Qualified Affordable Housing Project Investment

January 19, 2018,

the Bank entered into an agreement to invest in qualified affordable housing projects through a limited liability company. At

June 30, 2019

and

December 31, 2018,

the balance of the Bank’s investment was

$3.4

million and

$3.6

million, respectively, and is reflected in other assets on the consolidated balance sheets. The unfunded commitment related to the qualified affordable housing project investment at

June 30, 2019

and

December 31, 2018

was

$2.5

million and

$2.9

million, respectively, and is reflected in other liabilities on the consolidated balance sheets. The Bank expects to fulfill the commitment as capital calls are made through

2029.

The investment is accounted for using the proportional amortization method. During the

three

month periods ended

June 30, 2019

and

2018,

the Bank recognized amortization expense of

$87,000

and

$82,000,

respectively, which was included in income tax expense on the consolidated statements of income. Additionally, during the

three

month periods ended

June 30, 2019

and

2018,

the Bank recognized tax credits and other tax benefits from its qualified affordable housing project investment of

$123,000

and

$98,000,

respectively. During the

six

month periods ended

June 30, 2019

and

2018,

the Bank recognized amortization expense of

$169,000

and

$164,000,

respectively, which was included in income tax expense on the consolidated statements of income. Additionally, during the

six

month periods ended

June 30, 2019

and

2018,

the Bank recognized tax credits and other tax benefits from its qualified affordable housing project investment of

$248,000

and

$196,000,

respectively.