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 ~~June~~September 30, 2020

☐	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: 000-25805

Fauquier Bankshares, Inc.

(Exact name of registrant as specified in its charter)

Virginia

54-1288193

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

10 Courthouse Square, Warrenton, Virginia		20186
(Address of principal executive offices)		(Zip Code)

(540) 347-2700

(Registrant’s telephone number, including area code)

(Not applicable)

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock Par value $3.13 per share	FBSS	The Nasdaq Capital Market
Common StockPar value $3.13 per share	FBSS	The Nasdaq Capital Market

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 (Section 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 to not use 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 ☒

The registrant had 3,794,725 shares of common stock outstanding as of ~~August~~November 76, 2020.

FAUQUIER BANKSHARES, INC.

INDEX

Part I. FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements	2
	Consolidated Balance Sheets (Unaudited)	2
	Consolidated Statements of Operations (Unaudited)	3
	Consolidated Statements of Comprehensive Income (Unaudited)	4
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)	5
	Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2526
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3941
Item 4.	Controls and Procedures	3941
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	4041
Item 1A.	Risk Factors	4041
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4243
Item 3.	Defaults Upon Senior Securities	4243
Item 4.	Mine Safety Disclosures	4243
Item 5.	Other Information	4243
Item 6.	Exhibits	4344
SIGNATURES		4445

Part I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Fauquier Bankshares, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)	~~June~~September 30, 2020 (Unaudited)			December 31, 2019
Assets
Cash and due from banks	$	1210,~~839~~994		$	9,124
Interest-bearing deposits in other banks		6662,~~686~~666			37,203
Federal funds sold		1413			14
Securities available for sale, at fair value		7884,~~250~~590			79,783
Restricted investments		21,~~687~~835			2,016
Mortgage loans held for sale		-235			247
Loans		~~622~~638,~~660~~103			550,226
Allowance for loan losses		(6,~~400~~701	)		(5,227	)
Loans, net		~~616~~631,~~260~~402			544,999
Premises and equipment, net		16,~~978~~790			17,492
Accrued interest receivable		2,~~818~~635			1,984
Other real estate owned, net		1,356			1,356
Bank-owned life insurance		14,~~141~~231			13,961
Other assets		13,~~524~~539			13,992
Total assets	$	~~825~~840,~~553~~286		$	722,171
Liabilities
Deposits:
Noninterest-bearing checking	$	~~169~~179,~~542~~650		$	123,492
Interest-bearing:
Checking		~~262~~252,~~274~~627			242,531
Savings and money market accounts		~~203~~235,~~038~~718			182,007
Time deposits		7071,~~952~~839			74,125
Total interest-bearing		~~536~~560,~~264~~184			498,663
Total deposits		~~705~~739,~~806~~834			622,155
Federal Home Loan Bank advances		3212,~~651~~629			16,695
Junior subordinated debt		4,124			4,124
Other liabilities		11,~~884~~492			12,075
Total liabilities		~~754~~768,~~465~~079			655,049
Shareholders’ Equity
Common stock, par value $3.13, and additional paid-in capital; authorized: 8,000,000 shares; issued and outstanding: 3,794,725 and 3,783,724 shares including 19,843 and 20,352 unvested restricted shares, respectively		16,~~117~~152			15,964
Retained earnings		5152,~~812~~885			49,787
Accumulated other comprehensive income, net		3,~~159~~170			1,371
Total shareholders’ equity		7172,~~088~~207			67,122
Total liabilities and shareholders’ equity	$	~~825~~840,~~553~~286		$	722,171

See accompanying Notes to Consolidated Financial Statements.

Fauquier Bankshares, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share data)	2020			2019			2020			2019
Interest Income
Interest and fees on loans	$	6,~~507~~348		$	6,~~573~~651		$	1219,~~974~~322		$	1319,~~144~~795
Interest and dividends on securities:
Taxable interest income		~~364~~338			~~365~~355			~~743~~1,081			~~734~~1,089
Tax-exempt interest		~~100~~107			8589			~~199~~306			~~174~~263
Dividends		2729			3257			5584			70127
Interest on deposits in other banks		1019			~~224~~210			94113			~~336~~547
Total interest income		76,~~008~~841			7,~~279~~362			1420,~~065~~906			1421,~~458~~821
Interest Expense
Interest on deposits		~~499~~420			~~957~~930			1,~~246~~666			12,~~796~~727
Interest on federal funds purchased		-			-			-			14
Interest on Federal Home Loan Bank advances		7678			~~188~~190			~~147~~225			~~332~~523
Interest on Junior subordinated debt		49			5051			99148			99149
Total interest expense		~~624~~547			1,~~195~~171			12,~~492~~039			23,~~241~~413
Net interest income		6,~~384~~294			6,~~084~~191			1218,~~573~~867			1218,~~217~~408
Provision for loan losses		~~911~~345			~~205~~-			1,~~261~~606			255
Net interest income after provision for loan losses		5,~~473~~949			56,~~879~~191			1117,~~312~~261			1118,~~962~~153
Noninterest Income
Trust and estate fees		~~499~~681			~~427~~442			~~960~~1,641			~~843~~1,285
Brokerage fees		~~120~~127			~~128~~115			~~266~~393			~~218~~333
Service charges on deposit accounts		~~220~~259			~~378~~382			~~572~~831			~~761~~1,142
Interchange fee income, net		~~297~~333			~~313~~394			~~567~~900			~~584~~979
Bank-owned life insurance		90			9092			~~180~~270			~~183~~275
Other income (loss)		(4327	)		58188			(3259	)		~~206~~392
Gain on sale of securities available for sale		-			-			-			79
Gain on sale of mortgage loans held for sale, net		33			6			45			6
Gain (loss) on sale of mortgage loans held for sale, net		15			(3	)		60			2
Total noninterest income		1,~~216~~478			1,~~400~~610			24,~~558~~036			24,~~880~~487
Noninterest Expenses
Salaries and benefits		23,~~435~~076			23,~~923~~035			58,~~387~~463			58,~~935~~968
Occupancy		~~579~~586			~~604~~561			1,~~243~~829			1,~~219~~781
Furniture and equipment		~~190~~196			~~275~~269			~~381~~577			~~558~~827
Marketing and business development		~~107~~114			~~171~~129			~~216~~329			~~357~~487
Legal, audit and consulting		~~304~~301			~~282~~270			~~574~~875			~~531~~801
Data processing		~~361~~338			~~325~~353			~~736~~1,074			~~679~~1,031
Federal Deposit Insurance Corporation assessment		8195			93-			~~165~~260			187
Other operating expenses		832			836			1,792			1,761
Merger related expenses		43			-			43			-
Total noninterest expenses		4,889			5,509			10,494			11,227
Other operating expenses		921			802			2,713			2,561
Income before income taxes		1,800			1,770			3,376			3,615
Total noninterest expenses		5,670			5,419			16,163			16,643
Income tax expense		222			206			402			419
Income before income taxes		1,757			2,382			5,134			5,997
Net Income	$	1,578		$	1,564		$	2,974		$	3,196
Income tax expense		210			330			613			749
Earnings per share, basic	$	0.42		$	0.41		$	0.78		$	0.84
Net Income	$	1,547		$	2,052		$	4,521		$	5,248
Earnings per share, diluted	$	0.42		$	0.41		$	0.78		$	0.84
Earnings per share, basic	$	0.41		$	0.54		$	1.19		$	1.39
Dividends per share	$	0.125		$	0.12		$	0.25		$	0.24
Earnings per share, diluted	$	0.41		$	0.54		$	1.19		$	1.38
Dividends per share	$	0.125		$	0.12		$	0.375		$	0.36

See accompanying Notes to Consolidated Financial Statements.

Fauquier Bankshares, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2020			2019			2020			2019
Net income	$	1,~~578~~547		$	12,~~564~~052		$	24,~~974~~521		$	35,~~196~~248
Other comprehensive income, net of tax:
Change in fair value of securities available for sale, net of tax, $(188), $(257), $(580) and $(519), respectively		708			970			2,181			1,954
Change in fair value of securities available for sale, net of tax, $9, $(100), $(571) and $(619), respectively		(34	)		374			2,147			2,328
Reclassification adjustment for gains on securities available for sale, net of tax, $0, $0, $0 and $17, respectively		-			-			-			(62	)
Change in fair value of interest rate swap, net of tax, $(1), $37, $104 and $61, respectively		6			(136	)		(393	)		(228	)
Change in fair value of interest rate swap, net of tax, $(11), $37, $93 and $98, respectively		45			(141	)		(348	)		(369	)
Total other comprehensive income, net of tax, $(189), $(220), $(476) and $(441), respectively		714			834			1,788			1,664
Total other comprehensive income, net of tax, $(2), $(63), $(478) and $(504), respectively		11			233			1,799			1,897
Total comprehensive income	$	21,~~292~~558		$	2,~~398~~285		$	46,~~762~~320		$	47,~~860~~145

See accompanying Notes to Consolidated Financial Statements.

Fauquier Bankshares, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(In thousands, except share and per share data)	Common Stock and Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income		Total
Balance, March 31, 2019	$	15,861		$	45,980		$	292	$	62,133
Net income		-			1,564			-		1,564
Other comprehensive loss, net of tax, $(220)		-			-			834		834
Cash dividends ($0.12 per share)		-			(454	)		-		(454	)
Amortization of unearned compensation, restricted stock awards		40			-			-		40
Repurchase of common stock (520 shares)		(11	)		-			-		(11	)
Balance, June 30, 2019	$	15,890		$	47,090		$	1,126	$	64,106
Balance, March 31, 2020	$	16,083		$	50,709		$	2,445	$	69,237
Net income		-			2,052			-		2,052
Net income		-			1,578			-		1,578
Other comprehensive income, net of tax, $(63)		-			-			233		233
Other comprehensive income, net of tax, $(189)		-			-			714		714
Cash dividends ($0.12 per share)		-			(455	)		-		(455	)
Cash dividends ($0.125 per share)		-			(475	)		-		(475	)
Amortization of unearned compensation, restricted stock awards		40			-			-		40
Amortization of unearned compensation, restricted stock awards		34			-			-		34
Balance, September 30, 2019	$	15,930		$	48,687		$	1,359	$	65,976
Balance, June 30, 2020	$	16,117		$	51,812		$	3,159	$	71,088
Net income		-			1,547			-		1,547
Other comprehensive income, net of tax, $(2)		-			-			11		11
Cash dividends ($0.125 per share)		-			(474	)		-		(474	)
Amortization of unearned compensation, restricted stock awards		35			-			-		35
Balance, September 30, 2020	$	16,152		$	52,885		$	3,170	$	72,207

(In thousands, except share and per share data)	Common Stock and Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2018	$	15,742		$	44,803		$	(538	)	$	60,007
Net income		-			35,~~196~~248			-			35,~~196~~248
Other comprehensive income, net of tax effect, $(441)		-			-			1,664			1,664
Other comprehensive income, net of tax effect, $(504)		-			-			1,897			1,897
Cash dividends ($0.24 per share)		-			(909	)		-			(909	)
Cash dividends ($0.36 per share)		-			(1,364	)		-			(1,364	)
Amortization of unearned compensation, restricted stock awards		74114			-			-			74114
Issuance of common stock - unvested shares (5,884 shares)		-			-			-			-
Issuance of common stock - vested shares (4,149 shares)		95			-			-			95
Repurchase of common stock (960 shares)		(21	)		-			-			(21	)
Balance, June 30, 2019	$	15,890		$	47,090		$	1,126		$	64,106
Balance, September 30, 2019	$	15,930		$	48,687		$	1,359		$	65,976
Balance, December 31, 2019	$	15,964		$	49,787		$	1,371		$	67,122
Net income		-			24,~~974~~521			-			24,~~974~~521
Other comprehensive income, net of tax, $(476)		-			-			1,788			1,788
Other comprehensive income, net of tax, $(478)		-			-			1,799			1,799
Cash dividends ($0.25 per share)		-			(949	)		-			(949	)
Cash dividends ($0.375 per share)		-			(1,423	)		-			(1,423	)
Amortization of unearned compensation, restricted stock awards		69104			-			-			69104
Issuance of common stock - unvested shares (7,889 shares)		-			-			-			-
Issuance of common stock - vested shares (4,293 shares)		90			-			-			90
Issuance of common stock - performance-based restricted stock units (826 shares)		18			-			-			18
Repurchase of common stock (2,007 shares)		(24	)		-			-			(24	)
Balance, June 30, 2020	$	16,117		$	51,812		$	3,159		$	71,088
Balance, September 30, 2020	$	16,152		$	52,885		$	3,170		$	72,207

See accompanying Notes to Consolidated Financial Statements.

Fauquier Bankshares, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
	Nine Months Ended September 30,
(In thousands)	2020			2019
Cash Flows from Operating Activities
Net income	$	24,~~974~~521		$	35,~~196~~248
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		~~535~~809			~~644~~967
Provision for loan losses		1,~~261~~606			255
Loss on interest rate swaps		2			-
(Gain) loss on interest rate swaps		(3	)		8
Gain on sales of securities available for sale		-			(79	)
Amortization of security premiums, net		~~247~~377			~~206~~330
Amortization of unearned compensation, net of forfeiture		~~(30~~22	)		~~134~~190
Issuance of vested restricted stock		108			95
Bank-owned life insurance income		(~~180~~270	)		(~~183~~275	)
Originations of mortgage loans held for sale		(12,~~884~~761	)		(~~260~~2,362	)
Proceeds from mortgage loans held for sale		2,~~176~~833			~~266~~864
Gain on mortgage loans held for sale		(4560	)		(62	)
Changes in assets and liabilities:
Increase in other assets		(~~844~~678	)		(54,~~650~~998	)
Increase (decrease) in other liabilities		(~~744~~993	)		4,~~925~~916
Net cash provided by operating activities		35,~~576~~511			35,~~543~~157
Cash Flows from Investing Activities
Proceeds from sales, maturities, calls and principal payments of securities available for sale		610,~~317~~500			1819,~~014~~934
Purchase of securities available for sale		(212,~~270~~966	)		(1517,~~601~~990	)
Purchase of premises and equipment		(21107	)		(~~374~~500	)
Purchase of restricted investments, net		(671	)		(331	)
(Purchase) redemption of restricted investments, net		181			(331	)
Loan originations, net		(7287,~~367~~953	)		54,~~483~~270
Net cash provided by (used in) investing activities		(6990,~~012~~345	)		75,~~191~~383
Cash Flows from Financing Activities
Increase (decrease) in noninterest-bearing checking, interest-bearing checking, savings and money market accounts		86119,~~824~~965			(3929,~~428~~926	)
Increase (decrease) in time deposits		(32,~~173~~286	)		118,~~046~~288
Increase in Federal Home Loan Bank advances		15,956			5,958
Increase (decrease) in Federal Home Loan Bank advances		(4,066	)		5,937
Cash dividends paid on common stock		(~~949~~1,423	)		(~~909~~1,364	)
Repurchase of common stock		(24	)		(21	)
Net cash provided by (used in) financing activities		98112,~~634~~166			(2317,~~354~~086	)
Increase (decrease) in cash and cash equivalents		3327,~~198~~332			(126,~~620~~546	)
Cash and Cash Equivalents
Beginning		46,341			67,110
Ending	$	7973,~~539~~673		$	5460,~~490~~564
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest	$	12,~~556~~121		$	23,~~037~~159
Income taxes	$	-785		$	~~420~~640
Supplemental Disclosures of Noncash Investing Activities
Unrealized gain on securities available for sale, net of tax	$	2,~~181~~147		$	12,~~892~~266
Unrealized loss on interest rate swap, net of tax	$	(~~393~~348	)	$	(~~228~~369	)

See accompanying Notes to Consolidated Financial Statements.

FAUQUIER BANKSHARES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1.General

The consolidated financial statements include the accounts of Fauquier Bankshares, Inc. (the “Company”) and its wholly-owned subsidiary, The Fauquier Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, Fauquier Bank Services, Inc. and Specialty Properties Acquisitions - VA, LLC. Specialty Properties Acquisitions - VA, LLC was formed with the sole purpose of holding foreclosed property. The consolidated financial statements do not include the accounts of Fauquier Statutory Trust II, a wholly-owned subsidiary of the Company. In consolidation, significant intercompany financial balances and transactions have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of ~~June~~September 30, 2020 and the results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The notes included herein should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

The results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019 are not necessarily indicative of the results expected for the full year or any other interim period. Due to the significant uncertainties related to the ultimate duration of the novel coronavirus (“COVID-19”) pandemic and measures taken in response thereto, it is reasonably possible that estimates made in the financial statements could be materially and adversely impacted in the near term as a result of these conditions, including that the credit quality of the Company’s loan portfolio may decline and loan defaults could increase.

Certain amounts in the 2019 consolidated financial statements have been reclassified to conform to the 2020 presentation. No reclassifications were significant and there was no effect on net income.

~~Significant~~Business ~~Events~~Combination

On ~~March~~October 111, 2020, the ~~World~~Company ~~Health~~and ~~Organization~~Virginia ~~declared~~National ~~the~~Bankshares ~~novel~~Corporation ~~coronavirus~~ (“~~COVID-19~~Virginia National”) announced a ~~pandemic~~definitive asagreement to combine in a ~~result~~strategic ofmerger (the ~~global~~“Merger ~~spread~~Agreement”) ofpursuant to which the ~~illness~~Company will merge with and into Virginia National (the “Merger”). InAs ~~response~~a toresult of the ~~outbreak~~Merger, ~~federal~~the ~~and~~holders ~~state~~of ~~authorities~~shares inof the UCompany's common stock will receive 0.S.6750 ~~introduced~~shares ~~various~~of ~~measures~~Virginia toNational ~~try~~common tostock ~~limit~~for oreach ~~slow~~share of the ~~spread~~Company's common stock held immediately prior to the effective date of the ~~virus,~~Merger. ~~including~~The ~~travel~~transaction ~~restrictions~~is expected to be completed in the first quarter of 2021, ~~nonessential~~subject ~~business~~to ~~closures~~approval of both companies' shareholders, ~~stay-at-home~~regulatory ~~orders~~approvals and ~~strict~~other ~~social~~customary ~~distancing~~closing conditions.

The full impact of COVID-19 is unknown and rapidly evolving. It has caused substantial disruption in international and U.S. economies, markets and employment. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted to, among other provisions, provide emergency assistance for individuals, families and businesses affected by COVID-19.

The outbreak is having a significant adverse impact on certain industries the Company serves, including but not limited to, religious organizations, hospitality, childcare and restaurants. As of June 30, 2020, the Company’s aggregate exposure in these industries was $65.9 million, or 10.6% of total loans. Based on management’s current assessment of the increased inherent risk in the loan portfolio, the allowance for loan losses increased $1.2 million, or 22.4%, compared to December 31, 2019. The increase in the allowance for loan losses was in large part due to an increase in the qualitative factors related to COVID-19. Most notably, a $860,000 increase, was driven by the deteriorating economic conditions caused by COVID-19, including the increase in the unemployment rate for the Commonwealth of Virginia.

Due to the significant uncertainties related to the ultimate duration of COVID-19, it is reasonably possible that estimates made in the financial statements could be materially and adversely impacted in the near term as a result of these conditions, including that the credit quality of the Company’s loan portfolio may decline and loan defaults could increase.

Recent Accounting Pronouncements and Other Regulatory Statements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The amendments, among other things, require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available for sale debt securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU No. 2016-13 as codified in Topic 326, including ASU Nos. 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASUs have provided for various minor technical corrections and improvements to the codification as well as other transition matters. Smaller reporting companies who file with the SEC and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. Changes under ASU No. 2016-13 and subsequent updates represent a fundamental shift from existing GAAP and may result in a material increase to the Company's accounting for credit losses on financial instruments. To prepare for implementation of the new standard the Company established a working group to evaluate the impact these changes will have on the Company’s financial statements and related disclosures. The Company also contracted with a third-party for credit modeling in accordance with ASU No. 2016-13. The Company has focused on model validations, the

available for sale debt securities and purchased financial assets with credit deterioration. The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASUs 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03. These ASUs have provided for various minor technical corrections and improvements to the codification as well as other transition matters. Smaller reporting companies who file with the SEC and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022. Changes under ASU 2016-13 and subsequent updates represent a fundamental shift from existing GAAP and may result in a material increase to the Company's accounting for credit losses on financial instruments. To prepare for implementation of the new standard the Company has established a working group to evaluate the impact these changes will have on the Company’s financial statements and related disclosures. The Company has also contracted with a third-party for credit modeling in accordance with ASU 2016-13. The Company has focused on model validations, the development of processes and related controls, and the evaluation of parallel runs. The Company has not yet determined an estimate of the effect of these changes.

Effective November 25, 2019, the SEC adopted Staff Accounting Bulletin (“SAB”) 119. SAB 119 updated portions of the SEC’s interpretative guidance to align with FASB Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses.” The SAB covers topics including (i) measuring current expected credit losses; (ii) development, governance, and documentation of a systematic methodology; (iii) documenting the results of a systematic methodology; and (iv) validating a systematic methodology.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): “Changes to the Disclosure Requirements for Fair Value Measurement.” ASU No. 2018-13 ~~modifies~~modified the disclosure requirements on fair value measurements by requiring that Level 3 fair value disclosures include the range and weighted average of significant unobservable inputs used to develop those fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. Certain disclosure requirements in Topic 820 were also removed or modified. ASU No. 2018-13 was effective for the Company on January 1, 2020. The Company’s ~~does not expect the~~ adoption of ASU No. 2018-13 tohas ~~have~~not had a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” These amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. Certain disclosure requirements ~~have~~were ~~been~~ deleted while the following disclosure requirements ~~have~~were ~~been~~ added: the weighted-average interest crediting rates for cash balance plans and other plans with promised interest crediting rates and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. The amendments also clarify the disclosure requirements in paragraph 715-20-50-3, which state that the following information for defined benefit pension plans should be disclosed: The projected benefit obligation (“PBO”) and fair value of plan assets for plans with PBOs in excess of plan assets and the accumulated benefit obligation (“ABO”) and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments are effective for fiscal years ending after December 15, 2020. Early adoption is permitted. The Company does not expect the adoption of ASU No. 2018-14 to have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.” ~~The~~This ASU is expected to reduce the cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving financial statement preparers’ application of certain income tax-related guidance. This ASU is part of the FASB’s simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that ASU No. 2019-12 will have on its consolidated financial statements.

In January 2020, the FASB issued ASU No. 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” ~~The~~This ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions. ASU No. 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Among other topics, the amendments clarified that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of ASU No. 2020-01 to have a material impact on its consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the

~~value~~potential atburden ~~cost,~~in ~~less~~accounting ~~any~~for ~~impairment,~~reference ~~plus~~rate orreform. ~~minus~~This ~~changes~~ASU ~~resulting~~also ~~from~~provides ~~observable~~optional ~~price~~expedients ~~changes~~and inexceptions ~~orderly transactions~~ for ~~the~~applying ~~identical~~GAAP orto acontract ~~similar~~modifications ~~investment~~and ofhedging ~~the~~relationships, ~~same~~subject ~~issuer. Among~~to ~~other~~meeting ~~topics~~certain criteria, ~~the~~that ~~amendments~~reference ~~clarify~~London ~~that~~Inter-Bank anOffered ~~entity~~Rate ~~should~~(“LIBOR”) ~~consider~~or ~~observable~~another ~~transactions~~reference ~~that~~rate ~~require~~expected it to ~~either~~be ~~apply~~discontinued. orIt ~~discontinue~~is ~~the~~intended ~~equity~~to ~~method~~help ofstakeholders ~~accounting. For~~during ~~public~~the ~~business~~global ~~entities,~~market-wide ~~the~~reference ~~amendments~~rate intransition ~~the~~period. ~~ASU~~The ~~are~~guidance is effective for ~~fiscal~~all ~~years~~entities ~~beginning~~as ~~after~~of ~~December~~March 1512, 2020, ~~and~~through ~~interim~~December ~~periods~~31, ~~within those fiscal years~~2022. ~~Early~~ ~~adoption is permitted.~~ The Company ~~does~~continues ~~not~~to ~~expect~~evaluate the ~~adoption~~impact of ~~ASU~~the ~~2020-01~~reference torate ~~have~~reform ~~a material impact~~ on ~~its~~the Company’s consolidated financial statements.

InOn ~~March~~June ~~2020~~28, 2018, the ~~FASB~~SEC ~~issued~~adopted ~~ASU~~amendments Noto the definition of “smaller reporting company” that were effective on September 10, 2018. Under ~~2020-04~~the amended definition, generally, a company qualifies as a “~~Reference~~smaller ~~Rate~~reporting ~~Reform~~company” if (~~Topic~~i) ~~848~~it has public float of less than $250 million or (ii): ~~Facilitation~~it has less than $100 million in annual revenues and (a) no public float or (b) public float of less than $700 million. Because of the ~~Effects~~Company’s public float being less than $250 million as of ~~Reference~~the ~~Rate~~measurement ~~Reform~~date onin ~~Financial~~2019, ~~Reporting~~the Company is considered a smaller reporting company with respect to its SEC filings. On March 12, 2020, the SEC finalized amendments to its definitions of “accelerated filer” ~~These~~and “large accelerated filer.” The amendments ~~provide~~increase ~~temporary~~the ~~optional~~threshold ~~guidance~~criteria for meeting these filer classifications and are effective on April 27, 2020. Any changes in filer status are to ~~ease~~be applied beginning with the ~~potential~~filer’s ~~burden~~first inannual ~~accounting~~report ~~for~~filed ~~reference~~with ~~rate~~the ~~reform~~SEC subsequent to the effective date. For ~~The~~the ~~ASU~~Company, ~~provides~~this ~~optional~~will ~~expedients~~be ~~and~~its ~~exceptions~~annual ~~for~~report ~~applying~~on ~~GAAP~~Form 10-K with respect to ~~contract~~the ~~modifications~~year ~~and~~ending ~~hedging~~December ~~relationships~~31, ~~subject~~2020. Pursuant to ~~meeting~~Section ~~certain~~404(b) ~~criteria~~of the Sarbanes-Oxley Act, ~~that~~the ~~reference~~classifications ~~London~~of ~~Inter-bank~~“accelerated ~~Offered~~filer” ~~Rate~~and “large accelerated filer” require a public company to obtain an external auditor attestation concerning the effectiveness of a company’s internal control over financial reporting (“~~LIBOR~~ICFR”) orand ~~another~~include ~~reference~~the ~~rate~~opinion ~~expected~~on toICFR bein ~~discontinued~~its annual report on Form 10-K. ItThe isCompany ~~intended~~has tocomplied ~~help~~with ~~stakeholders~~such requirements during the ~~global~~years ~~market-wide~~it ~~reference~~was ~~rate~~considered ~~transition~~an ~~period.~~accelerated filer. The ~~guidance~~SEC’s March 2020 definition amendments exclude from the accelerated filer and large accelerated filer definitions an issuer that (i) is ~~effective~~eligible ~~for~~to ~~all~~be ~~entities~~a assmaller reporting company and (ii) had annual revenues of ~~March~~less ~~12,~~than ~~2020~~$100 ~~through~~million ~~December~~in ~~31,~~the ~~2022~~most recent fiscal year. Such ~~The~~entity can now be considered a “non-accelerated filer.” With respect to the 2020 fiscal year, the Company isexpects ~~currently~~to ~~evaluating~~continue to be a smaller reporting company and no longer be considered an accelerated filer. This would mean the ~~impact~~Company ofwould not be required to obtain the ~~reference~~external ~~rate~~auditor ~~reform~~attestation onof its ICFR. If the Company’s ~~consolidated~~annual revenues exceed $100 million, its category may change back to that of an accelerated filer. Non-accelerated filers have additional time to file quarterly and annual financial statements.

OnIn ~~June~~March ~~28,~~2020 2018, the SEC adopted amendments to the definition of “smaller reporting company” that were effective on September 10, 2018. Under the new definition, generally, a company qualifies as a “smaller reporting company” if (i)revised ~~it has public float of less than $250 million or (ii) it has less than $100 million~~ in ~~annual~~April ~~revenues and (a~~2020), novarious ~~public~~regulatory ~~float~~agencies, orincluding ~~(b)~~the ~~public~~Board ~~float~~ of ~~less~~Governors ~~than $700 million. Because~~ of the ~~Company’s~~Federal ~~public~~Reserve ~~float~~System ~~being~~and ~~less than $250 million as of~~ the ~~measurement~~Federal ~~date~~Deposit inInsurance ~~2019~~Corporation (collectively, “the ~~Company is considered a smaller reporting company with respect to its SEC filings. On March 12~~agencies”), ~~2020,~~issued ~~the~~an ~~SEC~~interagency ~~finalized~~statement ~~amendments~~on toloan ~~its~~modifications ~~definitions of “accelerated filer”~~ and ~~“large~~reporting ~~accelerated filer.” The amendments increase the threshold criteria~~ for ~~meeting~~financial ~~these~~institutions ~~filer~~working ~~classifications~~with ~~and~~customers ~~are~~affected ~~effective~~by ~~on April 27, 2020~~COVID-19. ~~Any~~The ~~changes~~interagency instatement ~~filer~~was ~~status~~effective ~~are~~immediately toand beimpacted ~~applied~~accounting ~~beginning~~for ~~with~~loan ~~the filer’s first annual report filed with the SEC subsequent to the effective date~~modifications. ~~For~~ ~~the~~Under ~~Company~~ASC 310-40, ~~this~~“Receivables ~~will be its annual report on Form 10~~-K ~~with~~Troubled ~~respect~~Debt toRestructurings ~~the~~by ~~year ending December 31~~Creditors,” ~~2020. Pursuant~~a torestructuring ~~Section 404(b)~~ of ~~the~~debt ~~Sarbanes-Oxley~~constitutes ~~Act,~~a ~~the~~troubled ~~classifications~~debt ofrestructuring (“~~accelerated filer~~TDR”) ~~and~~if ~~“large~~the ~~accelerated~~creditor, ~~filer”~~for ~~require~~economic aor ~~public~~legal ~~company~~reasons related to ~~obtain an external auditor attestation concerning~~ the ~~effectiveness of a company~~debtor’s ~~internal control over~~ financial ~~reporting~~difficulties, ~~(“ICFR”)~~grants ~~and~~a ~~include~~concession to the ~~opinion~~debtor onthat ~~ICFR~~it inwould ~~its~~not ~~annual~~otherwise ~~report on Form 10-K~~consider. The ~~Company~~agencies ~~has~~confirmed ~~complied~~ with ~~such~~the ~~requirements~~staff ~~during~~of the ~~years~~FASB itthat ~~was~~short-term ~~considered~~modifications anmade ~~accelerated~~on ~~filer. The~~a ~~SEC’s~~good ~~2020~~faith ~~definition~~basis ~~amendments~~in ~~exclude~~response ~~from~~to ~~the~~COVID-19 ~~accelerated~~to ~~filer~~borrowers ~~and~~who ~~large~~were ~~accelerated~~current ~~filer~~prior ~~definitions~~to anany ~~issuer~~relief, ~~that~~are ~~(i)~~not ~~is eligible~~ to be aconsidered ~~smaller reporting company and (ii) had annual revenues of less than $100 million in the most recent fiscal year~~TDRs. ~~Such~~ ~~entity~~This ~~can~~includes ~~now be considered a “non~~short-~~accelerated~~term ~~filer.” With~~modifications ~~respect~~such toas ~~the~~payment ~~2020~~deferrals, ~~fiscal~~fee ~~year~~waivers, ~~the~~extensions ~~Company~~of ~~expects~~repayment toterms, ~~continue~~or toother bedelays ain ~~smaller~~payment ~~reporting~~that ~~company~~are ~~and~~insignificant. noBorrowers ~~longer be~~ considered ancurrent ~~accelerated~~are ~~filer. This~~those ~~would~~that ~~mean~~are ~~the~~less ~~Company~~than ~~would~~30 ~~not~~days bepast ~~required~~due toon ~~obtain~~their ~~the~~contractual ~~external~~payments ~~auditor~~at ~~attestation of its ICFR. If~~ the ~~Company’s~~time ~~annual~~a ~~revenues~~modification ~~exceed~~program ~~$100~~is ~~million,~~implemented. ~~its~~See ~~category~~Note ~~may~~3 ~~change back to that~~ of anthe ~~accelerated~~consolidated ~~filer. Non-accelerated~~financial ~~filers~~statements ~~have~~for additional ~~time~~disclosure toof ~~file~~TDRs ~~quarterly~~as ~~and~~of ~~annual~~September ~~financial~~30, ~~statements~~2020.

In ~~March~~August 2020, ~~(revised~~the inFASB ~~April~~issued ~~2020),~~ASU ~~various~~No. ~~regulatory~~2020-06 ~~agencies,~~“Debt ~~including~~– ~~the~~Debt ~~Board~~with ofConversion ~~Governors~~and ofOther ~~the~~Options ~~Federal~~(Subtopic ~~Reserve~~470-20) ~~System~~and Derivatives and ~~the~~Hedging ~~Federal~~– ~~Deposit~~Contracts ~~Insurance~~in ~~Corporation~~Entity’s Own Equity (~~“the~~Subtopic ~~agencies”~~815-40),: ~~issued~~Accounting anfor ~~interagency~~Convertible ~~statement~~Instruments onand ~~loan~~Contracts ~~modifications~~in ~~and~~an ~~reporting~~Entity’s ~~for~~Own ~~financial~~Equity.” ~~institutions~~The ~~working~~ASU ~~with~~simplifies ~~customers~~accounting ~~affected~~for convertible instruments by ~~COVID-19.~~removing ~~The~~major ~~interagency~~separation ~~statement~~models ~~was~~required ~~effective~~under ~~immediately~~current ~~and~~U.S. ~~impacted~~GAAP. ~~accounting~~Consequently, ~~for~~more ~~loan~~convertible ~~modifications.~~debt ~~Under~~instruments ~~ASC~~will ~~310-40,~~be ~~“Receivables~~reported -as ~~Troubled~~a ~~Debt~~single ~~Restructurings~~liability byinstrument ~~Creditors,”~~and amore ~~restructuring~~convertible ofpreferred ~~debt~~stock ~~constitutes~~as a ~~troubled~~single ~~debt~~equity ~~restructuring~~instrument ~~(“TDR”)~~with ifno ~~the~~separate ~~creditor,~~accounting for ~~economic~~embedded orconversion ~~legal~~features. ~~reasons~~The ~~related~~ASU toremoves ~~the~~certain ~~debtor’s~~settlement ~~financial~~conditions ~~difficulties,~~that ~~grants~~are arequired ~~concession~~for toequity ~~the~~contracts ~~debtor~~to ~~that~~qualify itfor ~~would~~the ~~not~~derivative ~~otherwise~~scope ~~consider~~exception. The ~~agencies~~ASU ~~confirmed~~also ~~with~~simplifies the ~~staff~~diluted ofearnings ~~the~~per ~~FASB~~share ~~that~~calculation ~~short-term~~in ~~modifications~~certain ~~made~~areas. onIn aaddition, ~~good~~the ~~faith~~amendment ~~basis~~updates inthe ~~response~~disclosure torequirements ~~COVID-19~~for convertible instruments to ~~borrowers~~increase ~~who~~the ~~were~~information ~~current~~transparency. ~~prior~~For topublic ~~any~~business ~~relief~~entities, ~~are~~excluding ~~not~~smaller toreporting becompanies, ~~considered~~the ~~TDRs.~~amendments ~~This~~in ~~includes~~the ~~short-term~~ASU ~~modifications~~are ~~such~~effective asfor ~~payment~~fiscal ~~deferrals,~~years ~~fee~~beginning ~~waivers,~~after ~~extensions~~December of15, ~~repayment terms~~2021, orand ~~other~~interim ~~delays~~periods inwithin ~~payment~~those ~~that~~fiscal ~~are insignificant~~years. For ~~Borrowers~~all ~~considered~~other ~~current~~entities, ~~are~~the ~~those~~standard ~~that~~will ~~are~~be ~~less~~effective ~~than~~for 30fiscal ~~days~~years ~~past~~beginning ~~due~~after onDecember ~~their~~15, ~~contractual~~2023, ~~payments~~including atinterim ~~the~~periods ~~time~~within athose ~~modification~~fiscal ~~program~~years. Early adoption is ~~implemented~~permitted. ~~See~~The ~~Note~~Company 3does ofnot expect the ~~consolidated~~adoption ~~financial~~of ~~statements~~ASU ~~for~~2020-06 ~~additional~~to ~~disclosure~~have ofa ~~TDRs~~material asimpact ofon ~~June~~its ~~30,~~consolidated ~~2020~~financial statements.

In October 2020, the FASB issued ASU No. 2020-08, “Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs.” This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is not permitted. ASU No. 2020-08 states that all entities should apply the amendments in this ASU on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. The Company does not expect the adoption of ASU 2020-06 to have a material impact on its consolidated financial statements.

Note 2.Securities

The amortized cost and fair value of securities available for sale, with unrealized gains and losses follows:

	June 30, 2020
	September 30, 2020
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Obligations of U.S. Government corporations and agencies	$	5860,~~895~~791	$	3,~~071~~040	$	-(16	)	$	6163,~~966~~815
Obligations of states and political subdivisions		1419,~~956~~444		1,~~328~~401		-(70	)		1620,~~284~~775
	$	7380,~~851~~235	$	4,~~399~~441	$	-(86	)	$	7884,~~250~~590

	December 31, 2019
(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Obligations of U.S. Government corporations and agencies	$	63,090	$	937	$	(86	)	$	63,941
Obligations of states and political subdivisions		15,054		802		(14	)		15,842
	$	78,144	$	1,739	$	(100	)	$	79,783

The amortized cost and fair value of securities available for sale, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties.

	June 30, 2020
	September 30, 2020
(In thousands)	Amortized Cost		Fair Value
Due after one year through five years	$	17,305	$	18,360
Due in one year or less	$	1,055	$	1,065
Due after five years through ten years		10,020		10,588
Due after one year through five years		16,204		17,221
Due after ten years		46,526		49,302
Due after five years through ten years		10,396		11,032
	$	73,851	$	78,250
Due after ten years		52,580		55,272
	$	80,235	$	84,590

During the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, securities purchased were $213.30 million and $1518.60 million, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, proceeds from maturities, calls and principal payments of securities were $610.35 million and $413.19 million, respectively. During the ~~six~~nine months ended ~~June~~September 30, 2020 there were no securities sold. During the ~~six~~nine months ended ~~June~~September 30, 2019, securities sold were $136.90 million. There were no impairment losses on securities during the three and ~~six~~nine months ended ~~June~~September 30, 2020 and 2019.

There were no securities with gross unrealized losses at June 30, 2020. The following table shows the Company’s securities with gross unrealized losses, by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2019.

(In thousands)	Less than 12 Months					12 Months or More					Total
December 31, 2019	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
Obligations of U.S. Government corporations and agencies	$	11,460	$	(42	)	$	5,651	$	(44	)	$	17,111	$	(86	)
Obligations of states and political subdivisions		2,049		(14	)		-		-			2,049		(14	)
Total temporary impaired securities	$	13,509	$	(56	)	$	5,651	$	(44	)	$	19,160	$	(100	)

The ~~carrying~~following ~~value~~table ofshows the Company’s securities ~~pledged~~with togross ~~secure~~unrealized ~~deposits~~losses, by investment category and ~~for~~length ~~other~~of ~~purposes~~time ~~was~~that ~~$16.9 million~~individual ~~and~~securities ~~$16.6~~have ~~million~~been in a continuous unrealized loss position, at ~~June~~September 30, 2020 and December 31, 2019~~, respectively~~.

(In thousands)	Less than 12 Months					12 Months or More				Total
September 30, 2020	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)		Fair Value		Unrealized (Losses)
Obligations of U.S. Government corporations and agencies	$	6,097	$	(16	)	$	-	$	-	$	6,097	$	(16	)
Obligations of states and political subdivisions		4,081		(70	)		-		-		4,081		(70	)
Total temporary impaired securities	$	10,178	$	(86	)	$	-	$	-	$	10,178	$	(86	)

(In thousands)	Less than 12 Months					12 Months or More					Total
December 31, 2019	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)
Obligations of U.S. Government corporations and agencies	$	11,460	$	(42	)	$	5,651	$	(44	)	$	17,111	$	(86	)
Obligations of states and political subdivisions		2,049		(14	)		-		-			2,049		(14	)
Total temporary impaired securities	$	13,509	$	(56	)	$	5,651	$	(44	)	$	19,160	$	(100	)

There were 12 debt securities totaling $10.1 million of aggregate fair value considered temporarily impaired at September 30, 2020. The primary cause of the temporary impairments in the Company’s investments in debt securities was fluctuations in interest rates. The Company concluded that no other-than-temporary impairment existed in its securities portfolio at September 30, 2020, and no other-than-temporary impairment loss has been recognized in net income, based primarily on the fact that changes in fair value were caused primarily by fluctuations in interest rates, there were no securities with unrealized losses that were significant relative to their carrying amounts, no securities have been in an unrealized loss position continuously for more than 12 months, securities with unrealized losses had generally high credit quality, the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not that the Company will not be required to sell these investments before a recovery of its investment, and issuers have continued to make timely payments of principal and interest. Additionally, the Company’s mortgage-backed securities are entirely issued by either U.S. government agencies or U.S. government-sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.

The carrying value of securities pledged to secure deposits and for other purposes was $16.7 million and $16.6 million at September 30, 2020 and December 31, 2019, respectively.

Note 3.Loans and Allowance for Loan Losses

The Company’s allowance for loan losses has three basic components: specific, general, and unallocated. The specific component is used to individually allocate an allowance for larger balance, non-homogeneous loans identified as impaired. The general component is used to estimate the loss on pools of smaller balance, homogeneous loans, including 1-4 family mortgage loans and other consumer loans. The general component is also used for the remaining pool of larger balance, non-homogeneous loans, not identified as impaired. The unallocated component reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted to, among other provisions, provide emergency assistance for individuals, families and businesses affected by COVID-19. A provision in the CARES Act included the creation of the Paycheck Protection Program (“PPP”) through the Small Business Administration (“SBA”). Loans provided by the Bank through the PPP may be forgiven based on the borrowers’ compliance with the terms of the program. The SBA provides a 100% guaranty to the lender of principal and interest, unless the lender violates an obligation under the agreement. As loan losses are expected to be immaterial, if any at all, due to the SBA guaranty, there is no provision allocated for PPP loans within the allowance for loan loss calculation. The Commercial and ~~Industrial loan portfolio segment in the tables below include 543 PPP loans that totaled $52.8 million at June 30, 2020. There were no loans that were forgiven at June 30, 2020.~~

The following tables present the total allowance for loan losses by portfolio segment for the periods presented.

	June 30, 2020
(In thousands)	Commercial and Industrial			Commercial Real Estate		Construction and Land		Consumer			Student			Residential Real Estate		Home Equity Lines of Credit			Unallocated		Total
Allowance for Loan Losses
Beginning balance, December 31, 2019	$	296		$	1,788	$	652	$	154		$	65		$	1,596	$	326		$	350	$	5,227
Charge-offs		(99	)		-		-		(19	)		(2	)		-		-			-		(120	)
Recoveries		7			5		-		20			-			-		-			-		32
Provision (recovery)		339			382		366		(2	)		10			182		(16	)		-		1,261
Ending balance, June 30, 2020	$	543		$	2,175	$	1,018	$	153		$	73		$	1,778	$	310		$	350	$	6,400
Ending balances individually evaluated for impairment	$	69		$	67	$	-	$	-		$	-		$	-	$	-		$	-	$	136
Ending balances collectively evaluated for impairment	$	474		$	2,108	$	1,018	$	153		$	73		$	1,778	$	310		$	350	$	6,264
Loans
Individually evaluated for impairment	$	702		$	9,025	$	201	$	-		$	-		$	377	$	-				$	10,305
Collectively evaluated for impairment		86,342			177,979		73,500		6,428			7,832			227,540		32,734					612,355
Ending balance, June 30, 2020	$	87,044		$	187,004	$	73,701	$	6,428		$	7,832		$	227,917	$	32,734				$	622,660

	June 30, 2019
(In thousands)	Commercial and Industrial			Commercial Real Estate			Construction and Land		Consumer			Student			Residential Real Estate		Home Equity Lines of Credit			Unallocated		Total
Allowance for Loan Losses
Beginning balance, December 31, 2018	$	483		$	1,738		$	635	$	145		$	68		$	1,311	$	446		$	350	$	5,176
Charge-offs		(74	)		-			-		(23	)		(10	)		-		-			-		(107	)
Recoveries		1			75			-		9			-			-		-			-		85
Provision (recovery)		162			(34	)		15		10			9			137		(44	)		-		255
Ending balance, June 30, 2019	$	572		$	1,779		$	650	$	141		$	67		$	1,448	$	402		$	350	$	5,409

Industrial loan portfolio segment in the tables below include 549 PPP loans that totaled $53.1 million at September 30, 2020. There were no loans that were forgiven at September 30, 2020.

	December 31, 2019
(In thousands)	Commercial and Industrial			Commercial Real Estate			Construction and Land		Consumer			Student			Residential Real Estate		Home Equity Lines of Credit			Unallocated		Total
Allowance for Loan Losses
Beginning balance, December 31, 2018	$	483		$	1,738		$	635	$	145		$	68		$	1,311	$	446		$	350	$	5,176
Charge-offs		(328	)		-			-		(50	)		(13	)		-		-			-		(391	)
Recoveries		2			80			-		14			-			-		-			-		96
Provision (recovery)		139			(30	)		17		45			10			285		(120	)		-		346
Ending balance, December 31, 2019	$	296		$	1,788		$	652	$	154		$	65		$	1,596	$	326		$	350	$	5,227
Ending balances individually evaluated for impairment	$	-		$	229		$	-	$	-		$	-		$	-	$	-		$	-	$	229
Ending balances collectively evaluated for impairment	$	296		$	1,559		$	652	$	154		$	65		$	1,596	$	326		$	350	$	4,998
Loans
Individually evaluated for impairment	$	187		$	2,847		$	233	$	-		$	-		$	379	$	-				$	3,646
Collectively evaluated for impairment		27,217			179,051			64,998		5,958			8,151			224,937		36,268					546,580
Ending balance, December 31, 2019	$	27,404		$	181,898		$	65,231	$	5,958		$	8,151		$	225,316	$	36,268				$	550,226

The following tables present the total allowance for loan losses by portfolio segment for the periods presented.

	September 30, 2020
(In thousands)	Commercial and Industrial			Commercial Real Estate		Construction and Land		Consumer			Student			Residential Real Estate		Home Equity Lines of Credit			Unallocated		Total
Allowance for Loan Losses
Beginning balance, December 31, 2019	$	296		$	1,788	$	652	$	154		$	65		$	1,596	$	326		$	350	$	5,227
Charge-offs		(148	)		-		-		(21	)		(8	)		-		-			-		(177	)
Recoveries		11			14		-		20			-			-		-			-		45
Provision (recovery)		699			361		294		(18	)		31			263		(24	)		-		1,606
Ending balance, September 30, 2020	$	858		$	2,163	$	946	$	135		$	88		$	1,859	$	302		$	350	$	6,701
Ending balances individually evaluated for impairment	$	20		$	60	$	-	$	-		$	-		$	-	$	-		$	-	$	80
Ending balances collectively evaluated for impairment	$	838		$	2,103	$	946	$	135		$	88		$	1,859	$	302		$	350	$	6,621
Loans
Individually evaluated for impairment	$	509		$	8,369	$	-	$	-		$	-		$	377	$	-				$	9,255
Collectively evaluated for impairment		88,473			191,404		72,465		6,264			7,333			232,147		30,762					628,848
Ending balance, September 30, 2020	$	88,982		$	199,773	$	72,465	$	6,264		$	7,333		$	232,524	$	30,762				$	638,103

	September 30, 2019
(In thousands)	Commercial and Industrial			Commercial Real Estate			Construction and Land		Consumer			Student			Residential Real Estate		Home Equity Lines of Credit			Unallocated		Total
Allowance for Loan Losses
Beginning balance, December 31, 2018	$	483		$	1,738		$	635	$	145		$	68		$	1,311	$	446		$	350	$	5,176
Charge-offs		(93	)		-			-		(24	)		(12	)		-		-			-		(129	)
Recoveries		2			77			-		14			-			-		-			-		93
Provision (recovery)		162			(34	)		15		10			9			137		(44	)		-		255
Ending balance, September 30, 2019	$	554		$	1,781		$	650	$	145		$	65		$	1,448	$	402		$	350	$	5,395

	December 31, 2019
(In thousands)	Commercial and Industrial			Commercial Real Estate			Construction and Land		Consumer			Student			Residential Real Estate		Home Equity Lines of Credit			Unallocated		Total
Allowance for Loan Losses
Beginning balance, December 31, 2018	$	483		$	1,738		$	635	$	145		$	68		$	1,311	$	446		$	350	$	5,176
Charge-offs		(328	)		-			-		(50	)		(13	)		-		-			-		(391	)
Recoveries		2			80			-		14			-			-		-			-		96
Provision (recovery)		139			(30	)		17		45			10			285		(120	)		-		346
Ending balance, December 31, 2019	$	296		$	1,788		$	652	$	154		$	65		$	1,596	$	326		$	350	$	5,227
Ending balances individually evaluated for impairment	$	-		$	229		$	-	$	-		$	-		$	-	$	-		$	-	$	229
Ending balances collectively evaluated for impairment	$	296		$	1,559		$	652	$	154		$	65		$	1,596	$	326		$	350	$	4,998
Loans
Individually evaluated for impairment	$	187		$	2,847		$	233	$	-		$	-		$	379	$	-				$	3,646
Collectively evaluated for impairment		27,217			179,051			64,998		5,958			8,151			224,937		36,268					546,580
Ending balance, December 31, 2019	$	27,404		$	181,898		$	65,231	$	5,958		$	8,151		$	225,316	$	36,268				$	550,226

Loans by credit quality indicators were as follows at the dates presented:

	June 30, 2020
	September 30, 2020
(In thousands)	Commercial and Industrial		Commercial Real Estate		Construction and Land		Consumer		Student		Residential Real Estate		Home Equity Lines of Credit		Total
Grade:
Pass	$	8688,~~035~~139	$	~~175~~188,~~248~~682	$	7170,~~046~~110	$	6,~~426~~261	$	7,~~832~~333	$	~~220~~225,~~639~~260	$	3028,~~691~~785	$	~~597~~614,~~917~~570
Special mention		~~166~~212		89,~~500~~291		2,~~292~~289		23		-		~~322~~321		127		1112,~~409~~243
Substandard		~~843~~631		31,~~256~~800		~~363~~66		-		-		6,~~956~~943		1,~~916~~850		1311,~~334~~290
Doubtful		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-
Total	$	8788,~~044~~982	$	~~187~~199,~~004~~773	$	7372,~~701~~465	$	6,~~428~~264	$	7,~~832~~333	$	~~227~~232,~~917~~524	$	3230,~~734~~762	$	~~622~~638,~~660~~103

	December 31, 2019
(In thousands)	Commercial and Industrial		Commercial Real Estate		Construction and Land		Consumer		Student		Residential Real Estate		Home Equity Lines of Credit		Total
Grade:
Pass	$	26,555	$	175,063	$	62,231	$	5,955	$	8,151	$	218,686	$	34,218	$	530,859
Special mention		422		3,487		2,594		3		-		336		127		6,969
Substandard		427		3,348		406		-		-		6,294		1,923		12,398
Doubtful		-		-		-		-		-		-		-		-
Loss		-		-		-		-		-		-		-		-
Total	$	27,404	$	181,898	$	65,231	$	5,958	$	8,151	$	225,316	$	36,268	$	550,226

The past due status of loans at the dates presented were:

June 30, 2020

September 30, 2020

(In thousands)

30-59 Days Past Due

60-89 Days Past Due

90+ Days Past Due

Total Past Due

Current

Total Loans

90+ Days Past Due and Accruing

Nonaccruals

Commercial and industrial

~~710~~11

1043

~~702~~640

~~1,422~~694

8588,~~622~~288

8788,~~044~~982

~~144~~131

~~558~~509

Commercial real estate

~~989~~357

~~186~~199,~~015~~416

~~187~~199,~~004~~773

~~989~~357

Construction and land

~~860~~318

72,~~841~~147

7372,~~701~~465

Consumer

724

-7

831

6,~~420~~233

6,~~428~~264

-7

Student

~~546~~311

~~157~~265

~~765~~509

1,~~468~~085

6,~~364~~248

7,~~832~~333

~~765~~509

Residential real estate

~~392~~708

~~763~~383

-379

1,~~155~~470

~~226~~231,~~762~~054

~~227~~232,~~917~~524

-379

Home equity lines of credit

44129

65-

~~109~~129

3230,~~625~~633

3230,~~734~~762

65-

Total

21,~~559~~501

~~931~~691

21,~~521~~892

64,~~011~~084

~~616~~634,~~649~~019

~~622~~638,~~660~~103

~~974~~647

1,~~547~~245

	December 31, 2019
(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Current		Total Loans		90+ Days Past Due and Accruing		Nonaccruals
Commercial and industrial	$	330	$	-	$	34	$	364	$	27,040	$	27,404	$	34	$	-
Commercial real estate		-		-		989		989		180,909		181,898		-		989
Construction and land		5,472		-		-		5,472		59,759		65,231		-		-
Consumer		11		1		-		12		5,946		5,958		-		-
Student		345		220		1,204		1,769		6,382		8,151		1,205		-
Residential real estate		739		109		397		1,245		224,071		225,316		397		-
Home equity lines of credit		389		-		-		389		35,879		36,268		-		-
Total	$	7,286	$	330	$	2,624	$	10,240	$	539,986	$	550,226	$	1,636	$	989

The following table presents information related to impaired loans, by portfolio segment, at the dates presented.

	June 30, 2020
	September 30, 2020
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no specific allowance recorded:
Commercial and industrial	$	144	$	144	$	-	$	165	$	2
Commercial real estate	$	7,578	$	7,578	$	-	$	7,938	$	242
Commercial real estate		8,227		8,227		-		8,263		171
Construction and land		201		201		-		210		5
Residential real estate		377		377		-		378		4
With an allowance recorded:
Commercial and industrial	$	~~558~~509	$	~~558~~509	$	6920	$	~~939~~509	$	8
Commercial real estate		~~798~~791		~~798~~791		6760		~~804~~801		1528
Total:
Commercial and industrial	$	~~702~~509	$	~~702~~509	$	6920	$	~~1,104~~509	$	108
Commercial real estate		98,~~025~~369		98,~~025~~369		6760		98,~~067~~739		~~186~~270
Construction and land		201		201		-		210		5
Residential real estate		377		377		-		378		4
Total	$	109,~~305~~255	$	109,~~305~~255	$	~~136~~80	$	109,~~759~~626	$	~~205~~282

	December 31, 2019
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no specific allowance recorded:
Commercial and industrial	$	187	$	187	$	-	$	287	$	13
Commercial real estate		1,048		1,048		-		1,213		61
Construction and land		233		233		-		494		25
Residential real estate		379		379		-		384		16
With an allowance recorded:
Commercial real estate		1,799		1,813		229		1,806		38
Total:
Commercial and industrial	$	187	$	187	$	-	$	287	$	13
Commercial real estate		2,847		2,861		229		3,019		99
Construction and land		233		233		-		494		25
Residential real estate		379		379		-		384		16
Total	$	3,646	$	3,660	$	229	$	4,184	$	153

14TDRs are those loans for which a concession has been granted to a borrower experiencing financial difficulties. TDRs are identified at the point when the borrower enters into a modification agreement. The following table summarizes a modification that was classified as a TDR during the nine months ended September 30, 2020. There were no loan modifications that were classified as TDRs during the three months ended September 30, 2020 or during the three and nine months ended September 30, 2019.

TDRs are those loans for which a concession has been granted to a borrower experiencing financial difficulties. TDRs are identified at the point when the borrower enters into a modification agreement. The following table summarizes a modification that was classified as a TDR during the three and six months ended June 30, 2020. There were no loan modifications that were classified as TDRs during the three and six months ended June 30, 2019.

(Dollars in thousands)

Nine Months Ended

September 30, 2020

Class of Loan

Number of Contracts

Pre-Modification Outstanding Recorded Investment

Post-Modification Outstanding Recorded Investment

Commercial real estate

6,221

(Dollars in thousands)	Three and Six Months Ended June 30, 2020
Class of Loan	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial real estate	1	$	6,221	$	6,221

TDRs are considered impaired loans and are individually evaluated for impairment in the determination of the allowance for loan losses. TDR payment defaults occur when, within 12 months of the original TDR modification, either a full or partial charge-off occurs or the TDR becomes 90 days or more past due. There were no TDR defaults during the three and nine months ended September 30, 2020 and 2019. At September 30, 2020, there were five loans totaling $8.4 million that have

~~At June 30, 2020, there were six loans totaling $8.6 million that have~~ been identified as TDRs, which were current and performing in accordance with the modified terms. At December 31, 2019, there were five loans in the portfolio, totaling $2.5 million, that were identified as TDRs, which were current and performing in accordance with the modified terms.

At ~~June~~September 30, 2020 and 2019, the Company had no foreclosed residential real estate property in its possession or in the process of foreclosure.

In response to COVID-19 and under the provisions of the CARES Act, the Company ~~granted~~established a short-term loan ~~modifications~~modification ~~for~~program, allowing the deferral of scheduled payments for a 90-day period beginning in April 2020. Modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief ~~are~~were not considered TDRs. Borrowers who were considered current were ones whose loans were less than 30 days past due on their contractual payments at the time athe modification was entered. AtThe ~~June 30, 2020, the~~ Company modified 194 loans totaling $92.8 million under this ~~guidance~~initial payment deferral program. As of September 30, 2020, 94% of these deferments have ended and have returned to their normal payment schedules, ~~such~~while subsequent deferments totaling $5.5 million have been granted to 7 borrowers, consisting of 2 commercial and industrial loans, 1 commercial real estate loan, 1 construction and land loan, and 3 residential real estate loans. These additional deferrals remained within the CARES Act and the March 2020 interagency guidance and were not considered TDRs.

Note 4.Junior Subordinated Debt

On September 21, 2006, the Company’s wholly-owned Connecticut statutory business trust, Fauquier Statutory Trust II (“Trust II”), privately issued $4.0 million face amount of the trust’s Floating Rate Capital Securities in a pooled capital securities offering. Simultaneously, Trust II used the proceeds of that sale to purchase $4.0 million principal amount of the Company’s Floating Rate Junior Subordinated Deferrable Interest Debentures due 2036. The interest rate on the capital security resets every three months at 1.70% above the then current three-month LIBOR. Interest is paid quarterly. Total capital securities at ~~June~~September 30, 2020 and December 31, 2019 were $4.1 million. The Trust II issuance of capital securities and the respective subordinated debentures are callable at any time. The subordinated debentures are an unsecured obligation of the Company and are junior in right of payment to all present and future senior indebtedness of the Company. The capital securities are guaranteed by the Company on a subordinated basis.

Note 5.Derivative Instruments and Hedging Activities

The Company uses interest rate swaps to reduce interest rate risk and to manage net interest income. Interest differentials paid or received under the swap agreements are reflected as adjustments to interest income. These interest rate swap agreements include both cash flow and fair value hedge derivative instruments that qualify for hedge accounting. The notional amounts of the interest rate swaps are not exchanged and do not represent exposure to credit loss. In the event of default by a counter party, the risk in these transactions is the cost of replacing the agreements at current market rates.

The Company entered into an interest rate swap agreement on July 1, 2010 to manage the interest rate exposure on its Junior Subordinated Debt due 2036. By entering into this agreement, the Company ~~converts~~converted a floating rate liability into a fixed rate liability through the maturity date of September 15, 2020. Under the terms of the agreement, the Company ~~receives~~received interest quarterly at the rate equivalent to the three-month LIBOR plus 1.70%, repricing every three months on the same date as the Company’s Junior Subordinated Debt and paid interest monthly at the fixed rate of 3.21%. In addition, on June 24, 2016, the Company entered into a forward interest rate swap agreement to convert the floating rate liability on the same Junior Subordinated Debt to fixed from 2020 to 2031. Interest expense on these interest rate swaps was $28,000 and $9,000 for the three months ended September 30, 2020 and 2019, respectively, and $69,000 and $20,000 for the nine months ended September 30, 2020 and 2019, respectively. These swaps are designated as cash flow hedges with changes in the fair value recorded through other comprehensive income.

15The Company entered into two swap agreements to manage the interest rate risk related to two commercial loans on February 11, 2015 and April 7, 2015. The agreements allow the Company to convert fixed rate assets to floating rate assets through 2022 and 2025. The Company receives interest monthly at the rate equivalent to one-month LIBOR plus a spread repricing on the same date as the loans and pays interest at fixed rates. Interest expense on these swaps was $19,000 for the three months ended September 30, 2020 and interest income was $7,000 for the three months ended September 30, 2019. Interest expense for these swaps was $37,000 for the nine months ended September 30, 2020 and interest income was

and pays interest monthly at the fixed rate of 3.21%. Interest expense on the interest rate swap was $27,900 and $6,300 for the three months ended June 30, 2020 and 2019, respectively, and $41,200 and $10,900 for the six months ended June 30, 2020 and 2019, respectively. In addition, on June 24, 2016, the Company entered into a forward interest rate swap agreement to convert the floating rate liability on the same Junior Subordinated Debt to fixed from 2020 to 2031. There was no interest expense recognized on the forward interest rate swap for the three and six months ended June 30, 2020 and 2019, and there will be no exchange of payments until September 15, 2020, the expiration date of the interest rate swap. These swaps are designated as cash flow hedges with changes in the fair value recorded through other comprehensive income.

The Company entered into two swap agreements to manage the interest rate risk related to two commercial loans on February 11, 2015 and April 7, 2015. The agreements allow the Company to convert fixed rate assets to floating rate assets through 2022 and 2025. The Company receives interest monthly at the rate equivalent to one-month LIBOR plus a spread repricing on the same date as the loans and pays interest at fixed rates. Interest expense on these swaps was $16,200 for the three months ended June 30, 2020 and interest income was $9,100 for the three months ended June 30, 2019. Interest expense for these swaps was $18,000 for the six months ended June 30, 2020 and interest income was $18,100 for the six months ended June 30, 2019. These swaps are designated as fair value hedges and changes in fair value are recorded in current earnings. On July 28, 2020, one of these swap agreements with a notional/contract amount of $1.2 million was terminated resulting in a termination fee of $89,200.

Cash collateral held at other banks for these swaps was $1.1 million and $730,000 at June 30, 2020 and December 31, 2019, respectively. Collateral is dependent on the market valuation of the underlying hedges.

The following table summarizes the Company’s derivative instruments as of June 30, 2020 and December 31, 2019:

(In thousands)	June 30, 2020
Derivatives designated as hedging instruments	Notional/Contract Amount		Fair Value			Fair Value Balance Sheet Location	Expiration Date
Interest rate swap - cash flow	$	4,000	$	(24	)	Other Liabilities	9/15/2020
Interest rate forward swap - cash flow		4,000		(572	)	Other Liabilities	6/15/2031
Interest rate swap - fair value		1,215		(87	)	Other Liabilities	4/9/2025
Interest rate swap - fair value		4,251		(111	)	Other Liabilities	2/12/2022

(In thousands)	December 31, 2019
Derivatives designated as hedging instruments	Notional/Contract Amount		Fair Value			Fair Value Balance Sheet Location	Expiration Date
Interest rate swap - cash flow	$	4,000	$	(41	)	Other Liabilities	9/15/2020
Interest rate forward swap - cash flow		4,000		(59	)	Other Liabilities	6/15/2031
Interest rate swap - fair value		1,167		(17	)	Other Liabilities	4/9/2025
Interest rate swap - fair value		4,230		(23	)	Other Liabilities	2/12/2022

$25,000 for the nine months ended September 30, 2019. These swaps are designated as fair value hedges and changes in fair value are recorded in current earnings. On July 28, 2020, one of these swap agreements with a notional/contract amount of $1.2 million was terminated resulting in a termination fee of $89,200.

Cash collateral held at other banks for these swaps was $1.1 million and $730,000 at September 30, 2020 and December 31, 2019, respectively. Collateral is dependent on the market valuation of the underlying hedges.

The following table summarizes the Company’s derivative instruments as of September 30, 2020 and December 31, 2019:

(In thousands)

September 30, 2020

Derivatives designated as hedging instruments

Notional/Contract Amount

Fair Value

Balance Sheet Location

Expiration Date

Interest rate swap - cash flow

4,000

(541

)

Other Liabilities

6/15/2031

Interest rate swap - fair value

4,112

(93

)

Other Liabilities

2/12/2022

(In thousands)	December 31, 2019
Derivatives designated as hedging instruments	Notional/Contract Amount		Fair Value			Fair Value Balance Sheet Location	Expiration Date
Interest rate swap - cash flow	$	4,000	$	(41	)	Other Liabilities	9/15/2020
Interest rate forward swap - cash flow		4,000		(59	)	Other Liabilities	6/15/2031
Interest rate swap - fair value		1,167		(17	)	Other Liabilities	4/9/2025
Interest rate swap - fair value		4,230		(23	)	Other Liabilities	2/12/2022

Note 6.Earnings Per Share

The components of the Company’s earnings per share calculations are as follows:

	Three Months Ended June 30,								Six Months Ended June 30,
	Three Months Ended September 30,								Nine Months Ended September 30,
	2020				2019				2020				2019
	Shares		Per Share Amount		Shares		Per Share Amount		Shares		Per Share Amount		Shares		Per Share Amount
Basic earnings per share		3,794,725	$	0.4241		3,784,934	$	0.4154		3,~~791~~792,~~676~~700	$	01.7819		3,~~781~~782,~~931~~943	$	01.8439
Effect of dilutive stock awards		6,~~840~~554				95,~~032~~912				6,~~539~~544				98,~~524~~320
Diluted earnings per share		3,801,~~565~~279	$	0.4241		3,~~793~~790,~~966~~846	$	0.4154		3,~~798~~799,~~215~~244	$	01.7819		3,791,~~455~~263	$	01.8438

Unvested restricted shares have voting rights and receive nonforfeitable dividends during the vesting period; therefore, they are included in calculating basic earnings per share. The portion of unvested performance-based restricted stock units that are expected to vest, but have not yet been awarded, are included in the calculation of diluted earnings per share. Performance-based restricted stock units are expected to vest prior to the completion of the Merger.

Note 7.Share-based Compensation

Stock Incentive Plan

On May 21, 2019, the shareholders of the Company approved the Fauquier Bankshares, Inc. Amended and Restated Stock Incentive Plan (the “Plan”). The Plan superseded the Company’s stock incentive plan that was approved by shareholders in 2009. Under the Plan, awards of options, restricted stock, and other stock-based awards may be granted to employees, directors or consultants of the Company or any affiliate. The effective date of the Plan is May 21, 2019 with a termination date of May 21, 2029. The Company’s Board of Directors may terminate, suspend or modify the Plan within certain restrictions. The Plan authorizes for issuance 350,000 shares of the Company’s common stock.17

On May 21, 2019, the shareholders of the Company approved the Fauquier Bankshares, Inc. Amended and Restated Stock Incentive Plan (the “Plan”). The Plan superseded the Company’s stock incentive plan that was approved by shareholders in 2009. Under the Plan, awards of options, restricted stock, and other stock-based awards may be granted to employees, directors or consultants of the Company or any affiliate. The effective date of the Plan was May 21, 2019. The Plan has a termination date of May 21, 2029. The Company’s Board of Directors may terminate, suspend or modify the Plan within certain restrictions. The Plan authorizes for issuance 350,000 shares of the Company’s common stock.

Restricted Shares

Restricted shares are accounted for using the fair market value of the Company’s common stock on the date on which these shares were awarded. The restricted shares issued to certain executive officers are subject to a vesting period, whereby the restrictions on the shares lapse on the third anniversary of the date the shares were awarded. Compensation expense for these shares is recognized over the three-year period. The restricted shares issued to nonemployee directors are not subject to a vesting period and compensation expense is recognized on the date the shares are granted. Compensation expense for restricted shares was $3435,~~400~~000 and $3940,~~600~~000, net of forfeitures, for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and $~~158~~194,~~800~~000 and $~~168~~208,~~800~~000 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. The total unrecognized compensation expense related to restricted shares was $~~238~~203,000 and $~~241~~200,000 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. This expense is expected to be recognized through 2023. Restricted stock expense is expected to be accelerated upon the completion of the Merger.

A summary of the status of the Company’s unvested restricted shares granted under the Plan is presented below:

	June 30, 2020					June 30, 2019
	September 30, 2020					September 30, 2019
	Shares			Weighted Average Grant Date Fair Value Per Share		Shares			Weighted Average Grant Date Fair Value Per Share
Unvested shares, beginning		20,352		$	20.20		22,569		$	17.98
Granted		12,182			20.95		12,058			21.69
Vested		(10,684	)		19.14		(10,553	)		17.84
Forfeited or surrendered		(2,007	)		19.21		(440	)		14.98
Unvested shares, ending		19,843		$	21.33		23,634		$	20.10

Performance-based Restricted Stock Units

The Company grants performance-based restricted stock units to certain executive officers. Performance-based restricted stock units are accounted for using the fair market value of the Company’s common stock on the date awarded, and adjusted for subsequent changes in the market value. Performance-based restricted stock units are subject to a vesting period, whereby the restrictions on the rights lapse on the third anniversary of the date the units were awarded. Until vesting, the shares underlying the units are not issued and are not included in shares outstanding. Vesting is contingent upon the Company’s reaching predetermined performance goals as compared with a predetermined peer group of banks. Compensation expense for performance-based restricted stock units was $1317,~~100 and $28~~000,~~400,~~ net of forfeitures, for each of the three months ended ~~June~~September 30, 2020 and 2019, ~~respectively,~~ and $(9882,~~900~~000) and $5371,~~700~~000 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. The total unrecognized compensation expense related to performance-based restricted stock units was $9998,000 and $~~188~~104,000 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively. This expense is expected to be recognized through 2023. Expenses ~~and~~associated iswith ~~dependent~~performance-based ~~upon~~restricted ~~management~~stock ~~reaching~~units are expected to be accelerated upon the ~~predetermined~~completion ~~goals~~of the Merger.

A summary of the status of the Company’s unvested performance-based restricted stock units is presented below:

	June 30, 2020					June 30, 2019
	September 30, 2020					September 30, 2019
	Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share		Restricted Stock Units		Weighted Average Grant Date Fair Value Per Share
Unvested shares, beginning		30,012		$	18.90		22,103	$	17.90
Granted		7,889			20.95		7,909		21.69
Vested		(826	)		19.74		-		-
Forfeited		(11,701	)		16.92		-		-
Unvested shares, ending		25,374		$	20.43		30,012	$	18.98

Note 8.Employee Benefit Plans

The Company has supplemental executive retirement plans (“SERP”) for certain executives in which the contributions are solely funded by the Company. Benefits are to be paid in monthly installments following retirement or death. The SERP liability was $2.9 million at ~~June~~September 30, 2020 and December 31, 2019. For the three months ended ~~June~~September 30, 2020 and 2019, SERP expenses were $71,~~100~~000 and $7475,~~700~~000, respectively, and $~~142~~213,~~200~~000 and $~~147~~222,~~600~~000 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

The Company has a defined contribution retirement plan under Internal Revenue Code of 1986 Section 401(k) covering all employees who are at least 18 years of age and worked more than 20 hours per week. Under the plan, a participant may contribute an amount up to 100% of their covered compensation for the year, not to exceed the dollar limit set by law (Code Section 402(g)). The Company will make an annual matching contribution equal to 100% on the first 6% of compensation deferred, for a maximum match of 6% of compensation. The Company makes an additional safe harbor contribution equal to 3% of compensation to all eligible participants. The Company’s 401(k) plan expenses were $~~169~~176,~~100~~000 and $~~180~~181,~~700~~000 for the three months ended ~~June~~September 30, 2020 and 2019, respectively, and $~~405~~582,~~400~~000 and $~~411~~592,~~500~~000 for the ~~six~~nine months ended ~~June~~September 30, 2020 and 2019, respectively.

The Company maintains a Director Deferred Compensation Plan (“Deferred Compensation Plan”). This plan provides that any nonemployee director of the Company may elect to defer receipt of all or any portion of his or her compensation as a director. A participating director may elect to have amounts held in a deferred cash account, which is credited on a quarterly basis with interest equal to the highest rate offered by the Bank at the end of the preceding quarter. Alternatively, a participant may elect to have a deferred stock account in which deferred amounts are treated as if invested in the Company’s common stock at the fair market value on the date of deferral. The value of a stock account will change based upon the fair market value of an equivalent number of shares of common stock. In addition, the deferred amounts deemed invested in common stock will be credited with dividends on an equivalent number of shares. Amounts considered invested in the Company’s common stock are paid, at the election of the director, either in cash or in whole shares of the common stock and cash-in-lieu of fractional shares. Directors may elect to receive amounts contributed to their respective accounts in one or up to five installments. There were no directors participating in the Deferred Compensation Plan during the three and nine months ended September 30, 2020 and 2019.

18The Company has a nonqualified deferred compensation program for a former key employee’s retirement, in which the contribution expense is funded solely by the Company. The retirement benefit to be provided is variable based upon the performance of underlying life insurance policy assets. Deferred compensation expense for the three months ended September 30, 2020 and 2019 was $6,000 and $20,000, respectively, and $21,000 and $57,000 for the nine months ended September 30, 2020 and 2019, respectively. Concurrent with the establishment of the deferred compensation program, the Company purchased life insurance policies on this employee with the Company named as owner and beneficiary. These life insurance policies are intended to be utilized as a source of funding the deferred compensation program. Income on these life insurance policies was $7,000 for each of the three months ended September 30, 2020 and 2019, respectively, and $21,000 for each of the nine months ended September 30, 2020 and 2019, respectively. The Company has recorded on its consolidated balance sheets $1.4 million in cash surrender value of these policies at September 30, 2020 and December 31, 2019 and accrued liabilities of $155,000 and $153,000 at September 30, 2020 and December 31, 2019, respectively.

cash-in-lieu of fractional shares. Directors may elect to receive amounts contributed to their respective accounts in one or up to five installments. There were no directors participating in the Deferred Compensation Plan during the three and six months ended June 30, 2020 and 2019.

The Company has a nonqualified deferred compensation program for a former key employee’s retirement, in which the contribution expense is funded solely by the Company. The retirement benefit to be provided is variable based upon the performance of underlying life insurance policy assets. Deferred compensation expense for the three months ended June 30, 2020 and 2019 was $6,900 and $21,300, respectively, and $14,800 and $37,200 for the six months ended June 30, 2020 and 2019, respectively. Concurrent with the establishment of the deferred compensation program, the Company purchased life insurance policies on this employee with the Company named as owner and beneficiary. These life insurance policies are intended to be utilized as a source of funding the deferred compensation program. Income on these life insurance policies was $7,100 and $7,300 for the three months ended June 30, 2020 and 2019, respectively, and $14,200 and $14,300 for the six months ended June 30, 2020 and 2019, respectively. The Company has recorded on its consolidated balance sheets $1.4 million in cash surrender value of these policies at June 30, 2020 and December 31, 2019 and accrued liabilities of $154,000 and $153,000 at June 30, 2020 and December 31, 2019, respectively.

Note 9.Fair Value Measurement

GAAP requires the Company to record fair value adjustments to certain assets and liabilities. The fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants as of the measurement date.

GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:

Level 1:Inputs are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:

Inputs are defined as inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3:Inputs are defined as unobservable inputs for the asset or liability.

The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the consolidated financial statements:

Securities available for sale: Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity, then the security would fall to the lowest level of the hierarchy (Level 3). The Company’s investment portfolio is primarily valued using fair value measurements that are considered to be Level 2. The Company has contracted with an independent pricing service that uses Intercontinental Exchange (“ICE”) as the primary source for valuation. ICE utilizes evaluated pricing models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs.

Interest rate swaps: The Company recognizes interest rate swaps at fair value and classifies as Level 2. The Company has contracted with a third-party to provide valuations for interest rate swaps using standard valuation techniques.

The following table presents the balances of financial assets and liabilities measured at fair value on a recurring basis:

	Fair Value Measurements
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets at June 30, 2020:
Assets at September 30, 2020:
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	6163,~~966~~815	$	-	$	6163,~~966~~815	$	-
Obligations of states and political subdivisions		1620,~~284~~775		-		1620,~~284~~775		-
Total available for sale securities		7884,~~250~~590		-		7884,~~250~~590		-
Mutual funds		~~417~~419		~~417~~419		-		-
Total assets at fair value	$	78,667	$	417	$	78,250	$	-
Total	$	85,009	$	419	$	84,590	$	-
Liabilities at June 30, 2020:
Liabilities at September 30, 2020:
Interest rate swaps	$	~~794~~634	$	-	$	~~794~~634	$	-
Total liabilities at fair value	$	794	$	-	$	794	$	-
Total	$	634	$	-	$	634	$	-
Assets at December 31, 2019:
Available for sale securities:
Obligations of U.S. Government corporations and agencies	$	63,941	$	-	$	63,941	$	-
Obligations of states and political subdivisions		15,842		-		15,842		-
Total available for sale securities		79,783		-		79,783		-
Mutual funds		403		403		-		-
Total assets at fair value	$	80,186	$	403	$	79,783	$	-
Total	$	80,186	$	403	$	79,783	$	-
Liabilities at December 31, 2019:
Interest rate swaps		140	$	-	$	140	$	-
Total liabilities at fair value	$	140	$	-	$	140	$	-
Total	$	140	$	-	$	140	$	-

The Company may be required, from time to time, to measure and recognize certain assets at fair value on a nonrecurring basis in accordance with GAAP. The following describes the valuation techniques and inputs used by the Company in ~~determining the fair value of certain assets recorded at fair value on a nonrecurring basis in the consolidated financial statements.~~

Mortgage Loans Held for Sale: Mortgage loans held for sale are carried at lower of cost or market value. These loans currently consist of 1-4 family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). No nonrecurring fair value adjustments were recorded on mortgage loans held for sale during the three and six months ended June 30, 2020 and 2019. Net gains and losses on the sale of loans are recorded as a component of noninterest income on the consolidated statements of operations.

Impaired Loans: A loan is designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loans or the fair value of the collateral securing the loans, or the present value of the cash flows. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the Company’s collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal of one year or less, conducted by an independent, licensed appraiser using observable market data (Level 2). However, if the collateral is in the process of construction or if an appraisal of the real estate property is more than one year old and not solely based on observable market comparables or management determines the fair value of the collateral is further impaired below the appraised value, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal of one year or less, if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivable collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the consolidated statements of operations.

~~Other~~determining ~~Real~~the ~~Estate Owned: OREO is measured at~~ fair value ~~less estimated selling costs. Fair value is based upon independent market prices, appraised values~~ of ~~the~~certain ~~collateral,~~assets orrecorded ~~management’s~~at ~~estimation~~fair ~~of the~~ value ofon ~~the~~a ~~collateral.~~nonrecurring ~~The~~basis ~~Company~~in ~~considers~~the ~~OREO~~consolidated asfinancial ~~Level 3~~statements.

~~The~~Mortgage ~~following~~Loans ~~table~~Held ~~summarizes~~for ~~the~~Sale: Mortgage ~~Company’s~~loans ~~financial~~held ~~assets~~for ~~that~~sale ~~were~~are ~~measured~~carried at ~~fair~~lower of cost or market value. These loans currently consist of 1-4 family residential loans originated for sale in the secondary market. Fair value is based on athe price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). No nonrecurring ~~basis~~fair atvalue ~~June~~adjustments were recorded on mortgage loans held for sale during the three and nine months ended September 30, 2020 and ~~December 31,~~ 2019. Net gains and losses on the sale of loans are recorded as a component of noninterest income on the consolidated statements of operations.

	June 30, 2020
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets:
Impaired loans, net	$	1,220	$	-	$	-	$	1,220
Other real estate owned, net		1,356		-		-		1,356

Impaired Loans: A loan is designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreement will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loans or the fair value of the collateral securing the loans, or the present value of the cash flows. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the Company’s collateral is real estate. The value of real estate collateral is determined utilizing an income or market valuation approach based on an appraisal of one year or less, conducted by an independent, licensed appraiser using observable market data (Level 2). However, if the collateral is in the process of construction or if an appraisal of the real estate property is more than one-year old and not solely based on observable market comparables or management determines the fair value of the collateral is further impaired below the appraised value, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal of one-year or less, if deemed significant, or the net book value on the applicable business’ financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivable collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the consolidated statements of operations.

Other Real Estate Owned: Other real estate owned is measured at fair value less estimated selling costs. Fair value is based upon independent market prices, appraised values of the collateral, or management’s estimation of the value of the collateral. The Company considers other real estate owned as Level 3.

The following table summarizes the Company’s financial assets that were measured at fair value on a nonrecurring basis at September 30, 2020 and December 31, 2019.

	September 30, 2020
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets:
Mortgage loans held for sale	$	235	$	-	$	235	$	-
Impaired loans, net		1,220		-		-		1,220
Other real estate owned, net		1,356		-		-		1,356

	December 31, 2019
(In thousands)	Balance		Level 1		Level 2		Level 3
Assets:
Mortgage loans held for sale	$	247	$	-	$	247	$	-
Impaired loans, net		1,570		-		-		1,570
Other real estate owned, net		1,356		-		-		1,356

The following table displays quantitative information about Level 3 fair value measurements at June 30, 2020 and December 31, 2019.

	June 30, 2020
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Weighted Average Discount
Impaired loans, net	$	1,220	Appraised values	Age of appraisal, current market conditions, experience within local market		10	%
Other real estate owned, net		1,356	Appraised values	Age of appraisal, current market conditions and selling costs		18	%
Total	$	2,576

	December 31, 2019
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Weighted Average Discount
Impaired loans, net	$	1,570	Appraised values	Age of appraisal, current market conditions, experience within local market		13	%
Other real estate owned, net		1,356	Appraised values	Age of appraisal, current market conditions and selling costs		18	%
Total	$	2,926

The following table displays quantitative information about Level 3 fair value measurements at September 30, 2020 and December 31, 2019.

	September 30, 2020
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Weighted Average Discount
Impaired loans, net	$	1,220	Appraised values	Age of appraisal, current market conditions, experience within local market		5	%
Other real estate owned, net		1,356	Appraised values	Age of appraisal, current market conditions and selling costs		18	%
Total	$	2,576

	December 31, 2019
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Weighted Average Discount
Impaired loans, net	$	1,570	Appraised values	Age of appraisal, current market conditions, experience within local market		13	%
Other real estate owned, net		1,356	Appraised values	Age of appraisal, current market conditions and selling costs		18	%
Total	$	2,926

ASC 825, “Financial Instruments”, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. Additionally, the Company uses the exit price notion, rather than the entry price notion, in calculating the fair values of financial instruments not measured at fair value on a recurring basis.

The estimated fair values and related carrying amounts of the Company’s financial instruments are as follows:

	June 30, 2020
	September 30, 2020
(In thousands)	Carrying Amount		Level 1		Level 2		Level 3		Fair Value
Assets
Cash and short-term investments	$	7973,~~539~~673	$	7973,~~539~~673	$	-	$	-	$	7973,~~539~~673
Securities available for sale		7884,~~250~~590		-		7884,~~250~~590		-		7884,~~250~~590
Restricted investments		21,~~687~~835		-		21,~~687~~835		-		21,~~687~~835
Loans, net		616,260		-		-		615,710		615,710
Mortgage loans held for sale		235		-		235		-		235
Accrued interest receivable		2,818		-		2,818		-		2,818
Loans, net		631,402		-		-		630,236		630,236
Mutual funds		417		417		-		-		417
Accrued interest receivable		2,635		-		2,635		-		2,635
Bank-owned life insurance		14,141		-		14,141		-		14,141
Mutual funds		419		419		-		-		419
Total financial assets	$	794,112	$	79,956	$	97,896	$	615,710	$	793,562
Bank-owned life insurance		14,231		-		14,231		-		14,231
Total financial assets	$	809,020	$	74,092	$	103,526	$	630,236	$	807,854
Liabilities
Deposits	$	~~705~~739,~~806~~834	$	-	$	~~706~~740,~~432~~308	$	-	$	~~706~~740,~~432~~308
FHLB advances		3212,~~651~~629		-		3313,~~223~~199		-		3313,~~223~~199
Junior subordinated debt		4,124		-		4,~~124~~058		-		4,~~124~~058
Accrued interest payable		~~153~~135		-		~~153~~135		-		~~153~~135
Interest rate swaps		~~794~~634		-		~~794~~634		-		~~794~~634
Total financial liabilities	$	~~743~~757,~~528~~356	$	-	$	~~744~~758,~~726~~334	$	-	$	~~744~~758,~~726~~334

	December 31, 2019
(In thousands)	Carrying Amount		Level 1		Level 2		Level 3		Fair Value
Assets
Cash and short-term investments	$	46,341	$	46,341	$	-	$	-	$	46,341
Securities available for sale		79,783		-		79,783		-		79,783
Restricted investments		2,016		-		2,016		-		2,016
Mortgage loans held for sale		247				247		-

Filing Compare · FAUQUIER BANKSHARES, INC.