On March 11, 2020, the World Health Organization declared a pandemic as a result of the global spread of the coronavirus, commonly referred to as COVID-19. The spread of the disease quickly accelerated in the United States and to date, all 50 states have reported cases. The U.S. and state governments reacted to the pandemic by issuing shelter at home orders and requiring that non-essential businesses be closed to prevent spread of the virus. The health crisis quickly turned into a financial crisis resulting in guidance and mandates regarding foreclosures and repossessions and accounting and regulatory changes designed to encourage banks to work with customers suffering detrimental financial impact.

As a result of the pandemic effecting the states and local markets in which it operates, the Corporation successfully implemented its Business Continuity Plan with the goal of protecting the health, safety and financial well-being of its associates and customers. As part of its plan to protect the financial well-being of its customers, the Corporation chose to participate and educate its customers on the government sponsored plans established to provide financial assistance to businesses.

The U.S. Government’s Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) established the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) which provides small businesses with resources to maintain payroll, hire back employees who may have been laid off, and to cover applicable overhead expenses. We continued to provide access to the PPP and process applications until the window closed on August 8, 2020. These loans are 100% guaranteed by the SBA, have up to a two year or five year maturity, provide for a six month deferral period, and have an interest rate of 1%. These loans may be forgiven, in whole or in part, by the SBA if the borrower meets certain conditions, including by using at least 60% of the loan proceeds for payroll costs. The SBA also established processing fees from 1% to 5%, depending on the loan amount. We anticipate receiving approximately $3.5 million in deferred loan fees.

In April 2020, the Bank established eligibility to participate in the Paycheck Protection Program Liquidity Facility (“PPPLF”) which was established by Congress and administered by the Federal Reserve Bank. This facility uses the SBA guaranteed PPP loans as collateral, offering 100% collateral coverage with no recourse to the Bank. The majority of the PPP loan disbursements have been to internal, non-interest-bearing accounts awaiting use by borrowers. During the second quarter of 2020, we did not access this facility. We will continue to monitor our liquidity position and determine appropriate timing to utilize these funds.

During the second quarter of 2020, the Bank was approved to participate in the Main Street Lending Program established by the Federal Reserve. This program supports lending to small and medium-sized businesses and non-profit organizations that were in sound financial condition before the onset of the COVID-19 pandemic.

In addition, our banking regulators and other financial regulators, on March 22, 2020 and revised April 7, 2020, issued a joint interagency statement titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of the COVID-19 pandemic. Pursuant to the interagency statement, loan modifications that do not meet the conditions of Section 4013 of the CARES Act may still qualify as a modification that

does not need to be accounted for as a troubled debt restructuring (“TDR”). Specifically, the agencies confirmed with the staff of the Financial Accounting Standards Board that short-term modifications made in good faith in response to the pandemic to borrowers who were current prior to any relief are not TDRs under GAAP. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. Appropriate allowances for loan losses are expected to be maintained. With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to the pandemic as past due because of the deferral. The interagency statement also states that during short-term pandemic-related loan modifications, these loans generally should not be reported as nonaccrual.

We have received requests from our borrowers. Requests are evaluated individually and approved modifications are based on the unique circumstances of each borrower. Modifications include either deferrals of principal and interest or interest only periods of three months. Residential mortgage deferrals result in extensions of the maturity dates of the loans and commercial modifications result in either an extension of the maturity payment or a balloon payment at maturity.

In accordance with Section 4013 of the CARES Act and the interagency statement, we have not accounted for such loans as TDRs, nor have we designated them as past due or nonaccrual. The following table includes data on our consumer, residential mortgage and commercial loan portfolios, including a breakdown by industry, and the percentage of the portfolio that has been modified through July 31, 2020 as a result of COVID-19. For comparative purposes, modifications reported through May 6, 2020 are included.


	Total Loans at 6/30/20 (*)				Active COVID Modifications at 7/31/20				Active COVID Modifications through 5/6/20
Industry Category	# of Loans (**)		Balance (000s)	Balance as % of Total Portfolio	# of Loans		Balance (000s)	Balance as % of Total Portfolio	# of Loans		Balance (000s)	Balance as % of Category
RE/Rental/Leasing - Non-Owner Occupied	88	$	120,891	11.6%	25	$	53,664	44.4%	14	$	31,069	26.1%
RE/Rental/Leasing - All Other	321		93,575	9.0%	43		23,562	25.2%	32		15,934	17.1%
Construction - Developers	19		57,486	5.5%	1		2,975	5.2%	—		—	0.0%
Accommodations	31		47,462	4.6%	12		33,246	70.0%	10		22,050	46.7%
Services	207		44,481	4.3%	26		15,539	34.9%	21		11,187	25.3%
Health Care/Social Assistance	57		33,056	3.2%	16		8,564	25.9%	10		4,652	15.1%
RE/Rental/Leasing - Multifamily	109		31,016	3.0%	24		11,447	36.9%	25		11,598	35.5%
RE/Rental/Leasing - Developers	39		29,028	2.8%	3		6,773	23.3%	1		18	0.1%
Manufacturing	50		25,774	2.5%	7		10,710	41.6%	5		4,394	16.8%
Construction - All Other	262		25,749	2.5%	19		3,142	12.2%	20		2,841	12.5%
Prof/Scientific/Technical	107		22,060	2.1%	25		7,521	34.1%	9		5,863	29.5%
Trade	521		15,413	1.5%	5		1,405	9.1%	5		1,036	6.0%
Transportation/Warehousing	104		15,120	1.5%	5		235	1.6%	5		194	1.3%
Food Service	32		9,926	1.0%	—		—	0.0%	—		—	0.0%
Public Administration	44		9,493	0.9%	11		3,003	31.6%	11		2,943	31.5%
Entertainment/Recreation	26		7,226	0.7%	6		2,626	36.3%	3		983	18.8%
Agriculture	50		4,618	0.4%	2		508	11.0%	2		508	12.4%
Energy	12		1,665	0.2%	—		—	0.0%	—		—	0.0%
Total Commercial	2,079	$	594,039	57.0%	230	$	184,920	31.1%	173	$	115,270	19.8%
Total Residential Mortgage	2,223		345,358	33.1%	93		26,089	7.6%	157		40,928	9.4%
Total Consumer	6,509		103,117	9.9%	60		3,444	3.3%	178		5,027	13.9%
Total Loans at June 30, 2020	10,811	$	1,042,514	100.0%	383	$	214,453	20.6%	508	$	161,225	15.3%

(*) Excluding 1,118 PPP loans totaling $144.4 million, 18.1% including PPP loans
(**) Including active loans/lines with no outstanding balance