Document And Entity Information - USD ($)	12 Months Ended
Document And Entity Information - USD ($)	Dec. 31, 2020	Mar. 05, 2021	Jun. 30, 2020
Document And Entity Information [Abstract]
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2020
Document Transition Report	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Entity File Number	000-53528
Entity Registrant Name	Embassy Bancorp, Inc.
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	26-3339011
Entity Address, Address Line One	One Hundred Gateway Drive
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Bethlehem
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	18017
City Area Code	610
Local Phone Number	882-8800
Title of 12(g) Security	Common Stock, Par Value $1.00 per share
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	false
Entity Shell Company	false
Entity Public Float			$ 69,214,460
Entity Common Stock, Shares Outstanding		7,540,976
Documents Incorporated by Reference	Portions of the registrant’s definitive proxy statement for the 2021 annual meeting of shareholders are incorporated by reference into Part III of this report.
Entity Central Index Key	0001449794
Amendment Flag	false

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
ASSETS
Cash and due from banks	$ 14,528	$ 5,825
Interest bearing demand deposits with banks	116,379	33,161
Federal funds sold	1,000	1,000
Cash and Cash Equivalents	131,907	39,986
Securities available for sale	130,940	90,829
Restricted investment in bank stock	1,330	1,478
Loans receivable, net of allowance for loan losses of $10,570 in 2020; $8,022 in 2019	1,079,339	1,006,117
Paycheck Protection Program loans receivable	54,334
Premises and equipment, net of accumulated depreciation	3,346	2,123
Bank owned life insurance	25,189	20,259
Accrued interest receivable	3,136	2,048
Other assets	12,509	13,279
Total Assets	1,442,030	1,176,119
Deposits:
Non-interest bearing	269,996	171,815
Interest bearing	962,383	860,153
Total Deposits	1,232,379	1,031,968
Securities sold under agreements to repurchase	13,612	7,208
Short-term borrowings		18,067
Long-term borrowings	14,651
Paycheck Protection Program Liquidity Facility borrowings	50,794
Accrued interest payable	1,640	3,281
Other liabilities	16,780	15,980
Total Liabilities	1,329,856	1,076,504
Stockholders' Equity:
Common stock, $1 par value; authorized 20,000,000 shares; 2020 issued 7,637,216 shares; outstanding 7,528,967 shares; 2019 issued 7,543,524 shares; outstanding 7,478,477 shares	7,637	7,544
Surplus	26,405	25,937
Retained earnings	76,960	65,794
Accumulated other comprehensive income	2,937	1,340
Treasury stock, at cost: 108,249 and 65,047 shares at December 31, 2020 and December 31, 2019, respectively	(1,765)	(1,000)
Total Stockholders' Equity	112,174	99,615
Total Liabilities and Stockholders' Equity	$ 1,442,030	$ 1,176,119

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Consolidated Balance Sheets [Abstract]
Loans receivable, allowance	$ 10,570	$ 8,022
Common Stock, Par Value	$ 1	$ 1
Common Stock, Shares Authorized	20,000,000	20,000,000
Common Stock, Shares, Issued	7,637,216	7,543,524
Common Stock, Shares, Outstanding	7,528,967	7,478,477
Treasury Stock, Shares	108,249	65,047

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
Consolidated Statements of Income - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
INTEREST INCOME
Loans, including fees	$ 40,683	$ 39,636
Paycheck Protection Program loans, including fees	1,307
Securities, taxable	1,353	1,614
Securities, non-taxable	826	990
Short-term investments, including federal funds sold	160	622
Total Interest Income	44,329	42,862
INTEREST EXPENSE
Deposits	6,125	8,980
Securities sold under agreements to repurchase and federal funds purchased	18	74
Short-term borrowings	51	275
Long-term borrowings	90
Paycheck Protection Program Liquidity Facility borrowings	129
Total Interest Expense	6,413	9,329
Net Interest Income	37,916	33,533
PROVISION FOR LOAN LOSSES	2,520	605
Net Interest Income after Provision for Loan Losses	35,396	32,928
OTHER NON-INTEREST INCOME
Merchant and credit card processing fees	265	340
Debit card interchange fees	647	612
Other service fees	416	505
Bank owned life insurance	930	691
Gain on sale of securities	128
Gain on sale of other real estate owned		45
Gain on sale of loans	59
Total Other Non-Interest Income	2,445	2,193
OTHER NON-INTEREST EXPENSES
Salaries and employee benefits	11,098	10,464
Occupancy and equipment	3,323	3,400
Data processing	2,585	2,339
Merchant and credit card processing	50	85
Advertising and promotion	1,096	1,713
Professional fees	846	790
FDIC insurance	389	199
Loan & real estate	251	211
Charitable contributions	869	864
Other	1,603	1,683
Total Other Non-Interest Expenses	22,110	21,748
Income Before Income Taxes	15,731	13,373
INCOME TAX EXPENSE	2,921	2,494
Net Income	$ 12,810	$ 10,879
BASIC EARNINGS PER SHARE	$ 1.71	$ 1.46
DILUTED EARNINGS PER SHARE	1.70	1.44
DIVIDENDS PER SHARE	$ 0.22	$ 0.20

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Consolidated Statements Of Comprehensive Income [Abstract]
Net Income	$ 12,810	$ 10,879
Change in Accumulated Other Comprehensive Income:
Unrealized holding gain on securities available for sale	2,149	3,275
Less: reclassification adjustment for realized gains	(128)
Total other comprehensive income, before tax	2,021	3,275
Income tax effect	(424)	(688)
Net unrealized gain	1,597	2,587
Other comprehensive income, net of tax	1,597	2,587
Comprehensive Income	$ 14,407	$ 13,466

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member] Director [Member]	Common Stock [Member]	Surplus [Member] Director [Member]	Surplus [Member] Officer [Member]	Surplus [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss) Income [Member]	Treasury Stock [Member]	Director [Member]	Officer [Member]	Total
BALANCE-Beginning at Dec. 31, 2018		$ 7,530			$ 25,532	$ 56,410	$ (1,247)	$ (1,000)			$ 87,225
Net income						10,879					10,879
Other comprehensive income (loss), net of tax							2,587				2,587
Dividend declared and paid						(1,495)					(1,495)
Compensation expense recognized on stock options					4						4
Common stock grants	$ 10		$ 151						$ 161
Compensation expense recognized on stock grants, net of unearned compensation expense				$ 202						$ 202
Shares issued under employee stock purchase plan		4			48						52
BALANCE-Ending at Dec. 31, 2019		7,544			25,937	65,794	1,340	(1,000)			99,615
Net income						12,810					12,810
Other comprehensive income (loss), net of tax							1,597				1,597
Dividend declared and paid						(1,644)					(1,644)
Exercise of stock options		52			316						368
Stock tendered for funding exercise of stock options		(11)			(145)						(156)
Common stock grants	$ 13		$ 135						$ 148
Compensation expense recognized on stock grants, net of unearned compensation expense		34			104						138
Shares issued under employee stock purchase plan		5			58						63
Purchase of treasury stock								(765)			(765)
BALANCE-Ending at Dec. 31, 2020		$ 7,637			$ 26,405	$ 76,960	$ 2,937	$ (1,765)			$ 112,174

Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Dividend declared and paid per share	$ 0.22	$ 0.20
Exercise of stock options, shares	52,611
Stock tendered, shares	11,144
Unearned compensation expense on stock grants	$ 758	$ 457
Shares issued under employee stock purchase plan, shares	5,039	3,158
Purchased Treasury Stock I [Member]
Purchase treasury stock, shares	40,000
Purchased treasury stock, price per share	$ 18.00
Purchased Treasury Stock II [Member]
Purchase treasury stock, shares	3,202
Purchased treasury stock, price per share	$ 14.00
Director [Member]
Common stock grants, shares	12,757	10,799
Officer [Member]
Common stock grants, shares	34,429

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 12,810	$ 10,879
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	2,520	605
Amortization of deferred loan costs	269	262
Accretion of deferred Paycheck Protection Program loan fees	(862)
Depreciation	760	829
Net amortization of investment security premiums and discounts	492	172
Stock compensation expense	286	367
Net realized gain on sale of other real estate owned		(45)
Income on bank owned life insurance	(930)	(691)
Deferred income taxes	(558)	(238)
Realized gain on sale of securities available for sale	(128)
Loans originated for sale	(689)
Proceeds from sale of loans	748
Realized gain on sale of loans	(59)
(Increase) decrease in accrued interest receivable	(1,088)	130
Decrease in other assets	904	1,449
(Decrease) increase in accrued interest payable	(1,641)	1,592
Increase (decrease) in other liabilities	800	(1,008)
Net Cash Provided by Operating Activities	13,634	14,303
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale	(144,744)	(20,429)
Maturities, calls and principal repayments of securities available for sale	102,267	23,451
Proceeds from sales of securities available for sale	4,023
Net increase in loans	(76,011)	(57,040)
Net increase in Paycheck Protection Program loans	(53,472)
Net redemption of restricted investment in bank stock	148	1,316
Purchase of bank owned life insurance	(4,000)	0
Proceeds from sale of other real estate owned		180
Purchases of premises and equipment	(1,983)	(778)
Net Cash Used in Investing Activities	(173,772)	(53,300)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits	200,411	100,453
Net increase (decrease) in securities sold under agreements to repurchase	6,404	(11,675)
Proceeds from Employee Stock Purchase Plan	63	52
Decrease in short-term borrowed funds	(18,067)	(35,928)
Proceeds from long-term borrowed funds	14,651
Proceeds from Paycheck Protection Program Liquidity Facility borrowed funds	62,039
Repayment of Paycheck Protection Program Liquidity Facility borrowed funds	(11,245)
Purchase of treasury stock	(765)
Exercise of stock options, net payment for stock tendered	212
Dividends paid	(1,644)	(1,495)
Net Cash Provided by Financing Activities	252,059	51,407
Net Increase in Cash and Cash Equivalents	91,921	12,410
CASH AND CASH EQUIVALENTS - BEGINNING	39,986	27,576
CASH AND CASH EQUIVALENTS - ENDING	131,907	39,986
SUPPLEMENTARY CASH FLOWS INFORMATION
Interest paid	8,054	7,737
Income taxes paid	3,242	2,666
Non-cash Investing and Financing Activities:
Right of use assets obtained in exchange for new operating lease liabilities	$ 923
Recognition of operating lease right of use assets		10,921
Recognition of operating lease liabilities		$ 11,027

Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

Note 1 – Summary of Significant Accounting Policies

Principles of Consolidation and Nature of Operations

Embassy Bancorp, Inc. (the “Company”) is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company was formed for purposes of acquiring Embassy Bank For The Lehigh Valley (the “Bank”) in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow.

The Bank, which is the Company’s principal operating subsidiary, was originally incorporated as a Pennsylvania bank on May 11, 2001 and opened its doors on November 6, 2001. It was formed by a group of local business persons and professionals with significant prior experience in community banking in the Lehigh Valley area of Pennsylvania, the Bank’s primary market area.

Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of other-than-temporary impairment on available for sale debt securities, the determination of the allowance for loan losses, the valuation of other real estate owned, and the valuation of deferred tax assets.

Concentrations of Credit Risk

Most of the Company’s activities are with customers located in the Lehigh Valley area of Pennsylvania. Note 3 discusses the types of securities in which the Company invests. The concentrations of credit by type of loan are set forth in Note 4. The Company does not have any significant concentrations to any one specific industry or customer, with the exception of lending activity to a broad range of lessors of residential and non-residential real estate within the Lehigh Valley. Although the Company has a diversified loan portfolio, its debtors’ ability to honor their contracts is influenced by the region’s economy.

Presentation of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing demand deposits with bank, and federal funds sold. Generally, federal funds are purchased or sold for less than one week periods.

Securities

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Securities available for sale are carried at fair value. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Unrealized gains and losses are reported as increases or decreases in other comprehensive income. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.

Other-than-temporary accounting guidance specifies that (a) if a company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When an entity does not intend to sell the security, and it is more likely than not the entity will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. The Company recognized no other-than-temporary impairment charges during the years ended December 31, 2020 and 2019.

Restricted Investments in Bank Stock

Restricted investments in bank stock consist of FHLBank Pittsburgh (“FHLB”) stock and Atlantic Community Bankers Bank (“ACBB”) stock. The restricted stocks have no quoted market value and are carried at cost. Federal law requires a member institution of the FHLB to hold stock of its district FHLB according to a predetermined formula.

Management evaluates the FHLB and ACBB restricted stock for impairment. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the issuer as compared to the capital stock amount for the issuer and the length of time this situation has persisted, (2) commitments by the issuer to make payments required by law or regulation and the level of such payments in relation to the operating performance of the issuer, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuer.

Management believes no impairment charge is necessary related to the FHLB or ACBB restricted stock as of December 31, 2020. No impairment charge was taken related to the FHLB or ACBB restricted stock as of December 31, 2019.

Loans Receivable

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield using the effective interest method. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective interest method. Delinquency fees are recognized in income when collected.

As described in Note 2, the Company originates Paycheck Protection Program (“PPP”) loans as part of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The non-PPP loans receivable portfolio is segmented into commercial and consumer loans. Commercial loans consist of the following classes: commercial real estate, commercial construction and commercial. Consumer loans consist of the following classes: residential real estate and other consumer loans.

The Company makes commercial loans for real estate development and other business purposes required by the customer base. The Company’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversion of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayments of these loans are dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.

Residential mortgages and home equity loans are secured by the borrower’s residential real estate in either a first or second lien position. Residential mortgages and home equity loans have varying interest rates (fixed or variable) depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages may have amortizations up to 30 years and home equity loans may have maturities up to 25 years. Other consumer loans include installment loans, car loans, and overdraft lines of credit. Some of these loans may be unsecured.

For all classes of loans receivable, the accrual of interest may be discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed. Interest received on nonaccrual loans, including impaired loans, generally is applied against principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

Allowance for Loan Losses

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans, or portions of loans, determined to be confirmed losses are charged against the allowance account and subsequent recoveries, if any, are credited to the account. A loss is considered confirmed when information available at the balance sheet date indicates the loan, or a portion thereof, is uncollectible. As further described in Note 2, because of the 100% SBA guarantee, the Company has determined that no allowance for loan losses is required on PPP loans.

Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

Management maintains the allowance for loan losses at a level it believes adequate to absorb probable credit losses related to specifically identified loans, as well as probable incurred losses inherent in the remainder of the loan portfolio as of the balance sheet dates. The allowance for loan losses account consists of specific and general reserves.

For the specific portion of the allowance for loan losses, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. All amounts due according to the contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Factors considered by management in determining impairment include payment status, ability to pay and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Loans considered impaired are measured for impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. If the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, if the loan is collateral dependent, is less than the recorded investment in the loan, including accrued interest and net deferred loan fees or costs, the Company will recognize the impairment by adjusting the allowance for loan losses account through charges to earnings as a provision for loan losses.

For loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of

the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, loan-to-value ratio based on the original appraisal and the condition of the property. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

The general portion of the allowance for loan losses covers pools of loans by major loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate and other consumer loans. Loss contingencies for each of the major loan pools are determined by applying a total loss factor to the current balance outstanding for each individual pool. The total loss factor is comprised of a historical loss factor using the loss migration method plus a qualitative factor, which adjusts the historical loss factor for changes in trends, conditions and other relevant factors that may affect repayment of the loans in these pools as of the evaluation date. Loss migration involves determining the percentage of each pool that is expected to ultimately result in loss based on historical loss experience. Historical loss factors are based on the ratio of net loans charged-off to loans, net, for each of the major groups of loans. The historical loss factor for each pool, includes but is not limited to, an average of the Company’s historical net charge-off ratio for the most recent rolling four years plus current year to date.

In addition to these historical loss factors, management also uses a qualitative factor that represents a number of environmental risks that may cause estimated credit losses associated with the current portfolio to differ from historical loss experience. These environmental risks include: (i) changes in lending policies and procedures including underwriting standards and collection, charge-off and recovery practices; (ii) changes in the composition and volume of the portfolio; (iii) changes in national, local and industry conditions, including the effects of such changes on the value of underlying collateral for collateral-dependent loans; (iv) changes in the volume and severity of classified loans, including past due, nonaccrual, troubled debt restructures and other loan modifications; (v) changes in the levels of, and trends in, charge-offs and recoveries; (vi) the existence and effect of any concentrations of credit and changes in the level of such concentrations; (vii) changes in the experience, ability and depth of lending management and other relevant staff; (viii) changes in the quality of the loan review system and the degree of oversight by the board of directors; and (ix) the effect of external factors such as competition and regulatory requirements on the level of estimated credit losses in the current loan portfolio. Each environmental risk factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation. In 2020, the Bank adjusted the economic risk factor and loan modifications risk factor methodologies to incorporate the current economic implications, unemployment rate and amount of loan modifications due to the COVID-19 pandemic, leading to the increase in the allowance for loan losses as a percentage of total loans.

The unallocated component of the general allowance is used to cover inherent losses that exist as of the evaluation date, but which have not been identified as part of the allocated allowance using the above impairment evaluation methodology due to limitations in the process. One such limitation is the imprecision of accurately estimating the impact current economic conditions will have on historical loss rates. Variations in the magnitude of impact may cause estimated credit losses associated with the current portfolio to differ from historical loss experience, resulting in an allowance that is higher or lower than the anticipated level.

The allowance calculation methodology includes further segregation of loan classes into risk rating categories. The borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate, are evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payment, for commercial and consumer loans. Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful and loss. Loans criticized as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weakness may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness and borrowers are highly leveraged. They include loans that are inadequately protected by the current sound net worth and the paying capacity of the obligor or

of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

Federal regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses and may require the Company to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio, management believes the current level of the allowance for loan losses is adequate.

Other Real Estate Owned

Other real estate owned is comprised of properties acquired through foreclosure proceedings or acceptance of a deed-in-lieu of foreclosure and loans classified as in-substance foreclosures. A loan is classified as an in-substance foreclosure when the Company has taken possession of the collateral, regardless of whether formal foreclosure proceedings take place. Other real estate owned is recorded at fair value less cost to sell at the time of acquisition. Any excess of the loan balance over the recorded value is charged to the allowance for loan losses at the time of acquisition. After foreclosure, valuations are periodically performed and the assets are carried at the lower of cost or fair value less cost to sell. Changes in the valuation allowance on foreclosed assets are included in other income. Costs to maintain the assets are included in other expenses. Any gain or loss realized upon disposal of other real estate owned is included in other income.

Bank Owned Life Insurance

The Company invests in bank owned life insurance (“BOLI”) as a tax deferred investment and a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Company on certain of its employees and directors. The Company is the owner and primary beneficiary of the policies. This life insurance investment is carried at the cash surrender value of the underlying policies. Income from increases in cash surrender value of the policies is included in non-interest income and is not subject to income taxes unless surrendered. The Company does not intend to surrender these policies, and accordingly, no deferred taxes have been recorded on the earnings from these policies. The Company purchased $4.0 million of BOLI in 2020. There were no BOLI purchases in 2019.

Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the following estimated useful lives of the related assets: furniture, fixtures and equipment for five years to ten years, leasehold improvements for the life of the lease, building for forty years, computer equipment and data processing software for one year to five years, and automobiles for five years.

Transfers of Financial Assets

Transfers of financial assets, including sales of loan participations, are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Advertising Costs

The Company follows the policy of charging the costs of advertising to expense as incurred.

‎

Income Taxes

Income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to taxable income. Deferred income taxes are provided on the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and net operating loss carry forwards and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period, as adjusted for stock dividends and splits. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and are determined using the treasury stock method.



	Year Ended December 31,
	2020		2019

	(Dollars In Thousands, Except Per Share Data)

Net income	$	12,810	$	10,879

Weighted average shares outstanding		7,469,952		7,475,262
Dilutive effect of potential common
shares, stock options		53,643		68,839
Diluted weighted average common
shares outstanding		7,523,595		7,544,101
Basic earnings per share	$	1.71	$	1.46
Diluted earnings per share	$	1.70	$	1.44

There were no stock options not considered in computing diluted earnings per common share for the years ended December 31, 2020 and December 31, 2019.

Employee Benefit Plan

The Company has a 401(k) Plan (the “Plan”) for employees. All employees are eligible to participate after they have attained the age of 21 and have also completed 6 consecutive months of service during which at least 500 hours of service are completed. The employees may contribute up to the maximum percentage allowable by law of their compensation to the Plan, and the Company provides a match of fifty percent of the first 8% percent to eligible participating employees. Full vesting in the Plan is prorated equally over a four year period. The Company’s contributions to the Plan for the years ended December 31, 2020 and 2019 were $228 thousand and $210 thousand, respectively.

Off Balance Sheet Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit and letters of credit. Such financial instruments are recorded in the balance sheet when they are funded.

Comprehensive Income

US GAAP require that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income.

Stock-Based Compensation

The Company measures and records compensation expense for share-based payments based on the instrument's fair value on the date of grant. The fair value of each stock option grant is measured using the Black-Scholes option pricing model. The fair value of stock awards is based on the Company's stock price. Share-based compensation expense is recognized over the service period, generally defined as the vesting period.

Non-Interest Income

The majority of the Company’s revenue-generating transactions are not subject to ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)”, including revenue generated from financial instruments, such as its loans and investment securities, as these activities are subject to other US GAAP discussed elsewhere within the Company’s disclosures. Descriptions of the Company’s revenue-generating activities that are within the scope of Topic 606, which are presented in the consolidated statement of income as components of non-interest income, are merchant processing and credit card processing fees, debit card interchange fees, other service fees on deposit accounts, and gains and losses on other real estate owned. Credit card processing fees include income from commercial credit cards and merchant processing income. Income for such performance obligations are generally received at the time the performance obligations are satisfied or within the monthly service period. Service fees on deposit accounts represent general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the Company’s performance obligation is completed, which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). The Company recognizes debit card interchange fees daily from debit cardholder transactions conducted through the MasterCard payment network. The Company records a gain or loss from the sale of other real estate owned when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of other real estate owned to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction prices and related gain or loss on the sale if a significant financing component is present. The Company does not sell its mortgages on the secondary market, nor does it offer trust or investment brokerage services to its customers to generate fee income. On May 1, 2020, the Company sold its entire $689 thousand commercial credit card loan portfolio to an unrelated third party for a gain of $59 thousand. These loans were classified as held for sale at March 31, 2020 prior to the May 1, 2020 sale.

Subsequent Events

The Company has evaluated events and transactions occurring subsequent to the balance sheet date of December 31, 2020 through the date these consolidated financial statements were available for issuance for items that should potentially be recognized or disclosed in these consolidated financial statements. As of February 3, 2021, the Paycheck Protection Program Liquidity Facility (“PPPLF”) borrowings of $50.8 million were paid off in full. Refer to Note 2 for subsequent loan balances and activity related to the CARES Act.

Future Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses”. ASU 2016-13 requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These

expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts. This ASU will also require enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In November 2019, the FASB issued an update to defer the implementation date for smaller reporting companies from 2020 to 2023. The Company currently qualifies as a smaller reporting company under SEC Regulation S-K and, therefore, the guidance is effective for the Company in 2023. The Company has not yet determined the impact this standard will have on its financial statements or results of operations.

Reclassification

Certain amounts in the 2019 consolidated financial statements may have been reclassified to conform to 2020 presentation. These reclassifications had no effect on 2019 net income.

COVID-19

12 Months Ended

Dec. 31, 2020

COVID-19 [Abstract]

COVID-19

Note 2 – COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global pandemic and on March 13, 2020 the United States government declared COVID-19 as a national emergency. The continuing effects of COVID-19 could adversely impact a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their financial obligations to the Company. The economic effects of COVID-19 may adversely affect the Company’s financial condition and results of operations as further described below. The full future potential impact is unknown at this time.

For the year ended December 31, 2020, the Company provided certain borrowers affected in a variety of ways by COVID-19 with payment accommodations that facilitate their ability to work through the immediate impact of the virus. Payment accommodations were in the form of short-term principal and/or interest deferrals. These payment accommodations were made in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. Section 4013 of the CARES Act, enacted on March 27, 2020, provides that, from the period beginning March 1, 2020 until the earlier of December 31, 2020, subsequently extended until December 31, 2021, or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic declared by the President of the United States under the National Emergencies Act terminates, the Company may elect to suspend US GAAP for loan modifications related to the pandemic which would otherwise be categorized as troubled debt restructurings and suspend any determination of a loan modified as a result of the effects of the pandemic as being a troubled debt restructuring, including impairment for accounting purposes. Interest income is continuing to be recognized during the accommodation period. The following table presents COVID-19 payment accommodations based on loan type and amount at December 31, 2020:


	Number of Loans	Loan Amount
		(In Thousands)
Commercial real estate	137	$	128,846
Commercial	44		8,197
Residential real estate	72		14,234
Consumer	2		31
Total	255	$	151,308

Included in the totals above are two hundred forty-three (243) loans totaling $133.0 million in which the payment accommodation period has ended and the loan payments have resumed under their original contractual terms. Also included in the totals above are six (6) loans totaling $984 thousand that are in their first short-term (three month) payment accommodation period, one (1) loan totaling $25 thousand that is in its second short-term (three month) payment accommodation period and five (5) loans totaling $17.3 million that are in their third short-term (three month) payment accommodation period. At December 31, 2020, Management has not changed its classification of

these loans due to the quality knowledge our loan officers have obtained from their discussions with the borrowers and due to the strength of the collateral and guarantors. Management continues to carefully monitor those borrowers who remain on payment deferral for additional signs of distress that would result in a downgrade in loan classification. All loans under a modification period are considered current for payment status.

At February 28, 2021, the Company had two hundred forty-eight (248) Section 4013 loans totaling $149.5 million. Included in these totals are two hundred forty-three (243) loans totaling $132.6 million in which the payment accommodation period has ended and the loan payments have resumed under their original contractual terms. Also included in the totals are one (1) consumer loan totaling $418 thousand that is in its first short-term (three month) payment accommodation period and four (4) commercial loans totaling $16.5 million that have been given a fourth short-term (three month) payment accommodation period. Loans in the fourth short-term (three month) payment accommodation period consist of a $11.4 million loan to a borrower in the travel and hotel industry, a $3.8 million loan to a borrower in the assisted living facility industry and two (2) loans totaling $1.4 million to a borrower in the restaurant industry. Except for these four (4) loans being granted a fourth short-term (three month) payment accommodation, between January 1, 2021 and February 28, 2021, there were no new Section 4013 modifications made.

In order to participate in the SBA’s PPP program under the CARES Act, the Company made application for and was approved to be a PPP lender. The Company had not previously been an approved SBA 7(a) lender. The Company began accepting applications from qualified borrowers on April 3, 2020, and, as of December 31, 2020, the Company had a total of four hundred seventy (470) PPP loans with a receivable balance of $54.3 million, net of $1.2 million of unearned origination fees and costs. Through December 31, 2020, the Company had received forgiveness payments from the SBA on PPP loan principal balances of $13.2 million. From January 1, 2021 to February 28, 2021, the Company had received additional forgiveness payments from the SBA on PPP loan principal balances of $19.4 million.

These PPP loans are 100% guaranteed by the SBA, have a two year or up to five year maturity and an interest rate of 1% throughout the term of the loan, with payments deferred until forgiveness proceeds received from the SBA or ten months after the end of the covered period. The SBA may forgive the PPP loans if certain conditions are met by the borrower, including using at least 60% of the proceeds for payroll costs. The SBA also provided the Company with a processing fee for each loan, with the amount of such fee pre-determined by the SBA dependent upon the size of each loan. At December 31, 2020, the Company has recorded net deferred PPP loan fees and costs of $1.2 million, which will be recognized through interest income over the life of the related PPP loans. Because of the 100% SBA guarantee, the Company has determined that no allowance for loan losses is required on the PPP loans. All PPP loans have a pass rating and none are past due under their contractual terms.

On December 27, 2020 the 2021 Consolidated Appropriations Act (“CAA”) was signed into the law. The CAA included $284 billion in new PPP funding, and the Company is assisting its customers in applying for such funding. Through February 28, 2021, the Company originated new PPP loans under the CAA with a balance of $23.2 million, net of $922 thousand of unearned fees and costs.

‎

In April 2020, the Company applied and was approved by the Federal Reserve Board for both the ability to borrow under its PPPLF, as well as its Discount Window. The PPPLF provides term funding to depository institutions that originate loans to small businesses under the PPP. PPP loans that are pledged to secure PPPLF extensions of credit are excluded from leverage ratio calculations. The components of long-term borrowings with the PPPLF at December 31, 2020 were as follows:


	December 31, 2020
	(Dollars in Thousands)
Maturity Date	Interest Rate		Outstanding
April 2022	0.35%	$	32,240
May 2022	0.35%		18,554
Total PPPLF Outstanding Borrowings		$	50,794

As of February 3, 2021, the PPPLF borrowings have been paid off in full. The Company is approved to borrow under the PPPLF through June 30, 2021.

The Company’s allowance for loan losses increased $2.5 million to $10.6 million at December 31, 2020 from $8.0 million at December 31, 2019. At December 31, 2020 and December 31, 2019, the allowance for loan losses represented 0.97% and 0.79%, respectively, of total loans (not including PPP loans which are guaranteed by the SBA). In 2020, the Bank adjusted the economic risk factor and loan modifications risk factor methodologies to incorporate the current economic implications, unemployment rate and amount of loan modifications due to the COVID-19 pandemic, leading to the increase in the allowance for loan losses as a percentage of total loans. In determining its allowance for loan loss level for the year ending December 31, 2020, the Bank considered the health and composition of its loan portfolio going into and during the COVID-19 pandemic. At December 31, 2020, approximately 94% of the Bank’s loan portfolio is collateralized by real estate. Less than 6% of the Bank’s loan portfolio is to borrowers in the more particularly hard-hit industries (including the travel and hotel industry, the full-service and limited-service restaurant industries, and the assisted living facilities industry) and the Bank has no direct international exposure. The Bank was not required to adopt the Current Expected Credit Losses (“CECL”) FASB accounting standard in 2020, as this guidance will not be effective for the Bank until 2023. Based upon current economic conditions, the composition of the loan portfolio, the perceived credit risk in the portfolio and loan-loss experience of the Bank and comparable institutions in the Bank’s market area, management feels the allowance is adequate to absorb reasonably anticipated losses.

In response to the COVID-19 outbreak, the Federal Reserve Board in mid-March 2020 has reduced by 150 basis points the benchmark federal funds rate to a target range of 0% to 0.25%, and the yields on 10 year and 30 year Treasury notes have declined to historic lows. As a result of the decline in the Federal Reserve Board’s target federal funds rate and yields on Treasury notes, the Company’s future net interest margin and spread may be further reduced.

All loans that have the CARES Act Section 4013 modification, regardless of whether original contractual payment terms have resumed, are provided additional qualitative reserve in the Company’s allowance for loan loss calculation. None of the loans that remain in payment accommodation status at December 31, 2020 are considered impaired by Management at December 31, 2020 as, at this time, Management does not feel it probable that the Company will be unable to collect all amounts according to the contractual terms of the loan agreement.

Securities Available For Sale

12 Months Ended

Dec. 31, 2020

Securities Available For Sale [Abstract]

Securities Available For Sale

Note 3 – Securities Available For Sale

The amortized cost and approximate fair values of securities available-for-sale were as follows at December 31, 2020 and 2019, respectively:



			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

	(In Thousands)
December 31, 2020:
U.S. Treasury securities	$	9,998	$	-	$	-	$	9,998
U.S. Government agency obligations		39,059		1		(24)		39,036
Municipal bonds		37,409		1,967		-		39,376
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - commercial		512		31		-		543
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - residential		40,244		1,743		-		41,987
Total	$	127,222	$	3,742	$	(24)	$	130,940

December 31, 2019:
Municipal bonds	$	25,586	$	863	$	(5)	$	26,444
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - residential		63,546		877		(38)		64,385
Total	$	89,132	$	1,740	$	(43)	$	90,829

The amortized cost and fair value of securities as of December 31, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without any penalties.



		Amortized		Fair
		Cost		Value

	(In Thousands)
Due in one year or less	$	20,615	$	20,618
Due after one year through five years		30,833		30,818
Due after five years through ten years		6,887		7,157
Due after ten years		28,131		29,817
		86,466		88,410
U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - commercial		512		543
U.S. Government Sponsored Enterprise (GSE) - Mortgage-backed securities - residential		40,244		41,987
	$	127,222	$	130,940

Gross gains of $128 thousand were realized on the sales of securities for the year ended December 31, 2020. There were no gross losses on the sales of securities for the year ended December 31, 2020. There were no sales of securities for the year ended December 31, 2019.

‎

The following table shows the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2020 and December 31, 2019, respectively:



		Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

December 31, 2020 :	(In Thousands)
U.S. Government agency obligations	$	31,369	$	(24)	$	-	$	-	$	31,369	$	(24)
Total Temporarily Impaired Securities	$	31,369	$	(24)	$	-	$	-	$	31,369	$	(24)

December 31, 2019 :
Municipal bonds	$	1,295	$	(5)	$	-	$	-	$	1,295	$	(5)
U.S. Government Sponsored Enterprise (GSE) - ‎ Mortgage-backed securities - residential		4,701		(1)		8,528		(37)		13,229		(38)
Total Temporarily Impaired Securities	$	5,996	$	(6)	$	8,528	$	(37)	$	14,524	$	(43)

The Company had five (5) securities in an unrealized loss position at December 31, 2020 and five (5) securities in an unrealized loss position at December 31, 2019. Unrealized losses are due only to market interest rate fluctuations. As of December 31, 2020, the Company either has the intent and ability to hold the securities until maturity or market price recovery or believes that it is more likely than not that it will not be required to sell such securities. Management believes that the unrealized loss only represents temporary impairment of the securities. None of the individual losses are significant.

Securities with a carrying value of $98.7 million and $74.0 million at December 31, 2020 and December 31, 2019, respectively, were subject to agreements to repurchase, pledged to secure public deposits, or pledged for other purposes required or permitted by law.

Loans Receivable and Credit Quality

12 Months Ended

Dec. 31, 2020

Loans Receivable and Credit Quality [Abstract]

Loans Receivable and Credit Quality

Note 4 – Loans Receivable and Credit Quality

On May 1, 2020, the Company sold its entire $689 thousand commercial credit card loan portfolio to an unrelated third party for a gain of $59 thousand. These loans were classified as held for sale at March 31, 2020 prior to the May 1, 2020 sale.

The Company has presented PPP loans of $54.3 million separately from loans receivable on the Consolidated Balance Sheet. As described in Note 2, PPP loans are 100% SBA guaranteed and the Company has determined that no allowance for loan losses is required on PPP loans. All PPP loans are risk rated as pass and considered current for payment status purpose. PPP loans are not included in the following composition and credit quality tables.

‎

The following table presents the composition of loans receivable (not including PPP loans):



	December 31,
	2020		2019

	(In Thousands)

Commercial real estate	$	452,251	$	427,987
Commercial construction		12,176		12,622
Commercial		48,114		53,747
Residential real estate		576,437		518,150
Consumer		640		820

Total Loans		1,089,618		1,013,326

Unearned net loan origination costs		291		813
Allowance for Loan Losses		(10,570)		(8,022)

Net Loans	$	1,079,339	$	1,006,117

The following table summarizes information in regard to the allowance for loan losses (not including PPP loans) as of December 31, 2020 and 2019, respectively:



	Commercial Real Estate		Commercial Construction		Commercial		Residential Real Estate		Consumer		Unallocated		Total

	(In Thousands)
Allowance for loan losses
Year Ending December 31, 2020
Beginning Balance - December 31, 2019	$	3,221	$	121	$	770	$	3,488	$	19	$	403	$	8,022
Charge-offs		-		-		-		-		-		-		-
Recoveries		24		-		-		4		-		-		28
Provisions		1,134		29		78		993		(5)		291		2,520
Ending Balance - December 31, 2020	$	4,379	$	150	$	848	$	4,485	$	14	$	694	$	10,570

Year Ending December 31, 2019
Beginning Balance - December 31, 2018	$	3,248	$	94	$	574	$	3,179	$	19	$	298	$	7,412
Charge-offs		-		-		-		-		-		-		-
Recoveries		-		-		4		1		-		-		5
Provisions		(27)		27		192		308		-		105		605
Ending Balance - December 31, 2019	$	3,221	$	121	$	770	$	3,488	$	19	$	403	$	8,022

‎

The following tables represent the allocation of the allowance for loan losses and the related loan portfolio, (not including PPP loans), disaggregated based on impairment methodology at December 31, 2020 and December 31, 2019, respectively:



	Commercial Real Estate		Commercial Construction		Commercial		Residential Real Estate		Consumer		Unallocated		Total

	(In Thousands)
December 31, 2020
Allowance for Loan Losses
Ending Balance	$	4,379	$	150	$	848	$	4,485	$	14	$	694	$	10,570
Ending balance: individually evaluated for impairment	$	21	$	-	$	23	$	125	$	-	$	-	$	169
Ending balance: collectively evaluated for impairment	$	4,358	$	150	$	825	$	4,360	$	14	$	694	$	10,401

Loans receivables:
Ending balance	$	452,251	$	12,176	$	48,114	$	576,437	$	640			$	1,089,618
Ending balance: individually evaluated for impairment	$	1,547	$	315	$	230	$	1,548	$	-			$	3,640
Ending balance: collectively evaluated for impairment	$	450,704	$	11,861	$	47,884	$	574,889	$	640			$	1,085,978

December 31, 2019
Allowance for Loan Losses
Ending Balance	$	3,221	$	121	$	770	$	3,488	$	19	$	403	$	8,022
Ending balance: individually evaluated for impairment	$	-	$	-	$	27	$	175	$	-	$	-	$	202
Ending balance: collectively evaluated for impairment	$	3,221	$	121	$	743	$	3,313	$	19	$	403	$	7,820

Loans receivables:
Ending balance	$	427,987	$	12,622	$	53,747	$	518,150	$	820			$	1,013,326
Ending balance: individually evaluated for impairment	$	1,626	$	315	$	234	$	1,346	$	-			$	3,521
Ending balance: collectively evaluated for impairment	$	426,361	$	12,307	$	53,513	$	516,804	$	820			$	1,009,805

‎

The following table summarizes information in regard to impaired loans (not including PPP loans) by loan portfolio class as of December 31, 2020 and 2019, respectively:


							Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2020		(In Thousands)
With no related allowance recorded:
Commercial real estate	$	851	$	1,091			$	870	$	49
Commercial construction		315		315				315		10
Commercial		-		-				-		-
Residential real estate		944		1,014				873		32
Consumer		-		-				-		-
With an allowance recorded:
Commercial real estate	$	696	$	696	$	21	$	699	$	21
Commercial construction		-		-		-		-		-
Commercial		230		230		23		232		9
Residential real estate		604		604		125		614		22
Consumer		-		-		-		1		-
Total:
Commercial real estate	$	1,547	$	1,787	$	21	$	1,569	$	70
Commercial construction		315		315		-		315		10
Commercial		230		230		23		232		9
Residential real estate		1,548		1,618		125		1,487		54
Consumer		-		-		-		1		-
	$	3,640	$	3,950	$	169	$	3,604	$	143
December 31, 2019
With no related allowance recorded:
Commercial real estate	$	1,626	$	1,890			$	1,686	$	86
Commercial construction		315		315				315		11
Commercial		-		-				-		-
Residential real estate		530		786				640		14
Consumer		-		-				-		-
With an allowance recorded:
Commercial real estate	$	-	$	-	$	-	$	-	$	-
Commercial construction		-		-		-		-		-
Commercial		234		234		27		236		10
Residential real estate		816		816		175		828		30
Consumer		-		-		-		-		-
Total:
Commercial real estate	$	1,626	$	1,890	$	-	$	1,686	$	86
Commercial construction		315		315		-		315		11
Commercial		234		234		27		236		10
Residential real estate		1,346		1,602		175		1,468		44
Consumer		-		-		-		-		-
	$	3,521	$	4,041	$	202	$	3,705	$	151

‎

The following table presents the classes of the loan portfolio (not including PPP loans), summarized by the aggregate pass rating and the classified ratings of special mention (potential weaknesses), substandard (well defined weaknesses) and doubtful (full collection unlikely) within the Company's internal risk rating system as of December 31, 2020 and December 31, 2019, respectively:



	Pass		Special Mention		Substandard		Doubtful		Total

December 31, 2020		(In Thousands)
Commercial real estate	$	450,823	$	-	$	1,428	$	-	$	452,251
Commercial construction		11,861		-		315		-		12,176
Commercial		48,114		-		-		-		48,114
Residential real estate		575,344		512		581		-		576,437
Consumer		640		-		-		-		640
Total	$	1,086,782	$	512	$	2,324	$	-	$	1,089,618

December 31, 2019
Commercial real estate	$	426,526	$	-	$	1,461	$	-	$	427,987
Commercial construction		12,307		-		315		-		12,622
Commercial		53,656		91		-		-		53,747
Residential real estate		517,281		719		150		-		518,150
Consumer		820		-		-		-		820
Total	$	1,010,590	$	810	$	1,926	$	-	$	1,013,326

The following table presents nonaccrual loans by classes of the loan portfolio:



	December 31,

	2020		2019

	(In Thousands)
Commercial real estate	$	-	$	-
Commercial construction		-		-
Commercial		-		-
Residential real estate		274		18
Consumer		-		-
Total	$	274	$	18

‎

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. Loans performing under a CARES Act modification are considered current for payment status. The following table presents the classes of the loan portfolio (not including PPP loans) summarized by the past due status as of December 31, 2020 and 2019, respectively:



	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Total Loan ‎Receivables		Loan Receivables > 90 Days and Accruing

December 31, 2020	(In Thousands)
Commercial real estate	$	514	$	-	$	-	$	514	$	451,737	$	452,251	$	-
Commercial construction		-		-		-		-		12,176		12,176		-
Commercial		-		-		-		-		48,114		48,114		-
Residential real estate		336		-		42		378		576,059		576,437		-
Consumer		2		-		-		2		638		640		-
Total	$	852	$	-	$	42	$	894	$	1,088,724	$	1,089,618	$	-

December 31, 2019
Commercial real estate	$	-	$	-	$	-	$	-	$	427,987	$	427,987	$	-
Commercial construction		-		-		-		-		12,622		12,622		-
Commercial		-		-		-		-		53,747		53,747		-
Residential real estate		951		-		-		951		517,199		518,150		-
Consumer		-		-		-		-		820		820		-
Total	$	951	$	-	$	-	$	951	$	1,012,375	$	1,013,326	$	-

Troubled Debt Restructurings

The Company may grant a concession or modification for economic or legal reasons related to a borrower’s financial condition that it would not otherwise consider, resulting in a modified loan which is then identified as a troubled debt restructuring (“TDR”). The Company may modify loans through rate reductions, extensions to maturity, interest only payments, or payment modifications to better coincide the timing of payments due under the modified terms with the expected timing of cash flows from the borrowers’ operations. Loan modifications are intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. TDRs are considered impaired loans for purposes of calculating the Company’s allowance for loan losses. Payment accommodations completed since the COVID-19 outbreak reported in accordance with Section 4013 of the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus are described in Note 2 and are not considered a TDR.

The Company identifies loans for potential restructure primarily through direct communication with the borrower and the evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions, and negative trends may result in a payment default in the near future.

‎

The following table presents TDRs outstanding at December 31, 2020 and 2019, respectively:



	Accrual Loans		Non-Accrual Loans		Total Modifications

	(In Thousands)
December 31, 2020
Commercial real estate	$	1,125	$	-	$	1,125
Commercial construction		260		-		260
Commercial		230		-		230
Residential real estate		944		15		959
Consumer		-		-		-
Total	$	2,559	$	15	$	2,574

December 31, 2019
Commercial real estate	$	1,188	$	-	$	1,188
Commercial construction		260		-		260
Commercial		233		-		233
Residential real estate		982		18		1,000
Consumer		-		-		-
Total	$	2,663	$	18	$	2,681

There were no new TDRs during the year ended December 31, 2020 and December 31, 2019.

As December 31, 2020 and 2019, no available commitments were outstanding on TDRs.

There were no loans that were modified and classified as a TDR within the prior twelve months that experienced a payment default (loans ninety or more days past due) during the years ended December 31, 2020 and December 31, 2019.

Financial Instruments With Off-Balance Sheet Risk

12 Months Ended

Dec. 31, 2020

Financial Instruments With Off-Balance Sheet Risk [Abstract]

Financial Instruments With Off-Balance Sheet Risk

Note 5 - Financial Instruments with Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheets.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

‎

The following financial instruments were outstanding whose contract amounts represent credit risk:



	December 31,
	2020		2019

	(In Thousands)

Commitments to grant loans, fixed	$	5,080	$	14,574
Commitments to grant loans, variable		75		1,450
Unfunded commitments under lines of credit, fixed		6,833		16,967
Unfunded commitments under lines of credit, variable		123,430		106,491
Standby letters of credit		5,412		2,889

Total	$	140,830	$	142,371

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation.

Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

Outstanding letters of credit written are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The majority of these standby letters of credit expire within the next twelve months. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending other loan commitments. The Company requires collateral supporting these letters of credit as deemed necessary. The maximum undiscounted exposure related to these commitments at December 31, 2020 and 2019 was $5.4 million and $2.9 million, respectively, and the approximate value of underlying collateral upon liquidation that would be expected to cover this maximum potential exposure was $3.4 million and $1.8 million, respectively. The current amount of the liability as of December 31, 2020 and 2019 for guarantees under standby letters of credit issued is not considered material.

FHLB deposit letters of credit are standby letters of credit commitments issued by the Bank for the benefit of a third party, which secure public deposits in the Bank. FHLB deposit letters of credit are secured by qualifying assets of the Bank. The Company, through the Bank, had no FHLB deposit letters of credit outstanding as of December 31, 2020 and $7.6 million of FHLB deposit letters of credit outstanding as of December 31, 2019.

Bank Premises And Equipment

12 Months Ended

Dec. 31, 2020

Bank Premises And Equipment [Abstract]

Bank Premises And Equipment

Note 6 - Bank Premises and Equipment

The components of premises and equipment are as follows:


	December 31,
	2020		2019

	(In Thousands)

Furniture, fixtures, and equipment	$	3,902	$	3,396
Leasehold improvements		3,419		3,268
Buildings		1,141		-
Computer equipment and data processing software		4,083		3,771
Automobiles		272		272
Construction in progress		-		127

		12,817		10,834
Accumulated depreciation		(9,471)		(8,711)

	$	3,346	$	2,123

The $1.2 million increase in premises and equipment is primarily due to the opening of the permanent branch in the Borough of Macungie in November of 2020.

Deposits

12 Months Ended

Dec. 31, 2020

Deposits [Abstract]

Deposits

Note 7 – Deposits

The components of deposits:



	December 31,
	2020		2019

	(In Thousands)

Demand, non-interest bearing	$	269,996	$	171,815
Demand, NOW and money market, interest bearing		199,845		180,869
Savings		546,784		425,284
Time, $250 and over		85,272		92,517
Time, other		130,482		161,483
Total deposits	$	1,232,379	$	1,031,968

At December 31, 2020, the scheduled maturities of time deposits are as follows (in thousands):



2021	$	150,966
2022		29,095
2023		29,983
2024		4,436
2025		1,274

	$	215,754

Securities Sold Under Agreements To Repurchase And Offsetting Assets And Liabilities

12 Months Ended

Dec. 31, 2020

Securities Sold Under Agreements To Repurchase And Offsetting Assets And Liabilities [Abstract]

Securities Sold Under Agreements To Repurchase And Offsetting Assets And Liabilities

Note 8 - Securities Sold under Agreements to Repurchase and Offsetting Assets and Liabilities

Securities sold under agreements to repurchase generally mature within a few days from the transaction date and are reflected at the amount of cash received in connection with the transaction. The securities are retained under the Company’s control at its safekeeping agent. The Company adjusts collateral based on the fair value of the underlying securities, on a monthly basis. Information concerning securities sold under agreements to repurchase is summarized as follows:



	2020			2019

	(Dollars In Thousands)

Balance outstanding at December 31	$	13,612		$	7,208
Weighted average interest rate at the end of the year		0.058	%		0.588	%
Average daily balance during the year	$	11,027		$	10,870
Weighted average interest rate during the year		0.159	%		0.676	%
Maximum month-end balance during the year	$	14,430		$	17,570

The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Under these arrangements, the Company may transfer legal control over the assets but still retain effective control through an agreement that both entitles and obligates the Company to repurchase the assets. As a result, these repurchase agreements are accounted for as collateralized financing arrangements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a liability in the Company's consolidated balance sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts. In other words, there is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. In addition, as the Company does not enter into reverse repurchase agreements, there is no such offsetting to be done with the repurchase agreements.

The right of setoff for a repurchase agreement resembles a secured borrowing, whereby the collateral would be used to settle the fair value of the repurchase agreement should the Company be in default (e.g., fails to make an interest payment to the counterparty). For private institution repurchase agreements, if the private institution counterparty were to default (e.g., declare bankruptcy), the Company could cancel the repurchase agreement (i.e., cease payment of principal and interest), and attempt collection on the amount of collateral value in excess of the repurchase agreement fair value. The collateral is held by a third-party financial institution in the counterparty's custodial account. The counterparty has the right to sell or repledge the investment securities. For government entity repurchase agreements, the collateral is held by the Company in a segregated custodial account under a tri-party agreement.

The following table presents the liabilities subject to an enforceable master netting arrangement or repurchase agreements as of December 31, 2020 and December 31, 2019:



						Net Amounts
		Gross		Gross Amounts		of Liabilities
		Amounts of		Offset in the		Presented in the
		Recognized		Consolidated		Consolidated		Financial		Cash Collateral
		Liabilities		Balance Sheet		Balance Sheet		Instruments		Pledged		Net Amount

		(In Thousands)
December 31, 2020
Repurchase Agreements:
Corporate Institutions	$	13,612	$	-	$	13,612	$	(13,612)	$	-	$	-

December 31, 2019
Repurchase Agreements:
Corporate Institutions	$	7,208	$	-	$	7,208	$	(7,208)	$	-	$	-

As of December 31, 2020 and December 31, 2019, the fair value of securities pledged was $17.5 million and $10.1 million, respectively.

Short-Term And Long-Term Borrowings

12 Months Ended

Dec. 31, 2020

Short-Term And Long-Term Borrowings [Abstract]

Short-Term And Long-Term Borrowings

Note 9 – Short-term and Long-term Borrowings

Federal funds purchased and FHLB short term advances generally represent overnight or less than twelve month borrowings. Long term advances from the FHLB are for periods of twelve months or more and are generally less than sixty months. The Bank has an agreement with the FHLB, which allows for borrowings up to a percentage of qualifying assets. At December 31, 2020, the Bank had a maximum borrowing capacity for short-term and long-term advances of approximately $682.6 million. This borrowing capacity with the FHLB includes a line of credit of $150.0 million. There were no short-term FHLB advances outstanding as of December 31, 2020 and $18.1 million in short-term FHLB advances outstanding as of December 31, 2019. There were $14.7 million in long-term FHLB advances outstanding as of December 31, 2020 and none outstanding at December 31, 2019. All FHLB borrowings are secured by qualifying assets of the Bank.

The components of long-term borrowings with the FHLB at December 31, 2020 were as follows:


		2020

	(Dollars in Thousands)

Maturity Date		Interest ‎Rate		Outstanding

March 2022		0.79%	$	10,000
March 2022		0.64%		2,663
March 2022		0.61%		1,988
Total Outstanding Borrowings			$	14,651

The Bank also has a federal funds line of credit with the ACBB of $10.0 million, of which none was outstanding at December 31, 2020 and December 31, 2019. Advances from this line are unsecured.

As described in Note 2, the Bank participated in the PPPLF program and has long-term PPPLF borrowings through the Federal Reserve Bank of Philadelphia of $50.8 million, at an interest rate of 0.35%, as of December 31, 2020. All PPPLF borrowings are secured by PPP loans. As of February 3, 2021, the PPPLF borrowings have been paid off in full.

Employment Agreements And Supplemental Executive Retirement Plans

12 Months Ended

Dec. 31, 2020

Employment Agreements And Supplemental Executive Retirement Plans [Abstract]

Employment Agreements And Supplemental Executive Retirement Plans

Note 10 - Employment Agreements and Supplemental Executive Retirement Plans

The Company has entered into employment agreements with its Chief Executive Officer, Chief Financial Officer and Senior Loan Officer.

The Company has an unfunded, non-qualified Supplemental Executive Retirement Plan (“SERP”) for certain executive officers that provides for payments upon retirement, death, or disability. As of December 31, 2020 and 2019, other liabilities include $6.0 million and $5.3 million, respectively, accrued under these plans. For the years ended December 31, 2020 and 2019, $712 thousand and $463 thousand, respectively, were expensed under these plans.

- Definition

The entire disclosure for retirement benefits.

+ References

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+ Details

Stock Incentive Plan And Employee Stock Purchase Plan

12 Months Ended

Dec. 31, 2020

Stock Incentive Plan And Employee Stock Purchase Plan [Abstract]

Stock Incentive Plan And Employee Stock Purchase Plan

Note 11 - Stock Incentive Plan and Employee Stock Purchase Plan

Stock Incentive Plan:

At the Company’s annual meeting on June 20, 2019, the shareholders approved the amendment and restatement of the Embassy Bancorp, Inc. 2010 Stock Incentive Plan (the “SIP”), which was originally adopted by the Company’s shareholders effective June 16, 2010, to replenish the number of shares of common stock available for issuance under

the SIP and extend the term of the SIP for another ten (10) years. The SIP authorizes the Board of Directors, or a committee authorized by the Board of Directors, to award a stock based incentive to (i) designated officers (including officers who are directors) and other designated employees at the Company and its subsidiaries, and (ii) non-employee members of the Board of Directors and advisors and consultants to the Company and its subsidiaries. The SIP provides for stock based incentives in the form of incentive stock options as provided in Section 422 of the Internal Revenue Code of 1986, non-qualified stock options, stock appreciation rights, restricted stock, and deferred stock awards. The term of the option, the amount of time for the option to vest after grant, if any, and other terms and limitations will be determined at the time of grant. Options granted under the SIP may not have an exercise period that is more than ten years from the time the option is granted. The maximum number of shares of common stock authorized for issuance under the SIP increased from 500,000 to 756,356 (in order to replenish the shares that were previously issued). The SIP provides for appropriate adjustments in the number and kind of shares available for grant or subject to outstanding awards under the SIP to avoid dilution in the event of merger, stock splits, stock dividends or other changes in the capitalization of the Company. The SIP expires on June 20, 2029. At December 31, 2020, there were 452,814 shares available for issuance under the SIP.

The Company grants shares of restricted stock, under the SIP, to certain members of its Board of Directors as compensation for their services, in accordance with the Company’s Non-employee Directors Compensation program adopted in October 2010. The Company also granted restricted stock to certain officers under individual agreements with these officers. Some of these restricted stock awards vest immediately, while the remainder vest over a service period of three years to nine years. Management recognizes compensation expense for the fair value of the restricted stock awards on a straight-line basis over the requisite service period. Since inception of the plan and through the Company’s restricted stock grants activity for the year ended December 31, 2020, there have been 187,299 awards granted. During the years ended December 31, 2020 and 2019 there were 47,186 and 10,799 awards granted, respectively. During the years ended December 31, 2020 and 2019 the Company recognized $286 thousand and $363 thousand in compensation expense for the restricted stock awards.

Information regarding the Company’s restricted stock grants activity for the years ended December 31, 2020 and 2019 are as follows:


	Restricted Stock Awards		Weighted Average Grant Date Fair Value

Non-Vested at December 31, 2018	49,460	$	13.78
Granted	10,799		14.92
Vested	(25,005)		14.49

Non-Vested at December 31, 2019	35,254	$	13.63
Granted	47,186		12.45
Vested	(20,656)		12.82

Non-Vested at December 31, 2020	61,784	$	13.13

The Company has granted stock options to purchase shares of stock to certain executive officers under individual agreements and/or in accordance with their respective employment agreements. There was no stock compensation expense related to these options for the year ended December 31, 2020 and $4 thousand for the year ended December 31, 2019, respectively. At December 31, 2020, there was no unrecognized cost to the stock options.

‎

Activities under the SIP, related to stock options, is summarized as follows:


	Number of ‎Options		Weighted ‎Average Exercise Price

Outstanding, December 31, 2018	116,243	$	7.34
Granted	-		-
Exercised	-		-
Forfeited	-		-

Outstanding, December 31, 2019	116,243	$	7.34
Granted	-		-
Exercised	(52,611)		7.00
Forfeited	-		-

Outstanding, December 31, 2020	63,632	$	7.61

Exercisable, December 31, 2020	63,632	$	7.61

Stock options outstanding at December 31, 2020 are exercisable at prices ranging from $6.60 to $13.21 per share. The weighted-average remaining contractual life of options outstanding and exercisable at December 31, 2020 is 1.82 years. The weighted-average remaining contractual life of options outstanding and exercisable at December 31, 2019 was 2.06 years, respectively. At December 31, 2020, the aggregate intrinsic value of options outstanding and exercisable was $445 thousand. The intrinsic value was determined by using the latest known sales price of the Company’s common stock.

The following table summarizes information about the range of exercise prices for stock options outstanding at December 31, 2020:


Range of Exercise ‎Price	Weighted ‎Average ‎Exercise Price		Number ‎Outstanding	Weighted Average Remaining Contractual Life (Years)	Number ‎Exercisable

$6.60 to $8.26	$	7.25	59,405	1.60	59,405
$11.56 to $13.21	$	12.64	4,227	4.97	4,227

			63,632	1.82	63,632

Employee Stock Purchase Plan:

On January 1, 2017, the Company implemented the Embassy Bancorp, Inc. Employee Stock Purchase Plan, which was approved by the Company’s shareholders at the annual meeting held on June 16, 2016. Under the plan, each employee of the Company and its subsidiaries who is employed on an offering date and customarily is scheduled to work at least twenty (20) hours per week and more than five (5) months in a calendar year is eligible to participate. The purchase price for shares purchased under the plan shall initially equal 95% of the fair market value of such shares on the date of purchase. The purchase price may be adjusted from time to time by the Board of Directors; provided, however, that the discount to fair market value shall not exceed 15%. The Company has authorized 350,000 shares of its common stock for the plan, of which 15,261 shares have been issued as of December 31, 2020. The Company recognized discount expense in relation to the employee stock purchase plan of $3 thousand during the years ending December 31, 2020 and 2019.

Other Comprehensive Income

12 Months Ended

Dec. 31, 2020

Other Comprehensive Income [Abstract]

Other Comprehensive Income

Note 12 – Other Comprehensive Income

The components of other comprehensive income, both before tax and net of tax, are as follows:


	Year Ended December 31,
	2020						2019

	(In Thousands)

	Before		Tax		Net of		Before		Tax		Net of
	Tax		Effect		Tax		Tax		Effect		Tax
Change in accumulated other comprehensive income:
Unrealized holding gains on securities ‎ available for sale	$	2,149	$	(451)	$	1,698	$	3,275	$	(688)	$	2,587
Reclassification adjustments for gains on securities ‎ transactions included in net income (A), (B)		(128)		27		(101)		-		-		-
Total other comprehensive income	$	2,021	$	(424)	$	1,597	$	3,275	$	(688)	$	2,587

(A) Realized gains on securities transactions included in gain on sales of securities in the accompanying Consolidated Statements of Income.
(B) Tax effect included in income tax expense in the accompanying Consolidated Statements of Income.

A summary of the realized gains on securities available for sale for the years ended December 31, 2020 and 2019, net of tax, is as follows:


	Year Ended December 31,
		2020		2019

		(In Thousands)
Securities available for sale:
Realized gains on securities transactions	$	(128)	$	-
Income taxes		27		-
Net of tax	$	(101)	$	-

A summary of the accumulated other comprehensive income, net of tax, is as follows:


	Securities
	Available
	for Sale

	(In Thousands)
Year Ended December 31, 2020 and 2019
Balance January 1, 2020	$	1,340
Other comprehensive income before reclassifications		1,698
Amounts reclassified from accumulated other ‎ comprehensive income		(101)
Net other comprehensive income during the period		1,597
Balance December 31, 2020	$	2,937

Balance January 1, 2019	$	(1,247)
Other comprehensive income before reclassifications		2,587
Amounts reclassified from accumulated other ‎ comprehensive income		-
Net other comprehensive income during the period		2,587
Balance December 31, 2019	$	1,340

Regulatory Matters

12 Months Ended

Dec. 31, 2020

Regulatory Matters [Abstract]

Regulatory Matters

Note 13 - Regulatory Matters

The Company is required to maintain cash reserve balances in vault cash and with the Federal Reserve Bank. As of December 31, 2020, due to the reserve requirement ratios being set at 0% effective March 26, 2020, the Company had no minimum reserve requirement. The minimum reserve requirement at December 31, 2019 was $15.6 million.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Under the BASEL III rules the Company and the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios. The net unrealized gain or losses on available-for-sale securities are not included in computing regulatory capital amounts. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth below) of total, Tier 1 common capital, and Tier 1 capital (as defined in the regulations) to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of December 31, 2020, that the Company and the Bank meet all capital adequacy requirements to which they are subject.

Effective in 2018, the Federal Reserve raised the consolidated asset limit to be considered a small bank holding company from $1 billion to $3 billion. A company that qualifies as a small bank holding company is not subject to the Federal Reserve’s consolidated capital rules, although a company that so qualifies may continue to file reports that include such capital amounts and ratios. The Company has elected to continue to report those amounts and ratios.

As of December 31, 2020, the most recent notification from the regulatory agencies categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual capital amounts and ratios at December 31, 2020 and 2019 are presented below:


	Actual				For Capital Adequacy ‎Purposes						To be Well Capitalized under ‎Prompt Corrective Action ‎Provisions
	Amount		Ratio		Amount			Ratio			Amount			Ratio

	(Dollar Amounts in Thousands)

December 31, 2020:
Total capital (to risk-weighted assets)	$	119,583	13.1	%	$	≥	73,119	≥	8.0	%	$	≥	91,399	≥	10.0	%
Tier 1 common capital (to risk-weighted assets)		109,013	11.9			≥	41,130	≥	4.5			≥	59,409	≥	6.5
Tier 1 capital (to risk-weighted assets)		109,013	11.9			≥	54,839	≥	6.0			≥	73,119	≥	8.0
Tier 1 capital (to average assets)		109,013	8.1			≥	53,721	≥	4.0			≥	67,152	≥	5.0

December 31, 2019:
Total capital (to risk-weighted assets)	$	106,252	13.0	%	$	≥	65,584	≥	8.0	%	$	≥	81,980	≥	10.0	%
Tier 1 common capital (to risk-weighted assets)		98,230	12.0			≥	36,891	≥	4.5			≥	53,287	≥	6.5
Tier 1 capital (to risk-weighted assets)		98,230	12.0			≥	49,188	≥	6.0			≥	65,584	≥	8.0
Tier 1 capital (to average assets)		98,230	8.4			≥	46,674	≥	4.0			≥	58,343	≥	5.0

‎

The Company’s actual capital amounts and ratios at December 31, 2020 and 2019 are presented below:


	Actual				For Capital Adequacy ‎Purposes
	Amount		Ratio		Amount			Ratio

	(Dollar Amounts in Thousands)

December 31, 2020:
Total capital (to risk-weighted assets)	$	119,807	13.1	%	$	≥	73,122	≥	8.0	%
Tier 1 common capital (to risk-weighted assets)		109,237	12.0			≥	41,131	≥	4.5
Tier 1 capital (to risk-weighted assets)		109,237	12.0			≥	54,841	≥	6.0
Tier 1 capital (to average assets)		109,237	8.1			≥	53,722	≥	4.0

December 31, 2019:
Total capital (to risk-weighted assets)	$	106,297	13.0	%	$	≥	65,568	≥	8.0	%
Tier 1 common capital (to risk-weighted assets)		98,275	12.0			≥	36,882	≥	4.5
Tier 1 capital (to risk-weighted assets)		98,275	12.0			≥	49,176	≥	6.0
Tier 1 capital (to average assets)		98,275	8.4			≥	46,675	≥	4.0

The Bank is subject to certain restrictions on the amount of dividends that it may declare due to regulatory considerations. The Pennsylvania Banking Code provides that cash dividends may be declared and paid only out of accumulated net earnings.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details

Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2020

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 14 - Fair Value of Financial Instruments

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.

US GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy utilized at December 31, 2020 and 2019 are as follows:



Description	(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total

		(In Thousands)
U.S. Treasury securities	$	-	$	9,998	$	-	$	9,998
U.S. Government agency obligations		-		39,036		-		39,036
Municipal bonds		-		39,376		-		39,376
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - commercial		-		543		-		543
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - residential		-		41,987		-		41,987
December 31, 2020 Securities available for sale	$	-	$	130,940	$	-	$	130,940

Municipal bonds	$	-	$	26,444	$	-	$	26,444
U.S. Government Sponsored Enterprise (GSE) -
Mortgage-backed securities - residential		-		64,385		-		64,385
December 31, 2019 Securities available for sale	$	-	$	90,829	$	-	$	90,829

The fair value of securities available for sale are determined by matrix pricing (Level 2), which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted prices. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the security’s terms and conditions, among other things.

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at December 31, 2020 and 2019 are as follows:


Description	(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs		Total

		(In Thousands)
December 31, 2020 Impaired loans	$	-	$	-	$	1,361	$	1,361
December 31, 2019 Impaired loans	$	-	$	-	$	848	$	848

Impaired loans are those that are accounted for under existing FASB guidance, in which the Bank has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. Fair values may also include qualitative adjustments by management based on economic conditions and liquidation expenses. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Real estate properties acquired through, or in lieu of, foreclosure are to be sold and are carried at fair value less estimated cost to sell. Fair value is based upon independent market prices or appraised value of the property. These assets would be included in Level 3 fair value based upon the lowest level of input that is significant to the fair value measurement. At both December 31, 2020 and December 31, 2019, the Company had no real estate properties acquired through, or in lieu of, foreclosure.

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair value:


		Quantitative Information about Level 3 Fair Value Measurements
Description		Fair Value ‎Estimate		Valuation Techniques	Unobservable Input	Range ‎(Weighted Average)

			(Dollars In Thousands)
December 31, 2020:
Impaired loans		$	1,361	Appraisal of collateral	Appraisal adjustments (1)	0% to -25% (-15.1%)
					Liquidation expenses (2)	0% to -10.0% (-8.5%)
December 31, 2019:
Impaired loans		$	848	Appraisal of collateral	Appraisal adjustments (1)	0% to -25% (-25.0%)
					Liquidation expenses (2)	0% to -7.5% (-7.5%)

(1)	Appraisals may be adjusted by management for qualitative factors including economic conditions and the age of the appraisal.
	The range and weighted average of appraisal adjustments are presented as a percent of the appraisal.
(2)	Appraisals and pending agreements of sale are adjusted by management for liquidation expenses. The range and weighted average
	of liquidation expense adjustments are presented as a percent of the appraisal or pending agreement of sale.

‎

The estimated fair values of the Company’s financial instruments were as follows at December 31, 2020 and 2019:



		Carrying Amount		Fair Value Estimate		(Level 1) Quoted Prices in Active Markets for Identical Assets		(Level 2) Significant Other Observable Inputs		(Level 3) Significant Unobservable Inputs

	(In Thousands)
December 31, 2020:
Financial assets:
Cash and cash equivalents	$	131,907	$	131,907	$	131,907	$	-	$	-
Securities available-for-sale		130,940		130,940		-		130,940		-
Loans receivable, net of allowance		1,079,339		1,158,545		-		-		1,158,545
Paycheck Protection Program loans receivable		54,334		54,632		-		-		54,632
Restricted investments in bank stock		1,330		1,330		-		1,330		-
Accrued interest receivable		3,136		3,136		-		3,136		-
Financial liabilities:
Deposits		1,232,379		1,235,483		-		1,235,483		-
Securities sold under agreements to
repurchase and federal funds purchased		13,612		13,612		-		13,612		-
Long-term borrowings		14,651		14,707		-		-		14,707
Paycheck Protection Program
Liquidity Facility		50,794		50,810		-		-		50,810
Accrued interest payable		1,640		1,640		-		1,640		-
Off-balance sheet financial instruments:
Commitments to grant loans		-		-		-		-		-
Unfunded commitments under lines of credit		-		-		-		-		-
Standby letters of credit		-		-		-		-		-

December 31, 2019:
Financial assets:
Cash and cash equivalents	$	39,986	$	39,986	$	39,986	$	-	$	-
Securities available-for-sale		90,829		90,829		-		90,829		-
Loans receivable, net of allowance		1,006,117		1,013,093		-		-		1,013,093
Restricted investments in bank stock		1,478		1,478		-		1,478		-
Accrued interest receivable		2,048		2,048		-		2,048		-
Financial liabilities:
Deposits		1,031,968		1,033,786		-		1,033,786		-
Securities sold under agreements to
repurchase and federal funds purchased		7,208		7,208		-		7,208		-
Short-term borrowings		18,067		18,067		-		18,067		-
Accrued interest payable		3,281		3,281		-		3,281		-
Off-balance sheet financial instruments:
Commitments to grant loans		-		-		-		-		-
Unfunded commitments under lines of credit		-		-		-		-		-
Standby letters of credit		-		-		-		-		-

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Transactions With Executive Officers, Directors And Principal Stockholders

12 Months Ended

Dec. 31, 2020

Transactions With Executive Officers, Directors And Principal Stockholders [Abstract]

Transactions With Executive Officers, Directors And Principal Stockholders

Note 15 - Transactions with Executive Officers, Directors and Principal Stockholders

The Company has had, and may be expected to have in the future, banking transactions in the ordinary course of business with its executive officers, directors, principal stockholders, their immediate families, and affiliated companies (commonly referred to as related parties).

Related parties were indebted to the Company for loans totaling $16.2 million and $10.2 million at December 31, 2020 and 2019, respectively. During 2020, loans totaling $9.7 million were disbursed and loan repayments totaled $3.7 million.

Deposits with related parties were $18.4 million and $15.7 million at December 31, 2020 and 2019, respectively.

Fees paid to related parties for legal services for the years ended December 31, 2020 and 2019 were approximately $29 thousand and $43 thousand, respectively. The Company leases its main banking office from an investment group comprised of related parties and its West Broad Street office also from a related party, as disclosed in Note 16.

Lease Commitments

12 Months Ended

Dec. 31, 2020

Lease Commitments [Abstract]

Lease Commitments

Note 16 - Lease Commitments

The Company’s leases are all classified as operating leases, with one lease being short term. Currently, many of these leases contain renewal options. The Company has reviewed and based the right of use assets and lease liabilities on the present value of unpaid future minimum lease payments. Additionally, the amounts for the branch leases were impacted by assumptions around renewals and/or extensions and the interest rate used to discount those future lease obligations. The Company used the FHLB advance rates to calculate the discount rate in their review because none of the Company’s leases provided an implicit rate. The weighted average discount rate for all operating leases was 3.00%, with branch leases having a weighted average discount rate of 3.04% and equipment leases having a weighted average discount rate of 1.20%. These leases expire at various dates through October 2030. All operating equipment leases do not have renewal language in their contracts and therefore use the current term. As of December 31, 2020, the operating leases overall had a weighted average lease term of 6.11 years, with the branch leases having a weighted average life of 6.16 years and equipment leases having a weighted average life of 4.10 years.

At December 31, 2020, the Company had right of use assets of $9.0 million (included in other assets) and lease liabilities of $9.2 million (included in other liabilities) and at December 31, 2019, the Company had right of use assets of $9.6 million (included in other assets) and lease liabilities of $9.7 million (included in other liabilities), respectively. The cost for operating leases was $1.7 million, including short-term lease cost of $18 thousand, for the year ended December 31, 2020 and the cost of operating leases was $1.7 million, including short-term lease cost of $3 thousand, for the year ended December 31, 2019, respectively. Operating cash flow paid for lease liabilities was $1.6 million for the year ended December 31, 2020 and December 31, 2019, respectively.

In addition to fixed rentals, the leases require the Company to pay certain additional expenses of occupying these spaces, including real estate taxes, insurance, utilities, and repairs. These additional expenses, along with depreciation on leasehold improvements, are included in occupancy and equipment expense in the Consolidated Statements of Income. A portion of these leases are with related parties as noted in the following table.

A reconciliation of operating lease liabilities by minimum lease payments by year and in aggregate and discount amounts in aggregate, as of December 31, 2020, are as follows:


	Branch Leases				Equipment
	Third Parties		Related Parties		Leases		Total
	(In Thousands)
2021	$	1,032	$	647	$	58	$	1,737
2022		1,062		660		53		1,775
2023		1,079		673		40		1,792
2024		933		685		38		1,656
2025		588		698		21		1,307
Thereafter		1,131		726		-		1,857
Total Payments		5,825		4,089		210		10,124
Less: Discount Amount		500		393		4		897
Total Lease Liability	$	5,325	$	3,696	$	206	$	9,227

Rent expense to related parties was $661 thousand for the years ended December 31, 2020 and 2019, respectively, as described in Note 15.

Effective January 1, 2021 the Company entered into a lease agreement with a third party for a proposed new branch office to be located at 2002 West Liberty Street, Allentown, Lehigh County, Pennsylvania. The lease provides for an initial term of seven (7) years effective January 1, 2021, and grants the Bank two (2) successive options to renew for a term of five (5) years each and one (1) successive option to renew for a term of three (3) years. In addition to certain maintenance, real estate taxes and other costs, the annual basic rent for each of the first five (5) years of the initial term is $54 thousand, followed by annual basic rent in years six (6) and seven (7) of the initial term in the amount of $60 thousand. Under the first renewal option term, annual basic rent for the first three (3) years of this option term would be $60 thousand, followed by annual basic rent in the amount of $66 thousand for years four (4) and five (5) of this first renewal option term. Under the second renewal option term, annual basic rent for the first three (3) years of this option term would be $66 thousand, followed by annual rent in the amount of $72 thousand for years four (4) and five (5) of this second renewal option term. Under the third renewal option term of three (3) years, annual basic rent would be $72 thousand.

Federal Income Taxes

12 Months Ended

Dec. 31, 2020

Federal Income Taxes [Abstract]

Federal Income Taxes

Note 17 - Federal Income Taxes

The components of income tax expense are as follows:



	Year Ended December 31,
	2020		2019

	(In Thousands)

Current	$	3,479	$	2,732
Deferred		(558)		(238)
Income Tax Expense	$	2,921	$	2,494

A reconciliation of the statutory federal income tax at a rate of 21% as of December 31, 2020 and December 31, 2019 to the income tax expense included in the consolidated statements of income is as follows:



	Years Ended December 31,
	2020				2019

	(In Thousands)

		Dollar	%			Dollar	%
Federal income tax at statutory rate	$	3,303	21.0	%	$	2,808	21.0	%
Tax-exempt interest		(208)	(1.3)	%		(249)	(1.9)	%
Bank owned life insurance		(171)	(1.1)	%		(120)	(0.9)	%
Other		(3)	0.0	%		55	0.4	%

Income Tax Expense	$	2,921	18.6	%	$	2,494	18.6	%

The Company evaluates its tax positions and a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that has a likelihood of being realized on examination of more than 50 percent. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Under the “more likely than not” threshold guidelines, the Company believes no significant uncertain tax positions exist, either individually or in the aggregate, that would give rise to the non-recognition of an existing tax benefit. As of December 31, 2020 and 2019, the Company had no material unrecognized tax benefits or accrued interest and penalties. The Company’s policy is to account for interest as a component of interest expense and penalties as a component of other expense.

‎

The components of the net deferred tax asset (included in other assets) are as follows:



	December 31,
	2020		2019

	(In Thousands)

Deferred tax assets:
Allowance for loan losses	$	2,220	$	1,685
Deferred compensation		1,261		1,112
Lease liability		1,938		2,041
Premises and equipment		-		3
Other		4		4

Total Deferred Tax Assets		5,423		4,845

Deferred tax liabilities:
Premises and equipment		53		-
Prepaid assets		221		276
Deferred loan costs		629		497
Right of use asset		1,896		2,006
Unrealized gain on securities available for sale		781		357

Total Deferred Tax Liabilities	$	3,580	$	3,136

Net Deferred Tax Asset	$	1,843	$	1,709

Based upon the level of historical taxable income and projections for future taxable income over periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Parent Company Only Financial

12 Months Ended

Dec. 31, 2020

Parent Company Only Financial [Abstract]

Parent Company Only Financial

Note 18 – Parent Company Only Financial

Condensed financial information pertaining only to the parent company, Embassy Bancorp, Inc., is as follows:

BALANCE SHEETS



	December 31,
	2020		2019
	(In Thousands)
ASSETS

Cash	$	473	$	256
Other assets		33		26
Investment in subsidiary		111,950		99,569
Total Assets	$	112,456	$	99,851

LIABILITIES AND STOCKHOLDERS’ EQUITY

Other liabilities	$	282	$	236
Stockholders’ equity		112,174		99,615
Total Liabilities and Stockholders’ Equity	$	112,456	$	99,851

STATEMENTS OF INCOME AND COMPREHENSIVE INCOME



	Years Ending December 31,
	2020		2019
	(In Thousands)

Other expenses	$	(449)	$	(438)
Equity in net income of banking subsidiary		13,169		11,233
Income before income taxes		12,720		10,795
Income tax benefit		90		84
Net income	$	12,810	$	10,879

Equity in other comprehensive gain of banking subsidiary		1,597		2,587
Comprehensive income	$	14,407	$	13,466

‎

STATEMENT OF CASH FLOWS



	Years Ending December 31,
	2020		2019
	(In Thousands)

Cash Flows from Operating Activities:
Net income	$	12,810	$	10,879
Adjustments to reconcile net income to net cash used in
operating activities:
Stock compensation expense		286		367
Net change in other assets and liabilities		39		32
Equity in net income of banking subsidiary		(13,169)		(11,233)
Net Cash (Used) Provided in Operating Activities		(34)		45

Cash Flows Provided By Investing Activities:
Dividend from banking subsidiary		2,385		1,323

Cash Flows from Financing Activities:
Exercise of stock options and proceeds from ESPP		431		52
Purchase of treasury stock		(765)		-
Stock tendered for options		(156)		-
Dividends paid		(1,644)		(1,495)

Net Cash Used in Financing Activities		(2,134)		(1,443)
Net Increase (Decrease) in Cash		217		(75)
Cash – Beginning		256		331

Cash - Ending	$	473	$	256

‎

Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2020

Summary Of Significant Accounting Policies [Abstract]

Principles Of Consolidation And Nature Of Operations

Principles of Consolidation and Nature of Operations

Embassy Bancorp, Inc. (the “Company”) is a Pennsylvania corporation organized in 2008 and registered as a bank holding company pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company was formed for purposes of acquiring Embassy Bank For The Lehigh Valley (the “Bank”) in connection with the reorganization of the Bank into a bank holding company structure, which was consummated on November 11, 2008. Accordingly, the Company owns all of the capital stock of the Bank, giving the organization more flexibility in meeting its capital needs as the Company continues to grow.

The Bank, which is the Company’s principal operating subsidiary, was originally incorporated as a Pennsylvania bank on May 11, 2001 and opened its doors on November 6, 2001. It was formed by a group of local business persons and professionals with significant prior experience in community banking in the Lehigh Valley area of Pennsylvania, the Bank’s primary market area.

Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of other-than-temporary impairment on available for sale debt securities, the determination of the allowance for loan losses, the valuation of other real estate owned, and the valuation of deferred tax assets.

Concentrations Of Credit Risk

Concentrations of Credit Risk

Most of the Company’s activities are with customers located in the Lehigh Valley area of Pennsylvania. Note 3 discusses the types of securities in which the Company invests. The concentrations of credit by type of loan are set forth in Note 4. The Company does not have any significant concentrations to any one specific industry or customer, with the exception of lending activity to a broad range of lessors of residential and non-residential real estate within the Lehigh Valley. Although the Company has a diversified loan portfolio, its debtors’ ability to honor their contracts is influenced by the region’s economy.

Presentation Of Cash Flows

Presentation of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, amounts due from banks, interest-bearing demand deposits with bank, and federal funds sold. Generally, federal funds are purchased or sold for less than one week periods.

Securities

Securities classified as available for sale are those securities that the Company intends to hold for an indefinite period of time, but not necessarily to maturity. Securities available for sale are carried at fair value. Any decision to sell a security classified as available for sale would be based on various factors, including significant movement in interest rates, changes in maturity mix of the Company’s assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Unrealized gains and losses are reported as increases or decreases in other comprehensive income. Realized gains or losses, determined on the basis of the cost of the specific securities sold, are included in earnings. Premiums and discounts are recognized in interest income using the interest method over the terms of the securities.

Other-than-temporary accounting guidance specifies that (a) if a company does not have the intent to sell a debt security prior to recovery and (b) it is more likely than not that it will not have to sell the debt security prior to recovery, the security would not be considered other-than-temporarily impaired unless there is a credit loss. When an entity does not intend to sell the security, and it is more likely than not the entity will not have to sell the security before recovery of its cost basis, it will recognize the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. The Company recognized no other-than-temporary impairment charges during the years ended December 31, 2020 and 2019.

Restricted Investments In Bank Stock

Restricted Investments in Bank Stock

Restricted investments in bank stock consist of FHLBank Pittsburgh (“FHLB”) stock and Atlantic Community Bankers Bank (“ACBB”) stock. The restricted stocks have no quoted market value and are carried at cost. Federal law requires a member institution of the FHLB to hold stock of its district FHLB according to a predetermined formula.

Management evaluates the FHLB and ACBB restricted stock for impairment. Management’s determination of whether these investments are impaired is based on their assessment of the ultimate recoverability of their cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of their cost is influenced by criteria such as (1) the significance of the decline in net assets of the issuer as compared to the capital stock amount for the issuer and the length of time this situation has persisted, (2) commitments by the issuer to make payments required by law or regulation and the level of such payments in relation to the operating performance of the issuer, and (3) the impact of legislative and regulatory changes on institutions and, accordingly, on the customer base of the issuer.

Management believes no impairment charge is necessary related to the FHLB or ACBB restricted stock as of December 31, 2020. No impairment charge was taken related to the FHLB or ACBB restricted stock as of December 31, 2019.

Loans Receivable

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at their outstanding unpaid principal balances, net of any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield using the effective interest method. Premiums and discounts on purchased loans are amortized as adjustments to interest income using the effective interest method. Delinquency fees are recognized in income when collected.

As described in Note 2, the Company originates Paycheck Protection Program (“PPP”) loans as part of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The non-PPP loans receivable portfolio is segmented into commercial and consumer loans. Commercial loans consist of the following classes: commercial real estate, commercial construction and commercial. Consumer loans consist of the following classes: residential real estate and other consumer loans.

The Company makes commercial loans for real estate development and other business purposes required by the customer base. The Company’s credit policies determine advance rates against the different forms of collateral that can be pledged against commercial loans. Typically, the majority of loans will be limited to a percentage of their underlying collateral values such as real estate values, equipment, eligible accounts receivable and inventory. Individual loan advance rates may be higher or lower depending upon the financial strength of the borrower and/or term of the loan. The assets financed through commercial loans are used within the business for its ongoing operation. Repayment of these kinds of loans generally comes from the cash flow of the business or the ongoing conversion of assets. Commercial real estate loans include long-term loans financing commercial properties. Repayments of these loans are dependent upon either the ongoing cash flow of the borrowing entity or the resale of or lease of the subject property. Commercial real estate loans typically require a loan to value ratio of not greater than 80% and vary in terms.

Residential mortgages and home equity loans are secured by the borrower’s residential real estate in either a first or second lien position. Residential mortgages and home equity loans have varying interest rates (fixed or variable) depending on the financial condition of the borrower and the loan to value ratio. Residential mortgages may have amortizations up to 30 years and home equity loans may have maturities up to 25 years. Other consumer loans include installment loans, car loans, and overdraft lines of credit. Some of these loans may be unsecured.

For all classes of loans receivable, the accrual of interest may be discontinued when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan is currently performing. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid interest credited to income in the current year is reversed. Interest received on nonaccrual loans, including impaired loans, generally is applied against principal. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments.

Allowance For Loan Losses