In early January 2020, the World Health Organization issued an alert that a novel coronavirus outbreak was emanating from the Wuhan Province in China. Over the course of the next several weeks, the outbreak continued to spread to various regions of the world prompting the World Health Organization to declare COVID-19 a global pandemic on March 11, 2020. In the United States, the rapid spread of the COVID-19 virus invoked various Federal and New York State authorities to make emergency declarations and issue executive orders to limit the spread of the disease. Measures included restrictions on international and domestic travel, limitations on public gatherings, implementation of social distancing protocols, school closings, orders to shelter in place and mandates to close all non-essential businesses to the public.

As a result, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. The Company has many employees working remotely and has significantly reduced physical customer contact with employees and other customers by limiting branch activities to drive-thru transactions wherever possible, teleconferencing and in-branch “appointments only” services. Transactional volume has also increased through the Bank’s telephone and internet banking channels. We will take further actions as may be required by government authorities or that we determine to be in the best interests of our employees, customers and business partners.

Concerns about the spread of the disease and its anticipated negative impact on economic activity, severely disrupted both domestic and international financial markets prompting the world’s central banks to inject significant amounts of monetary stimulus into their respective economies. In the United States, the Federal Reserve System’s Federal Open Market Committee, swiftly cut the target Federal Funds rate to a range of 0% to 0.25%, including a 50 basis point reduction in the target federal funds rate on March 3, 2020 and an additional 100 basis point reduction on March 15, 2020. In addition, the Federal Reserve initiated various market support programs to ease the stress on financial markets.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed into law on March 27, 2020, provides financial assistance in various forms to both businesses and consumers. In addition, the CARES Act also created many directives affecting the operations of financial services providers, such as the Company, including a forbearance program for federally-backed mortgage loans and protections for borrowers from negative credit reporting due to loan accommodations related to the national emergency. The banking regulatory agencies have likewise issued guidance encouraging financial institutions to work prudently with borrowers who are, or may be, unable to meet their contractual payment obligations because of the effects of COVID-19. The Company has begun working with its business and individual customers affected by COVID-19 and expects a significant amount of modifications across many of its loan portfolios in the near term. Through May 15, 2020, the Bank granted payment deferral requests primarily for 90 days, on 540 loans representing approximately $142.9 million of existing loan balances.

Borrowers that were delinquent in their payments to the Bank, prior to requesting a COVID-19 related financial hardship payment deferral were reviewed on a case by case basis for troubled debt restructure classification and non-performing loan status. In the instances where the Company granted a payment deferral to a delinquent borrower, the borrower’s delinquency status was frozen as of February 29, 2020, and their loans will continue to be reported as delinquent during the deferment period based on their delinquency status as of that date. The Company anticipates that the number and amount of COVID-19 financial hardship payment deferral requests will increase significantly during the second quarter of 2020. Consistent with industry regulatory guidance, borrowers that were granted COVID-19 related deferrals but were otherwise current on loan payments will continue to have their loans reported as current loans during the agreed upon deferral period, accrue interest and not be accounted for as troubled debt restructurings.

The future performance of the Company’s loan portfolios with respect to credit losses will be highly dependent upon the course and duration, both nationally and within the Company’s market area, of the public health and economic factors related to the pandemic, as well as the concentrations in the Company’s loan portfolio. Concentrations of loans within a portfolio that are made to a singular borrower, to a related groups of borrowers, or to a limited number of industries, are generally considered to be additional risk factors in estimating future credit losses. Therefore, the Company monitors all of its credit relationships to ensure that the total loan amounts extended to one borrower, or to a related group of borrowers, does not exceed the maximum permissible levels defined by applicable regulation or the Company’s generally more restrictive internal policy limits.

Loans to a single borrower, or to a related group of borrowers, are referred to as total related credits. Total related credits encompass all related or affiliated borrower loan balances, including available unused lines of credit, for both personal and business loans. At March 31, 2020, the Company had 25 total related credit relationships, comprised of 179 individual loans, with outstanding balances in excess of $5.0 million. These total related credits ranged from $5.0 million to $12.8 million on that date with aggregate balances of $192.0 million. Of the $192.0 million in total related credits, $182.4 million was secured by various collateral assets, primarily commercial real estate, and $9.6 million was unsecured.

In addition, the future credit-related performance of a loan portfolio generally depends upon the types of loans within the portfolio, concentrations by type of loan and the quality of the collateral securing the loans. The following table details the Company's loan portfolio by collateral type within major categories as of March 31, 2020:

(Dollars in thousands)	Balance		Number of Loans		Average Loan Balance		Minimum/ Maximum Loan Balance					Allowance for Loan Losses		Percent of Total Loans
Residential Mortgage Loans	$	214,637		2,096	$	102	$	1	-	$	1,576	$	731		29	%

Commercial Real Estate:
Mixed Use	$	44,722		50	$	894	$	39	-	$	7,433	$	724		6	%
Multi-Family Residential		39,216		58		676		27	-		6,015		635		5	%
Hotels and Motels		32,576		10		3,258		226	-		11,500		528		4	%
Office		31,560		57		554		14	-		4,927		511		4	%
Retail		23,661		54		438		2	-		5,248		383		3	%
1-4 Family Residential		18,604		147		127		10	-		1,250		301		2	%
Automobile Dealership		16,054		10		1,605		174	-		6,099		260		2	%
Recreation/Golf Course/Marina		10,857		15		723		35	-		3,150		176		1	%
Warehouse		10,173		15		678		10	-		2,700		165		1	%
Manufacturing/Industrial		6,458		14		461		5	-		1,450		105		1	%
Restaurant		6,386		25		255		11	-		1,325		104		1	%
Automobile Repair		4,853		10		485		61	-		2,342		79		1	%
Not-For-Profit & Community Service Real Estate		3,398		3		1,133		110	-		1,698		55		1	%
Land		3,204		6		534		28	-		2,000		52		1	%
Skilled Nursing Facility		2,833		1		2,833		2,833	-		2,833		46		1	%
All Other		7,374		37		199		1	-		746		119		1	%
Total Commercial Real Estate Loans	$	261,929		512	$	512						$	4,243		35	%

Commercial and Industrial:
Secured Term Loans	$	64,025		366	$	175	$	0	-	$	6,335	$	1,322		9	%
Unsecured Term Loans		20,749		133		156		0	-		1,647		429		3	%
Secured Lines of Credit		48,009		284		169		0	-		5,000		991		6	%
Unsecured Lines of Credit		11,345		139		82		0	-		2,999		234		1	%
Total Commercial and Industrial Loans	$	144,128		922	$	156						$	2,976		19	%

Tax Exempt Loans	$	7,937		24	$	331	$	9	-	$	2,425	$	1		1	%

Consumer:
Home Equity Lines of Credit	$	44,732		1,100	$	41	$	1	-	$	418	$	536		6	%
Automobile		33,832		2,076		16		1	-		375		405		4	%
Consumer Secured		4,726		85		56		24	-		157		57		1	%
Consumer Unsecured		35,827		7,095		5		1	-		120		429		4	%
All Others		2,454		849		3		0	-		60		30		1	%
Total Consumer Loans	$	121,571		11,205	$	11						$	1,457		16	%

Net deferred loan fees		320		-		-					-		-		-
Unallocated allowance for loan losses		-		-		-					-		198		-
Total Loans	$	750,522	$	14,759	$	51						$	9,606		100	%

Including the potential effects of the COVID-19 outbreak on the Company’s loan portfolios, the ongoing and dynamic nature of the pandemic and the resultant, potentially severe and long-lasting, economic dislocations, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.