Ledyard Financial : 2023 Audit Report

CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023 and 2022

With Independent Auditor's Report

Independent Auditor's Report

Board of Directors and Shareholders

Ledyard Financial Group Inc. and Subsidiary

Hanover, NH

Opinion

We have audited the accompanying consolidated financial statements (the ''financial statements'') of Ledyard Financial Group Inc. and Subsidiary (the "Company") which comprise the consolidated balance sheet as of December 31, 2023, and the related consolidated statements of income, comprehensive income (loss), changes in shareholder's equity, and cash flows for the year then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America (''GAAP'').

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America ("GAAS"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Prior Period Financial Statements

The financial statements of the Company as of and for the years ended December 31, 2022 were audited by other auditors whose report dated March 24, 2023, expressed an umodified opinion on those statements.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date the financial statements are available to be issued.

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Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Wipfli LLP

Aurora, Illinois

March 22, 2024

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LEDYARD FINANCIAL GROUP, INC. AND SUBSIDIARY

Consolidated Balance Sheets

December 31, 2023 and 2022

ASSETS

				2023			2022
Cash and due from banks	$	4,816,544	$	5,582,380
Interest bearing deposits		22,319,521			11,750,492
-
Total cash and cash equivalents		27,136,065			17,332,872
Securities available for sale,
amortized cost of- $	173,164,544 and $139,955,945
-		162,840,079			127,205,328
at December 31, 2023 and 2022, respectively
Securities held-to-maturity		184,638,517			175,855,003
Nonmarketable equity securities		4,717,650			2,988,750
Loans receivable, net of allowance for credit losses of		415,986,217			358,214,130
$2,779,907 in 2023 and $3,842,765 in 2022
Accrued interest receivable		3,904,244			3,267,313
Premises and equipment, net		13,116,455			13,562,762
Bank owned life insurance		12,175,725			11,927,194
Other assets			31,600,039			33,111,175
	Total assets	$	856,114,991		$	743,464,527

LIABILITIES AND SHAREHOLDERS' EQUITY

					2023					2022
Deposits
Demand			$	214,213,480	$	281,354,863
NOW accounts		44,194,169				59,510,444
Money market accounts		112,996,125				140,084,636
Savings				53,212,879				58,087,833
Time deposits, other		186,751,023				25,082,988
Time deposits, $250,000 and over		48,789,315				6,211,205
Total deposits		660,156,991				570,331,969
Securities sold under agreements to repurchase		-					219,243
Borrowed funds				111,799,137				87,977,971
Subordinated debentures		17,738,503				17,698,065
Accrued expenses and other liabilities		10,400,277				14,238,041
Total liabilities		800,094,908				690,465,289
Shareholders' equity
Common stock, $0.33 par value; 11,000,000 shares authorized, 3,483,513
and 3,464,393 shares issued, 3,367,515 and 3,348,395 shares							1,154,798
outstanding at December 31, 2023 and 2022, respectively		1,161,171
Additional paid in capital		15,622,989				15,167,996
Treasury	stock, at cost; 115,998 shares at December 31, 2023 and 2022		(1,644,238)					(1,644,238)
	-
Retained earnings		55,491,704				54,407,449
Accumulated other comprehensive loss			(14,611,543)					(16,086,767)
Total shareholders' equity		56,020,083				52,999,238
Total liabilities and shareholders' equity	$	856,114,991		$	743,464,527

The accompanying notes are an integral part of these consolidated financial statements.

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LEDYARD FINANCIAL GROUP, INC. AND SUBSIDIARY

Consolidated Statements of Income

Years Ended December 31, 2023 and 2022

				2023					2022
Interest and dividend income
Interest and fees on loans	$	17,677,245				$	12,968,366
Investment securities		10,299,945					7,540,799
Other interest earning assets		508,070					249,441
Total	interest and dividend income		28,485,260					20,758,606
-
Interest expense
Deposits				6,643,748					609,721
Borrowed funds		3,846,519					886,737
Subordinated debt		760,439					576,329
Total interest expense		11,250,706					2,072,787
Net interest income		17,234,554					18,685,819
Provision for (reduction in) credit losses		666,999					(3,634,494)
Net interest income after provision for credit losses		16,567,555					22,320,313
Non-interest income
Ledyard Financial Advisors division income		12,655,777					12,778,651
Service fees		979,769					949,880
Net loss on sales of securities		(15,236)					(2,966,353)
Other				507,013					451,244
Total non-interest income		14,127,323					11,213,422
Non-interest expense
Salaries and employee benefits		16,500,650					16,070,916
Occupancy and equipment		6,226,197					5,699,380
Federal Deposit Insurance Corporation (FDIC) insurance fees		327,717					198,497
Other general and administrative		4,852,039					4,068,222
Total non-interest expense		27,906,603					26,037,015
Income before income taxes		2,788,275					7,496,720
Income tax (benefit) expense		(376,919)					515,468
Net income			$	3,165,194				$	6,981,252
Basic earnings per share		$0.96					$2.14
Diluted earnings per share		$0.96					$2.13
Weighted average numbers of shares outstanding		3,296,358					3,261,499

The accompanying notes are an integral part of these consolidated financial statements.

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LEDYARD FINANCIAL GROUP, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income (Loss)

Years Ended December 31, 2023 and 2022

					2023				2022
Net income				$	3,165,194	$	6,981,252
Other comprehensive income (loss), net of tax
Securities:
Changes in net unrealized gains (losses) on securities
available for sale, net of income tax expense (benefit) of $326,927		940,233	(29,139,130)
and $	(10,131,935) in 2023 and 2022, respectively
- -
Reclassification adjustment for net losses on sales of
securities available for sale, net of income tax benefit		11,305
of $3,931 and $	765,319 in 2023 and 2022, respectively					2,201,034
- -
Reclassification adjustment for unrealized holding losses included in accumulated
other comprehensive income from the transfer of securities from available-for-
sale to held-to-maturity, adjusted for amortization, net of income tax benefit of		1,137,860				838,579
$395,650 and $291,514 in 2023 and 2022, respectively
Total securities		2,089,398	(26,099,517)
Derivative Contracts:
Unrealized (losses) gains on cash flow hedges, net of income tax (benefit) expense of
$(213,554) and $633,049 in 2023 and 2022, respectively			(614,174)				1,820,631
Total other comprehensive income (loss)			1,475,224			(24,278,886)
Total comprehensive income (loss)	$	4,640,418		$ (17,297,634)

The accompanying notes are an integral part of these consolidated financial statements.

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LEDYARD FINANCIAL GROUP, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Shareholders' Equity

Years Ended December 31, 2023 and 2022

													Accumulated
					Additional									Other
		Common			Paid-in			Treasury			Retained		Comprehensive
		Stock			Capital			Stock			Earnings		(Loss) Income			Total
Balance, December 31, 2021	$	1,155,787	$	14,768,380	$	(1,654,724)	$	50,244,036	$	8,192,119	$	72,705,598
Net income		-			-			-			6,981,252			-			6,981,252
Other comprehensive loss,
net of tax effect		-			-			-			-			(24,278,886)			(24,278,886)
Total comprehensive loss		-			-			-			6,981,252			(24,278,886)			(17,297,634)
Cash dividends paid, $0.84 per share		-			-			-			(2,817,839)			-			(2,817,839)
Stock awards issued from treasury
(740 shares)		-			5,890			10,486			-			-			16,376
Stock-based compensation expense		-			947,569			-			-			-			947,569
Restricted stock issued,
net of shares returned																	(554,832)
to cover taxes (-2,967 shares)		(989)			(553,843)			-			-			-
Balance, December 31, 2022
	1,154,798			15,167,996			(1,644,238)			54,407,449			(16,086,767)			52,999,238
Net income		-			-			-			3,165,194			-			3,165,194
Other comprehensive gain,		-			-			-			-			1,475,224			1,475,224
net of tax effect
Total comprehensive income		-			-			-			3,165,194			1,475,224			4,640,418
Cumulative effect of change in		-			-			-			745,758			-			745,758
accounting principle (See Note 1)
Cash dividends paid, $0.84 per share		-			-			-			(2,826,697)			-			(2,826,697)
Stock-based compensation expense		-			616,489			-			-			-			616,489
Restricted stock issued,
net of shares returned		6,373			(161,496)			-			-			-			(155,123)
to cover taxes (19,120 shares)
Balance, December 31, 2023	$	1,161,171	$	15,622,989	$	(1,644,238)	$	55,491,704	$	(14,611,543)	$	56,020,083

The accompanying notes are an integral part of these consolidated financial statements.

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LEDYARD FINANCIAL GROUP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

Years Ended December 31, 2023 and 2022

Cash flows from operating activities				2023				2022
	$	3,165,194
Net income							$	6,981,252
Adjustments to reconcile net income to net cash provided by operating activities
Provision for (reduction in) credit losses				666,999				(3,634,494)
Depreciation of premises and equipment				1,004,502				939,162
Net amortization (accretion) of securities				197,302				(921,538)
Net losses on securities					15,236				2,966,353
Deferred income tax benefit				(1,504,240)			(774,869)
Amortization of limited partnerships				1,152,656				1,098,716
Stock based compensation				616,489				947,569
Fair	value of stock awards	issued from treasury				‐			16,376
-
Increase in accrued interest receivable				(636,931)			(17,634)
Decrease in other assets					194,580				156,777
Decrease in right of use assets				209,374				439,353
Decrease in	loans held for sale				‐			114,400
	-	-
Decrease in operating lease liabilities				(212,042)			(438,058)
Decrease in accrued expenses and other liabilities				(2,602,943)			(331,229)
Net cash from operating activities				2,266,176				7,542,136
Cash flows from investing activities
Proceeds from sales, calls, maturities and paydowns of securities available for sale			19,400,465				30,293,514
Purchase of securities available for sale	- -			(53,525,979)			(27,610,493)
					and paydowns of securities held‐to‐maturity			2,001,925				2,607,852
Proceeds from calls, maturities - -
Purchase of securities held‐to‐maturity				(10,040,625)			‐
Purchase of non‐marketable equity securities				(1,728,900)			(1,802,800)
Low‐income housing investment				(1,796,665)			(1,769,759)
Net change in loans to customers				(56,660,134)			514,176
Purchase of premises and equipment				(558,195)			(1,877,719)
Net cash from investing activities				(102,908,108)			354,771
Cash flows from financing activities				89,825,022
Net change in deposits								(104,750,491)
Proceeds from short term borrowings				2,170,105,000				612,601,000
Repayment of short‐-term borrowings				(2,171,205,000)			(531,300,000)
Proceeds from long‐term borrowings				25,000,000				1,122,000
Repayment of long term borrowings				(78,834)			(72,333)
Proceeds from	issuance of subordinated debt				‐			18,000,000
	-
Decrease in securities sold under agreements to repurchase				(219,243)			(731,560)
Restricted stock issued, net of repurchase for tax withholdings and tax benefit			(155,123)			(554,832)
Cash dividends paid on common stock				(2,826,697)			(2,817,839)
Net cash from financing activities				110,445,125				(8,504,055)
Net change in cash and cash equivalents				9,803,193				(607,148)
Cash and cash equivalents, beginning of year				17,332,872				17,940,020
Cash and cash equivalents, end of year		$	27,136,065		$	17,332,872
Supplemental disclosure of cash flow information:
Interest paid on deposits and borrowed funds		$	10,427,423		$	1,743,740
Income taxes refunded
		$	(200,000)	$	(615,390)
Supplemental disclosure of non‐cash investing activities:
	$	‐	$	194,144,720
Transfer of securities from available‐for‐sale to held‐to‐maturity

The accompanying notes are an integral part of these consolidated financial statements.

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LEDYARD FINANCIAL GROUP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2023 and 2022

Nature of Business

Ledyard Financial Group, Inc. (the Company) is headquartered in Hanover, New Hampshire and, as a bank holding company, it provides financial services to its customers through its wholly-owned bank subsidiary, Ledyard National Bank (the Bank). The Bank provides retail and commercial banking and wealth advisory services through its office locations in New Hampshire and Vermont.

1. Summary of Significant Accounting Policies

The accounting policies of the Company are in conformity with U.S. generally accepted accounting principles (U.S. GAAP) and general practices within the banking industry. The following is a description of the more significant policies.

Basis of Presentation

The Company follows accounting standards as set by the Financial Accounting Standards Board (FASB). FASB sets U.S. GAAP that management follows to consistently report the Company's financial condition, results of operations and cash flows.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned bank subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

In preparing financial statements in conformity with U.S. GAAP, management is required 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 financial statements and the reported amounts of revenues 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 the allowance for credit losses. In connection with the determination of the allowance, management obtains independent appraisals for significant properties and collateral securing significant loans. Accordingly, the ultimate collectability of a substantial portion of the Company's loan portfolio is susceptible to changes in local market conditions.

While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Company's loan portfolio. Such agencies 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.

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LEDYARD FINANCIAL GROUP, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2023 and 2022

1. Summary of Significant Accounting Policies (continued) Significant Group Concentrations of Credit Risk

The Company's operations are affected by various risk factors, including interest rate risk, credit risk, and risk from geographic concentration of lending activities. Management attempts to manage interest rate risk through various asset/liability management techniques designed to match maturities of assets and liabilities. Loan policies and administration are designed to provide assurance that loans will only be granted to creditworthy borrowers, although credit losses are expected to occur because of subjective factors beyond the control of the Company. Although the Company has a diversified loan portfolio, most of its lending activities are conducted within the geographic area where it is located. As a result, the Company and its borrowers may be especially vulnerable to the consequences of changes in the local economy. In addition, a substantial portion of the Company's loans are secured by real estate.

Cash and Cash Equivalents

For purposes of the statements of cash flows, cash and cash equivalents include cash and due from banks, and interest-bearing deposits.

The Company's due from bank accounts and interest-bearing deposits, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant risk on cash and cash equivalents.

Investment Securities

Securities that management has the positive intent and ability to hold to maturity are classified as held-to-maturity and carried at cost, adjusted for amortization of premiums and accretion of discounts over the period to call or maturity using methods approximating the interest method. Securities not classified as held-to-maturity are classified as available-for-sale and are carried at fair value. Nonmarketable equity securities, consisting of stock in the Federal Home Loan Bank (FHLB), Federal Reserve Bank (FRB), and Connecticut On-Line Computer Center (COCC) are carried at cost, subject to adjustments for any observable market transactions on the same or similar instruments of the investee. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Unrealized gains and losses on securities available-for-sale are reported as a net amount in other comprehensive income or loss, net of tax. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific-identification method.

Prior to January 1, 2023, declines in fair value of securities that were deemed to be other than temporary, if applicable, were reflected in earnings as realized losses. In estimating other-than- temporary impairment losses, management considered the length of time and the extent to which fair value had been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

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