The Community Financial Corporation Reports Record EPS of $1.34 and ROAA of 1.31% for the Third Quarter 2022

WALDORF, Md., Oct. 24, 2022 (GLOBE NEWSWIRE) -- The Community Financial Corporation (NASDAQ:TCFC) (the "Company"), the holding company for Community Bank of the Chesapeake (the "Bank"), today reported record net income for the three months ended September 30, 2022 of $7.6 million, or $1.34 per diluted common share. This compares to net income of $6.8 million, or $1.21 per diluted common share for the second quarter of 2022, and net income of $6.4 million or $1.12 per diluted common share for the quarter ended September 30, 2021. The Company reported record net income for the nine months ended September 30, 2022 of $20.7 million or diluted earnings per share of $3.65 compared to net income for the comparable 2021 period of $19.1 million or diluted earnings per share of $3.29.

Third Quarter 2022 Highlights

• Record Net Income: Net income totaled $7.6 million for the quarter ended September 30, 2022, or $1.34 per diluted common share compared to net income of $6.4 million or $1.12 per diluted common share for the quarter ended September 30, 2021 and $6.8 million or $1.21 per diluted common share for the quarter ended June 30, 2022.
• Increasing Profitability: Return on average assets ("ROAA"), return on average common equity ("ROACE") and return on average tangible common equity ("ROATCE") were 1.31%, 15.97% and 17.18% respectively, for the three months ended September 30, 2022 compared to 1.17%, 12.45% and 13.41% for the three months ended September 30, 2021. ROAA, ROACE and ROATCE were 1.19%, 14.39% and 15.50% for the three months ended June 30, 2022.
• Expanding Net Interest Margin: Net interest margin increased to 3.47% for the three months ended September 30, 2022 from 3.25% for the second quarter of 2022. Loan and overall interest-earning asset yields increased 33 and 41 basis points to 4.46% and 3.89% in the third quarter of 2022 from 4.13% and 3.48% for the three months ended June 30, 2022. The Company's cost of funds increased 20 basis points for the comparable three month period from 0.23% to 0.43%.
• Positioned for Rising Rates:
  • Increasing Loan Yields: End of period contractual rates increased by 36 basis points to 4.41% at September 30, 2022 compared to June 30, 2022. The loan portfolio is positioned for rising rates with $467.8 million or 27% of net portfolio loans scheduled to reprice monthly or in the next three months and an additional $76.6 million or 4% repricing in the following nine months. The Bank's effective duration on the loan portfolio was 2.1 years at September 30, 2022.
  • Improved Deposit Franchise: Focused efforts have increased non-interest-bearing accounts to 30.5% of deposits at September 30, 2022 from 21.6% of deposits at September 30, 2021.
• Prudent Loan Growth: Total portfolio loans increased to $1,743.3 million, an increase of $90.8 million or 22.0% annualized, compared to the prior quarter, and $164.5 million or 13.9% annualized, from December 31, 2021, as the Company continued to gain market share in Virginia. The loan pipeline at September 30, 2022 was $153.0 million, which is expected to provide solid loan growth in the fourth quarter.
• Stable Asset Quality: Non-accrual loans, OREO and TDRs were $6.7 million or 0.28% of total assets at September 30, 2022 compared to $6.7 million or 0.29% of total assets at June 30, 2022, and $7.2 million or 0.31% at September 30, 2021.

Management Commentary

"Increasing net interest income and stable expenses drove another quarter of record performance at Community Bank in the third quarter," stated James M. Burke, President and Chief Executive Officer of The Community Financial Corporation. "Our expansion into Virginia has delivered consistent loan growth while maintaining our conservative credit culture. Increasing revenue resulted in net interest margin and profitability improvements which we anticipate should continue into the fourth quarter. Market rate increases did lead to an increase in demand deposit costs, but we are optimistic that our assets will continue to reprice more quickly than our liabilities in the fourth quarter driven, in part, by our leading Southern Maryland deposit franchise."

Results of Operations

		(UNAUDITED)
		Three Months Ended September 30,
(dollars in thousands)			2022			2021		$ Change				% Change
Interest and dividend income		$	21,345		$	17,659		$	3,686			20.9	%
Interest expense			2,288			1,050			1,238			117.9	%
Net interest income			19,057			16,609			2,448			14.7	%
Provision for credit losses			694			—			694			0.0	%
Provision for unfunded commitments			6			—			6			0.0	%
Noninterest income			1,229			1,400			(171	)		(12.2	)%
Noninterest expense			9,626			9,447			179			1.9	%
Income before income taxes			9,960			8,562			1,398			16.3	%
Income tax expense			2,380			2,158			222			10.3	%
Net income		$	7,580		$	6,404		$	1,176			18.4	%

		(UNAUDITED)
		Nine Months Ended September 30,
(dollars in thousands)			2022			2021		$ Change				% Change
Interest and dividend income		$	57,455		$	52,781		$	4,674			8.9	%
Interest expense			4,361			3,228			1,133			35.1	%
Net interest income			53,094			49,553			3,541			7.1	%
Provision for credit losses			1,569			586			983			167.7	%
Provision for unfunded commitments			1			—			1			—	%
Noninterest income			4,104			5,616			(1,512	)		(26.9	)%
Noninterest expense			28,044			28,973			(929	)		(3.2	)%
Income before income taxes			27,584			25,610			1,974			7.7	%
Income tax expense			6,882			6,475			407			6.3	%
Net income		$	20,702		$	19,135		$	1,567			8.2	%

Net Interest Income

Net interest income for the comparable quarters increased primarily from increases in interest-earning asset yields and growth in loans and investments partially offset by increased interest expense from higher funding costs. Net interest margin of 3.47% for the three months ended September 30, 2022 increased 19 basis points from 3.28% for the three months ended September 30, 2021 and increased 22 basis points from 3.25% for the three months ended June 30, 2022. Net interest margin expanded during the third quarter of 2022, primarily due to average yields on loans and investment securities (not including interest-bearing deposits) increasing to 4.46% and 2.02% for the three months ended September 30, 2022 from 4.13% and 1.52% for the three months ended June 30, 2022. Interest income from the Company's participation in the U.S. SBA PPP program was $0.2 million and $1.2 million for the three months ended September 30, 2022 and September 30, 2021, respectively and $0.3 million for the three months ended June 30, 2022.

Net interest income increased for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 due primarily to growth in investment balances and yields and increases in loan yields from the re-pricing of the Bank's adjustable rate portfolios as well as a change in the mix of loans from lower yielding U.S. PPP loans to higher yielding commercial real estate loans. Increases to net interest income were partially offset by increased interest expense from higher funding costs. Loan interest income increased $1.9 million to $51.1 million for the nine months ended September 30, 2022 from $49.3 million for the three months ended September 30, 2021. Excluding U.S. SBA PPP interest income, for the same comparable periods loan interest income increased $5.1 million. Net interest margin of 3.28% for the nine months ended September 30, 2022 was 10 basis points lower than the 3.38% for the nine months ended September 30, 2021. U.S. SBA PPP loan interest positively impacted margins by four basis points for the nine months ended September 30, 2022 and 14 basis points for the nine months ended September 30, 2021.

The Company's cost of funds was 0.43% during the third quarter of 2022 compared to 0.23% for the prior quarter and increased from 0.21% for the three months ended September 30, 2021. The Bank's interest rate asset sensitivity has improved in 2022, as average non-interest bearing ("NIB") deposit accounts have increased. For the third quarter of 2022 total average NIB deposits increased to 31.2% compared to 22.8% for the comparable period in 2021. The Company's cost of funds was 0.28% during the first nine months of 2022 compared to 0.23% for the nine months ended September 30, 2021.

Management anticipates that net interest margins will expand in the fourth quarter of 2022, but at a slower rate than the second and third quarters of 2022, as deposit betas are likely to increase due to FOMC rate increases and more aggressive competition for funding. The average cost of deposits increased 24 basis points from 0.20% for the month of June to 0.44% for the month of September. Higher beta municipal relationships have been the main driver of increased deposit rates through the third quarter of 2022. For the same comparative periods, average interest-earning asset yields increased 41 basis points from 3.60% to 4.01%.

Management is optimistic that improvements in the Bank's funding composition and asset-sensitivity in the loan portfolio will benefit margins and profitability in an increasing interest-rate environment.

Noninterest Income

The $0.2 million decrease in noninterest income in the current quarter was due to no interest rate protection referral fee income compared to $0.2 million for the three months ended September 30, 2021. In addition, changes in interest rates resulted in $0.2 million of unrealized losses in the third quarter of 2022 on securities invested in a Community Reinvestment Act mutual fund. These reductions in noninterest income for the comparable quarters were partially offset by increases in service charges of $0.1 million due to increased interchange fees from increased volume. Noninterest income as a percentage of average assets was 0.21% and 0.26%, respectively, for the three months ended September 30, 2022 and 2021.

The $1.5 million decrease in noninterest income for the nine months ended September 30, 2022 compared to the same period in the prior year was principally due to reductions in interest rate protection referral fee income of $0.9 million, $0.6 million in gains on the sale of investment securities sold in the first nine months of 2021 and $0.5 million in unrealized losses on securities invested in a Community Reinvestment Act mutual fund. These reductions for the comparable periods were partially offset by $0.1 million in increased service charge income and $0.4 million related to the sale of impaired loans. In the first quarter of 2021, the Bank sold non-accrual and classified commercial real estate and residential mortgage loans and recognized a loss on the sale of $0.2 million, and in the second quarter of 2022, impaired loan sales resulted in a gain of $0.2 million. Noninterest income as a percentage of assets was 0.24% and 0.35%, respectively, for the nine months ended September 30, 2022 and 2021.

Noninterest Expense

Noninterest expense of $9.6 million for the three months ended September 30, 2022 increased $0.2 million or 1.9% compared to the three months ended September 30, 2021. The flat overall expense run rate for the comparable periods was primarily due to increases of $0.2 million in data processing expenses and $0.2 million in professional fees as well as other operating expenses of $0.2 million, partially offset by a decrease of $0.5 million in compensation and benefits. Professional fees, occupancy and data processing have increased substantially compared to the same quarter in the prior year due in large part to increased cost of labor and materials due to inflation. Actual compensation expenses were lower due to lower health insurance claims and a slightly lower average FTE count than anticipated.

In the second quarter of 2022, the Bank increased base compensation by 4% and its minimum starting wage to $20.00 per hour for non-executive employees to address local wage pressures caused by inflation and to attract and retain our employees. Management expects a $9.6-$9.8 million normalized expense run rate in the fourth quarter.

Noninterest expense of $28.0 million decreased $0.9 million or 3.2% for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The decrease in noninterest expense for the comparable periods was primarily due to decreases in compensation and benefits of $0.5 million, OREO expenses of $0.7 million and fraud losses of $1.1 million.

Compensation expenses were lower for the comparative periods due to lower health insurance claims, a lower average FTE count than the prior year and lower deferred compensation accruals. In addition, compensation and benefits expense has benefited from the Company's increased use of technology. Deferred costs for U.S. SBA PPP loans originated were $0.3 million for the nine months ended September 30, 2021. Compensation and benefits would have increased overall 2021 noninterest expense if U.S. SBA PPP loans deferred costs were not included in loan origination costs.

Noninterest expense in the first nine months of 2021 included a $1.3 million initial expense and subsequent recovery of $0.2 million related to an isolated wire transfer fraud incident. Our investigation determined that no information systems of the Bank were compromised, and no employee fraud was involved. Excluding the impact of the $1.1 million isolated fraud losses and the $0.3 million in U.S. SBA PPP deferred costs, the Company's noninterest expense was $28.2 million for the nine months ended September 30, 2021.

OREO expenses have moderated as the Bank reduced foreclosed assets from $1.5 million at September 30, 2021 to no OREO assets at September 30, 2022.

These decreases to noninterest expense were partially offset by increases of $0.6 million in professional fees, $0.3 million in data processing expenses, and $0.2 million in occupancy expense. As noted above, inflationary pressures have increased the cost of labor and materials affecting these financial line items.

The Company's efficiency ratio was 47.45% and 49.03% for the three and nine months ended September 30, 2022 compared to 52.46% and 52.52% for the three and nine months ended September 30, 2021. The Company's net operating expense ratio was 1.45% and 1.38% for the three and nine months ended September 30, 2022 compared to 1.47% for both the three and nine months ended September 30, 2021. The efficiency and net operating expense ratios have improved (decreased) as the Company has improved asset quality and grown operating revenues while controlling expense growth.

Income Tax Expense

The effective tax rate for the three months ended September 30, 2022 was 23.90% compared to an effective tax rate of 25.20% for the three months ended September 30, 2021. The effective tax rate for the nine months ended September 30, 2022 was 24.95% compared to an effective tax rate of 25.28% for the nine months ended September 30, 2021.

Balance Sheet

Assets

Total assets increased $32.3 million, or 1.4%, to $2.36 billion at September 30, 2022 compared to total assets of $2.33 billion at December 31, 2021, primarily due to net loan growth. Cash decreased a net of $86.4 million and was used to fund net loan growth of $135.7 million. Available for sale ("AFS") debt securities, which are reported at fair value, decreased $33.3 million to $464.5 million, primarily due to unrealized losses from rising interest rates during 2022. In addition, deferred tax assets increased $15.7 million to $24.8 million primarily due to increases in unrealized losses of the Bank's AFS investment portfolio related to changes in interest rates. Deferred tax assets also increased due to the adoption of the current expected credit losses ("CECL") accounting standard on January 1, 2022.

During the third quarter of 2022, total net loans increased 21.1% annualized or $86.4 million from $1,636.1 million at June 30, 2022 to $1,722.5 million at September 30, 2022. The Company's loan pipeline was $153.0 million at September 30, 2022. Non-owner occupied commercial real estate as a percentage of risk-based capital at September 30, 2022 and December 31, 2021 were $978.2 million or 374% and $813.0 million or 331%, respectively. Construction loans as a percentage of risk-based capital at September 30, 2022 and December 31, 2021 were $145.4 million or 56% and $140.4 million or 57%, respectively.

Funding

Total deposits increased $70.4 million or 3.4% (4.6% annualized) to $2,126.6 million at September 30, 2022 compared to $2,056.2 million at December 31, 2021. The increase included a $105.4 million increase to transaction deposits offset by a $35.0 million decrease to time deposits. During the first nine months of 2022, non-interest-bearing demand deposits increased $201.7 million to $647.4 million at September 30, 2022, representing 30.5% of deposits, compared to 21.7% of deposits at December 31, 2021. The Company's business development efforts continue to focus on increasing non-interest bearing and lower cost transaction accounts.

Stockholders' Equity and Regulatory Capital

During the nine months ended September 30, 2022, total stockholders' equity decreased $29.0 million. The decrease in equity was primarily due to an increase of $42.0 million in accumulated other comprehensive loss ("AOCL") related to the Bank's AFS securities portfolio due to changes in market interest rates. In addition, equity decreased due to common dividends paid of $2.8 million, stock repurchases of $3.6 million and $2.0 million for the adoption of the CECL accounting standard on January 1, 2022. Decreases in equity were partially offset by net income of $20.7 million and net stock related activities in connection with stock-based compensation and ESOP activity of $0.7 million.

The Company's common equity to assets ratio decreased to 7.59% at September 30, 2022 from 8.94% at December 31, 2021. The Company's ratio of tangible common equity ("TCE") to tangible assets decreased to 7.14% at September 30, 2022 from 8.48% at December 31, 2021 (see Non-GAAP reconciliation schedules) due primarily to increases in AOCL. Regulatory capital was not impacted by the increase in AOCL and Tier 1 capital to average asset ratios at the Bank and the Company remained strong at 10.25% and 9.56% at September 30, 2022 compared to 9.95% and 9.23% at December 31, 2021.

On December 9, 2021, the Company announced its Board of Directors approved the resumption of repurchases allowed under the stock repurchase plan originally adopted in October 2020 (the "2020 Repurchase Plan"). The Company was permitted to repurchase up to the 99,450 shares remaining under the 2020 Repurchase Plan using up to $4.0 million in the aggregate and up to $1.5 million in the aggregate on a quarterly basis. During the third quarter of 2022, the Company repurchased 13,647 shares at an average price of $37.11 per share. At September 30, 2022, the Company had no remaining shares available for repurchase under the 2020 Repurchase Plan.

Asset Quality

Allowance for credit losses ("ACL") and provision for credit losses ("PCL"); Allowance for Loan Losses ("ALLL") and provision for loan losses ("PLL")¹; Classified and Non-Performing Assets

On January 1, 2022, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which replaced the incurred loss methodology for determining our ACL with an expected loss methodology that is referred to as the CECL. The measurement of expected credit losses under the CECL methodology applies to financial assets subject to credit losses and measured at amortized cost, and certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. In addition, ASU 2016-13 made changes to the accounting for available-for-sale ("AFS") debt securities. Credit- related impairments on AFS debt securities are now recognized as an allowance for credit loss rather than a write-down of the securities' amortized cost basis when management does not intend to sell or believes that it is not likely that they will be required to sell the securities prior to recovery of the securities amortized cost basis. We adopted ASU 2016-13 using the modified retrospective method. Results for reporting periods beginning after January 1, 2022 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP. At adoption, the Company did not hold Held to Maturity ("HTM") investment debt securities.

The impact at adoption was an increase to the ACL of $2.5 million, the recording of a reserve for unfunded commitments of $0.2 million, an increase in deferred taxes of $0.7 million, and a decrease in retained earnings of $2.0 million.

ACL balances increased to 1.26% of portfolio loans at September 30, 2022 compared to an ALLL of 1.17% of portfolio loans at December 31, 2021. At and for the three months ended September 30, 2022, the Company's ACL increased $3.6 million or 19.6% to $22.0 million from $18.4 million at December 31, 2021. The Company recorded a $0.7 million and $1.6 million PCL for the three and nine months ended September 30, 2022 compared to no PLL and $0.6 million PLL for the three and nine months ended September 30, 2021. There were $0.5 million in net charge-offs during the nine months ended September 30, 2022 compared to $1.4 million in net charge-offs for the nine months ended September 30, 2021.

Management believes that the allowance is adequate at September 30, 2022.

Classified assets increased $0.8 million from $5.2 million at December 31, 2021 to $6.0 million at September 30, 2022. Management considers classified assets to be an important measure of asset quality. The Company's risk rating process for classified loans is an important factor in the Company's ACL qualitative framework. Management remains committed to expeditiously resolving non-performing or substandard credits that are not likely to become performing or passing credits in a reasonable timeframe.

During 2021, classified assets decreased $17.1 million. Asset quality improved with the resolution of $16.9 million in non-accrual and impaired loans through loan sales and negotiated payoffs, as well as the resolution of $3.1 million in OREO. The Company's sale of impaired loans decreased the specific reserve, improved asset quality, and improved several ALLL qualitative factors.

The ratio of non-accrual loans and OREO to total portfolio loans and OREO decreased 12 basis points from 0.48% at December 31, 2021 to 0.36% at September 30, 2022. The ratio of non-accrual loans, OREO and TDRs to total assets decreased seven basis points from 0.35% at December 31, 2021 to 0.28% at September 30, 2022. 

Non-accrual loans decreased $1.3 million from $7.6 million at December 31, 2021 to $6.3 million at September 30, 2022. There were no OREO balances at September 30, 2022 and December 31, 2021.

About The Community Financial Corporation - Headquartered in Waldorf, MD, The Community Financial Corporation is the bank holding company for Community Bank of the Chesapeake, a full-service commercial bank with assets of approximately $2.4 billion. Through its branch offices and commercial lending centers, Community Bank of the Chesapeake offers a broad range of financial products and services to individuals and businesses. The Company's branches are located at its main office in Waldorf, Maryland, and branch offices in Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and Fredericksburg - Downtown and Fredericksburg - Harrison Crossing, Virginia. More information about Community Bank of the Chesapeake can be found at www.cbtc.com.

Use of non-GAAP Financial Measures - Statements included in this press release include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company's management uses these non-GAAP financial measures, and believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

Forward-looking Statements - Certain statements contained in this news release may not be based on historical facts and are "forward-looking statements" within the meaning Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can generally be identified by the fact that they do not relate strictly to historical or current facts. They often include words or phrases such as "is optimistic," "project," "believe," "expect," "anticipate," "estimate", "assume" and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Statements in this release that are not strictly historical are forward-looking and are based upon current expectations that may differ materially from actual results. These forward-looking statements include, without limitation: (i) those relating to the Company's and the Bank's future growth and management's outlook or expectations for revenue, assets, asset quality, profitability, business prospects, net interest margin, non-interest revenue, allowance for loan losses, the level of credit losses from lending, liquidity levels, capital levels, or future financial or business performance strategies or expectations; (ii) any statements of the plans and objectives of management for future operations products or services, including the expected benefits from, and/or the execution of integration plans relating to any acquisition we have undertaken or that we undertake in the future; (iii) plans and cost savings regarding branch closings or consolidation; (iv) projections related to certain financial metrics, including with respect to the quarterly expense run rate; (v) expected benefits of programs we introduce, including residential mortgage programs and retail and commercial credit card programs; and (vi) any statement of expectation or belief, and any assumptions underlying the foregoing. These forward-looking statements express management's current expectations or forecasts of future events, results and conditions, and by their nature are subject to and involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the statements made herein. Factors that might cause actual results to differ materially from those made in such statements include, but are not limited to: (i) risks, uncertainties and other factors relating to the COVID-19 pandemic (including the length of time that the pandemic continues; the ability of states and local governments to successfully implement the lifting of restrictions on movement and the potential imposition of further restrictions on movement and travel in the future, the effect of the pandemic on the general economy and on the businesses of our borrowers and their ability to make payments on their obligations; (ii) the remedial actions and stimulus measures adopted by federal, state and local governments, and the inability of employees to work due to illness, quarantine, or government mandates); (iii) the impacts related to or resulting from Russia's military action in Ukraine, including the broader impacts to financial markets and the global macroeconomic and geopolitical environments; (iv) assumptions that interest-earning assets will reprice faster than interest-bearing liabilities and the Bank's ability to maintain its current favorable funding mix; (v) the synergies and other expected financial benefits from any acquisition that we have undertaken or may undertake in the future may or may not be realized within the expected time frames; (vi) the impact of our adoption of the CECL standard; (vii) limitations on our ability to declare and pay dividends or engage in share repurchases; (viii) changes in the Company's or the Bank's strategy, costs or difficulties related to integration matters might be greater than expected; (ix) availability of and costs associated with obtaining adequate and timely sources of liquidity; (x) the ability to maintain credit quality; (xi) general economic trends and conditions, including inflation and its impacts; (xii) changes in interest rates; (xiii) loss of deposits and loan demand to other financial institutions; (xiv) substantial changes in financial markets; (xv) changes in real estate value and the real estate market; (xxi) regulatory changes; (xvii) the impact of government shutdowns or sequestration; (xviii) the possibility of unforeseen events affecting the industry generally; (xix) the uncertainties associated with newly developed or acquired operations; (xx) the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future; (xxi) market disruptions and other effects of terrorist activities; and (xxii) the matters described in "Item 1A Risk Factors" in the Company's Annual Report on Form 10-K for the Year Ended December 31, 2021, and in its other Reports filed with the Securities and Exchange Commission (the "SEC"). The Company's forward-looking statements may also be subject to other risks and uncertainties, including those that it may discuss elsewhere in this news release or in its filings with the SEC, accessible on the SEC's Web site at www.sec.gov. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required under the rules and regulations of the SEC.

You are cautioned not to place undue reliance on the forward-looking statements contained in this document in that actual results could differ materially from those indicated in such forward-looking statements, due to a variety of factors. Any forward-looking statement speaks only as of the date of this new release, and the Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this new release.

Data is unaudited as of September 30, 2022. This selected information should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

CONTACTS:

James M. Burke, Chief Executive Officer

Todd L. Capitani, Chief Financial Officer

(888) 745-2265

SUPPLEMENTAL QUARTERLY FINANCIAL DATA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
		Three Months Ended
(dollars in thousands)		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Interest and Dividend Income
Loans, including fees		$	18,735			$	16,772			$	15,610			$	16,222			$	16,342
Interest and dividends on securities			2,454				1,924				1,666				1,531				1,296
Interest on deposits with banks			156				78				60				25				21
Total Interest and Dividend Income			21,345				18,774				17,336				17,778				17,659
Interest Expense
Deposits			1,850				819				513				565				594
Short-term borrowings			52				16				—				—				—
Long-term debt			386				371				354				332				456
Total Interest Expense			2,288				1,206				867				897				1,050
Net Interest Income ("NII")			19,057				17,568				16,469				16,881				16,609
Provision for credit losses			694				425				450				—				—
Provision (recovery) for unfunded commitments			6				26				(31	)			—				—
NII After Provision For Credit Losses			18,357				17,117				16,050				16,881				16,609
Noninterest Income
Loan appraisal, credit, and misc. charges			65				44				176				257				29
Unrealized losses on equity securities			(187	)			(155	)			(222	)			(45	)			(22	)
Loss on premises and equipment held for sale			—				—				—				(5	)			(20	)
Income from bank owned life insurance			220				217				214				219				220
Service charges			1,130				1,108				926				1,235				987
Referral fee income			—				—				361				574				176
Net gains (losses) on sale of loans originated for sale			1				1				(4	)			55				30
Gains on sale of loans			—				209				—				—				—
Total Noninterest Income			1,229				1,424				1,451				2,290				1,400
Noninterest Expense
Compensation and benefits			5,116				5,051				5,055				5,265				5,650
OREO valuation allowance and expenses			—				—				6				767				20
Sub Total			5,116				5,051				5,061				6,032				5,670
Operating Expenses
Occupancy expense			826				820				732				656				731
Advertising			149				159				64				128				145
Data processing expense			1,062				1,008				1,007				1,006				840
Professional fees			923				845				731				937				676
Depreciation of premises and equipment			177				150				149				139				137
FDIC Insurance			160				177				179				90				120
Core deposit intangible amortization			97				102				109				115				121
Fraud losses			37				30				40				16				132
Other expenses			1,079				996				1,008				1,060				875
Total Operating Expenses			4,510				4,287				4,019				4,147				3,777
Total Noninterest Expense			9,626				9,338				9,080				10,179				9,447
Income before income taxes			9,960				9,203				8,421				8,992				8,562
Income tax expense			2,380				2,369				2,133				2,241				2,158
Net Income		$	7,580			$	6,834			$	6,288			$	6,751			$	6,404

SUPPLEMENTAL QUARTERLY FINANCIAL DATA - Continued CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(dollars in thousands, except per share amounts)		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Assets
Cash and due from banks		$	18,008			$	16,164			$	80,702			$	108,990			$	112,314
Federal funds sold			20,325				37,320				—				—				—
Interest-bearing deposits with banks			14,970				34,659				32,460				30,664				34,929
Securities available for sale ("AFS"), at fair value			464,502				485,456				507,527				497,839				456,664
Equity securities carried at fair value through income			4,254				4,423				4,562				4,772				4,805
Non-marketable equity securities held in other financial institutions			207				207				207				207				207
Federal Home Loan Bank ("FHLB") stock - at cost			1,226				1,234				1,685				1,472				1,472
Loans held for sale			—				—				373				—				—
Net U.S. Small Business Administration ("SBA") Paycheck Protection ("PPP") Loans			1,211				5,022				15,279				26,398				54,807
Portfolio Loans Receivable net of allowance for credit losses of $22,027, $21,404, $21,382, $18,417, and $18,579			1,721,250				1,631,055				1,608,156				1,560,393				1,514,837
Net Loans			1,722,461				1,636,077				1,623,435				1,586,791				1,569,644
Goodwill			10,835				10,835				10,835				10,835				10,835
Premises and equipment, net			21,626				21,802				21,304				21,427				21,795
Other real estate owned ("OREO")			—				—				—				—				1,536
Accrued interest receivable			6,791				6,099				5,389				5,588				6,045
Investment in bank owned life insurance			39,583				39,363				39,145				38,932				38,713
Core deposit intangible			725				821				924				1,032				1,147
Net deferred tax assets			24,755				20,223				15,523				9,033				8,790
Right of use assets - operating leases			6,022				6,123				6,033				6,124				6,215
Other assets			3,331				2,708				1,819				3,600				3,581
Total Assets		$	2,359,621			$	2,323,514			$	2,351,923			$	2,327,306			$	2,278,692
Liabilities and Stockholders' Equity
Liabilities
Deposits
Non-interest-bearing deposits		$	647,432			$	635,649			$	644,385			$	445,778			$	432,606
Interest-bearing deposits			1,479,125				1,449,727				1,450,698				1,610,386				1,572,001
Total deposits			2,126,557				2,085,376				2,095,083				2,056,164				2,004,607
Long-term debt			—				—				12,213				12,231				12,249
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPs")			12,000				12,000				12,000				12,000				12,000
Subordinated notes - 4.75%			19,552				19,538				19,524				19,510				19,496
Lease liabilities - operating leases			6,288				6,372				6,266				6,343				6,418
Accrued expenses and other liabilities			16,070				15,357				13,697				12,925				19,794
Total Liabilities			2,180,467				2,138,643				2,158,783				2,119,173				2,074,564
Stockholders' Equity
Common stock			56				56				57				57				57
Additional paid in capital			97,712				97,455				97,189				96,896				96,649
Retained earnings			125,608				119,523				115,179				113,448				107,890
Accumulated other comprehensive losses			(43,906	)			(31,847	)			(18,969	)			(1,952	)			(9	)
Unearned ESOP shares			(316	)			(316	)			(316	)			(316	)			(459	)
Total Stockholders' Equity			179,154				184,871				193,140				208,133				204,128
Total Liabilities and Stockholders' Equity		$	2,359,621			$	2,323,514			$	2,351,923			$	2,327,306			$	2,278,692
Common shares issued and outstanding			5,644,186				5,649,729				5,686,799				5,718,528				5,724,011

SUPPLEMENTAL QUARTERLY FINANCIAL DATA - Continued SELECTED FINANCIAL INFORMATION AND RATIOS (UNAUDITED)
		Three Months Ended
(dollars in thousands, except per share amounts)		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
KEY OPERATING RATIOS
Return on average assets ("ROAA")			1.31	%			1.19	%			1.08	%			1.18	%			1.17	%
Pre-tax Pre-Provision ROAA**			1.84				1.68				1.53				1.57				1.57
Return on average common equity ("ROACE")			15.97				14.39				12.30				13.00				12.45
Pre-tax Pre-Provision ROACE**			22.46				20.33				17.35				17.31				16.65
Return on Average Tangible Common Equity ("ROATCE")**			17.18				15.50				13.22				13.97				13.41
Average total equity to average total assets			8.17				8.28				8.79				9.06				9.40
Interest rate spread			3.26				3.14				3.05				3.17				3.22
Net interest margin			3.47				3.25				3.12				3.22				3.28
Cost of funds			0.43				0.23				0.17				0.17				0.21
Cost of deposits			0.36				0.16				0.10				0.11				0.12
Cost of debt			4.40				3.81				3.24				3.04				3.19
Efficiency ratio			47.45				49.17				50.67				53.10				52.46
Non-interest income to average assets			0.21				0.25				0.25				0.40				0.26
Non-interest expense to average assets			1.66				1.63				1.56				1.78				1.73
Net operating expense to average assets			1.45				1.38				1.31				1.38				1.47
Average interest-earning assets to average interest-bearing liabilities			149.96				150.34				141.56				129.68				132.54
Net charge-offs (recoveries) to average portfolio loans			0.02				0.10				0.00				0.04				(0.02	)
COMMON SHARE DATA
Basic net income per common share		$	1.34			$	1.21			$	1.11			$	1.18			$	1.12
Diluted net income per common share			1.34				1.21				1.10				1.18				1.12
Cash dividends paid per common share			0.175				0.175				0.175				0.15				0.15
Basic - weighted average common shares outstanding			5,636,640				5,647,821				5,688,221				5,711,746				5,709,814
Diluted - weighted average common shares outstanding			5,644,822				5,657,733				5,699,038				5,723,011				5,720,001
ASSET QUALITY
Total assets		$	2,359,621			$	2,323,514			$	2,351,923			$	2,327,306			$	2,278,692
Total portfolio loans(1)			1,743,277				1,652,459				1,629,538				1,578,810				1,533,416
Classified assets			5,967				6,062				4,745				5,211				6,663
Allowance for credit losses			22,027				21,404				21,382				18,417				18,579
Past due loans - 31 to 89 days			713				900				386				568				189
Past due loans >=90 days			428				147				1,233				961				1,400
Total past due loans(2)			1,141				1,047				1,619				1,529				1,589
Non-accrual loans(3)			6,290				6,235				7,465				7,631				5,160
Accruing troubled debt restructures ("TDRs")			433				439				442				447				455
Other real estate owned ("OREO")			—				—				—				—				1,536
Non-accrual loans, OREO and TDRs		$	6,723			$	6,674			$	7,907			$	8,078			$	7,151

** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.

____________________________________

(1)  Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio. Asset quality ratios for loans exclude U.S. SBA PPP loans. December 31, 2021 and September 30, 2021 reported balance are shown net of deferred costs and fees to conform with the current period's presentation.

(2)  Delinquency excludes Purchase Credit Impaired ("PCI") loans for December 31, 2021 and September 30, 2021.

(3)  Non-accrual loans include all loans that are 90 days or more delinquent and loans that are non-accrual due to the operating results or cash flows of a customer. Non-accrual loans can include loans that are current with all loan payments. At September 30, 2022 and December 31, 2021, the Company had current non-accrual loans of $5.7 million and $6.7 million, respectively.

SUPPLEMENTAL QUARTERLY FINANCIAL DATA - Continued SELECTED FINANCIAL INFORMATION AND RATIOS (UNAUDITED)
		Three Months Ended
(dollars in thousands, except per share amounts)		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
ASSET QUALITY RATIOS(1)
Classified assets to total assets			0.25	%			0.26	%			0.20	%			0.22	%			0.29	%
Classified assets to risk-based capital			2.25				2.35				1.87				2.10				2.75
Allowance for credit losses to total portfolio loans			1.26				1.30				1.31				1.17				1.21
Allowance for credit losses to non-accrual loans			350.19				343.29				286.43				241.34				360.06
Past due loans - 31 to 89 days to total portfolio loans			0.04				0.05				0.02				0.04				0.01
Past due loans >=90 days to total portfolio loans			0.02				0.01				0.08				0.06				0.09
Total past due (delinquency) to total portfolio loans			0.07				0.06				0.10				0.10				0.10
Non-accrual loans to total portfolio loans			0.36				0.38				0.46				0.48				0.34
Non-accrual loans and TDRs to total portfolio loans			0.39				0.40				0.49				0.51				0.37
Non-accrual loans and OREO to total portfolio assets			0.27				0.27				0.32				0.33				0.29
Non-accrual loans and OREO to total portfolio loans and OREO			0.36				0.38				0.46				0.48				0.44
Non-accrual loans, OREO and TDRs to total assets			0.28				0.29				0.34				0.35				0.31
COMMON SHARE DATA
Book value per common share		$	31.74			$	32.72			$	33.96			$	36.40			$	35.66
Tangible book value per common share**			29.69				30.66				31.90				34.32				33.57
Common shares outstanding at end of period			5,644,186				5,649,729				5,686,799				5,718,528				5,724,011
OTHER DATA
Full-time equivalent employees			199				190				191				186				196
Branches			12				12				11				11				11
Loan Production Offices			4				4				4				4				4
CAPITAL RATIOS
Tier 1 capital to average assets			9.56	%			9.42	%			9.17	%			9.23	%			9.41	%
Tier 1 common capital to risk-weighted assets			11.40				11.66				11.58				11.92				11.89
Tier 1 capital to risk-weighted assets			12.05				12.34				12.28				12.64				12.64
Total risk-based capital to risk-weighted assets			14.30				14.68				14.65				14.92				14.99
Common equity to assets			7.59				7.96				8.21				8.94				8.96
Tangible common equity to tangible assets **			7.14				7.49				7.75				8.48				8.48

** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.

____________________________________

(1)  Asset quality ratios are calculated using total portfolio loans. Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio.

SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA CONSOLIDATED INCOME STATEMENT (UNAUDITED)
		Nine Months Ended September 30,
(dollars in thousands)			2022				2021
Interest and Dividend Income
Loans, including fees		$	51,117			$	49,254
Interest and dividends on securities			6,044				3,461
Interest on deposits with banks			294				66
Total Interest and Dividend Income			57,455				52,781
Interest Expense
Deposits			3,182				2,036
Short-term borrowings			68				—
Long-term debt			1,111				1,192
Total Interest Expense			4,361				3,228
Net Interest Income ("NII")			53,094				49,553
Provision for credit losses			1,569				586
Provision for unfunded commitments			1				—
NII After Provision for Credit Losses			51,524				48,967
Noninterest Income
Loan appraisal, credit, and misc. charges			285				271
Gain on sale of assets			—				68
Net gains on sale of investment securities			—				586
Unrealized losses on equity securities			(564	)			(94	)
Loss on premises and equipment held for sale			—				(20	)
Income from bank owned life insurance			651				652
Service charges			3,164				3,066
Referral fee income			361				1,248
Net (losses) gains on sale of loans originated for sale			(2	)			30
Gains (losses) on sale of loans			209				(191	)
Total Noninterest Income			4,104				5,616
Noninterest Expense
Compensation and benefits			15,222				15,770
OREO valuation allowance and expenses			6				689
Sub-total			15,228				16,459
Operating Expense
Occupancy expense			2,378				2,180
Advertising			372				372
Data processing expense			3,077				2,766
Professional fees			2,499				1,920
Depreciation of premises and equipment			476				419
FDIC Insurance			516				512
Core deposit intangible amortization			308				380
Fraud losses			107				1,243
Other expenses			3,083				2,722
Total Operating Expense			12,816				12,514
Total Noninterest Expense			28,044				28,973
Income before income taxes			27,584				25,610
Income tax expense			6,882				6,475
Net Income		$	20,702			$	19,135

SUPPLEMENTAL YEAR TO DATE FINANCIAL DATA (UNAUDITED)
		Nine Months Ended September 30,
			2022				2021
KEY OPERATING RATIOS
Return on average assets ("ROAA")			1.19	%			1.20	%
Pre-tax Pre-Provision ROAA**			1.68				1.64
Return on average common equity ("ROACE")			14.17				12.53
Pre-tax Pre-Provision ROACE**			19.96				17.16
Return on Average Tangible Common Equity ("ROATCE")			15.25				13.53
Average total equity to average total assets			8.42				9.58
Interest rate spread			3.15				3.31
Net interest margin			3.28				3.38
Cost of funds			0.28				0.23
Cost of deposits			0.21				0.15
Cost of debt			3.80				2.73
Efficiency ratio			49.03				52.52
Non-interest income to average assets			0.24				0.35
Non-interest expense to average assets			1.62				1.82
Net operating expense to average assets			1.38				1.47
Average interest-earning assets to average interest-bearing liabilities			147.26				130.95
Net charge-offs to average portfolio loans			0.04				0.13
COMMON SHARE DATA
Basic net income per common share		$	3.66			$	3.29
Diluted net income per common share			3.65				3.29
Cash dividends paid per common share			0.53				0.43
Weighted average common shares outstanding:
Basic			5,656,950				5,813,704
Diluted			5,665,950				5,823,218

____________________________________

** Non-GAAP financial measure. See reconciliation of GAAP and NON-GAAP measures.

RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)

Reconciliation of U.S. GAAP total assets, common equity, common equity to assets and book value to Non-GAAP tangible assets, tangible common equity, tangible common equity to tangible assets and tangible book value.

This press release, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with generally accepted accounting principles, or GAAP. This financial information includes certain performance measures, which exclude intangible assets. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.

(dollars in thousands, except per share amounts)		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Total assets		$	2,359,621			$	2,323,514			$	2,351,923			$	2,327,306			$	2,278,692
Less: intangible assets
Goodwill			10,835				10,835				10,835				10,835				10,835
Core deposit intangible			725				821				924				1,032				1,147
Total intangible assets			11,560				11,656				11,759				11,867				11,982
Tangible assets		$	2,348,061			$	2,311,858			$	2,340,164			$	2,315,439			$	2,266,710
Total common equity		$	179,154			$	184,871			$	193,140			$	208,133			$	204,128
Less: intangible assets			11,560				11,656				11,759				11,867				11,982
Tangible common equity		$	167,594			$	173,215			$	181,381			$	196,266			$	192,146
Common shares outstanding at end of period			5,644,186				5,649,729				5,686,799				5,718,528				5,724,011
Common equity to assets			7.59	%			7.96	%			8.21	%			8.94	%			8.96	%
Tangible common equity to tangible assets			7.14	%			7.49	%			7.75	%			8.48	%			8.48	%
Common book value per share		$	31.74			$	32.72			$	33.96			$	36.40			$	35.66
Tangible common book value per share		$	29.69			$	30.66			$	31.90			$	34.32			$	33.57

RECONCILIATION OF NON-GAAP MEASURES (UNAUDITED)

Pre-Tax Pre-Provision ("PTPP") Income, PTPP Return on Average Assets ("ROAA"), PTPP Return on Average Common Equity ("ROACE"), and Return on Average Tangible Common Equity ("ROATCE")

Management believes that PTPP income, which reflects the Company's profitability before income taxes and provisions for credit losses, allows investors to better assess the Company's operating income and expenses in relation to the Company's core operating revenue by removing the volatility that is associated with credit provisions and different state income tax rates for comparable institutions. ROATCE is computed by dividing net earnings applicable to common shareholders by average tangible common shareholders' equity. Management believes that ROATCE is meaningful because it measures the performance of a business consistently, whether acquired or internally developed. ROATCE is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. Management also believes that during a crisis such as the COVID-19 pandemic, this information is useful as the impact of the pandemic on the provisions for credit losses of various institutions will likely vary based on the geography of the communities served by a particular institution.

		Three Months Ended																				Nine Months Ended
(dollars in thousands)		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				September 30, 2022				September 30, 2021
Net income (as reported)		$	7,580			$	6,834			$	6,288			$	6,751			$	6,404			$	20,702			$	19,135
Provision for credit losses			694				425				450				—				—				1,569				586
Provision (recovery) for unfunded commitments			6				26				(31	)			—				—				1				—
Income tax expenses			2,380				2,369				2,133				2,241				2,158				6,882				6,475
Non-GAAP PTPP income		$	10,660			$	9,654			$	8,840			$	8,992			$	8,562			$	29,154			$	26,196
ROAA			1.31	%			1.19	%			1.08	%			1.18	%			1.17	%			1.19	%			1.20	%
Pre-tax Pre-Provision ROAA			1.84	%			1.68	%			1.52	%			1.57	%			1.57	%			1.68	%			1.64	%
ROACE			15.97	%			14.39	%			12.30	%			13.00	%			12.45	%			14.17	%			12.53	%
Pre-tax Pre-Provision ROACE			22.46	%			20.33	%			17.29	%			17.31	%			16.65	%			19.96	%			17.16	%
Average assets		$	2,322,315			$	2,293,536			$	2,325,992			$	2,293,264			$	2,187,989			$	2,313,887			$	2,125,596
Average equity		$	189,838			$	189,992			$	204,554			$	207,745			$	205,723			$	194,741			$	203,597

		Three Months Ended																				Nine Months Ended
(dollars in thousands)		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021				September 30, 2022				September 30, 2021
Net income (as reported)		$	7,580			$	6,834			$	6,288			$	6,751			$	6,404			$	20,702			$	19,135
Core deposit intangible amortization (net of tax)			74				76				81				86				91				231				284
Net earnings applicable to common shareholders		$	7,654			$	6,910			$	6,369			$	6,837			$	6,495			$	20,933			$	19,419
ROATCE			17.18	%			15.50	%			13.22	%			13.97	%			13.41	%			15.25	%			13.53	%
Average tangible common equity		$	178,215			$	178,269			$	192,725			$	195,803			$	193,662			$	183,017			$	191,411

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME(UNAUDITED)
		For the Three Months Ended September 30,																				For the Three Months Ended
			2022										2021									September 30, 2022										June 30, 2022
(dollars in thousands)		Average Balance				Interest			Average Yield/Cost			Average Balance				Interest			Average Yield/Cost			Average Balance				Interest			Average Yield/Cost			Average Balance				Interest			Average Yield/Cost
Assets
Interest-earning assets:
Commercial real estate		$	1,205,675			$	13,117		4.35	%		$	1,094,089			$	10,977		4.01	%		$	1,205,675			$	13,117		4.35	%		$	1,181,885			$	11,842		4.01	%
Residential first mortgages			82,336				715		3.47	%			100,195				742		2.96	%			82,336				715		3.47	%			85,030				730		3.43	%
Residential rentals			223,532				2,286		4.09	%			154,481				1,565		4.05	%			223,532				2,286		4.09	%			194,972				1,999		4.10	%
Construction and land development			27,770				386		5.56	%			34,810				399		4.58	%			27,770				386		5.56	%			30,302				361		4.77	%
Home equity and second mortgages			25,612				352		5.50	%			27,751				246		3.55	%			25,612				352		5.50	%			26,101				274		4.20	%
Commercial loans			52,280				865		6.62	%			44,881				547		4.88	%			52,280				865		6.62	%			42,744				517		4.84	%
Commercial equipment loans			76,392				781		4.09	%			59,964				614		4.10	%			76,392				781		4.09	%			68,349				699		4.09	%
U.S. SBA PPP loans			2,595				160		24.66	%			71,751				1,236		6.89	%			2,595				160		24.66	%			11,847				315		10.64	%
Consumer loans			5,082				73		5.75	%			1,742				16		3.67	%			5,082				73		5.75	%			4,040				35		3.47	%
Allowance for credit losses			(21,667	)			—		0.00	%			(18,852	)			—		0.00	%			(21,667	)			—		0.00	%			(21,375	)			—		0.00	%
Loan portfolio(1)		$	1,679,607			$	18,735		4.46	%		$	1,570,812			$	16,342		4.16	%		$	1,679,607			$	18,735		4.46	%		$	1,623,895			$	16,772		4.13	%
Taxable investment securities			464,560				2,338		2.01	%			370,498				1,212		1.31	%			464,560				2,338		2.01	%			484,079				1,808		1.49	%
Nontaxable investment securities			21,225				116		2.19	%			16,204				84		2.07	%			21,225				116		2.19	%			21,304				117		2.20	%
Interest-bearing deposits in other banks			18,930				85		1.80	%			36,516				16		0.18	%			18,930				85		1.80	%			23,958				63		1.05	%
Federal funds sold			11,163				71		2.54	%			30,266				5		0.07	%			11,163				71		2.54	%			6,178				14		0.91	%
Total Interest-Earning Assets			2,195,485				21,345		3.89	%			2,024,296				17,659		3.49	%			2,195,485				21,345		3.89	%			2,159,414				18,774		3.48	%
Cash and cash equivalents			18,975										66,292										18,975										28,645
Goodwill			10,835										10,835										10,835										10,835
Core deposit intangible			788										1,226										788										888
Other assets			96,232										85,340										96,232										93,754
Total Assets		$	2,322,315									$	2,187,989									$	2,322,315									$	2,293,536
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits		$	644,606			$	—		0.00	%		$	434,316			$	—		0.00	%		$	644,606			$	—		0.00	%		$	650,249			$	—		0.00	%
Interest-bearing deposits
Savings			121,450				15		0.05	%			110,873				14		0.05	%			121,450				15		0.05	%			120,645				15		0.05	%
Demand deposits			620,109				1,499		0.97	%			659,628				75		0.05	%			620,109				1,499		0.97	%			571,475				431		0.30	%
Money market deposits			378,251				99		0.10	%			358,017				100		0.11	%			378,251				99		0.10	%									0.11	%
Certificates of deposit			304,361				237		0.31	%			341,672				405		0.47	%			304,361				237		0.31	%			317,930				270		0.34	%
Total interest-bearing deposits			1,424,171				1,850		0.52	%			1,470,190				594		0.16	%			1,424,171				1,850		0.52	%			1,395,644				819		0.23	%
Total Deposits			2,068,777				1,850		0.36	%			1,904,506				594		0.12	%			2,068,777				1,850		0.36	%			2,045,893				819		0.16	%
Long-term debt			—				—		0.00	%			25,625				131		2.04	%			—				—		0.00	%			3,350				22		2.63	%
Short-term debt			8,310				52		2.50	%			—				—		0.00	%			8,310				52		2.50	%			5,791				16		1.11	%
Subordinated Notes			19,543				252		5.16	%			19,487				251		5.15	%			19,543				252		5.16	%			19,529				252		5.16	%
Guaranteed preferred beneficial interest in junior subordinated debentures			12,000				134		4.47	%			12,000				74		2.47	%			12,000				134		4.47	%			12,000				97		3.23	%
Total Debt			39,853				438		4.40	%			57,112				456		3.19	%			39,853				438		4.40	%			40,670				387		3.81	%
Interest-Bearing Liabilities			1,464,024				2,288		0.63	%			1,527,302				1,050		0.27	%			1,464,024				2,288		0.63	%			1,436,314				1,206		0.34	%
Total Funds			2,108,630				2,288		0.43	%			1,961,618				1,050		0.21	%			2,108,630				2,288		0.43	%			2,086,563				1,206		0.23	%
Other liabilities			23,847										20,648										23,847										16,981
Stockholders' equity			189,838										205,723										189,838										189,992
Total Liabilities and Stockholders' Equity		$	2,322,315									$	2,187,989									$	2,322,315									$	2,293,536
Net interest income						$	19,057									$	16,609									$	19,057									$	17,568
Interest rate spread									3.26	%									3.22	%									3.26	%									3.14	%
Net yield on interest-earning assets									3.47	%									3.28	%									3.47	%									3.25	%
Average interest-earning assets to average interest-bearing liabilities									149.96	%									132.54	%									149.96	%									150.34	%
Average loans to average deposits									81.19	%									82.48	%									81.19	%									79.37	%
Average transaction deposits to total average deposits **									85.29	%									82.06	%									85.29	%									84.46	%
Cost of funds									0.43	%									0.21	%									0.43	%									0.23	%
Cost of deposits									0.36	%									0.12	%									0.36	%									0.16	%
Cost of debt									4.40	%									3.19	%									4.40	%									3.81	%

(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There were $62,000, $91,000 and $55,000 of accretion interest for the three months ended September 30, 2022 and 2021, and June 30, 2022, respectively.

____________________________________

** Transaction deposits exclude time deposits.

AVERAGE CONSOLIDATED BALANCE SHEETS AND NET INTEREST INCOME (UNAUDITED)
		For the Nine Months Ended September 30,
			2022										2021
(dollars in thousands)		Average Balance				Interest			Average Yield/Cost			Average Balance				Interest			Average Yield/Cost
Assets
Interest-earning assets:
Commercial real estate		$	1,166,898			$	35,697		4.08	%		$	1,081,350			$	32,625		4.02	%
Residential first mortgages			84,707				2,157		3.40				111,401				2,494		2.99
Residential rentals			205,368				6,116		3.97				144,316				4,421		4.08
Construction and land development			30,559				1,154		5.04				36,401				1,226		4.49
Home equity and second mortgages			25,885				871		4.49				28,689				745		3.46
Commercial loans			47,252				1,932		5.45				44,241				1,614		4.86
Commercial equipment loans			68,872				2,122		4.11				60,506				1,725		3.80
U.S. SBA PPP loans			11,563				927		10.69				97,231				4,356		5.97
Consumer loans			4,119				141		4.56				1,497				48		4.28
Allowance for credit losses			(21,364	)			—		—				(18,908	)			—		—
Loan portfolio(1)		$	1,623,859			$	51,117		4.20			$	1,586,724			$	49,254		4.14
Taxable investment securities			477,527				5,717		1.60				292,625				3,182		1.45
Nontaxable investment securities			20,028				327		2.18				17,517				279		2.12
Interest-bearing deposits in other banks			28,412				209		0.98				30,183				44		0.19
Federal funds sold			5,821				85		1.95				27,964				22		0.10
Total Interest-Earning Assets			2,155,647				57,455		3.55				1,955,013				52,781		3.60
Cash and cash equivalents			54,369										71,559
Goodwill			10,835										10,835
Core deposit intangible			889										1,351
Other assets			92,147										86,838
Total Assets		$	2,313,887									$	2,125,596
Liabilities and Stockholders' Equity
Noninterest-bearing demand deposits			635,013				—		—	%			407,375				—		—	%
Interest-bearing liabilities:
Savings			121,111				46		0.05				106,190			$	40		0.05
Demand deposits			605,590				2,033		0.45				628,543				258		0.05
Money market deposits			380,873				302		0.11				354,161				297		0.11
Certificates of deposit			314,813				801		0.34				345,821				1,441		0.56
Total Interest-bearing deposits			1,422,387				3,182		0.30				1,434,715				2,036		0.19
Total Deposits			2,057,400				3,182		0.21				1,842,090				2,036		0.15
Long-term debt			5,145				47		1.22				26,723				213		1.06
Short-term borrowings			4,731				68		1.92				—				—		—
Subordinated Notes			19,529				755		5.15				19,483				754		5.16
Guaranteed preferred beneficial interest in junior subordinated debentures			12,000				309		3.43				12,000				225		2.50
Total Debt			41,405				1,179		3.80				58,206				1,192		2.73
Total Interest-Bearing Liabilities			1,463,792				4,361		0.40				1,492,921				3,228		0.29
Total funds			2,098,805				4,361		0.28	%			1,900,296				3,228		0.23	%
Other liabilities			20,341										21,703
Stockholders' equity			194,741										203,597
Total Liabilities and Stockholders' Equity		$	2,313,887									$	2,125,596
Net interest income						$	53,094									$	49,553
Interest rate spread									3.15	%									3.31	%
Net yield on interest-earning assets									3.28	%									3.38	%
Average interest-earning assets to average interest-bearing liabilities									147.26	%									130.95	%
Average loans to average deposits									78.93	%									86.14	%
Average transaction deposits to total average deposits **									84.70	%									81.23	%
Cost of funds									0.28	%									0.23	%
Cost of deposits									0.21	%									0.15	%
Cost of debt									3.80	%									2.73	%

(1) Loan average balance includes non-accrual loans. There are no tax equivalency adjustments. There were $168,000 and $256,000 of accretion interest during the nine months ended September 30, 2022 and 2021, respectively.

____________________________________

** Transaction deposits exclude time deposits.

SUMMARY OF LOAN PORTFOLIO (UNAUDITED) (dollars in thousands)
Portfolio loans, net of deferred costs and fees, are summarized by type as follows:
		As of **
BY LOAN TYPE		September 30, 2022				%			June 30, 2022				%			March 31, 2022				%			December 31, 2021				%			September 30, 2021				%
Portfolio Loans:
Commercial real estate		$	1,202,660			68.98	%		$	1,178,758			71.33	%		$	1,177,761			72.28	%		$	1,113,793			70.54	%		$	1,087,102			70.89	%
Residential first mortgages			83,081			4.77				84,782			5.13				86,416			5.30				92,710			5.87				98,590			6.43
Residential rentals			282,365			16.20				210,116			12.72				191,065			11.73				194,911			12.35				172,073			11.22
Construction and land development			23,197			1.33				31,068			1.88				30,649			1.88				35,502			2.25				37,070			2.42
Home equity and second mortgages			26,054			1.49				25,200			1.53				26,445			1.62				25,661			1.63				26,542			1.73
Commercial loans			41,615			2.39				43,472			2.63				48,948			3.00				50,512			3.20				48,287			3.15
Consumer loans			5,754			0.33				4,511			0.27				3,592			0.22				3,015			0.19				2,183			0.14
Commercial equipment			78,551			4.51				74,552			4.51				64,662			3.97				62,706			3.97				61,569			4.02
Total portfolio loans			1,743,277			100.00	%			1,652,459			100.00	%			1,629,538			100.00	%			1,578,810			100.00	%			1,533,416			100.00	%
Less: Allowance for Credit Losses			(22,027	)		(1.26	)			(21,404	)		(1.30	)			(21,382	)		(1.31	)			(18,417	)		(1.17	)			(18,579	)		(1.21	)
Total net portfolio loans			1,721,250							1,631,055							1,608,156							1,560,393							1,514,837
U.S. SBA PPP loans			1,211							5,022							15,279							26,398							54,807
Total net loans		$	1,722,461						$	1,636,077						$	1,623,435						$	1,586,791						$	1,569,644

____________________________________

** December 31, 2021 and September 30, 2021 reported balance are shown net of deferred costs and fees to conform with the current period's presentation.

END OF PERIOD CONTRACTUAL RATES (UNAUDITED)
The following table is based on end of period ("EOP") contractual interest rates and does not include the amortization of deferred costs and fees or assumptions regarding non-accrual interest:
		September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			September 30, 2021
(dollars in thousands)		EOP Contractual Interest rate			EOP Contractual Interest rate			EOP Contractual Interest rate			EOP Contractual Interest rate			EOP Contractual Interest rate
Commercial real estate		4.36	%		4.00	%		3.79	%		3.79	%		3.91	%
Residential first mortgages		3.84	%		3.83	%		3.80	%		3.80	%		3.84	%
Residential rentals		4.34	%		4.03	%		3.78	%		3.81	%		3.97	%
Construction and land development		5.61	%		4.57	%		4.36	%		4.38	%		4.32	%
Home equity and second mortgages		5.64	%		4.19	%		3.50	%		3.51	%		3.51	%
Commercial loans		5.93	%		4.79	%		4.47	%		4.48	%		4.48	%
Consumer loans		5.12	%		5.13	%		4.33	%		4.37	%		5.26	%
Commercial equipment		4.37	%		4.30	%		4.29	%		4.32	%		4.39	%
U.S. SBA PPP loans		1.00	%		1.00	%		1.00	%		1.00	%		1.00	%
Total Loans		4.41	%		4.04	%		3.81	%		3.80	%		3.85	%
Yields without U.S. SBA PPP Loans		4.41	%		4.05	%		3.85	%		3.84	%		3.95	%

ALLOWANCE FOR CREDIT LOSSES AND ALLOWANCE FOR LOAN LOSSES (UNAUDITED)
(dollars in thousands)		For the Three Months Ended**
		September 30, 2022				June 30, 2022				March 31, 2022				December 31, 2021				September 30, 2021
Beginning of period		$	21,404			$	21,382			$	18,417			$	18,579			$	18,516
Impact of ASC 326 Adoption			—				—				2,496				—				—
Charge-offs			(92	)			(447	)			—				(181	)			(491	)
Recoveries			21				44				19				19				554
Net (charge-offs) recoveries			(71	)			(403	)			19				(162	)			63
Provision for credit losses			694				425				450				—				—
End of period		$	22,027			$	21,404			$	21,382			$	18,417			$	18,579
Net (charge-offs) recoveries to average portfolio loans (annualized)2			(0.02	)%			(0.10	)%			0.00	%			(0.04	)%			0.02	%
Breakdown of general and specific allowance as a percentage of total portfolio loans2
General allowance		$	21,919			$	21,108			$	21,087			$	18,151			$	18,256
Specific allowance			108				296				295				266				323
		$	22,027			$	21,404			$	21,382			$	18,417			$	18,579
General allowance			1.26	%			1.28	%			1.29	%			1.15	%			1.19	%
Specific allowance			—	%			0.02	%			0.02	%			0.02	%			0.02	%
Allowance to total portfolio loans			1.26	%			1.30	%			1.31	%			1.17	%			1.21	%
Allowance to non-acquired loans			n/a	(1)			n/a	(1)			n/a	(1)			1.20	%			1.25	%
Allowance + Non-PCI FV Mark			n/a	(2)			n/a	(2)		$	n/a	(2)		$	18,815			$	19,070
Allowance + Non-PCI FV Mark to total portfolio loans			n/a	(2)			n/a	(2)			n/a	(2)			1.19	%			1.24	%

____________________________________

** The Company implemented the CECL accounting standard effective January 1, 2022. The Company used an incurred loss methodology for quarters displayed before March 31, 2022.

(1)   Allowance to non-acquired loans is no longer relevant as the ACL considers all portfolio loans.

(2)   Allowance to non-acquired loans and Non-PCI FV Mark are no longer relevant as all the ACL considers all loan portfolios.

CLASSIFIED AND SPECIAL MENTION ASSETS3 (UNAUDITED)
The following is a breakdown of the Company's classified and special mention assets at September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021, 2020, 2019, and 2018, respectively:
		As of
(dollars in thousands)		9/30/2022				6/30/2022				3/31/2022				12/31/2021				12/31/2020				12/31/2019				12/31/2018
Classified loans
Substandard		$	5,967			$	6,062			$	4,745			$	5,211			$	19,249			$	26,863			$	32,226
Doubtful			—				—				—				—				—				—				—
Total classified loans			5,967				6,062				4,745				5,211				19,249				26,863				32,226
Special mention loans			160				160				—				—				7,672				—				—
Total classified and special mention loans		$	6,127			$	6,222			$	4,745			$	5,211			$	26,921			$	26,863			$	32,226
Classified loans		$	5,967			$	6,062			$	4,745			$	5,211			$	19,249			$	26,863			$	32,226
Classified securities			—				—				—				—				—				—				482
Other real estate owned			—				—				—				—				3,109				7,773				8,111
Total classified assets		$	5,967			$	6,062			$	4,745			$	5,211			$	22,358			$	34,636			$	40,819
Total classified assets as a percentage of total assets			0.25	%			0.26	%			0.20	%			0.22	%			1.10	%			1.93	%			2.42	%
Total classified assets as a percentage of Risk Based Capital			2.25	%			2.35	%			1.87	%			2.10	%			9.61	%			16.21	%			21.54	%

SUMMARY OF DEPOSITS (UNAUDITED)
		September 30, 2022						June 30, 2022						March 31, 2022						December 31, 2021						September 30, 2021
(dollars in thousands)		Balance			%			Balance			%			Balance			%			Balance			%			Balance			%
Noninterest-bearing demand		$	647,432		30.45	%		$	635,649		30.48	%		$	644,385		30.75	%		$	445,778		21.68	%		$	432,606		21.58	%
Interest-bearing:
Demand deposits			691,987		32.54	%			635,344		30.47	%			618,869		29.54	%			790,481		38.45	%			764,482		38.14	%
Money market deposits			371,175		17.45	%			380,712		18.26	%			387,700		18.51	%			372,717		18.13	%			355,582		17.74	%
Savings			123,564		5.81	%			119,363		5.72	%			124,038		5.92	%			119,767		5.82	%			112,282		5.60	%
Certificates of deposit			292,399		13.75	%			314,308		15.07	%			320,091		15.28	%			327,421		15.92	%			339,655		16.94	%
Total interest-bearing			1,479,125		69.55	%			1,449,727		69.52	%			1,450,698		69.25	%			1,610,386		78.32	%			1,572,001		78.42	%
Total Deposits		$	2,126,557		100.00	%		$	2,085,376		100.00	%		$	2,095,083		100.00	%		$	2,056,164		100.00	%		$	2,004,607		100.00	%
Transaction accounts		$	1,834,158		86.25	%		$	1,771,068		84.93	%		$	1,774,992		84.72	%		$	1,728,743		84.08	%		$	1,664,952		83.06	%

<sup>_________________________________

1</sup> The Company implemented the CECL accounting standard effective January 1, 2022. The Company used an incurred loss methodology for all periods compared before March 31, 2022.

² Portfolio loans include all loan portfolios except the U.S. SBA PPP loan portfolio

³ Classified loans are not net of deferred costs and fees before the quarter ended March 31, 2022.