in Westchester County, New York, two in Rockland County, New York, and one in Bronx County, New York. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are commercial real estate, commercial and residential mortgage loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. There are no significant concentrations of loans to any one industry or customer. However, the customers’ ability to repay their loans is dependent on the real estate and general economic conditions in the areas in which they operate.

Assets held by the Company in an agency or fiduciary capacity for its customers are excluded from the consolidated financial statements since they do not constitute assets of the Company. Assets held by the Company amounted to $1,257,877 and $1,325,894 at March 31, 2022 and December 31, 2021, respectively.

Certain information and footnote disclosures normally included in the audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, included herein for the year ended December 31, 2021 for Orange County Bancorp, Inc. contained in the Company’s Form 10-K as filed with the Securities and Exchange Commission on March 30, 2022. In the opinion of the management of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal and recurring accruals) necessary to present fairly the financial position as of March 31, 2022, the results of operations, comprehensive income, stockholders’ equity for the three months ended March 31, 2022 and 2021 and cash flow statements for the three months ended March 31, 2022 and 2021. The results of operations for any interim period are not necessarily indicative of the results that may be expected for the full year or for any future period.

Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ.

Recent Accounting Pronouncements: In March 2022, the FASB issued ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The ASU made certain targeted amendments specific to troubled debt restructurings(TDRs) by creditors and vintage disclosure related to gross write-offs. Upon adoption, the Corporation will be required to apply the loan and refinancing and restructuring guidance to determine whether a modification results in a new loan or a continuation of an existing loan, rather than applying the recognition and measurement guidance for TDRs. The ASU also requires companies to disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within scope of Subtopic 326-20. ASU 2022-02 is effective March 31, 2023, for entities that have adopted ASU 2016-13, otherwise effective date is the same as ASU 2016-13. The Corporation will adopt ASU 2016-13 effective January 1, 2023 and will simultaneously implement ASU 2022-02.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments — Credit Losses Topic 326: Measurement of Credit Losses on Financial Instruments. The objective of the ASU is to provide financial statement users

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ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date by replacing the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates. In November 2019, the FASB adopted changes to delay the effective date of ASU 2016-13 to January 2023 for certain entities, including certain Securities and Exchange Commission filers, public business entities, and private companies. As a result, the Company is eligible for the delay and will adopt the ASU effective January 1, 2023. The Company is currently working with a third-party vendor in the development of certain methodologies and modeling techniques that will be implemented to accommodate this adoption. It is expected that the modeling of the new accounting standard will be run in parallel with the Company’s current incurred loss methodology throughout 2022 in an effort to evaluate and inform the potential impact the adoption of ASU 2016-13 will have on its consolidated financial statements and results of operations.

Note 2 — Investment Securities

The amortized cost and fair value of investment securities at March 31, 2022 and December 31, 2021:

    

    

Gross

    

Gross

    

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

Available-for-sale March 31, 2022

U.S. government agencies

$

82,764

$

36

$

(4,644)

$

78,156

Mortgage-backed securities

 

332,716

 

80

 

(18,336)

314,460

Corporate Securities

 

20,076

 

30

 

(625)

19,481

Obligations of states and political subdivisions

 

98,541

 

117

 

(6,614)

92,044

Total debt securities

$

534,097

$

263

$

(30,219)

$

504,141

    

    

Gross

    

Gross

    

 

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

Available-for-sale December 31, 2021

U.S. government agencies

 

$

80,596

 

$

440

 

$

(1,330)

 

$

79,706

Mortgage-backed securities

 

272,931

 

1,285

 

(3,784)

 

270,432

Corporate Securities

20,081

278

(148)

20,211

Obligations of states and political subdivisions

 

92,545

 

2,149

 

(246)

 

94,448

Total debt securities

 

$

466,153

 

$

4,152

 

$

(5,508)

 

$

464,797

There were no proceeds from sales of securities and associated gains and losses for the three months ended March 31, 2022 and 2021.

The amortized cost and fair value of debt securities as of March 31, 2022 are shown below by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

    

Available-for-sale

Amortized

Fair

Cost

Value

Due in one year or less

$

6,331

$

6,351

Due after one through five years

 

11,126

 

11,078

Due after five through ten years

 

59,318

 

56,184

Due after ten years

 

124,606

 

116,068

 

201,381

 

189,681

Mortgage-backed securities

 

332,716

 

314,460

Total debt securities

$

534,097

$

504,141

Securities pledged at March 31, 2022 and December 31, 2021 had a carrying amount of $339,088 and $233,907 and were pledged to secure public deposits.

At March 31, 2022 and December 31, 2021, there were no holdings of securities of any one issuer, other than the US Government and its agencies, in an amount greater than 10% of stockholders’ equity.

The following table summarizes securities with unrealized and unrecognized losses at March 31, 2022 and December 31, 2021, aggregated by major security types and length of time in continuous loss position:

Less than 12 Months

12 Months or More

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

Available-for-sale March 31, 2022

U.S. government agencies

$

34,553

$

(1,926)

$

28,186

$

(2,718)

$

62,739

$

(4,644)

Mortgage-backed securities

 

226,887

 

(14,008)

 

42,711

 

(4,328)

 

269,598

 

(18,336)

Corporate Securities

 

10,438

 

(625)

 

10,438

 

(625)

Obligations of states and political subdivisions

 

71,331

 

(6,243)

 

3,034

 

(371)

 

74,365

 

(6,614)

Total debt securities

$

343,209

$

(22,802)

$

73,931

$

(7,417)

$

417,140

$

(30,219)

Less than 12 Months

12 Months or More

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Value

Losses

Value

Losses

Value

Losses

Available-for-sale December 31, 2021

U.S. government agencies

$

10,337

$

(121)

$

32,210

$

(1,209)

$

42,547

$

(1,330)

Mortgage-backed securities

 

177,506

 

(3,273)

 

14,134

 

(511)

 

191,640

 

(3,784)

Corporate Securities

9,354

(148)

9,354

(148)

Obligations of states and political subdivisions

 

13,349

 

(138)

 

3,298

 

(108)

 

16,647

 

(246)

Total debt securities

$

210,546

$

(3,680)

$

49,642

$

(1,828)

$

260,188

$

(5,508)

There was no other than temporary impairment loss recognized on any securities at March 31, 2022 or December 31, 2021.

As of March 31, 2022, the Company’s securities portfolio consisted of 267 securities, 193 of which were in an unrealized loss position. As of December 31, 2021, the Company’s securities portfolio consisted of 252 securities, 78 of which were in an unrealized loss position. Unrealized losses are primarily related to the Company’s mortgage backed securities, U.S. government agency securities, and investments in obligations of states and political subdivisions as discussed below.

At March 31, 2022, mortgage-backed securities held by the Company were issued by U.S. government sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because

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ORANGE COUNTY BANCORP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands except per share data)

the Company does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other than temporarily impaired at March 31, 2022.

The Company’s unrealized losses on U.S. government agency securities relate primarily to its investment in Small Business Administration (“SBA”) issued securities. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities, and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other than temporarily impaired at March 31, 2022.

At March 31, 2022, the Company’s unrealized loss on obligations of state and political subdivisions was related to the decline in fair value. The fair value decline is driven by interest rate impact and not credit quality. The Company does not have the intent to sell these securities and it is likely that the Company will not be required to sell the securities before their anticipated recovery. Accordingly, the Company does not consider these securities to be other than temporarily impaired at March 31, 2022.

Note 3 — Loans

Loans at March 31, 2022 and December 31, 2021 were as follows:

    

March 31, 2022

December 31, 2021

Commercial and industrial

$

263,228

$

268,508

Commercial real estate

 

873,111

 

852,707

Commercial real estate construction

 

101,080

 

72,250

Residential real estate

 

65,160

 

65,248

Home equity

 

12,871

 

13,638

Consumer

 

18,986

 

19,077

Total

$

1,334,436

$

1,291,428

Included in commercial and industrial loans as of March 31, 2022 and December 31, 2021 were loans issued under the SBA’s Paycheck Protection Program (“PPP”) of $12,689 and $38,114, respectively.

The following table presents the activity in the allowance for loan losses by portfolio segment for each of the three months ended March 31, 2022 and 2021:

    

Three Months Ended March 31, 2022

Commercial

    

    

Commercial

    

    

    

    

and

Commercial

Real Estate

Residential

Home

Industrial

Real Estate

Construction

Real Estate

Equity

Consumer

Total

Allowance for loan losses:

  

  

  

  

  

  

  

Beginning balance

$

4,901

$

11,183