UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2021March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 000-16435
COMMUNITY BANCORP /VT |
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Vermont |
| 03-0284070 | ||
(State of Incorporation) |
| (IRS Employer Identification Number) | ||
| ||||
4811 US Route 5, Derby, Vermont |
| 05829 | ||
(Address of Principal Executive Offices) |
| (zip code) |
Registrant’s Telephone Number: (802) 334-7915
Securities registered pursuant to Section 12(b) of the Act: NONE
Title of Each Class | Trading Symbol(s) | Name of each exchange on which registered |
| (Not Applicable) |
|
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file for such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ NO ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated | ☒ | Smaller reporting company | ☒ |
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
At August 05, 2021,May 4, 2022, there were 5,348,9685,391,518 shares outstanding of the Corporation’s common stock.
FORM 10-Q
Index
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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2 |
Table of Contents |
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
The following are the unaudited consolidated financial statements for the Company.
Community Bancorp. and Subsidiary |
| June 30, |
| December 31, |
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| March 31, |
| December 31, |
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Consolidated Balance Sheets |
| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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| (Unaudited) |
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| (Unaudited) |
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Assets |
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Cash and due from banks |
| $ | 36,375,914 |
| $ | 10,850,787 |
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| $ | 17,330,851 |
| $ | 17,839,374 |
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Federal funds sold and overnight deposits |
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| 59,930,620 |
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| 104,199,133 |
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| 67,121,921 |
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| 92,519,552 |
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Total cash and cash equivalents |
| 96,306,534 |
| 115,049,920 |
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| 84,452,772 |
| 110,358,926 |
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Securities available-for-sale |
| 91,556,135 |
| 60,705,178 |
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| 185,755,566 |
| 182,342,459 |
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Restricted equity securities, at cost |
| 1,447,150 |
| 1,446,550 |
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| 1,390,950 |
| 1,434,450 |
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Loans held-for-sale |
| 793,544 |
| 130,400 |
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| 246,000 |
| 339,000 |
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Loans |
| 704,201,276 |
| 709,355,330 |
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| 696,293,182 |
| 689,988,533 |
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Allowance for loan losses |
| (7,719,257 | ) |
| (7,208,485 | ) |
| (7,890,648 | ) |
| (7,710,256 | ) | ||||
Deferred net loan fees |
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| (2,799,132 | ) |
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| (1,195,741 | ) | ||||||||
Deferred net loan cost (fees) |
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| 274,346 |
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| (37,972 | ) | ||||||||
Net loans |
| 693,682,887 |
| 700,951,104 |
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| 688,676,880 |
| 682,240,305 |
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Bank premises and equipment, net |
| 12,478,958 |
| 10,209,869 |
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| 13,503,142 |
| 13,767,328 |
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Accrued interest receivable |
| 3,040,833 |
| 2,987,977 |
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| 2,719,138 |
| 2,400,560 |
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Bank owned life insurance |
| 5,030,987 |
| 4,988,236 |
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| 5,093,288 |
| 5,073,228 |
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Goodwill |
| 11,574,269 |
| 11,574,269 |
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| 11,574,269 |
| 11,574,269 |
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Other assets |
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| 9,587,341 |
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| 10,189,781 |
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| 11,778,865 |
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| 9,575,274 |
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Total assets |
| $ | 925,498,638 |
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| $ | 918,233,284 |
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| $ | 1,005,190,870 |
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| $ | 1,019,105,799 |
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Liabilities and Shareholders’ Equity |
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Liabilities |
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Deposits: |
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Demand, non-interest bearing |
| $ | 204,616,899 |
| $ | 185,954,976 |
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| $ | 203,661,459 |
| $ | 209,465,151 |
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Interest-bearing transaction accounts |
| 232,134,055 |
| 242,902,715 |
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| 258,401,561 |
| 265,513,937 |
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Money market funds |
| 111,345,535 |
| 115,546,064 |
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| 130,731,075 |
| 129,728,954 |
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Savings |
| 143,739,953 |
| 124,555,124 |
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| 177,994,875 |
| 168,390,905 |
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Time deposits, $250,000 and over |
| 15,951,519 |
| 16,488,963 |
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| 17,106,871 |
| 17,463,871 |
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Other time deposits |
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| 92,105,434 |
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| 96,842,998 |
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| 89,404,604 |
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| 88,837,135 |
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Total deposits |
| 799,893,395 |
| 782,290,840 |
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| 877,300,445 |
| 879,399,953 |
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Borrowed funds |
| 2,300,000 |
| 2,800,000 |
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| 1,300,000 |
| 1,300,000 |
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Repurchase agreements |
| 23,516,636 |
| 38,727,312 |
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| 28,744,011 |
| 32,609,875 |
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Junior subordinated debentures |
| 12,887,000 |
| 12,887,000 |
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| 12,887,000 |
| 12,887,000 |
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Accrued interest and other liabilities |
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| 6,174,518 |
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| 4,239,419 |
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| 7,514,626 |
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| 8,148,703 |
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Total liabilities |
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| 844,771,549 |
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| 840,944,571 |
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| 927,746,082 |
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| 934,345,531 |
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Shareholders’ Equity |
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Preferred stock, 1,000,000 shares authorized, 15 shares issued and outstanding |
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at 06/30/21 and 12/31/20 ($100,000 liquidation value, per share) |
| 1,500,000 |
| 1,500,000 |
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Common stock - $2.50 par value; 15,000,000 shares authorized, 5,559,867 |
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shares issued at 06/30/21 and 5,527,380 shares issued at 12/31/20 |
| 13,899,668 |
| 13,818,450 |
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Preferred stock, 1,000,000 shares authorized, 15 shares issued and outstanding at 03/31/22 and 12/31/21 ($100,000 liquidation value, per share) |
| 1,500,000 |
| 1,500,000 |
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Common stock - $2.50 par value; 15,000,000 shares authorized, 5,602,178 shares issued at 03/31/22 and 5,587,939 shares issued at 12/31/21 |
| 14,005,445 |
| 13,969,848 |
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Additional paid-in capital |
| 34,783,343 |
| 34,309,646 |
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| 35,559,149 |
| 35,322,063 |
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Retained earnings |
| 33,072,970 |
| 29,368,046 |
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| 38,914,579 |
| 37,758,105 |
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Accumulated other comprehensive income |
| 93,885 |
| 915,348 |
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Less: treasury stock, at cost; 210,101 shares at 06/30/21 and 12/31/20 |
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| (2,622,777 | ) |
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| (2,622,777 | ) | ||||||||
Accumulated other comprehensive loss |
| (9,911,608 | ) |
| (1,166,971 | ) | ||||||||||
Less: treasury stock, at cost; 210,101 shares at 03/31/22 and 12/31/21 |
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| (2,622,777 | ) |
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| (2,622,777 | ) | ||||||||
Total shareholders’ equity |
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| 80,727,089 |
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| 77,288,713 |
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| 77,444,788 |
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| 84,760,268 |
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Total liabilities and shareholders’ equity |
| $ | 925,498,638 |
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| $ | 918,233,284 |
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| $ | 1,005,190,870 |
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| $ | 1,019,105,799 |
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Book value per common share outstanding |
| $ | 14.81 |
| $ | 14.25 |
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| $ | 14.08 |
| $ | 15.48 |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
3 |
Table of Contents |
Community Bancorp. and Subsidiary |
| Three Months Ended June 30, |
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| Three Months Ended March 31, |
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Consolidated Statements of Income |
| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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(Unaudited) |
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Interest income |
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Interest and fees on loans |
| $ | 7,888,423 |
| $ | 7,842,397 |
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| $ | 7,487,200 |
| $ | 8,253,296 |
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Interest on taxable debt securities |
| 293,731 |
| 253,178 |
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Interest on debt securities |
| 667,226 |
| 265,112 |
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Dividends |
| 14,981 |
| 21,400 |
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| 16,460 |
| 10,619 |
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Interest on federal funds sold and overnight deposits |
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| 80,006 |
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| 74,467 |
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| 80,660 |
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| 87,883 |
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Total interest income |
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| 8,277,141 |
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| 8,191,442 |
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| 8,251,546 |
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| 8,616,910 |
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Interest expense |
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Interest on deposits |
| 631,093 |
| 1,027,208 |
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| 551,959 |
| 705,244 |
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Interest on borrowed funds |
| 14,449 |
| 3,733 |
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| 21,965 |
| 14,941 |
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Interest on repurchase agreements |
| 20,509 |
| 59,006 |
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| 21,040 |
| 35,442 |
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Interest on junior subordinated debentures |
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| 99,916 |
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| 116,962 |
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| 98,352 |
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| 98,795 |
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Total interest expense |
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| 765,967 |
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| 1,206,909 |
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| 693,316 |
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| 854,422 |
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Net interest income |
| 7,511,174 |
| 6,984,533 |
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| 7,558,230 |
| 7,762,488 |
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Provision for loan losses |
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| 267,501 |
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| 307,499 |
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| 862,500 |
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| 267,497 |
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Net interest income after provision for loan losses |
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| 7,243,673 |
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| 6,677,034 |
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| 6,695,730 |
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| 7,494,991 |
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Non-interest income |
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Service fees |
| 856,631 |
| 721,521 |
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| 862,887 |
| 788,623 |
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Income from sold loans |
| 277,061 |
| 396,291 |
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| 203,842 |
| 185,006 |
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Other income from loans |
| 246,716 |
| 301,129 |
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| 271,260 |
| 183,274 |
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Net realized gain on sale of securities AFS |
| 0 |
| 39,086 |
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Other income |
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| 388,127 |
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| 304,075 |
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| 348,440 |
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| 415,328 |
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Total non-interest income |
|
| 1,768,535 |
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| 1,762,102 |
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| 1,686,429 |
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| 1,572,231 |
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Non-interest expense |
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Salaries and wages |
| 1,944,999 |
| 1,928,421 |
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| 2,040,000 |
| 1,975,003 |
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Employee benefits |
| 824,210 |
| 734,441 |
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| 772,052 |
| 831,210 |
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Occupancy expenses, net |
| 652,202 |
| 637,269 |
|
| 753,364 |
| 744,720 |
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Other expenses |
|
| 1,847,985 |
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| 1,687,322 |
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| 1,888,172 |
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| 1,814,118 |
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Total non-interest expense |
|
| 5,269,396 |
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| 4,987,453 |
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| 5,453,588 |
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| 5,365,051 |
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Income before income taxes |
| 3,742,812 |
| 3,451,683 |
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| 2,928,571 |
| 3,702,171 |
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Income tax expense |
|
| 696,406 |
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| 609,372 |
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| 523,029 |
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| 676,470 |
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Net income |
| $ | 3,046,406 |
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| $ | 2,842,311 |
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| $ | 2,405,542 |
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| $ | 3,025,701 |
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Earnings per common share |
| $ | 0.57 |
| $ | 0.54 |
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| $ | 0.44 |
| $ | 0.57 |
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Weighted average number of common shares used in computing earnings per share |
| 5,338,502 |
| 5,263,189 |
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| 5,382,678 |
| 5,322,404 |
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Dividends declared per common share |
| $ | 0.22 |
| $ | 0.19 |
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| $ | 0.23 |
| $ | 0.22 |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
4 |
Table of Contents |
Community Bancorp. and Subsidiary |
| Six Months Ended June 30, |
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Consolidated Statements of Income |
| 2021 |
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| 2020 |
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(Unaudited) |
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Interest income |
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Interest and fees on loans |
| $ | 16,141,719 |
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| $ | 15,208,358 |
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Interest on taxable debt securities |
|
| 558,844 |
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| 537,934 |
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Dividends |
|
| 25,600 |
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| 45,825 |
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Interest on federal funds sold and overnight deposits |
|
| 167,888 |
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| 171,477 |
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Total interest income |
|
| 16,894,051 |
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| 15,963,594 |
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Interest expense |
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Interest on deposits |
|
| 1,336,337 |
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| 2,276,745 |
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Interest on borrowed funds |
|
| 29,390 |
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| 16,528 |
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Interest on repurchase agreements |
|
| 55,951 |
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| 118,541 |
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Interest on junior subordinated debentures |
|
| 198,711 |
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| 271,488 |
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Total interest expense |
|
| 1,620,389 |
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| 2,683,302 |
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Net interest income |
|
| 15,273,662 |
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| 13,280,292 |
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Provision for loan losses |
|
| 534,998 |
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| 684,002 |
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Net interest income after provision for loan losses |
|
| 14,738,664 |
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| 12,596,290 |
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Non-interest income |
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Service fees |
|
| 1,645,255 |
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| 1,527,732 |
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Income from sold loans |
|
| 462,067 |
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| 536,754 |
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Other income from loans |
|
| 429,989 |
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| 521,596 |
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Net realized gain on sale of securities AFS |
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| 0 |
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|
| 39,086 |
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Other income |
|
| 803,455 |
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|
| 490,641 |
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Total non-interest income |
|
| 3,340,766 |
|
|
| 3,115,809 |
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Non-interest expense |
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Salaries and wages |
|
| 3,920,002 |
|
|
| 3,814,737 |
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Employee benefits |
|
| 1,655,420 |
|
|
| 1,532,882 |
|
Occupancy expenses, net |
|
| 1,396,922 |
|
|
| 1,320,504 |
|
Other expenses |
|
| 3,662,103 |
|
|
| 3,412,550 |
|
Total non-interest expense |
|
| 10,634,447 |
|
|
| 10,080,673 |
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Income before income taxes |
|
| 7,444,983 |
|
|
| 5,631,426 |
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Income tax expense |
|
| 1,372,876 |
|
|
| 927,876 |
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Net income |
| $ | 6,072,107 |
|
| $ | 4,703,550 |
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Earnings per common share |
| $ | 1.13 |
|
| $ | 0.89 |
|
Weighted average number of common shares used in computing earnings per share |
|
| 5,330,497 |
|
|
| 5,254,202 |
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Dividends declared per common share |
| $ | 0.44 |
|
| $ | 0.38 |
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Community Bancorp. and Subsidiary |
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Consolidated Statements of Comprehensive Income |
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(Unaudited) |
| Three Months Ended March 31, |
| |||||
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| 2022 |
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| 2021 |
| ||
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Net income |
| $ | 2,405,542 |
|
| $ | 3,025,701 |
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Other comprehensive loss, net of tax: |
|
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Unrealized holding loss on securities AFS arising during the period |
|
| (11,069,161 | ) |
|
| (1,660,640 | ) |
Tax effect |
|
| 2,324,524 |
|
|
| 348,735 |
|
Other comprehensive loss, net of tax |
|
| (8,744,637 | ) |
|
| (1,311,905 | ) |
Total comprehensive (loss) income |
| $ | (6,339,095 | ) |
| $ | 1,713,796 |
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
5 |
Community Bancorp. and Subsidiary |
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| ||
Consolidated Statements of Comprehensive Income |
|
|
|
|
|
| ||
(Unaudited) |
| Three Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net income |
| $ | 3,046,406 |
|
| $ | 2,842,311 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
Unrealized holding gain on securities AFS arising during the period |
|
| 620,812 |
|
|
| 246,634 |
|
Reclassification adjustment for gain realized in income |
|
| 0 |
|
|
| (39,086 | ) |
Unrealized gain during the period |
|
| 620,812 |
|
|
| 207,548 |
|
Tax effect |
|
| (130,370 | ) |
|
| (43,586 | ) |
Other comprehensive income, net of tax |
|
| 490,442 |
|
|
| 163,962 |
|
Total comprehensive income |
| $ | 3,536,848 |
|
| $ | 3,006,273 |
|
|
| Six Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net income |
| $ | 6,072,107 |
|
| $ | 4,703,550 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
Unrealized holding (loss) gain on securities AFS arising during the period |
|
| (1,039,828 | ) |
|
| 989,223 |
|
Reclassification adjustment for gain realized in income |
|
| 0 |
|
|
| (39,086 | ) |
Unrealized (loss) gain during the period |
|
| (1,039,828 | ) |
|
| 950,137 |
|
Tax effect |
|
| 218,365 |
|
|
| (199,529 | ) |
Other comprehensive (loss) income, net of tax |
|
| (821,463 | ) |
|
| 750,608 |
|
Total comprehensive income |
| $ | 5,250,644 |
|
| $ | 5,454,158 |
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
Table of Contents |
Community Bancorp. and Subsidiary |
Consolidated Statements of Changes in Shareholders’ Equity |
(Unaudited) |
|
| Six Months Ended June 30, 2021 |
|
| Three Months Ended March 31, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| Total |
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| Total |
| ||||||||||||||||||||||||
|
| Common |
| Preferred |
| paid-in |
| Retained |
|
|
| Treasury |
| shareholders’ |
|
| Common |
| Preferred |
| paid-in |
| Retained |
|
|
| Treasury |
| shareholders’ |
| ||||||||||||||||||||||||
|
| Stock |
|
| Stock |
|
| capital |
|
| earnings |
|
| AOCI* |
|
| stock |
| equity |
|
| Stock |
|
| Stock |
|
| capital |
|
| earnings |
|
| AOCI* |
|
| stock |
|
| equity |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
January 1, 2021 |
| $ | 13,818,450 |
| $ | 1,500,000 |
| $ | 34,309,646 |
| $ | 29,368,046 |
| $ | 915,348 |
| ($2,622,777) |
| $ | 77,288,713 |
| |||||||||||||||||||||||||||||||||
January 1, 2022 |
| $ | 13,969,848 |
| $ | 1,500,000 |
| $ | 35,322,063 |
| $ | 37,758,105 |
| $ | (1,166,971 | ) |
| $ | (2,622,777 | ) |
| $ | 84,760,268 |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Issuance of common stock |
| 42,523 |
|
|
| 222,256 |
|
|
|
|
|
|
| 264,779 |
|
| 35,597 |
|
|
| 237,086 |
|
|
|
|
|
|
| 272,683 |
| ||||||||||||||||||||||||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Common stock |
|
|
|
|
|
|
| (1,169,555 | ) |
|
|
|
|
| (1,169,555 | ) |
|
|
|
|
|
|
| (1,236,880 | ) |
|
|
|
|
| (1,236,880 | ) | ||||||||||||||||||||||
Preferred stock |
|
|
|
|
|
|
| (12,188 | ) |
|
|
|
|
| (12,188 | ) |
|
|
|
|
|
|
| (12,188 | ) |
|
|
|
|
| (12,188 | ) | ||||||||||||||||||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
| 3,025,701 |
|
|
|
|
| 3,025,701 |
|
|
|
|
|
|
|
| 2,405,542 |
|
|
|
|
| 2,405,542 |
| ||||||||||||||||||||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,311,905 | ) |
|
|
|
| (1,311,905 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8,744,637 | ) |
|
|
|
|
|
| (8,744,637 | ) |
March 31, 2021 |
| $ | 13,860,973 |
|
| $ | 1,500,000 |
|
| $ | 34,531,902 |
|
| $ | 31,212,004 |
|
| ($396,557) |
|
| ($2,622,777) |
| $ | 78,085,545 |
| |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Issuance of common stock |
| 38,695 |
|
|
| 251,441 |
|
|
|
|
|
|
| 290,136 |
| |||||||||||||||||||||||||||||||||||||||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Common stock |
|
|
|
|
|
|
| (1,173,253 | ) |
|
|
|
|
| (1,173,253 | ) | ||||||||||||||||||||||||||||||||||||||
Preferred stock |
|
|
|
|
|
|
| (12,187 | ) |
|
|
|
|
| (12,187 | ) | ||||||||||||||||||||||||||||||||||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
| 3,046,406 |
|
|
|
|
| 3,046,406 |
| |||||||||||||||||||||||||||||||||||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 490,442 |
|
|
|
|
| 490,442 |
| ||||||||||||||||||||||||||||
June 30, 2021 |
| $ | 13,899,668 |
|
| $ | 1,500,000 |
|
| $ | 34,783,343 |
|
| $ | 33,072,970 |
|
| $ | 93,885 |
|
| ($2,622,777) |
| $ | 80,727,089 |
| ||||||||||||||||||||||||||||
March 31, 2022 |
| $ | 14,005,445 |
|
| $ | 1,500,000 |
|
| $ | 35,559,149 |
|
| $ | 38,914,579 |
|
| $ | (9,911,608 | ) |
| $ | (2,622,777 | ) |
| $ | 77,444,788 |
|
|
| Six Months Ended June 30, 2020 |
|
| Three Months Ended March 31, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| Total |
|
|
|
|
|
| Additional |
|
|
|
|
|
|
| Total |
| ||||||||||||||||||||||||
|
| Common |
| Preferred |
| paid-in |
| Retained |
|
|
| Treasury |
| shareholders’ |
|
| Common |
| Preferred |
| paid-in |
| Retained |
|
|
| Treasury |
| shareholders’ |
| ||||||||||||||||||||||||
|
| Stock |
|
| Stock |
|
| capital |
|
| earnings |
|
| AOCI* |
|
| stock |
| equity |
|
| Stock |
|
| Stock |
|
| capital |
|
| earnings |
|
| AOCI* |
|
| stock |
|
| equity |
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
January 1, 2020 |
| $ | 13,624,643 |
| $ | 1,500,000 |
| $ | 33,464,381 |
| $ | 22,667,949 |
| $ | 260,483 |
| ($2,622,777) |
| $ | 68,894,679 |
| |||||||||||||||||||||||||||||||||
January 1, 2021 |
| $ | 13,818,450 |
| $ | 1,500,000 |
| $ | 34,309,646 |
| $ | 29,368,046 |
| $ | 915,348 |
| $ | (2,622,777 | ) |
| $ | 77,288,713 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Issuance of common stock |
| 40,465 |
|
|
| 213,812 |
|
|
|
|
|
|
| 254,277 |
|
| 42,523 |
|
|
| 222,256 |
|
|
|
|
|
|
| 264,779 |
| ||||||||||||||||||||||||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Common stock |
|
|
|
|
|
|
| (995,536 | ) |
|
|
|
|
| (995,536 | ) |
|
|
|
|
|
|
| (1,169,555 | ) |
|
|
|
|
| (1,169,555 | ) | ||||||||||||||||||||||
Preferred stock |
|
|
|
|
|
|
| (17,813 | ) |
|
|
|
|
| (17,813 | ) |
|
|
|
|
|
|
| (12,188 | ) |
|
|
|
|
| (12,188 | ) | ||||||||||||||||||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
| 1,861,239 |
|
|
|
|
| 1,861,239 |
|
|
|
|
|
|
|
| 3,025,701 |
|
|
|
|
| 3,025,701 |
| ||||||||||||||||||||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 586,646 |
|
|
|
|
| 586,646 |
| ||||||||||||||||||||||||||||
March 31, 2020 |
| $ | 13,665,108 |
|
| $ | 1,500,000 |
|
| $ | 33,678,193 |
|
| $ | 23,515,839 |
|
| $ | 847,129 |
|
| ($2,622,777) |
| $ | 70,583,492 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Issuance of common stock |
| 47,752 |
|
|
| 214,135 |
|
|
|
|
|
|
| 261,887 |
| |||||||||||||||||||||||||||||||||||||||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Common stock |
|
|
|
|
|
|
| (998,899 | ) |
|
|
|
|
| (998,899 | ) | ||||||||||||||||||||||||||||||||||||||
Preferred stock |
|
|
|
|
|
|
| (12,187 | ) |
|
|
|
|
| (12,187 | ) | ||||||||||||||||||||||||||||||||||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
| 2,842,311 |
|
|
|
|
| 2,842,311 |
| |||||||||||||||||||||||||||||||||||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 163,962 |
|
|
|
|
| 163,962 |
| ||||||||||||||||||||||||||||
June 30, 2020 |
| $ | 13,712,860 |
|
| $ | 1,500,000 |
|
| $ | 33,892,328 |
|
| $ | 25,347,064 |
|
| $ | 1,011,091 |
|
| ($2,622,777) |
| $ | 72,840,566 |
| ||||||||||||||||||||||||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,311,905 | ) |
|
|
|
|
|
| (1,311,905 | ) | ||||||||||||||||||||||||||
March 31, 2021 |
| $ | 13,860,973 |
|
| $ | 1,500,000 |
|
| $ | 34,531,902 |
|
| $ | 31,212,004 |
|
| $ | (396,557 | ) |
| $ | (2,622,777 | ) |
| $ | 78,085,545 |
|
____________
*Accumulated other comprehensive (loss) income
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
6 |
Table of Contents |
Community Bancorp. and Subsidiary |
|
|
|
|
|
| ||
Consolidated Statements of Cash Flows |
|
|
|
|
|
| ||
(Unaudited) |
| Three Months Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net income |
| $ | 2,405,542 |
|
| $ | 3,025,701 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization, bank premises and equipment |
|
| 285,202 |
|
|
| 259,449 |
|
Provision for loan losses |
|
| 862,500 |
|
|
| 267,497 |
|
Deferred income tax |
|
| 47,344 |
|
|
| 16,608 |
|
Gain on sale of loans |
|
| (102,945 | ) |
|
| (114,211 | ) |
(Income) loss from CFS Partners |
|
| (225,870 | ) |
|
| 1,693,014 |
|
Amortization of bond premium, net |
|
| 186,967 |
|
|
| 95,456 |
|
Proceeds from sales of loans held for sale |
|
| 4,425,711 |
|
|
| 2,145,611 |
|
Originations of loans held for sale |
|
| (4,229,766 | ) |
|
| (2,435,200 | ) |
Increase in taxes payable |
|
| 408,593 |
|
|
| 569,100 |
|
Increase in interest receivable |
|
| (318,578 | ) |
|
| (250,630 | ) |
(Increase) decrease in mortgage servicing rights |
|
| (2,374 | ) |
|
| 38,280 |
|
Decrease in right-of-use assets |
|
| 49,669 |
|
|
| 49,031 |
|
Decrease in operating lease liabilities |
|
| (51,283 | ) |
|
| (49,198 | ) |
Increase in other assets |
|
| (173,852 | ) |
|
| (148,665 | ) |
Increase in cash surrender value of BOLI |
|
| (20,060 | ) |
|
| (21,673 | ) |
Amortization of limited partnerships |
|
| 67,092 |
|
|
| 90,762 |
|
Change in net deferred loan fees and costs |
|
| (312,318 | ) |
|
| 1,076,424 |
|
Decrease in interest payable |
|
| (1,332 | ) |
|
| (12,953 | ) |
Decrease in accrued expenses |
|
| (567,062 | ) |
|
| (420,431 | ) |
(Decrease) increase in other liabilities |
|
| (24,896 | ) |
|
| 3,175 |
|
Net cash provided by operating activities |
|
| 2,708,284 |
|
|
| 5,877,147 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Investments - AFS |
|
|
|
|
|
|
|
|
Maturities, calls, pay downs and sales |
|
| 4,434,388 |
|
|
| 4,383,743 |
|
Purchases |
|
| (19,103,623 | ) |
|
| (27,371,666 | ) |
Proceeds from redemption of restricted equity securities |
|
| 43,500 |
|
|
| 0 |
|
Decrease in limited partnership contributions payable |
|
| 0 |
|
|
| (150,000 | ) |
Increase in loans, net |
|
| (6,998,537 | ) |
|
| (20,167,317 | ) |
Capital expenditures net of proceeds from sales of bank premises and equipment |
|
| (70,686 | ) |
|
| (2,657,300 | ) |
Recoveries of loans charged off |
|
| 11,780 |
|
|
| 25,314 |
|
Net cash used in investing activities |
|
| (21,683,178 | ) |
|
| (45,937,226 | ) |
7 |
Table of Contents |
Community Bancorp. and Subsidiary |
|
|
|
|
|
| ||
Consolidated Statements of Cash Flows |
|
|
|
|
|
| ||
(Unaudited) |
| Six Months Ended June 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net income |
| $ | 6,072,107 |
|
| $ | 4,703,550 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization, bank premises and equipment |
|
| 527,106 |
|
|
| 457,594 |
|
Provision for loan losses |
|
| 534,998 |
|
|
| 684,002 |
|
Deferred income tax |
|
| (118,016 | ) |
|
| (89,331 | ) |
Net realized gain on sale of securities AFS |
|
| 0 |
|
|
| (39,086 | ) |
Gain on sale of loans |
|
| (256,724 | ) |
|
| (321,125 | ) |
Gain on sale of bank premises and equipment |
|
| (9,800 | ) |
|
| 0 |
|
Gain on sale of OREO |
|
| 0 |
|
|
| (23,372 | ) |
Loss (income) from CFS Partners |
|
| 1,405,942 |
|
|
| (311,167 | ) |
Amortization of bond premium, net |
|
| 227,051 |
|
|
| 34,968 |
|
Proceeds from sales of loans held for sale |
|
| 6,720,974 |
|
|
| 19,557,165 |
|
Originations of loans held for sale |
|
| (7,127,394 | ) |
|
| (19,645,640 | ) |
(Decrease) increase in taxes payable |
|
| (502,632 | ) |
|
| 838,865 |
|
Increase in interest receivable |
|
| (52,856 | ) |
|
| (1,362,460 | ) |
Decrease in mortgage servicing rights |
|
| 12,816 |
|
|
| 11,844 |
|
Decrease in right-of-use assets |
|
| 98,078 |
|
|
| 121,650 |
|
Decrease in operating lease liabilities |
|
| (98,407 | ) |
|
| (120,438 | ) |
Increase in other assets |
|
| (158,830 | ) |
|
| (115,557 | ) |
Increase in cash surrender value of BOLI |
|
| (42,751 | ) |
|
| (41,744 | ) |
Amortization of limited partnerships |
|
| 181,524 |
|
|
| 168,342 |
|
Change in net deferred loan fees and costs |
|
| 1,603,391 |
|
|
| 2,944,294 |
|
Decrease in interest payable |
|
| (25,382 | ) |
|
| (30,765 | ) |
Decrease in accrued expenses |
|
| (217,439 | ) |
|
| (1,762 | ) |
Decrease in other liabilities |
|
| (65,366 | ) |
|
| (71,837 | ) |
Net cash provided by operating activities |
|
| 8,708,390 |
|
|
| 7,347,990 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Investments - AFS |
|
|
|
|
|
|
|
|
Maturities, calls, pay downs and sales |
|
| 9,522,747 |
|
|
| 10,957,147 |
|
Purchases |
|
| (41,640,583 | ) |
|
| (8,096,136 | ) |
Proceeds from redemption of restricted equity securities |
|
| 0 |
|
|
| 522,400 |
|
Purchases of restricted equity securities |
|
| (600 | ) |
|
| (503,400 | ) |
Decrease in limited partnership contributions payable |
|
| (150,000 | ) |
|
| (288,000 | ) |
Decrease (increase) in loans, net |
|
| 5,097,834 |
|
|
| (114,075,128 | ) |
Capital expenditures net of proceeds from sales of bank premises and equipment |
|
| (2,884,472 | ) |
|
| (154,595 | ) |
Proceeds from sales of OREO |
|
| 0 |
|
|
| 282,319 |
|
Recoveries of loans charged off |
|
| 31,994 |
|
|
| 54,457 |
|
Net cash used in investing activities |
|
| (30,023,080 | ) |
|
| (111,300,936 | ) |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Net increase in demand and interest-bearing transaction accounts |
| 7,893,263 |
| 68,461,978 |
| |||||||||||
Net (decrease) increase in demand and interest-bearing transaction accounts |
| (12,916,068 | ) |
| 7,863,790 |
| ||||||||||
Net increase in money market and savings accounts |
| 14,984,300 |
| 22,856,626 |
|
| 10,606,091 |
| 19,474,878 |
| ||||||
Net decrease in time deposits |
| (5,275,008 | ) |
| (6,975,213 | ) | ||||||||||
Net increase (decrease) in time deposits |
| 210,469 |
| (3,639,187 | ) | |||||||||||
Net decrease in repurchase agreements |
| (15,210,676 | ) |
| (4,731,553 | ) |
| (3,865,864 | ) |
| (6,627,854 | ) | ||||
Net increase in short-term borrowings |
| 0 |
| 2,000,000 |
| |||||||||||
Repayments on long-term borrowings |
| (500,000 | ) |
| 0 |
|
| 0 |
| (500,000 | ) | |||||
Increase (decrease) in finance lease obligations |
| 2,340,406 |
| (30,256 | ) | |||||||||||
(Decrease) increase in finance lease obligations |
| (52,807 | ) |
| 2,388,819 |
| ||||||||||
Dividends paid on preferred stock |
| (24,375 | ) |
| (30,000 | ) |
| (12,188 | ) |
| (12,188 | ) | ||||
Dividends paid on common stock |
|
| (1,636,606 | ) |
|
| (1,467,707 | ) |
|
| (900,893 | ) |
|
| (743,679 | ) |
Net cash provided by financing activities |
|
| 2,571,304 |
|
|
| 80,083,875 |
| ||||||||
Net cash (used in) provided by financing activities |
|
| (6,931,260 | ) |
|
| 18,204,579 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Net decrease in cash and cash equivalents |
| (18,743,386 | ) |
| (23,869,071 | ) |
| (25,906,154 | ) |
| (21,855,500 | ) | ||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
| ||||||
Beginning |
|
| 115,049,920 |
|
|
| 48,562,212 |
|
|
| 110,358,926 |
|
|
| 115,049,920 |
|
Ending |
| $ | 96,306,534 |
|
| $ | 24,693,141 |
|
| $ | 84,452,772 |
|
| $ | 93,194,420 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Supplemental Schedule of Cash Paid During the Period: |
|
|
|
|
|
|
|
|
|
| ||||||
Interest |
| $ | 1,645,771 |
|
| $ | 2,714,067 |
|
| $ | 694,648 |
|
| $ | 867,375 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income taxes, net of refunds |
| $ | 1,812,000 |
|
| $ | 10,000 |
| ||||||||
|
|
|
|
|
| |||||||||||
Supplemental Schedule of Noncash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Change in unrealized (loss) gain on securities AFS |
| ($1,039,828) |
|
| $ | 950,137 |
| |||||||||
Change in unrealized loss on securities AFS |
| $ | (11,069,161 | ) |
| $ | (1,660,640 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Common Shares Dividends Paid: |
|
|
|
|
|
|
|
|
|
| ||||||
Dividends declared |
| $ | 2,342,808 |
| $ | 1,994,435 |
|
| $ | 1,236,880 |
| $ | 1,169,555 |
| ||
Increase in dividends payable attributable to dividends declared |
| (151,287 | ) |
| (10,564 | ) |
| (63,304 | ) |
| (161,097 | ) | ||||
Dividends reinvested |
|
| (554,915 | ) |
|
| (516,164 | ) |
|
| (272,683 | ) |
|
| (264,779 | ) |
|
| $ | 1,636,606 |
|
| $ | 1,467,707 |
| ||||||||
Total dividends paid |
| $ | 900,893 |
|
| $ | 743,679 |
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
Table of Contents |
Notes to Consolidated Financial Statements
Note 1. Basis of Presentation and Consolidation and Certain Definitions
Basis of Presentation and Consolidation. The interim consolidated financial statements of Community Bancorp. and Subsidiary are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments necessary for the fair presentation of the consolidated financial condition and results of operations of the Company and its subsidiary, Community National Bank (the Bank), contained herein have been made. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 20202021 contained in the Company’s Annual Report on Form 10-K. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for any other interim period or the full annual period ending December 31, 2021.2022.
There were no reclassifications to the consolidated financial statements for the periods presented.
The Company is considered a “smaller reporting company” under the disclosure rules of the SEC, as amended in 2018. Accordingly, the Company has elected to provide its audited consolidated statements of income, comprehensive income, cash flows and changes in shareholders’ equity for a two year, rather than a three year, period, and provides smaller reporting company scaled disclosures where management deems it appropriate.
In addition to the definitions provided elsewhere in this quarterly report, the definitions, acronyms and abbreviations identified below are used throughout this report, including in Part I. “Financial Information” and Part II. “Other Information”, and are intended to aid the reader and provide a reference page when reviewing this report.
ABS: | Asset backed security | FASB: | Financial Accounting Standards Board |
|
| FDIC: | Federal Deposit Insurance Corporation |
|
|
|
|
Agency MBS: | MBS issued by a US government agency | FHLBB: | Federal Home Loan Bank of Boston |
or GSE | FHLMC: | Federal Home Loan Mortgage Corporation | |
ALCO: |
| FOMC: | Federal Open Market Committee |
|
| FRB: | Federal Reserve Board |
|
| FRBB: | Federal Reserve Bank of Boston |
|
| GAAP: | Generally Accepted Accounting Principles |
| Accounting Standards | in the United States | |
|
| GSE: | Government sponsored enterprise |
|
| HTM: | Held-to-maturity |
|
| ICS: | Insured Cash Sweeps of the |
|
|
| |
|
| IRS: | Internal Revenue Service |
|
| JNE: | Jobs for New England |
|
|
|
|
|
|
|
|
bp or bps: | Basis point(s) |
|
|
|
|
|
|
CARES ACT: | Coronavirus Aid Relief and Economic |
|
|
Security Act |
|
| |
CBLR: | Community Bank Leverage Ratio |
|
|
CDARS: | Certificate of Deposit Accounts Registry |
| Other |
Service of the |
|
| |
InterFi Network |
|
| |
CDs: | Certificates of deposit |
|
|
CDI: | Core deposit intangible |
|
|
CECL: | Current Expected Credit Loss |
|
|
CFSG: | Community Financial Services Group, LLC |
|
|
CFS Partners: | Community Financial Services Partners, | RD: | USDA Rural Development |
LLC | SBA: | U.S. Small Business Administration | |
CMO | Collateralized Mortgage Obligation | SEC: | U.S. Securities and Exchange Commission |
|
|
| |
|
|
|
|
Company: | Community Bancorp. and Subsidiary |
|
|
COVID-19: | Coronavirus Disease 2019 |
| U.S. |
CRE: | Commercial Real Estate |
|
|
DDA or DDAs: | Demand Deposit Account(s) | 2018 | Economic Growth, Regulatory Relief and |
DTC: | Depository Trust Company | Regulatory | Consumer Protection Act of 2018 |
DRIP: | Dividend Reinvestment Plan | Relief Act: | |
Exchange Act: | Securities Exchange Act of 1934 |
Table of Contents |
Note 2. Risks and Uncertainties
The COVID-19 pandemic has adversely affected, and may continue to adversely affect, economic activity globally, nationally and locally. Government actions taken to help mitigate the spread of COVID-19 and its economic effects included restrictions on travel, quarantines in certain areas, forced closures for certain types of public places and businesses, extensions of unemployment benefits and direct stimulus payments to individuals. Although most COVID-19 related restrictions on businesses have been lifted, the effects of the pandemic and the measures taken in response to it are expected to continue to impact financial markets, consumer confidence, unemployment rates and the economy, including the local economy in the Company’s Vermont and New Hampshire markets, in ways that cannot be predicted. Moreover, the emergence of new strains of the COVID-19 virus could result in additional responsive government measures and economic disruption.
In addition, due to the COVID-19 pandemic, market interest rates have declined significantly, with the 10-year Treasury bond falling below 1.00 percent on March 3, 2020 for the first time. On March 3, 2020, the FOMC reduced the targeted federal funds interest rate range by 50 bps to a range of 1.00% to 1.25%. This range was further reduced to a range of 0 percent to 0.25% on March 16, 2020. On April 29, 2020, the FOMC indicated that the federal funds target rate range will remain unchanged until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals. Since that time, the FOMC has repeatedly reiterated that position, most recently in July, 2021.
The duration of these reductions in interest rates and other lingering after-effects of the COVID-19 pandemic could adversely affect the Company’s business, financial condition and results of operations in future periods. It is reasonably possible that estimates made in the Company’s consolidated financial statements could be materially and adversely impacted as a result of the effects of the pandemic, including expected credit losses on loan receivables.
Note 3. Recent Accounting Developments
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Under the new guidance, which will replace the existing incurred loss model for recognizing credit losses, banks and other lending institutions will be required to recognize the full amount of expected credit losses over the life of a loan. The new guidance, which is referred to as the current expected credit loss, or CECL model, requires that expected credit losses for financial assets held at the reporting date that are accounted for at amortized cost be measured and recognized based on historical experience and current and reasonably supportable forecasted conditions to reflect the full amount of expected credit losses over the life of the loans. A modified version of these requirements also applies to debt securities classified as available for sale, which will require that credit losses on those securities be recorded through an allowance for credit losses rather than a write-down. The ASU may have a material impact on the Company’s consolidated financial statements upon adoption as it will require a change in the Company’s methodology for calculating its ALL and allowance on unused commitments. The Company will transition from an incurred loss model to an expected loss model, which may result in an increase in the ALL upon adoption and may negatively impact the Company’s and the Bank’s regulatory capital ratios. The Company has formed a committee to assess the implications of this new pronouncement and transitioned to a software solution for preparing the ALL calculation and related reports that management believes provides the Company with stronger data integrity, ease and efficiency in ALL preparation. The new software solution also provides numerous training opportunities for the appropriate personnel within the Company. The Company has gathered and is continuing to analyze the historical data to serve as a basis for estimating the ALL under CECL and continues to evaluate the anticipated impact of the adoption of the ASU on its consolidated financial statements. As initially proposed,The ASU will become effective for the ASU was to be effective forCompany beginning with the 2023 fiscal years beginning after December 15, 2019,year including interim periodsperiods. Parallel calculations under the existing ALL methodology and the CECL model will be run throughout 2022 in preparation for the transition to CECL.
In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance amends Topic 326 (CECL) to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, under the CECL model creditors will determine whether a modification results in a new loan or continuation of existing loan. These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to Topic 326 require that an entity disclose current-period gross write-offs by year of origination within thosethe vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance will become effective for the Company beginning with the fiscal years, with early adoption permitted for fiscal years beginning after December 15, 2018,year 2023, including interim periods within such years. However, on October 16, 2019, the FASB approved an extended effective date for compliance with the ASU by smaller reporting companies, which are now required to comply with the ASU for fiscal years beginning after December 15, 2022, with early adoption permitted.periods. The Company qualifies for this extension andis currently assessing the impact of ASU No. 2022-02 but does not intend to early adoptexpect that its adoption will have a material impact on the ASU at this time. Management will continue to evaluate the Company’s CECL compliance and implementation timetable in light of the extension.consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and has issued subsequent amendments thereto, which provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is assessing ASU No. 2020-04 and its impact on the transition away from LIBOR for its Junior Subordinated Debentures due December 15, 2037, the Company’s only financial instruments that utilize LIBOR as a reference rate.
In March and April, 2020, federal banking regulators issued interagency guidance on accounting for loan modifications in light of the economic impact of the COVID-19 pandemic. The guidance interprets current accounting standards and indicates that a lender can conclude that a borrower is not experiencing financial difficulty if short-term (that is, six months or less) modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant, provided that the loan is less than 30 days past due at the time a modification program is implemented. The banking agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs under ASC No. 310-40, Receivables – Troubled Debt Restructurings by Creditors. Additionally, a provision of the CARES Act enacted in March 2020 provides that COVID-19 related loan modifications (including modifications that are not short-term) made to a loan between March 1, 2020 and the earlier of December 31, 2020 or the sixtieth day after the end of the COVID-19 emergency declared by the President will not require the loan to be treated as a TDR under U.S. GAAP, so long as the modified loan was not past due as of December 31, 2019. On December 27, 2020, the Consolidated Appropriations Act 2021 (CAA) extended the date for COVID-19 related loan modifications from December 31, 2020 to January 1, 2022.
10 |
Table of Contents |
Note 4.3. Earnings per Common Share
Earnings per common share amounts are computed based on the weighted average number of shares of common stock issued during the period (retroactively adjusted for stock splits and stock dividends, if any), including Dividend Reinvestment Plan shares issuable upon reinvestment of dividends declared, and reduced for shares held in treasury.
The following tables illustrate the calculation of earnings per common share for the periods presented, as adjusted for the cash dividends declared on the preferred stock:
Three Months Ended June 30, |
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net income, as reported |
| $ | 3,046,406 |
|
| $ | 2,842,311 |
|
Less: dividends to preferred shareholders |
|
| 12,187 |
|
|
| 12,187 |
|
Net income available to common shareholders |
| $ | 3,034,219 |
|
| $ | 2,830,124 |
|
Weighted average number of common shares used in calculating earnings per share |
|
| 5,338,502 |
|
|
| 5,263,189 |
|
Earnings per common share |
| $ | 0.57 |
|
| $ | 0.54 |
|
Six Months Ended June 30, |
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net income, as reported |
| $ | 6,072,107 |
|
| $ | 4,703,550 |
|
Less: dividends to preferred shareholders |
|
| 24,375 |
|
|
| 30,000 |
|
Net income available to common shareholders |
| $ | 6,047,732 |
|
| $ | 4,673,550 |
|
Weighted average number of common shares used in calculating earnings per share |
|
| 5,330,497 |
|
|
| 5,254,202 |
|
Earnings per common share |
| $ | 1.13 |
|
| $ | 0.89 |
|
Three Months Ended March 31, |
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Net income, as reported |
| $ | 2,405,542 |
|
| $ | 3,025,701 |
|
Less: dividends to preferred shareholders |
|
| 12,188 |
|
|
| 12,188 |
|
Net income available to common shareholders |
| $ | 2,393,354 |
|
| $ | 3,013,513 |
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
used in calculating earnings per share |
|
| 5,382,678 |
|
|
| 5,322,404 |
|
Earnings per common share |
| $ | 0.44 |
|
| $ | 0.57 |
|
Note 5.4. Investment Securities
Debt securities AFS as of the balance sheet dates consisted of the following:
|
|
|
| Gross |
| Gross |
|
|
|
|
|
| Gross |
| Gross |
|
|
| ||||||||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| ||||||||||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
June 30, 2021 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
March 31, 2022 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
U.S. GSE debt securities |
| $ | 10,004,550 |
| $ | 98,563 |
| $ | 96,712 |
| $ | 10,006,401 |
|
| $ | 12,001,306 |
| $ | 0 |
| $ | 764,922 |
| $ | 11,236,384 |
| ||||||
U.S. Government securities |
| 5,565,064 |
| 12,582 |
| 1,964 |
| 5,575,682 |
|
| 39,497,938 |
| 0 |
| 1,868,539 |
| 37,629,399 |
| ||||||||||||||
Taxable Municipal securities |
| 300,000 |
| 0 |
| 26,323 |
| 273,677 |
| |||||||||||||||||||||||
Tax-Exempt Municipal securities |
| 4,644,229 |
| 0 |
| 336,281 |
| 4,307,948 |
| |||||||||||||||||||||||
Agency MBS |
| 66,145,762 |
| 323,573 |
| 549,374 |
| 65,919,961 |
|
| 132,398,698 |
| 23,491 |
| 9,482,071 |
| 122,940,118 |
| ||||||||||||||
ABS and OAS |
| 2,306,445 |
| 114,118 |
| 0 |
| 2,420,563 |
|
| 1,847,185 |
| 4,332 |
| 22,855 |
| 1,828,662 |
| ||||||||||||||
CMO |
| 977,473 |
| 0 |
| 15,955 |
| 961,518 |
|
| 1,422,549 |
| 0 |
| 115,921 |
| 1,306,628 |
| ||||||||||||||
Other investments |
|
| 6,438,000 |
|
|
| 234,010 |
|
|
| 0 |
|
|
| 6,672,010 |
|
|
| 6,190,000 |
|
|
| 68,665 |
|
|
| 25,915 |
|
|
| 6,232,750 |
|
Total |
| $ | 91,437,294 |
|
| $ | 782,846 |
|
| $ | 664,005 |
|
| $ | 91,556,135 |
|
| $ | 198,301,905 |
|
| $ | 96,488 |
|
| $ | 12,642,827 |
|
| $ | 185,755,566 |
|
December 31, 2020 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
| Gross |
| Gross |
|
|
| |||||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| |||||||||||||||||||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
December 31, 2021 |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
U.S. GSE debt securities |
| $ | 8,007,142 |
| $ | 165,934 |
| $ | 3,245 |
| $ | 8,169,831 |
|
| $ | 12,001,978 |
| $ | 36,024 |
| $ | 209,504 |
| $ | 11,828,498 |
| ||||||
U.S. Government securities |
| 32,374,935 |
| 0 |
| 333,894 |
| 32,041,041 |
| |||||||||||||||||||||||
Taxable Municipal securities |
| 300,000 |
| 0 |
| 1,267 |
| 298,733 |
| |||||||||||||||||||||||
Tax-Exempt Municipal securities |
| 830,279 |
| 1,167 |
| 67 |
| 831,379 |
| |||||||||||||||||||||||
Agency MBS |
| 40,861,370 |
| 547,930 |
| 30,951 |
| 41,378,349 |
|
| 128,291,487 |
| 184,002 |
| 1,342,968 |
| 127,132,521 |
| ||||||||||||||
ABS and OAS |
| 2,508,997 |
| 160,999 |
| 0 |
| 2,669,996 |
|
| 2,131,610 |
| 82,414 |
| 0 |
| 2,214,024 |
| ||||||||||||||
CMO |
| 1,451,349 |
| 0 |
| 30,891 |
| 1,420,458 |
| |||||||||||||||||||||||
Other investments |
|
| 8,169,000 |
|
|
| 318,002 |
|
|
| 0 |
|
|
| 8,487,002 |
|
|
| 6,438,000 |
|
|
| 142,199 |
|
|
| 4,394 |
|
|
| 6,575,805 |
|
Total |
| $ | 59,546,509 |
|
| $ | 1,192,865 |
|
| $ | 34,196 |
|
| $ | 60,705,178 |
|
| $ | 183,819,638 |
|
| $ | 445,806 |
|
| $ | 1,922,985 |
|
| $ | 182,342,459 |
|
11 |
Table of Contents |
Investments pledged as collateral for repurchase agreements consisted of U.S. GSE debt securities, Agency MBS, ABS and OAS, and CMO. These repurchase agreements mature daily. These pledged investments as of the balance sheet dates were as follows:
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
|
|
|
|
|
|
| ||
June 30, 2021 |
| $ | 70,804,826 |
|
| $ | 70,677,931 |
|
December 31, 2020 |
|
| 59,546,509 |
|
|
| 60,705,178 |
|
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
|
|
|
|
|
|
| ||
March 31, 2022 |
| $ | 60,664,506 |
|
| $ | 56,148,099 |
|
December 31, 2021 |
|
| 63,045,599 |
|
|
| 62,256,702 |
|
Proceeds fromThere were no sales of debt securities were $884,137 for the first sixthree months of 2020, with gains of $39,086. There were no sales for the first six months of2022 or 2021.
The scheduled maturities of debt securities as of the balance sheet dates were as follows:
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
June 30, 2021 |
|
|
|
|
|
| ||
Due in one year or less |
| $ | 2,481,000 |
|
| $ | 2,522,966 |
|
Due from one to five years |
|
| 7,463,374 |
|
|
| 7,659,499 |
|
Due from five to ten years |
|
| 14,343,837 |
|
|
| 14,426,569 |
|
Due after ten years |
|
| 1,003,321 |
|
|
| 1,027,140 |
|
Agency MBS |
|
| 66,145,762 |
|
|
| 65,919,961 |
|
Total |
| $ | 91,437,294 |
|
| $ | 91,556,135 |
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 2,227,000 |
|
| $ | 2,247,603 |
|
Due from one to five years |
|
| 5,942,000 |
|
|
| 6,239,399 |
|
Due from five to ten years |
|
| 9,511,476 |
|
|
| 9,801,921 |
|
Due after ten years |
|
| 1,004,663 |
|
|
| 1,037,906 |
|
Agency MBS |
|
| 40,861,370 |
|
|
| 41,378,349 |
|
Total |
| $ | 59,546,509 |
|
| $ | 60,705,178 |
|
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
March 31, 2022 |
|
|
|
|
|
| ||
Due in one year or less |
| $ | 3,718,000 |
|
| $ | 3,739,035 |
|
Due from one to five years |
|
| 45,449,014 |
|
|
| 43,386,569 |
|
Due from five to ten years |
|
| 10,790,658 |
|
|
| 10,173,219 |
|
Due after ten years |
|
| 5,945,535 |
|
|
| 5,516,625 |
|
Agency MBS |
|
| 132,398,698 |
|
|
| 122,940,118 |
|
Total |
| $ | 198,301,905 |
|
| $ | 185,755,566 |
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 3,470,000 |
|
| $ | 3,508,582 |
|
Due from one to five years |
|
| 36,860,731 |
|
|
| 36,619,130 |
|
Due from five to ten years |
|
| 13,065,163 |
|
|
| 12,942,726 |
|
Due after ten years |
|
| 2,132,257 |
|
|
| 2,139,500 |
|
Agency MBS |
|
| 128,291,487 |
|
|
| 127,132,521 |
|
Total |
| $ | 183,819,638 |
|
| $ | 182,342,459 |
|
Agency MBS are not due at a single maturity date and have not been allocated to maturity groupings for purposes of the maturity table.
Debt securities with unrealized losses as of the balance sheet dates are presented in the table below.
|
| Less than 12 months |
| 12 months or more |
| Total |
|
| Less than 12 months |
| 12 months or more |
| Totals |
| ||||||||||||||||||||||||||||||||||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Number of |
| Fair |
| Unrealized |
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Number of |
| Fair |
| Unrealized |
| ||||||||||||||||||||||||||
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Securities |
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Securities |
|
| Value |
|
| Loss |
| ||||||||||||||
June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
U.S. GSE debt securities |
| $ | 4,904,518 |
| $ | 96,712 |
| $ | 0 |
| $ | 0 |
| 5 |
| $ | 4,904,518 |
| $ | 96,712 |
|
| $ | 6,718,245 |
| $ | 283,061 |
| $ | 4,518,139 |
| $ | 481,861 |
| 11 |
| $ | 11,236,384 |
| $ | 764,922 |
| ||||||||||||||
U.S. Government securities |
| 1,997,649 |
| 1,964 |
| 0 |
| 0 |
| 5 |
| 1,997,649 |
| 1,964 |
|
| 37,629,399 |
| 1,868,539 |
| 0 |
| 0 |
| 52 |
| 37,629,399 |
| 1,868,539 |
| ||||||||||||||||||||||||||
Taxable Municipal securities |
| 273,677 |
| 26,323 |
| 0 |
| 0 |
| 1 |
| 273,677 |
| 26,323 |
| |||||||||||||||||||||||||||||||||||||||||
Tax-Exempt Municipal securities |
| 4,307,948 |
| 336,281 |
| 0 |
| 0 |
| 9 |
| 4,307,948 |
| 336,281 |
| |||||||||||||||||||||||||||||||||||||||||
Agency MBS |
| 45,410,219 |
| 543,987 |
| 285,062 |
| 5,387 |
| 34 |
| 45,695,281 |
| 549,374 |
|
| 91,645,963 |
| 6,483,880 |
| 29,071,931 |
| 2,998,191 |
| 106 |
| 120,717,894 |
| 9,482,071 |
| ||||||||||||||||||||||||||
ABS and OAS |
| 1,277,498 |
| 22,855 |
| 0 |
| 0 |
| 2 |
| 1,277,498 |
| 22,855 |
| |||||||||||||||||||||||||||||||||||||||||
CMO |
|
| 961,518 |
|
|
| 15,955 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6 |
|
|
| 961,518 |
|
|
| 15,955 |
|
| 449,231 |
| 29,845 |
| 857,397 |
| 86,076 |
| 3 |
| 1,306,628 |
| 115,921 |
| |||||||||||||
Other investments |
|
| 470,085 |
|
|
| 25,915 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2 |
|
|
| 470,085 |
|
|
| 25,915 |
| ||||||||||||||||||||||||||||
Total |
| $ | 53,273,904 |
|
| $ | 658,618 |
|
| $ | 285,062 |
|
| $ | 5,387 |
|
|
| 50 |
|
| $ | 53,558,966 |
|
| $ | 664,005 |
|
| $ | 142,772,046 |
|
| $ | 9,076,699 |
|
| $ | 34,447,467 |
|
| $ | 3,566,128 |
|
|
| 186 |
|
| $ | 177,219,513 |
|
| $ | 12,642,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
U.S. GSE debt securities |
| $ | 1,999,234 |
| $ | 3,245 |
| $ | 0 |
| $ | 0 |
| 2 |
| $ | 1,999,234 |
| $ | 3,245 |
| |||||||||||||||||||||||||||||||||||
Agency MBS |
|
| 2,076,167 |
|
|
| 19,845 |
|
|
| 520,546 |
|
|
| 11,106 |
|
|
| 6 |
|
|
| 2,596,713 |
|
|
| 30,951 |
| ||||||||||||||||||||||||||||
Total |
| $ | 4,075,401 |
|
| $ | 23,090 |
|
| $ | 520,546 |
|
| $ | 11,106 |
|
|
| 8 |
|
| $ | 4,595,947 |
|
| $ | 34,196 |
|
12 |
Table of Contents |
|
| Less than 12 months |
|
| 12 months or more |
|
| Totals |
| |||||||||||||||||||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Number of |
|
| Fair |
|
| Unrealized |
| |||||||
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Securities |
|
| Value |
|
| Loss |
| |||||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
U.S. GSE debt securities |
| $ | 5,869,117 |
|
| $ | 130,883 |
|
| $ | 1,921,379 |
|
| $ | 78,621 |
|
|
| 7 |
|
| $ | 7,790,496 |
|
| $ | 209,504 |
|
U.S. Government securities |
|
| 32,041,041 |
|
|
| 333,894 |
|
|
| 0 |
|
|
| 0 |
|
|
| 46 |
|
|
| 32,041,041 |
|
|
| 333,894 |
|
Taxable Municipal securities |
|
| 298,733 |
|
|
| 1,267 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
|
| 298,733 |
|
|
| 1,267 |
|
Tax-Exempt Municipal securities |
|
| 330,212 |
|
|
| 67 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1 |
|
|
| 330,212 |
|
|
| 67 |
|
Agency MBS |
|
| 107,061,452 |
|
|
| 1,128,587 |
|
|
| 8,809,493 |
|
|
| 214,381 |
|
|
| 84 |
|
|
| 115,870,945 |
|
|
| 1,342,968 |
|
CMO |
|
| 1,420,458 |
|
|
| 30,891 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3 |
|
|
| 1,420,458 |
|
|
| 30,891 |
|
Other investments |
|
| 491,606 |
|
|
| 4,394 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2 |
|
|
| 491,606 |
|
|
| 4,394 |
|
Total |
| $ | 147,512,619 |
|
| $ | 1,629,983 |
|
| $ | 10,730,872 |
|
| $ | 293,002 |
|
|
| 144 |
|
| $ | 158,243,491 |
|
| $ | 1,922,985 |
|
The unrealized losses for all periods presented were principally attributable to changes in prevailing interest rates for similar types of securities and not deterioration in the creditworthiness of the issuer.
Management evaluates its debt securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions, or adverse developments relating to the issuer, warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than the carrying value, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies or other adverse developments in the status of the securities have occurred, and the results of reviews of the issuer’s financial condition. As of June 30, 2021March 31, 2022 and December 31, 2020,2021, there were no declines in the fair value of any of the securities reflected in the table above that were deemed by management to be OTTI.
Note 6.5. Loans, Allowance for Loan Losses and Credit Quality
The composition of net loans as of the balance sheet dates was as follows:
|
| June 30, |
| December 31, |
|
| March 31, |
| December 31, |
| ||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Commercial & industrial |
| $ | 172,804,158 |
| $ | 161,067,501 |
|
| $ | 121,473,157 |
| $ | 120,933,470 |
| ||
Commercial real estate |
| 284,946,461 |
| 280,544,550 |
|
| 308,311,734 |
| 300,958,931 |
| ||||||
Municipal |
| 35,807,161 |
| 54,807,367 |
|
| 48,660,440 |
| 47,955,231 |
| ||||||
Residential real estate - 1st lien |
| 170,113,951 |
| 170,507,263 |
|
| 181,610,294 |
| 181,316,345 |
| ||||||
Residential real estate - Jr lien |
| 36,355,567 |
| 38,147,659 |
|
| 33,066,989 |
| 34,359,864 |
| ||||||
Consumer |
|
| 4,173,978 |
|
|
| 4,280,990 |
|
|
| 3,170,568 |
|
|
| 4,464,692 |
|
Total loans |
|
| 704,201,276 |
|
|
| 709,355,330 |
|
|
| 696,293,182 |
|
|
| 689,988,533 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
ALL |
| (7,719,257 | ) |
| (7,208,485 | ) |
| (7,890,648 | ) |
| (7,710,256 | ) | ||||
Deferred net loan fees |
|
| (2,799,132 | ) |
|
| (1,195,741 | ) | ||||||||
Deferred net loan cost (fees) |
|
| 274,346 |
|
|
| (37,972 | ) | ||||||||
Net loans |
| $ | 693,682,887 |
|
| $ | 700,951,104 |
|
| $ | 688,676,880 |
|
| $ | 682,240,305 |
|
Table of Contents |
The following is an age analysis of past due loans (including non-accrual) as of the balance sheet dates, by portfolio segment:
|
|
|
|
|
|
|
|
|
|
|
| Non- |
| 90 Days or |
|
|
|
| 90 Days |
| Total |
|
|
|
|
| Non-Accrual |
| 90 Days or More and |
| ||||||||||||||||||||||||||
|
|
|
| 90 Days |
| Total |
|
|
| Total |
| Accrual |
| More and |
| |||||||||||||||||||||||||||||||||||||||||
June 30, 2021 |
| 30-89 Days |
|
| or More |
|
| Past Due |
|
| Current |
|
| Loans |
|
| Loans |
|
| Accruing |
| |||||||||||||||||||||||||||||||||||
March 31, 2022 |
| 30-89 Days |
|
| or More |
|
| Past Due |
|
| Current |
|
| Total Loans |
|
| Loans |
|
| Accruing |
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Commercial & industrial |
| $ | 83,651 |
| $ | 0 |
| $ | 83,651 |
| $ | 172,720,507 |
| $ | 172,804,158 |
| $ | 394,901 |
| $ | 0 |
|
| $ | 233,764 |
| $ | 141,700 |
| $ | 375,464 |
| $ | 121,097,693 |
| $ | 121,473,157 |
| $ | 222,236 |
| $ | 0 |
| ||||||||||||
Commercial real estate |
| 514,911 |
| 2,873,734 |
| 3,388,645 |
| 281,557,816 |
| 284,946,461 |
| 1,836,177 |
| 623,734 |
|
| 1,546,310 |
| 1,640,382 |
| 3,186,692 |
| 305,125,042 |
| 308,311,734 |
| 3,708,593 |
| 0 |
| ||||||||||||||||||||||||||
Municipal |
| 0 |
| 0 |
| 0 |
| 35,807,161 |
| 35,807,161 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| 48,660,440 |
| 48,660,440 |
| 0 |
| 0 |
| ||||||||||||||||||||||||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
- 1st lien |
| 623,692 |
| 1,145,153 |
| 1,768,845 |
| 168,345,106 |
| 170,113,951 |
| 1,274,249 |
| 533,391 |
|
| 1,221,885 |
| 611,883 |
| 1,833,768 |
| 179,776,526 |
| 181,610,294 |
| 1,343,723 |
| 561,440 |
| ||||||||||||||||||||||||||
- Jr lien |
| 208,953 |
| 112,574 |
| 321,527 |
| 36,034,040 |
| 36,355,567 |
| 184,924 |
| 35,098 |
|
| 82,115 |
| 93,374 |
| 175,489 |
| 32,891,500 |
| 33,066,989 |
| 140,411 |
| 93,374 |
| ||||||||||||||||||||||||||
Consumer |
|
| 9,567 |
|
|
| 0 |
|
|
| 9,567 |
|
|
| 4,164,411 |
|
|
| 4,173,978 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4,028 |
|
|
| 0 |
|
|
| 4,028 |
|
|
| 3,166,540 |
|
|
| 3,170,568 |
|
|
| 0 |
|
|
| 0 |
|
Totals |
| $ | 1,440,774 |
|
| $ | 4,131,461 |
|
| $ | 5,572,235 |
|
| $ | 698,629,041 |
|
| $ | 704,201,276 |
|
| $ | 3,690,251 |
|
| $ | 1,192,223 |
|
| $ | 3,088,102 |
|
| $ | 2,487,339 |
|
| $ | 5,575,441 |
|
| $ | 690,717,741 |
|
| $ | 696,293,182 |
|
| $ | 5,414,963 |
|
| $ | 654,814 |
|
|
|
|
|
|
|
|
|
|
|
|
| Non- |
| 90 Days or |
|
|
|
| 90 Days |
| Total |
|
|
|
|
| Non-Accrual |
| 90 Days or More and |
| ||||||||||||||||||||||||||
|
|
|
| 90 Days |
| Total |
|
|
| Total |
| Accrual |
| More and |
| |||||||||||||||||||||||||||||||||||||||||
December 31, 2020 |
| 30-89 Days |
|
| or More |
|
| Past Due |
|
| Current |
|
| Loans |
|
| Loans |
|
| Accruing |
| |||||||||||||||||||||||||||||||||||
December 31, 2021 |
| 30-89 Days |
|
| or More |
|
| Past Due |
|
| Current |
|
| Total Loans |
|
| Loans |
|
| Accruing |
| |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Commercial & industrial |
| $ | 119,413 |
| $ | 0 |
| $ | 119,413 |
| $ | 160,948,088 |
| $ | 161,067,501 |
| $ | 434,196 |
| $ | 0 |
|
| $ | 833,875 |
| $ | 0 |
| $ | 833,875 |
| $ | 120,099,595 |
| $ | 120,933,470 |
| $ | 98,661 |
| $ | 0 |
| ||||||||||||
Commercial real estate |
| 127,343 |
| 567,957 |
| 695,300 |
| 279,849,250 |
| 280,544,550 |
| 1,875,942 |
| 0 |
|
| 49,450 |
| 2,400,514 |
| 2,449,964 |
| 298,508,967 |
| 300,958,931 |
| 4,517,839 |
| 0 |
| ||||||||||||||||||||||||||
Municipal |
| 0 |
| 0 |
| 0 |
| 54,807,367 |
| 54,807,367 |
| 0 |
| 0 |
|
| 0 |
| 0 |
| 0 |
| 47,955,231 |
| 47,955,231 |
| 0 |
| 0 |
| ||||||||||||||||||||||||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
- 1st lien |
| 1,872,439 |
| 828,344 |
| 2,700,783 |
| 167,806,480 |
| 170,507,263 |
| 2,173,315 |
| 390,288 |
|
| 1,190,300 |
| 608,775 |
| 1,799,075 |
| 179,517,270 |
| 181,316,345 |
| 1,180,563 |
| 506,827 |
| ||||||||||||||||||||||||||
- Jr lien |
| 18,322 |
| 180,711 |
| 199,033 |
| 37,948,626 |
| 38,147,659 |
| 191,311 |
| 98,889 |
|
| 51,837 |
| 86,476 |
| 138,313 |
| 34,221,551 |
| 34,359,864 |
| 143,566 |
| 86,476 |
| ||||||||||||||||||||||||||
Consumer |
|
| 14,388 |
|
|
| 0 |
|
|
| 14,388 |
|
|
| 4,266,602 |
|
|
| 4,280,990 |
|
|
| 0 |
|
|
| 0 |
|
|
| 9,741 |
|
|
| 0 |
|
|
| 9,741 |
|
|
| 4,454,951 |
|
|
| 4,464,692 |
|
|
| 0 |
|
|
| 0 |
|
Totals |
| $ | 2,151,905 |
|
| $ | 1,577,012 |
|
| $ | 3,728,917 |
|
| $ | 705,626,413 |
|
| $ | 709,355,330 |
|
| $ | 4,674,764 |
|
| $ | 489,177 |
|
| $ | 2,135,203 |
|
| $ | 3,095,765 |
|
| $ | 5,230,968 |
|
| $ | 684,757,565 |
|
| $ | 689,988,533 |
|
| $ | 5,940,629 |
|
| $ | 593,303 |
|
For all loan segments, loans over 30 days past due are considered delinquent.
As of the balance sheet dates presented, residential mortgage loans in process of foreclosure consisted of the following:following residential mortgage loans:
|
| Number of loans |
|
| Balance |
| ||
|
|
|
|
|
|
| ||
June 30, 2021 |
|
| 5 |
|
| $ | 157,640 |
|
December 31, 2020 |
|
| 6 |
|
|
| 312,807 |
|
A state-imposed moratorium on residential foreclosure proceedings adopted in April 2020 in response to the COVID-19 pandemic, remained in effect in Vermont as of June 30, 2021.
|
| Number of loans |
|
| Balance |
| ||
|
|
|
|
|
|
| ||
March 31, 2022 |
|
| 4 |
|
| $ | 153,054 |
|
December 31, 2021 |
|
| 5 |
|
|
| 195,082 |
|
Allowance for loan losses
The ALL is established through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes that future payments of a loan balance are unlikely. Subsequent recoveries, if any, are credited to the allowance.
Unsecured loans are charged off when they become uncollectible and no later than 120 days past due. Unsecured loans to customers who subsequently file bankruptcy are charged off within 30 days of receipt of the notification of filing or by the end of the month in which the loans become 120 days past due, whichever occurs first. For secured loans, both residential and commercial, the potential loss on impaired loans is carried as a loan loss reserve specific allocation; the loss portion is charged off when collection of the full loan appears unlikely. The unsecured portion of a real estate loan is that portion of the loan exceeding the “fair value” of the collateral less the estimated cost to sell. Value of the collateral is determined in accordance with the Company’s appraisal policy. The unsecured portion of an impaired real estate secured loan is charged off by the end of the month in which the loan becomes 180 days past due.
14 |
Table of Contents |
As described below, the allowance consists of general, specific and unallocated components. However, the entire allowance is available to absorb losses in the loan portfolio, regardless of specific, general and unallocated components considered in determining the amount of the allowance.
General component
The general component of the ALL is based on historical loss experience and various qualitative factors and is stratified by the following loan segments: commercial and industrial, CRE, municipal, residential real estate 1st lien, residential real estate Jr lien and consumer loans. The Company does not disaggregate its portfolio segments further into classes.
Loss ratios are calculated by loan segment using appropriate look back periods. Management uses an average of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment in the current economic climate. During periods of economic stability, a relatively longer period (e.g., five years) may be appropriate. During periods of significant expansion or contraction, the Company may appropriately shorten the historical time period. Due primarily to the effects of COVID-19, during 2020 the Company shortened its look back period to one year, which remained in effect ashowever, during the first quarter of June 30, 2021.2022, the look back period was lengthened to two years.
Qualitative factors include the levels of and trends in delinquencies and non-performing loans, levels of and trends in loan risk groups, trends in volumes and terms of loans, effects of any changes in loan related policies, experience, ability and the depth of management, documentation and credit data exception levels, national and local economic trends, external factors such as competition and regulation and lastly, concentrations of credit risk in a variety of areas, including portfolio product mix, the level of loans to individual borrowers and their related interests, loans to industry segments, and the geographic distribution of CRE loans. This evaluation is inherently subjective as it requires estimates that are susceptible to revision as more information becomes available.
The qualitative factors are determined based on the various risk characteristics of each loan segment. The Company has policies, procedures and internal controls that management believes are commensurate with the risk profile of each of these segments. Major risk characteristics relevant to each portfolio segment are as follows:
Commercial & Industrial – Loans in this segment include commercial and industrial loans and to a lesser extent loans to finance agricultural production. Commercial loans are made to businesses and are generally secured by assets of the business, including trade assets and equipment. While not the primary collateral, in many cases these loans may also be secured by the real estate of the business. Repayment is expected from the cash flows of the business. A weakened economy, soft consumer spending, unfavorable foreign trade conditions and the rising cost of labor or raw materials are examples of issues that can impact the credit quality in this segment.
Commercial Real Estate – Loans in this segment are principally made to businesses and are generally secured by either owner-occupied, or non-owner occupied CRE. A relatively small portion of this segment includes farm loans secured by farm land and buildings. As with commercial and industrial loans, repayment of owner-occupied CRE loans is expected from the cash flows of the business and the segment would be impacted by the same risk factors as commercial and industrial loans. The non-owner occupied CRE portion includes both residential and commercial construction loans, vacant land and real estate development loans, multi-family dwelling loans and commercial rental property loans. Repayment of construction loans is expected from permanent financing takeout; the Company generally requires a commitment or eligibility for the take-out financing prior to construction loan origination. Real estate development loans are generally repaid from the sale of the subject real property as the project progresses. Construction and development lending entail additional risks, including the project exceeding budget, not being constructed according to plans, not receiving permits, or the pre-leasing or occupancy rate not meeting expectations. Repayment of multi-family loans and commercial rental property loans is expected from the cash flow generated by rental payments received from the individuals or businesses occupying the real estate. CRE loans are impacted by factors such as competitive market forces, vacancy rates, cap rates, net operating incomes, lease renewals and overall economic demand. In addition, loans in the recreational and tourism sector can be affected by weather conditions, such as unseasonably low winter snowfalls. CRE lending also carries a higher degree of environmental risk than other real estate lending.
Municipal – Loans in this segment are made to local municipalities, attributable to municipal financing transactions and backed by the full faith and credit of town governments or dedicated governmental revenue sources, with no historical losses recognized by the Company.
Residential Real Estate - 1st Lien – Loans in this segment are collateralized by first mortgages on 1 – 4 family owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment.
Table of Contents |
Residential Real Estate – Jr Lien – Loans in this segment are collateralized by junior lien mortgages on 1 – 4 family residential real estate and repayment is primarily dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment.
Consumer – Loans in this segment are made to individuals for consumer and household purposes. This segment includes both loans secured by automobiles and other consumer goods, as well as loans that are unsecured. This segment also includes overdrafts, which are extensions of credit made to both individuals and businesses to cover temporary shortages in their deposit accounts and are generally unsecured. The Company maintains policies restricting the size and term of these extensions of credit. The overall health of the economy, including unemployment rates, has an impact on the credit quality of this segment.
Specific component
The specific component of the ALL relates to loans that are impaired. Impaired loans are loans to a borrower that in the aggregate are greater than $100,000 and that are in non-accrual status or are TDRs regardless of amount. A specific allowance is established for an impaired loan when its estimated fair value or net present value of future cash flows is less than the carrying value of the loan. For all loan segments, except consumer loans, a loan is considered impaired when, based on current information and events, in management’s estimation it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant or temporary payment delays and payment shortfalls generally are not classified as impaired. Management evaluates 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 and frequency 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. Impairment is measured on a loan by loan basis, by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.
Impaired loans also include troubled loans that are restructured. A TDR occurs when the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that would otherwise not be granted. TDRs may include the transfer of assets to the Company in partial satisfaction of a troubled loan, a modification of a loan’s terms, or a combination of the two. As described above in Note 3,2, under March 2020 guidance from the federal banking agencies and concurrence by the FASB, certain short-term loan accommodations made in good faith prior to January 1, 2022 for borrowers experiencing financial difficulties due to the COVID-19 health emergency willare not be considered TDRs.
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer loans for impairment evaluation, unless such loans are subject to a restructuring agreement.
Unallocated component
An unallocated component of the ALL is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component reflects management’s estimate of the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
16 |
Table of Contents |
The tables below summarize changes in the ALL and select loan information, by portfolio segment, for the periods indicated.
As of or for the three months ended June 30,March 31, 2022
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
ALL beginning balance |
| $ | 939,047 |
|
| $ | 4,151,760 |
|
| $ | 76,728 |
|
| $ | 1,765,892 |
|
| $ | 182,014 |
|
| $ | 55,698 |
|
| $ | 539,117 |
|
| $ | 7,710,256 |
|
Charge-offs |
|
| (17,650 | ) |
|
| (667,474 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (8,764 | ) |
|
| 0 |
|
|
| (693,888 | ) |
Recoveries |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,276 |
|
|
| 1,210 |
|
|
| 8,294 |
|
|
| 0 |
|
|
| 11,780 |
|
Provision (credit) |
|
| 117,903 |
|
|
| 1,159,995 |
|
|
| 10,861 |
|
|
| 46,289 |
|
|
| (4,671 | ) |
|
| (19,036 | ) |
|
| (448,841 | ) |
|
| 862,500 |
|
ALL ending balance |
| $ | 1,039,300 |
|
| $ | 4,644,281 |
|
| $ | 87,589 |
|
| $ | 1,814,457 |
|
| $ | 178,553 |
|
| $ | 36,192 |
|
| $ | 90,276 |
|
| $ | 7,890,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 115,614 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 115,614 |
|
Collectively |
|
| 1,039,300 |
|
|
| 4,644,281 |
|
|
| 87,589 |
|
|
| 1,698,843 |
|
|
| 178,553 |
|
|
| 36,192 |
|
|
| 90,276 |
|
|
| 7,775,034 |
|
Total |
| $ | 1,039,300 |
|
| $ | 4,644,281 |
|
| $ | 87,589 |
|
| $ | 1,814,457 |
|
| $ | 178,553 |
|
| $ | 36,192 |
|
| $ | 90,276 |
|
| $ | 7,890,648 |
|
| ||||||||||||||||||||||||||||||||
Loans evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 222,236 |
|
| $ | 3,713,169 |
|
| $ | 0 |
|
| $ | 3,910,848 |
|
| $ | 85,691 |
|
| $ | 0 |
|
|
|
|
|
| $ | 7,931,944 |
|
Collectively |
|
| 121,250,921 |
|
|
| 304,598,565 |
|
|
| 48,660,440 |
|
|
| 177,699,446 |
|
|
| 32,981,298 |
|
|
| 3,170,568 |
|
|
|
|
|
|
| 688,361,238 |
|
Total |
| $ | 121,473,157 |
|
| $ | 308,311,734 |
|
| $ | 48,660,440 |
|
| $ | 181,610,294 |
|
| $ | 33,066,989 |
|
| $ | 3,170,568 |
|
|
|
|
|
| $ | 696,293,182 |
|
As of or for the year ended December 31, 2021
|
|
|
|
|
|
|
| Residential |
| Residential |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential |
| Residential |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
| Commercial |
| Commercial |
|
|
| Real Estate |
| Real Estate |
|
|
|
|
|
|
|
| Commercial |
| Commercial |
|
|
| Real Estate |
| Real Estate |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
ALL beginning balance |
| $ | 888,631 |
| $ | 3,823,685 |
| $ | 83,531 |
| $ | 1,667,594 |
| $ | 203,312 |
| $ | 39,622 |
| $ | 761,913 |
| $ | 7,468,288 |
|
| $ | 842,547 |
| $ | 3,854,153 |
| $ | 82,211 |
| $ | 1,735,304 |
| $ | 234,896 |
| $ | 60,461 |
| $ | 398,913 |
| $ | 7,208,485 |
| ||||||||||||||
Charge-offs |
| 0 |
| 0 |
| 0 |
| 0 |
| 0 |
| (23,212 | ) |
| 0 |
| (23,212 | ) |
| (18,847 | ) |
| (22,000 | ) |
| 0 |
| (98,704 | ) |
| 0 |
| (87,651 | ) |
| 0 |
| (227,202 | ) | |||||||||||||||||||||||||
Recoveries |
| 0 |
| 0 |
| 0 |
| 759 |
| 432 |
| 5,489 |
| 0 |
| 6,680 |
|
| 4,761 |
| 27,160 |
| 0 |
| 7,636 |
| 10,821 |
| 54,430 |
| 0 |
| 104,808 |
| ||||||||||||||||||||||||||||||
Provision (credit) |
|
| 10,532 |
|
|
| 109,161 |
|
|
| (26,239 | ) |
|
| (13,310 | ) |
|
| (2,475 | ) |
|
| 39,325 |
|
|
| 150,507 |
|
|
| 267,501 |
|
|
| 110,586 |
|
|
| 292,447 |
|
|
| (5,483 | ) |
|
| 121,656 |
|
|
| (63,703 | ) |
|
| 28,458 |
|
|
| 140,204 |
|
|
| 624,165 |
|
ALL ending balance |
| $ | 899,163 |
|
| $ | 3,932,846 |
|
| $ | 57,292 |
|
| $ | 1,655,043 |
|
| $ | 201,269 |
|
| $ | 61,224 |
|
| $ | 912,420 |
|
| $ | 7,719,257 |
|
| $ | 939,047 |
|
| $ | 4,151,760 |
|
| $ | 76,728 |
|
| $ | 1,765,892 |
|
| $ | 182,014 |
|
| $ | 55,698 |
|
| $ | 539,117 |
|
| $ | 7,710,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
ALL evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Individually |
| $ | 0 |
| $ | 0 |
| $ | 0 |
| $ | 79,978 |
| $ | 0 |
| $ | 0 |
| $ | 0 |
| $ | 79,978 |
| |||||||||||||||||||||||||||||||||||||||
Collectively |
|
| 939,047 |
|
|
| 4,151,760 |
|
|
| 76,728 |
|
|
| 1,685,914 |
|
|
| 182,014 |
|
|
| 55,698 |
|
|
| 539,117 |
|
|
| 7,630,278 |
| ||||||||||||||||||||||||||||||||
Total |
| $ | 939,047 |
|
| $ | 4,151,760 |
|
| $ | 76,728 |
|
| $ | 1,765,892 |
|
| $ | 182,014 |
|
| $ | 55,698 |
|
| $ | 539,117 |
|
| $ | 7,710,256 |
| ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||
Individually |
| $ | 93,362 |
| $ | 4,553,734 |
| $ | 0 |
| $ | 3,720,503 |
| $ | 88,563 |
| $ | 0 |
|
|
| $ | 8,456,162 |
| ||||||||||||||||||||||||||||||||||||||||
Collectively |
|
| 120,840,108 |
|
|
| 296,405,197 |
|
|
| 47,955,231 |
|
|
| 177,595,842 |
|
|
| 34,271,301 |
|
|
| 4,464,692 |
|
|
|
|
| 681,532,371 |
| ||||||||||||||||||||||||||||||||||
Total |
| $ | 120,933,470 |
|
| $ | 300,958,931 |
|
| $ | 47,955,231 |
|
| $ | 181,316,345 |
|
| $ | 34,359,864 |
|
| $ | 4,464,692 |
|
|
|
| $ | 689,988,533 |
|
17 |
Table of Contents |
As of or for the three months ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
| Commercial |
|
|
|
| �� | Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
ALL beginning balance |
| $ | 842,547 |
|
| $ | 3,854,153 |
|
| $ | 82,211 |
|
| $ | 1,735,304 |
|
| $ | 234,896 |
|
| $ | 60,461 |
|
| $ | 398,913 |
|
| $ | 7,208,485 |
|
Charge-offs |
|
| (18,847 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (14,161 | ) |
|
| 0 |
|
|
| (33,008 | ) |
Recoveries |
|
| 4,761 |
|
|
| 7,000 |
|
|
| 0 |
|
|
| 1,567 |
|
|
| 528 |
|
|
| 11,458 |
|
|
| 0 |
|
|
| 25,314 |
|
Provision (credit) |
|
| 60,170 |
|
|
| (37,468 | ) |
|
| 1,320 |
|
|
| (69,277 | ) |
|
| (32,112 | ) |
|
| (18,136 | ) |
|
| 363,000 |
|
|
| 267,497 |
|
ALL ending balance |
| $ | 888,631 |
|
| $ | 3,823,685 |
|
| $ | 83,531 |
|
| $ | 1,667,594 |
|
| $ | 203,312 |
|
| $ | 39,622 |
|
| $ | 761,913 |
|
| $ | 7,468,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 119,306 |
|
| $ | 255 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 119,561 |
|
Collectively |
|
| 888,631 |
|
|
| 3,823,685 |
|
|
| 83,531 |
|
|
| 1,548,288 |
|
|
| 203,058 |
|
|
| 39,621 |
|
|
| 761,913 |
|
|
| 7,348,727 |
|
Total |
| $ | 888,631 |
|
| $ | 3,823,685 |
|
| $ | 83,531 |
|
| $ | 1,667,594 |
|
| $ | 203,313 |
|
| $ | 39,621 |
|
| $ | 761,913 |
|
| $ | 7,468,288 |
|
| ||||||||||||||||||||||||||||||||
Loans evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 420,974 |
|
| $ | 1,645,678 |
|
| $ | 0 |
|
| $ | 4,394,274 |
|
| $ | 143,333 |
|
| $ | 0 |
|
|
|
|
|
| $ | 6,604,259 |
|
Collectively |
|
| 188,022,649 |
|
|
| 276,837,413 |
|
|
| 52,207,213 |
|
|
| 165,415,944 |
|
|
| 36,735,240 |
|
|
| 3,666,921 |
|
|
|
|
|
|
| 722,885,380 |
|
Total |
| $ | 188,443,623 |
|
| $ | 278,483,091 |
|
| $ | 52,207,213 |
|
| $ | 169,810,218 |
|
| $ | 36,878,573 |
|
| $ | 3,666,921 |
|
|
|
|
|
| $ | 729,489,639 |
|
Impaired loans, by portfolio segment, were as follows:
|
| As of March 31, 2022 |
|
|
|
|
|
|
| |||||||||||
|
|
|
|
| Unpaid |
|
|
|
|
| Average |
|
| Interest |
| |||||
|
| Recorded |
|
| Principal |
|
| Related |
|
| Recorded |
|
| Income |
| |||||
|
| Investment(1) |
|
| Balance |
|
| Allowance |
|
| Investment(1)(2) |
|
| Recognized(2) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
1st lien |
| $ | 1,113,112 |
|
| $ | 1,129,082 |
|
| $ | 115,614 |
|
| $ | 907,849 |
|
| $ | 14,387 |
|
Jr lien |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 51 |
|
Total with related allowance |
|
| 1,113,112 |
|
|
| 1,129,082 |
|
|
| 115,614 |
|
|
| 907,849 |
|
|
| 14,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 222,236 |
|
|
| 261,011 |
|
|
|
|
|
|
| 157,799 |
|
|
| 204 |
|
Commercial real estate |
|
| 3,713,309 |
|
|
| 4,861,145 |
|
|
|
|
|
|
| 4,133,691 |
|
|
| 1,670 |
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st lien |
|
| 2,836,069 |
|
|
| 3,845,577 |
|
|
|
|
|
|
| 2,943,358 |
|
|
| 42,714 |
|
Jr lien |
|
| 85,697 |
|
|
| 131,069 |
|
|
|
|
|
|
| 87,133 |
|
|
| 37 |
|
Total with no related allowance |
|
| 6,857,311 |
|
|
| 9,098,802 |
|
|
|
|
|
|
| 7,321,981 |
|
|
| 44,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 7,970,423 |
|
| $ | 10,227,884 |
|
| $ | 115,614 |
|
| $ | 8,229,830 |
|
| $ | 59,063 |
|
(1) | Recorded investment in impaired loans as of March 31, 2022 includes accrued interest receivable of $38,479. |
(2) | For the three months ended March 31, 2022. |
18 |
Table of Contents |
As of or for the six months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
ALL beginning balance |
| $ | 842,547 |
|
| $ | 3,854,153 |
|
| $ | 82,211 |
|
| $ | 1,735,304 |
|
| $ | 234,896 |
|
| $ | 60,461 |
|
| $ | 398,913 |
|
| $ | 7,208,485 |
|
Charge-offs |
|
| (18,847 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (37,373 | ) |
|
| 0 |
|
|
| (56,220 | ) |
Recoveries |
|
| 4,761 |
|
|
| 7,000 |
|
|
| 0 |
|
|
| 2,326 |
|
|
| 960 |
|
|
| 16,947 |
|
|
| 0 |
|
|
| 31,994 |
|
Provision (credit) |
|
| 70,702 |
|
|
| 71,693 |
|
|
| (24,919 | ) |
|
| (82,587 | ) |
|
| (34,587 | ) |
|
| 21,189 |
|
|
| 513,507 |
|
|
| 534,998 |
|
ALL ending balance |
| $ | 899,163 |
|
| $ | 3,932,846 |
|
| $ | 57,292 |
|
| $ | 1,655,043 |
|
| $ | 201,269 |
|
| $ | 61,224 |
|
| $ | 912,420 |
|
| $ | 7,719,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 98,503 |
|
| $ | 233 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 98,736 |
|
Collectively |
|
| 899,163 |
|
|
| 3,932,846 |
|
|
| 57,292 |
|
|
| 1,556,540 |
|
|
| 201,036 |
|
|
| 61,224 |
|
|
| 912,420 |
|
|
| 7,620,521 |
|
Total |
| $ | 899,163 |
|
| $ | 3,932,846 |
|
| $ | 57,292 |
|
| $ | 1,655,043 |
|
| $ | 201,269 |
|
| $ | 61,224 |
|
| $ | 912,420 |
|
| $ | 7,719,257 |
|
| ||||||||||||||||||||||||||||||||
Loans evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 382,207 |
|
| $ | 1,880,249 |
|
| $ | 0 |
|
| $ | 4,153,955 |
|
| $ | 139,919 |
|
| $ | 0 |
|
|
|
|
|
| $ | 6,556,330 |
|
Collectively |
|
| 172,421,951 |
|
|
| 283,066,212 |
|
|
| 35,807,161 |
|
|
| 165,959,996 |
|
|
| 36,215,648 |
|
|
| 4,173,978 |
|
|
|
|
|
|
| 697,644,946 |
|
Total |
| $ | 172,804,158 |
|
| $ | 284,946,461 |
|
| $ | 35,807,161 |
|
| $ | 170,113,951 |
|
| $ | 36,355,567 |
|
| $ | 4,173,978 |
|
|
|
|
|
| $ | 704,201,276 |
|
As of or for the year ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
ALL beginning balance |
| $ | 836,766 |
|
| $ | 3,181,646 |
|
| $ | 0 |
|
| $ | 1,388,564 |
|
| $ | 289,684 |
|
| $ | 51,793 |
|
| $ | 178,038 |
|
| $ | 5,926,491 |
|
Charge-offs |
|
| (39,148 | ) |
|
| (34,200 | ) |
|
| 0 |
|
|
| (203,623 | ) |
|
| (28,673 | ) |
|
| (74,327 | ) |
|
| 0 |
|
|
| (379,971 | ) |
Recoveries |
|
| 1,087 |
|
|
| 20,000 |
|
|
| 0 |
|
|
| 12,856 |
|
|
| 5,809 |
|
|
| 33,213 |
|
|
| 0 |
|
|
| 72,965 |
|
Provision (credit) |
|
| 43,842 |
|
|
| 686,707 |
|
|
| 82,211 |
|
|
| 537,507 |
|
|
| (31,924 | ) |
|
| 49,782 |
|
|
| 220,875 |
|
|
| 1,589,000 |
|
ALL ending balance |
| $ | 842,547 |
|
| $ | 3,854,153 |
|
| $ | 82,211 |
|
| $ | 1,735,304 |
|
| $ | 234,896 |
|
| $ | 60,461 |
|
| $ | 398,913 |
|
| $ | 7,208,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 108,474 |
|
| $ | 307 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 108,781 |
|
Collectively |
|
| 842,547 |
|
|
| 3,854,153 |
|
|
| 82,211 |
|
|
| 1,626,830 |
|
|
| 234,589 |
|
|
| 60,461 |
|
|
| 398,913 |
|
|
| 7,099,704 |
|
Total |
| $ | 842,547 |
|
| $ | 3,854,153 |
|
| $ | 82,211 |
|
| $ | 1,735,304 |
|
| $ | 234,896 |
|
| $ | 60,461 |
|
| $ | 398,913 |
|
| $ | 7,208,485 |
|
| ||||||||||||||||||||||||||||||||
Loans evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 414,266 |
|
| $ | 1,943,723 |
|
| $ | 0 |
|
| $ | 4,657,050 |
|
| $ | 135,053 |
|
| $ | 0 |
|
|
|
|
|
| $ | 7,150,092 |
|
Collectively |
|
| 160,653,235 |
|
|
| 278,600,827 |
|
|
| 54,807,367 |
|
|
| 165,850,213 |
|
|
| 38,012,606 |
|
|
| 4,280,990 |
|
|
|
|
|
|
| 702,205,238 |
|
Total |
| $ | 161,067,501 |
|
| $ | 280,544,550 |
|
| $ | 54,807,367 |
|
| $ | 170,507,263 |
|
| $ | 38,147,659 |
|
| $ | 4,280,990 |
|
|
|
|
|
| $ | 709,355,330 |
|
As of or for the three months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
ALL beginning balance |
| $ | 867,667 |
|
| $ | 3,323,054 |
|
| $ | 0 |
|
| $ | 1,477,276 |
|
| $ | 285,781 |
|
| $ | 53,717 |
|
| $ | 179,269 |
|
| $ | 6,186,764 |
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (15,507 | ) |
|
| 0 |
|
|
| (15,507 | ) |
Recoveries |
|
| 1,087 |
|
|
| 20,000 |
|
|
| 0 |
|
|
| 2,476 |
|
|
| 1,380 |
|
|
| 11,985 |
|
|
| 0 |
|
|
| 36,928 |
|
Provision (credit) |
|
| 17,792 |
|
|
| 63,448 |
|
|
| 0 |
|
|
| 32,145 |
|
|
| 32,588 |
|
|
| (1,542 | ) |
|
| 163,068 |
|
|
| 307,499 |
|
ALL ending balance |
| $ | 886,546 |
|
| $ | 3,406,502 |
|
| $ | 0 |
|
| $ | 1,511,897 |
|
| $ | 319,749 |
|
| $ | 48,653 |
|
| $ | 342,337 |
|
| $ | 6,515,684 |
|
|
| As of December 31, 2021 |
|
|
|
|
|
|
| |||||||||||
|
|
|
|
| Unpaid |
|
|
|
|
| Average |
|
| Interest |
| |||||
|
| Recorded |
|
| Principal |
|
| Related |
|
| Recorded |
|
| Income |
| |||||
|
| Investment(1) |
|
| Balance |
|
| Allowance |
|
| Investment(1)(2) |
|
| Recognized(2) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
1st lien |
| $ | 702,586 |
|
| $ | 716,118 |
|
| $ | 79,978 |
|
| $ | 858,124 |
|
| $ | 60,769 |
|
Jr lien |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,452 |
|
|
| 243 |
|
Total with related allowance |
|
| 702,586 |
|
|
| 716,118 |
|
|
| 79,978 |
|
|
| 861,576 |
|
|
| 61,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 93,362 |
|
|
| 115,414 |
|
|
|
|
|
|
| 290,181 |
|
|
| 204 |
|
Commercial real estate |
|
| 4,554,074 |
|
|
| 5,108,557 |
|
|
|
|
|
|
| 2,747,193 |
|
|
| 120,996 |
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st lien |
|
| 3,050,647 |
|
|
| 4,076,352 |
|
|
|
|
|
|
| 3,331,971 |
|
|
| 205,514 |
|
Jr lien |
|
| 88,570 |
|
|
| 132,802 |
|
|
|
|
|
|
| 124,803 |
|
|
| 186 |
|
Total with no related allowance |
|
| 7,786,653 |
|
|
| 9,433,125 |
|
|
|
|
|
|
| 6,494,148 |
|
|
| 326,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 8,489,239 |
|
| $ | 10,149,243 |
|
| $ | 79,978 |
|
| $ | 7,355,724 |
|
| $ | 387,912 |
|
As of or for the six months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
ALL beginning balance |
| $ | 836,766 |
|
| $ | 3,181,646 |
|
| $ | 0 |
|
| $ | 1,388,564 |
|
| $ | 289,684 |
|
| $ | 51,793 |
|
| $ | 178,038 |
|
| $ | 5,926,491 |
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (77,695 | ) |
|
| (28,673 | ) |
|
| (42,898 | ) |
|
| 0 |
|
|
| (149,266 | ) |
Recoveries |
|
| 1,087 |
|
|
| 20,000 |
|
|
| 0 |
|
|
| 5,810 |
|
|
| 4,747 |
|
|
| 22,813 |
|
|
| 0 |
|
|
| 54,457 |
|
Provision (credit) |
|
| 48,693 |
|
|
| 204,856 |
|
|
| 0 |
|
|
| 195,218 |
|
|
| 53,991 |
|
|
| 16,945 |
|
|
| 164,299 |
|
|
| 684,002 |
|
ALL ending balance |
| $ | 886,546 |
|
| $ | 3,406,502 |
|
| $ | 0 |
|
| $ | 1,511,897 |
|
| $ | 319,749 |
|
| $ | 48,653 |
|
| $ | 342,337 |
|
| $ | 6,515,684 |
|
Impaired loans, by portfolio segment, were as follows:
|
| As of June 30, 2021 |
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Recorded Investment(1) |
|
| Unpaid Principal Balance |
|
| Related Allowance |
|
| Average Recorded Investment(1)(2) |
|
| Average Recorded Investment(1)(3) |
|
| Interest Income Recognized(3) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1st lien |
| $ | 819,752 |
|
| $ | 826,472 |
|
| $ | 98,503 |
|
| $ | 967,850 |
|
| $ | 945,427 |
|
| $ | 32,518 |
|
Jr lien |
|
| 4,181 |
|
|
| 4,174 |
|
|
| 233 |
|
|
| 4,323 |
|
|
| 4,475 |
|
|
| 228 |
|
Total with related allowance |
|
| 823,933 |
|
|
| 830,646 |
|
|
| 98,736 |
|
|
| 972,173 |
|
|
| 949,902 |
|
|
| 32,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 382,207 |
|
|
| 452,976 |
|
|
|
|
|
|
| 401,591 |
|
|
| 405,816 |
|
|
| 204 |
|
Commercial real estate |
|
| 1,880,489 |
|
|
| 2,369,692 |
|
|
|
|
|
|
| 1,763,205 |
|
|
| 1,823,474 |
|
|
| 4,299 |
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st lien |
|
| 3,371,491 |
|
|
| 4,290,817 |
|
|
|
|
|
|
| 3,342,168 |
|
|
| 3,491,101 |
|
|
| 111,079 |
|
Jr lien |
|
| 135,745 |
|
|
| 179,768 |
|
|
|
|
|
|
| 137,307 |
|
|
| 134,964 |
|
|
| 0 |
|
Total with no related allowance |
|
| 5,769,932 |
|
|
| 7,293,253 |
|
|
|
|
|
|
| 5,644,271 |
|
|
| 5,855,355 |
|
|
| 115,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 6,593,865 |
|
| $ | 8,123,899 |
|
| $ | 98,736 |
|
| $ | 6,616,444 |
|
| $ | 6,805,257 |
|
| $ | 148,328 |
|
_____________________
|
| |
|
| |
|
|
|
| As of December 31, 2020 |
|
|
|
|
| |||||||||||||
|
|
|
| Unpaid |
|
|
|
| Average |
|
| Interest |
| |||||||
|
| Recorded |
|
| Principal |
|
| Related |
|
| Recorded |
|
| Income |
| |||||
|
| Investment(1) |
|
| Balance |
|
| Allowance |
|
| Investment(1)(2) |
|
| Recognized(2) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
1st lien |
| $ | 900,581 |
|
| $ | 950,063 |
|
| $ | 108,474 |
|
| $ | 889,262 |
|
| $ | 72,713 |
|
Jr lien |
|
| 4,777 |
|
|
| 4,775 |
|
|
| 307 |
|
|
| 5,416 |
|
|
| 541 |
|
Total with related allowance |
|
| 905,358 |
|
|
| 954,838 |
|
|
| 108,781 |
|
|
| 894,678 |
|
|
| 73,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 414,266 |
|
|
| 471,405 |
|
|
|
|
|
|
| 397,136 |
|
|
| 6,396 |
|
Commercial real estate |
|
| 1,944,013 |
|
|
| 2,394,284 |
|
|
|
|
|
|
| 1,746,430 |
|
|
| 14,139 |
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st lien |
|
| 3,788,965 |
|
|
| 4,607,848 |
|
|
|
|
|
|
| 3,878,829 |
|
|
| 230,838 |
|
Jr lien |
|
| 130,279 |
|
|
| 169,720 |
|
|
|
|
|
|
| 163,750 |
|
|
| 4,524 |
|
Total with no related allowance |
|
| 6,277,523 |
|
|
| 7,643,257 |
|
|
|
|
|
|
| 6,186,145 |
|
|
| 255,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 7,182,881 |
|
| $ | 8,598,095 |
|
| $ | 108,781 |
|
| $ | 7,080,823 |
|
| $ | 329,151 |
|
(1) | Recorded investment in impaired loans as of December 31, | |
(2) | For the year ended December 31, |
|
| As of June 30, 2020 |
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Recorded Investment(1) |
|
| Unpaid Principal Balance |
|
| Related Allowance |
|
| Average Recorded Investment(1)(2) |
|
| Average Recorded Investment(1)(3) |
|
| Interest Income Recognized(3) |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
1st lien |
| $ | 864,493 |
|
| $ | 903,869 |
|
| $ | 119,841 |
|
| $ | 916,476 |
|
| $ | 903,797 |
|
| $ | 39,735 |
|
Jr lien |
|
| 5,414 |
|
|
| 5,411 |
|
|
| 445 |
|
|
| 5,550 |
|
|
| 5,740 |
|
|
| 282 |
|
Total with related allowance |
|
| 869,907 |
|
|
| 909,280 |
|
|
| 120,286 |
|
|
| 922,026 |
|
|
| 909,537 |
|
|
| 40,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 383,737 |
|
|
| 417,734 |
|
|
|
|
|
|
| 387,962 |
|
|
| 398,952 |
|
|
| 213 |
|
Commercial real estate |
|
| 1,614,105 |
|
|
| 1,983,282 |
|
|
|
|
|
|
| 1,632,676 |
|
|
| 1,655,041 |
|
|
| 7,339 |
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st lien |
|
| 4,231,160 |
|
|
| 5,011,883 |
|
|
|
|
|
|
| 4,032,707 |
|
|
| 3,893,458 |
|
|
| 117,120 |
|
Jr lien |
|
| 86,831 |
|
|
| 120,377 |
|
|
|
|
|
|
| 197,834 |
|
|
| 181,880 |
|
|
| 0 |
|
Total with no related allowance |
|
| 6,315,833 |
|
|
| 7,533,276 |
|
|
|
|
|
|
| 6,251,179 |
|
|
| 6,129,331 |
|
|
| 124,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 7,185,740 |
|
| $ | 8,442,556 |
|
| $ | 120,286 |
|
| $ | 7,173,205 |
|
| $ | 7,038,868 |
|
| $ | 164,689 |
|
__________________
|
| As of March 31, 2021 |
|
|
|
|
|
|
| |||||||||||
|
|
|
|
| Unpaid |
|
|
|
|
| Average |
|
| Interest |
| |||||
|
| Recorded |
|
| Principal |
|
| Related |
|
| Recorded |
|
| Income |
| |||||
|
| Investment(1) |
|
| Balance |
|
| Allowance |
|
| Investment(1)(2) |
|
| Recognized(2) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
1st lien |
| $ | 1,159,129 |
|
| $ | 1,196,306 |
|
| $ | 119,306 |
|
| $ | 1,029,855 |
|
| $ | 18,650 |
|
Jr lien |
|
| 4,466 |
|
|
| 4,463 |
|
|
| 255 |
|
|
| 4,622 |
|
|
| 117 |
|
Total with related allowance |
|
| 1,163,595 |
|
|
| 1,200,769 |
|
|
| 119,561 |
|
|
| 1,034,477 |
|
|
| 18,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 420,975 |
|
|
| 485,396 |
|
|
|
|
|
|
| 417,620 |
|
|
| 204 |
|
Commercial real estate |
|
| 1,645,921 |
|
|
| 2,103,732 |
|
|
|
|
|
|
| 1,794,967 |
|
|
| 2,044 |
|
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st lien |
|
| 3,269,662 |
|
|
| 4,132,986 |
|
|
|
|
|
|
| 3,529,314 |
|
|
| 46,958 |
|
Jr lien |
|
| 138,870 |
|
|
| 180,547 |
|
|
|
|
|
|
| 134,574 |
|
|
| 0 |
|
Total with no related allowance |
|
| 5,475,428 |
|
|
| 6,902,661 |
|
|
|
|
|
|
| 5,876,475 |
|
|
| 49,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 6,639,023 |
|
| $ | 8,103,430 |
|
| $ | 119,561 |
|
| $ | 6,910,952 |
|
| $ | 67,973 |
|
(1) | Recorded investment in impaired loans as of | |
(2) | For the three months ended | |
|
|
For all loan segments, the accrual of interest is discontinued when a loan is specifically determined to be impaired or when the loan is delinquent 90 days and management believes, after considering collection efforts and other factors, that the borrower’s financial condition is such that collection of interest is considered by management to be doubtful. Any unpaid interest previously accrued on those loans is reversed from income. Interest income is generally not recognized on specific impaired loans unless the likelihood of further loss is considered by management to be remote. Interest payments received on impaired loans are generally applied as a reduction of the loan principal balance. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and a satisfactory payment performance of six or more months has occurred.
Table of Contents |
Credit Quality Grouping
In developing the ALL, management uses credit quality groupings to help evaluate trends in credit quality. The Company groups credit risk into Groups A, B and C. The manner the Company utilizes to assign risk grouping is driven by loan purpose. Commercial purpose loans are individually risk graded while the retail portion of the portfolio is generally grouped by delinquency pool.
Group A loans - Acceptable Risk – are loans that are expected to perform as agreed under their respective terms. Such loans carry a normal level of risk that does not require management attention beyond that warranted by the loan or loan relationship characteristics, such as loan size or relationship size. Group A loans include commercial purpose loans that are individually risk rated and retail loans that are rated by pool. Group A retail loans include performing consumer and residential real estate loans. Residential real estate loans are loans to individuals secured by 1-4 family homes, including first mortgages, home equity and home improvement loans. Loan balances fully secured by deposit accounts or that are fully guaranteed by the federal government are considered acceptable risk.
Group B loans – Management Involved - are loans that require greater attention than the acceptable risk loans in Group A. Characteristics of such loans may include, but are not limited to, borrowers that are experiencing negative operating trends such as reduced sales or margins, borrowers that have exposure to adverse market conditions such as increased competition or regulatory burden, or borrowers that have had unexpected or adverse changes in management. These loans have a greater likelihood of migrating to an unacceptable risk level if these characteristics are left unchecked. Group B is limited to commercial purpose loans that are individually risk rated.
Group C loans – Unacceptable Risk – are loans that have distinct shortcomings that require a greater degree of management attention. Examples of these shortcomings include a borrower’s inadequate capacity to service debt, poor operating performance, or insolvency. These loans are more likely to result in repayment through collateral liquidation. Group C loans range from those that are likely to sustain some loss if the shortcomings are not corrected, to those for which loss is imminent and non-accrual treatment is warranted. Group C loans include individually rated commercial purpose loans and retail loans adversely rated in accordance with the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification Policy. Group C retail loans include 1-4 family residential real estate loans and home equity loans past due 90 days or more with loan-to-value ratios greater than 60%, home equity loans 90 days or more past due where the Bank does not hold first mortgage, irrespective of loan-to-value, loans in bankruptcy where repayment is likely but not yet established, and lastly consumer loans that are 90 days or more past due.
Commercial purpose loan ratings are assigned by the commercial account officer; for larger and more complex commercial loans, the credit rating is a collaborative assignment by the lender and the credit analyst. The credit risk rating is based on the borrower’s expected performance, i.e., the likelihood that the borrower will be able to service its obligations in accordance with the loan terms. Credit risk ratings are meant to measure risk versus simply record history. Assessment of expected future payment performance requires consideration of numerous factors. While past performance is part of the overall evaluation, expected performance is based on an analysis of the borrower’s financial strength, and historical and projected factors such as size and financing alternatives, capacity and cash flow, balance sheet and income statement trends, the quality and timeliness of financial reporting, and the quality of the borrower’s management. Other factors influencing the credit risk rating to a lesser degree include collateral coverage and control, guarantor strength and commitment, documentation, structure and covenants and industry conditions. There are uncertainties inherent in this process.
Credit risk ratings are dynamic and require updating whenever relevant information is received. Risk ratings are assessed on an ongoing basis and at various points, including at delinquency or at the time of other adverse events. For larger, more complex or adversely rated loans, risk ratings are also assessed at the time of annual or periodic review. Lenders are required to make immediate disclosure to the Senior Credit Officer of any known increase in loan risk, even if considered temporary in nature.
Table of Contents |
The risk ratings within the loan portfolio, by segment, as of the balance sheet dates were as follows:
As of June 30, 2021March 31, 2022
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|
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|
|
|
|
| Residential |
| Residential |
|
|
|
|
|
|
|
|
|
|
|
| Residential |
| Residential |
|
|
|
|
| ||||||||||||||||||||||||||
|
| Commercial |
| Commercial |
|
|
| Real Estate |
| Real Estate |
|
|
|
|
|
| Commercial |
| Commercial |
|
|
| Real Estate |
| Real Estate |
|
|
|
|
| ||||||||||||||||||||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Total |
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Total |
| ||||||||||||||
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|
|
|
|
|
|
|
|
|
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|
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Group A |
| $ | 168,967,061 |
| $ | 268,988,333 |
| $ | 35,807,161 |
| $ | 168,019,516 |
| $ | 36,076,944 |
| $ | 4,173,978 |
| $ | 682,032,993 |
|
| $ | 118,322,106 |
| $ | 299,401,050 |
| $ | 48,660,440 |
| $ | 177,592,027 |
| $ | 32,631,970 |
| $ | 3,170,568 |
| $ | 679,778,161 |
| ||||||||||||
Group B |
| 749,301 |
| 8,365,384 |
| 0 |
| 0 |
| 0 |
| 0 |
| 9,114,685 |
|
| 579,664 |
| 2,422,197 |
| 0 |
| 0 |
| 0 |
| 0 |
| 3,001,861 |
| ||||||||||||||||||||||||||
Group C |
|
| 3,087,796 |
|
|
| 7,592,744 |
|
|
| 0 |
|
|
| 2,094,435 |
|
|
| 278,623 |
|
|
| 0 |
|
|
| 13,053,598 |
|
|
| 2,571,387 |
|
|
| 6,488,487 |
|
|
| 0 |
|
|
| 4,018,267 |
|
|
| 435,019 |
|
|
| 0 |
|
|
| 13,513,160 |
|
Total |
| $ | 172,804,158 |
|
| $ | 284,946,461 |
|
| $ | 35,807,161 |
|
| $ | 170,113,951 |
|
| $ | 36,355,567 |
|
| $ | 4,173,978 |
|
| $ | 704,201,276 |
|
| $ | 121,473,157 |
|
| $ | 308,311,734 |
|
| $ | 48,660,440 |
|
| $ | 181,610,294 |
|
| $ | 33,066,989 |
|
| $ | 3,170,568 |
|
| $ | 696,293,182 |
|
As of December 31, 20202021
|
|
|
|
|
|
|
| Residential |
| Residential |
|
|
|
|
|
|
|
|
|
|
|
| Residential |
| Residential |
|
|
|
|
| ||||||||||||||||||||||||||
|
| Commercial |
| Commercial |
|
|
| Real Estate |
| Real Estate |
|
|
|
|
|
| Commercial |
| Commercial |
|
|
| Real Estate |
| Real Estate |
|
|
|
|
| ||||||||||||||||||||||||||
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Total |
|
| & Industrial |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Total |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Group A |
| $ | 156,748,590 |
| $ | 261,932,833 |
| $ | 54,807,367 |
| $ | 167,478,918 |
| $ | 37,850,056 |
| $ | 4,280,990 |
| $ | 683,098,754 |
|
| $ | 117,607,773 |
| $ | 285,732,365 |
| $ | 47,955,231 |
| $ | 177,456,149 |
| $ | 34,166,076 |
| $ | 4,464,692 |
| $ | 667,382,286 |
| ||||||||||||
Group B |
| 998,641 |
| 12,784,078 |
| 0 |
| 0 |
| 0 |
| 0 |
| 13,782,719 |
|
| 693,084 |
| 6,550,335 |
| 0 |
| 0 |
| 0 |
| 0 |
| 7,243,419 |
| ||||||||||||||||||||||||||
Group C |
|
| 3,320,270 |
|
|
| 5,827,639 |
|
|
| 0 |
|
|
| 3,028,345 |
|
|
| 297,603 |
|
|
| 0 |
|
|
| 12,473,857 |
|
|
| 2,632,613 |
|
|
| 8,676,231 |
|
|
| 0 |
|
|
| 3,860,196 |
|
|
| 193,788 |
|
|
| 0 |
|
|
| 15,362,828 |
|
Total |
| $ | 161,067,501 |
|
| $ | 280,544,550 |
|
| $ | 54,807,367 |
|
| $ | 170,507,263 |
|
| $ | 38,147,659 |
|
| $ | 4,280,990 |
|
| $ | 709,355,330 |
|
| $ | 120,933,470 |
|
| $ | 300,958,931 |
|
| $ | 47,955,231 |
|
| $ | 181,316,345 |
|
| $ | 34,359,864 |
|
| $ | 4,464,692 |
|
| $ | 689,988,533 |
|
Modifications of Loans and TDRs
A loan is classified as a TDR if, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider.
The Company is deemed to have granted such a concession if it has modified a troubled loan in any of the following ways:
| · | Reduced accrued interest; |
| · | Reduced the original contractual interest rate to a rate that is below the current market rate for the borrower; |
| · | Converted a variable-rate loan to a fixed-rate loan; |
| · | Extended the term of the loan beyond an insignificant delay; |
| · | Deferred or forgiven principal in an amount greater than three months of payments; |
| · | Performed a refinancing and deferred or forgiven principal on the original loan; |
| · | Capitalized protective advance to pay delinquent real estate taxes; or |
| · | Capitalized delinquent accrued interest. |
An insignificant delay or insignificant shortfall in the amount of payments typically would not require the loan to be accounted for as a TDR. However, pursuant to regulatory guidance, any payment delay longer than three months is generally not considered insignificant. Management’s assessment of whether a concession has been granted also takes into account payments expected to be received from third parties, including third-party guarantors, provided that the third party has the ability to perform on the guarantee.
The Company’s TDRs are principally a result of extending loan repayment terms to relieve cash flow difficulties. The Company has only, on a limited basis, reduced interest rates for borrowers below the current market rate for the borrower. The Company has not forgiven principal or reduced accrued interest within the terms of original restructurings, nor has it converted variable rate terms to fixed rate terms. However, the Company evaluates each TDR situation on its own merits and does not foreclose the granting of any particular type of concession.
The Company has adopted the TDR guidance issued by the federal banking agencies in March and April 2020 regarding the treatment of certain short-term loan modifications relating to the COVID-19 pandemic (See Note 3)2). Under this guidance, qualifying concessions and modifications are not considered TDRs. As of June 30, 2021,In total, throughout the pandemic, the Company had granted short term loan concessions and/or modifications within the terms of this guidance to 525 borrowers,595 borrowers. Of those loans, 351 remained on the books with respect to loans having an aggregate principal balance of $111.0 million. These loans may bear a higher risk$103.2 million as of default in future periods.March 31, 2022.
Table of Contents |
There were no new TDRs during the three months ended June 30, 2021. New TDRs, by portfolio segment, during the periods presented were as follows:
|
| Six months ended June 30, 2021 |
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| Pre- |
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| Post- |
| |||
|
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|
|
| Modification |
|
| Modification |
| |||
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|
|
|
| Outstanding |
|
| Outstanding |
| |||
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| Number of |
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| Recorded |
|
| Recorded |
| |||
|
| Contracts |
|
| Investment |
|
| Investment |
| |||
|
|
|
|
|
|
|
|
|
| |||
Commercial & industrial |
|
| 1 |
|
| $ | 41,751 |
|
| $ | 41,751 |
|
|
| Three months ended March 31, 2022 |
| |||||||||
|
|
|
|
| Pre- |
|
| Post- |
| |||
|
|
|
|
| Modification |
|
| Modification |
| |||
|
|
|
|
| Outstanding |
|
| Outstanding |
| |||
|
| Number of |
|
| Recorded |
|
| Recorded |
| |||
|
| Contracts |
|
| Investment |
|
| Investment |
| |||
|
|
|
|
|
|
|
|
|
| |||
Residential real estate - 1st lien |
|
| 1 |
|
| $ | 292,592 |
|
| $ | 292,592 |
|
|
| Year ended December 31, 2020 |
| |||||||||
|
|
|
|
| Pre- |
|
| Post- |
| |||
|
|
|
|
| Modification |
|
| Modification |
| |||
|
|
|
|
| Outstanding |
|
| Outstanding |
| |||
|
| Number of |
|
| Recorded |
|
| Recorded |
| |||
|
| Contracts |
|
| Investment |
|
| Investment |
| |||
|
|
|
|
|
|
|
|
|
| |||
Residential real estate - 1st lien |
|
| 6 |
|
| $ | 591,826 |
|
| $ | 687,751 |
|
|
| Year ended December 31, 2021 |
| |||||||||
|
|
|
|
| Pre- |
|
| Post- |
| |||
|
|
|
|
| Modification |
|
| Modification |
| |||
|
|
|
|
| Outstanding |
|
| Outstanding |
| |||
|
| Number of |
|
| Recorded |
|
| Recorded |
| |||
|
| Contracts |
|
| Investment |
|
| Investment |
| |||
|
|
|
|
|
|
|
|
|
| |||
Commercial & industrial |
|
| 1 |
|
| $ | 41,751 |
|
| $ | 41,751 |
|
Commercial real estate |
|
| 2 |
|
|
| 3,153,402 |
|
|
| 3,153,402 |
|
Residential real estate – 1st lien |
|
| 1 |
|
|
| 67,007 |
|
|
| 67,007 |
|
|
|
| 4 |
|
| $ | 3,262,160 |
|
| $ | 3,262,160 |
|
|
| Three months ended June 30, 2020 |
|
| Six months ended June 30, 2020 |
| ||||||||||||||||||
|
|
|
|
| Pre- |
|
| Post- |
|
|
|
|
| Pre- |
|
| Post- |
| ||||||
|
|
|
|
| Modification |
|
| Modification |
|
|
|
|
| Modification |
|
| Modification |
| ||||||
|
|
|
|
| Outstanding |
|
| Outstanding |
|
|
|
|
| Outstanding |
|
| Outstanding |
| ||||||
|
| Number of |
|
| Recorded |
|
| Recorded |
|
| Number of |
|
| Recorded |
|
| Recorded |
| ||||||
|
| Contracts |
|
| Investment |
|
| Investment |
|
| Contracts |
|
| Investment |
|
| Investment |
| ||||||
Residential real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
- 1st lien |
|
| 3 |
|
| $ | 477,189 |
|
| $ | 545,515 |
|
|
| 6 |
|
| $ | 645,298 |
|
| $ | 741,993 |
|
|
| Three months ended March 31, 2021 |
| |||||||||
|
|
|
|
| Pre- |
|
| Post- |
| |||
|
|
|
|
| Modification |
|
| Modification |
| |||
|
|
|
|
| Outstanding |
|
| Outstanding |
| |||
|
| Number of |
|
| Recorded |
|
| Recorded |
| |||
|
| Contracts |
|
| Investment |
|
| Investment |
| |||
|
|
|
|
|
|
|
|
|
| |||
Commercial & industrial |
|
| 1 |
|
| $ | 41,751 |
|
| $ | 41,751 |
|
The TDRs for which there was a payment default during the twelve month periods presented below were as follows:
For the twelve months ended June 30, 2021March 31, 2022
|
| Number of |
|
| Recorded |
| ||
|
| Contracts |
|
| Investment |
| ||
|
|
|
|
|
|
| ||
Commercial & industrial |
|
| 1 |
|
| $ | 39,876 |
|
|
| Number of |
|
| Recorded |
| ||
|
| Contracts |
|
| Investment |
| ||
|
|
|
|
|
|
| ||
Commercial real estate |
|
| 2 |
|
| $ | 2,422,965 |
|
For the twelve months ended December 31, 20202021
|
| Number of |
|
| Recorded |
| ||
|
| Contracts |
|
| Investment |
| ||
|
|
|
|
|
|
| ||
Residential real estate - 1st lien |
|
| 1 |
|
| $ | 165,168 |
|
For the twelve months ended June 30, 2020
|
| Number of |
|
| Recorded |
| ||
|
| Contracts |
|
| Investment |
| ||
|
|
|
|
|
|
| ||
Commercial & industrial |
|
| 4 |
|
| $ | 267,450 |
|
Residential real estate - 1st lien |
|
| 3 |
|
|
| 289,790 |
|
Residential real estate - Jr lien |
|
| 1 |
|
|
| 51,733 |
|
|
|
| 8 |
|
| $ | 608,973 |
|
|
| Number of |
|
| Recorded |
| ||
|
| Contracts |
|
| Investment |
| ||
|
|
|
|
|
|
| ||
Commercial & industrial |
|
| 1 |
|
| $ | 38,001 |
|
Commercial real estate |
|
| 2 |
|
|
| 3,081,810 |
|
|
|
| 3 |
|
| $ | 3,119,811 |
|
Table of Contents |
For the twelve months ended March 31, 2021
|
| Number of |
|
| Recorded |
| ||
|
| Contracts |
|
| Investment |
| ||
|
|
|
|
|
|
| ||
Commercial & industrial |
|
| 1 |
|
| $ | 41,001 |
|
Residential real estate - 1st lien |
|
| 1 |
|
|
| 162,821 |
|
|
|
| 2 |
|
| $ | 203,822 |
|
TDRs are treated as other impaired loans and carry individual specific reserves with respect to the calculation of the ALL. These loans are categorized as non-performing, may be past due, and are generally adversely risk rated. The TDRs that have defaulted under their restructured terms are generally in collection status and their reserve is typically calculated using the fair value of collateral method.
The specific allowances within the ALL related to TDRs as of the balance sheet dates are presented in the table below.
|
| June 30, |
|
| December 31, |
| ||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Specific Allocation |
| $ | 98,736 |
|
| $ | 108,781 |
|
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Specific Allocation |
| $ | 115,614 |
|
| $ | 79,978 |
|
As of the balance sheet dates, the Company evaluates whether it is contractually committed to lend additional funds to debtors with impaired, non-accrual or modified loans. The Company is contractually committed to lend on one SBA guaranteed line of credit to a borrower whose lending relationship was previously restructured.
Note 7.6. Goodwill and Other Intangible Assets
As a result of a merger with LyndonBank on December 31, 2007, the Company recorded goodwill amounting to $11,574,269. The goodwill is not amortizable and is not deductible for tax purposes.
As of December 31, 2020,2021, the most recent evaluation, management concluded that no impairment existed. Management evaluates its goodwill intangible for impairment at least annually, or more frequently as circumstances warrant, including, as applicable, circumstances arising out of the COVID-19 pandemic, including the disruptions to the economy and increased volatility in the financial markets and related impacts on the Company’s business.
Note 8.7. Fair Value
Certain assets and liabilities are recorded at fair value to provide additional insight into the Company’s quality of earnings and comprehensive income. The fair values of some of these assets and liabilities are measured on a recurring basis while others are measured on a non-recurring basis, with the determination based upon applicable existing accounting pronouncements. For example, securities available-for-sale are recorded at fair value on a recurring basis. Other assets, such as MSRs, loans held-for-sale, impaired loans, and OREO are recorded at fair value on a non-recurring basis using the lower of cost or market methodology to determine impairment of individual assets. The Company groups assets and liabilities which are recorded at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement (with Level 1 considered highest and Level 3 considered lowest). A brief description of each level follows.
Level | Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S. Treasury and other U.S. Government debt securities that are highly liquid and are actively traded in over-the-counter markets. |
|
|
Level | Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes MSRs, collateral-dependent impaired loans and OREO. |
|
|
Level | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
Table of Contents |
The following methods and assumptions were used by the Company in estimating its fair value measurements:
Debt Securities AFSAFS:: Fair value measurement is based upon quoted prices for similar assets, if available. If quoted prices are not available, fair values are measured using matrix pricing models, or other model-based valuation techniques requiring observable inputs other than quoted prices such as yield curves, prepayment speeds and default rates. Level 1 securities would include U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets. Level 2 securities include federal agency securities.
Impaired loansloans: : Impaired loans are reported based on one of three measures: the present value of expected future cash flows discounted at the loan’s effective interest rate; the loan’s observable market price; or the fair value of the collateral if the loan is collateral dependent. If the fair value is less than an impaired loan’s recorded investment, an impairment loss is recognized as part of the ALL. Accordingly, certain impaired loans may be subject to measurement at fair value on a non-recurring basis. Management has estimated the fair values of collateral-dependent loans using Level 2 inputs, such as the fair value of collateral based on independent third-party appraisals.
Loans held-for-sale: The fair value of loans held-for-sale is based upon an actual purchase and sale agreement between the Company and an independent market participant. The sale is executed within a reasonable period following quarter end at the stated fair value.
MSRs: MSRs represent the value associated with servicing residential mortgage loans. Servicing assets and servicing liabilities are reported using the amortization method and compared to fair value for impairment. In evaluating the carrying values of MSRs, the Company obtains third party valuations based on loan level data including note rate, and the type and term of the underlying loans. The Company classifies MSRs as non-recurring Level 2.
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Assets measured at fair value on a recurring basis and reflected in the consolidated balance sheets at the dates presented, segregated by fair value hierarchy, are summarized below. There were no Level 3 assets or liabilities measured on a recurring basis as of the balance sheet dates presented, nor were there any transfers of assets between Levels during either 20212022 or 2020.2021.
|
| June 30, |
| December 31, |
|
| March 31, |
| December 31, |
| ||||||
Assets: (market approach) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Level 1 |
|
|
|
|
|
|
|
|
|
| ||||||
U.S. Government securities |
| $ | 5,575,682 |
|
| $ | 0 |
|
| $ | 37,629,399 |
|
| $ | 32,041,041 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Level 2 |
|
|
|
|
|
|
|
|
|
| ||||||
U.S. GSE debt securities |
| $ | 10,006,401 |
| $ | 8,169,831 |
|
| $ | 11,236,384 |
| $ | 11,828,498 |
| ||
Taxable Municipal securities |
| 273,677 |
| 298,733 |
| |||||||||||
Tax-Exempt Municipal securities |
| 4,307,948 |
| 831,379 |
| |||||||||||
Agency MBS |
| 65,919,961 |
| 41,378,349 |
|
| 122,940,118 |
| 127,132,521 |
| ||||||
ABS and OAS |
| 2,420,563 |
| 2,669,996 |
|
| 1,828,662 |
| 2,214,024 |
| ||||||
CMO |
| 961,518 |
| 0 |
|
| 1,306,628 |
| 1,420,458 |
| ||||||
Other investments |
|
| 6,672,010 |
|
|
| 8,487,002 |
|
|
| 6,232,750 |
|
|
| 6,575,805 |
|
Total Level 2 Assets |
| $ | 85,980,453 |
|
| $ | 60,705,178 |
| ||||||||
Level 2 Total |
| $ | 148,126,167 |
|
| $ | 150,301,418 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Total Assets |
| $ | 91,556,135 |
|
| $ | 60,705,178 |
| ||||||||
Grand Total |
| $ | 185,755,566 |
|
| $ | 182,342,459 |
|
24 |
Table of Contents |
Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis
The following table includes assets measured at fair value on a non-recurring basis that have had a fair value adjustment since their initial recognition. Impaired loans measured at fair value only include impaired loans with a partial write-down or with a related specific ALL and are presented net of the specific allowances as disclosed in Note 6.5. Assets measured at fair value on a non-recurring basis and reflected in the consolidated balance sheets at the dates presented, segregated by fair value hierarchy level, are summarized below. There were no Level 1 or Level 3 assets or liabilities measured on a non-recurring basis as of the balance sheet dates presented, nor were there any transfers of assets between levels during either 20212022 or 2020.2021.
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| June 30, |
| December 31, |
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| March 31, |
| December 31, |
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Level 2 |
| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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Assets: (market approach) |
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Impaired loans, net of related allowance |
| $ | 319,542 |
| $ | 323,645 |
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| $ | 1,792,892 |
| $ | 177,523 |
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Loans held-for-sale |
| 793,544 |
| 130,400 |
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| 246,000 |
| 339,000 |
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MSRs (1) |
| 909,330 |
| 922,146 |
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| 900,094 |
| 897,720 |
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(1) |
FASB ASC Topic 825, “Financial Instruments”, requires disclosures of fair value information about financial instruments, whether or not recognized in the balance sheet, if the fair values can be reasonably determined. 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 using observable inputs when available. 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. Topic 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The estimated fair values of commitments to extend credit and letters of credit were immaterial as of the dates presented in the tables below. The estimated fair values of the Company’s financial instruments as of the balance sheet dates were as follows:
Note
The following table shows the changes in the carrying amount of the MSRs, included in other assets in the consolidated balance sheets, for the periods indicated:
Note
In the normal course of business, the Company is involved in litigation that is considered incidental to its business. Management does not expect that any such litigation will be material to the Company’s consolidated financial condition or results of operations.
Note
The Company has evaluated events and transactions through the date that the financial statements were issued for potential recognition or disclosure in these financial statements, as required by GAAP. On
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Period Ended
The following discussion analyzes the consolidated financial condition of Community Bancorp. and its wholly-owned subsidiary, Community National Bank, as of
The following discussion should be read in conjunction with the Company’s audited consolidated financial statements and related notes contained in its
FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the results of operations, financial condition and business of the Company and its subsidiary. Words used in the discussion below such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects”, “plans,” “assumes”, “predicts,” “may”, “might”, “will”, “could”, “should” and similar expressions, indicate that management of the Company is making forward-looking statements.
Forward-looking statements are not guarantees of future performance. They necessarily involve risks, uncertainties and assumptions. Examples of forward looking statements included in this discussion include, but are not limited to, statements regarding the potential
Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include, among others, the following possibilities:
Readers are cautioned not to place undue reliance on such statements as they speak only as of the date they are made. The Company does not undertake, and disclaims any obligation, to revise or update any forward-looking statements to reflect the occurrence or anticipated occurrence of events or circumstances after the date of this Report, except as required by applicable law. The Company claims the protection of the safe harbor for forward-looking statements provided in the Private Securities Litigation Reform Act of 1995.
NON-GAAP FINANCIAL MEASURES
Under SEC Regulation G, public companies making disclosures containing financial measures that are not in accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure. The SEC has exempted from the definition of non-GAAP financial measures certain commonly used financial measures that are not based on GAAP. However, three non-GAAP financial measures commonly used by financial institutions, namely tax-equivalent net interest income and tax-equivalent net interest margin (as presented in the tables in the section labeled Interest Income Versus Interest Expense (NII)) and core earnings (as defined and discussed in the Results of Operations section), have not been specifically exempted by the SEC, and may therefore constitute non-GAAP financial measures under Regulation G. We are unable to state with certainty whether the SEC would regard those measures as subject to Regulation G.
Management believes that these non-GAAP financial measures are useful in evaluating the Company’s financial performance and facilitate comparisons with the performance of other financial institutions. However, that information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP.
OVERVIEW
The Company’s consolidated assets on Total deposits on March 31, 2022 were $877,300,445 compared to $879,399,953 on December 31, 2021, a decrease of
Consolidated
Total interest income decreased $365,364, or 4.2%, year over year, due to the changes discussed in the previous paragraph related to PPP loan processing fees and investment and loan income. The investment portfolio has increased considerably year over year accounting for the
The provision for loan losses for the
Equity capital On
As of
CRITICAL ACCOUNTING POLICIES
The Company’s
The Company’s critical accounting policies govern:
These policies are described in the Company’s
RESULTS OF OPERATIONS
Net income for the
Return on average assets, which is net income divided by average total assets, measures how effectively a corporation uses its assets to produce earnings. Return on average equity, which is net income divided by average shareholders’ equity, measures how effectively a corporation uses its equity capital to produce earnings.
The following tables show these ratios annualized, as well as other equity ratios, for the comparison periods presented.
INTEREST INCOME VERSUS INTEREST EXPENSE (NET INTEREST INCOME)
The largest component of the Company’s operating income is NII, which is the difference between interest earned on loans and investments and the interest paid on deposits and other sources of funds (i.e., borrowings). The Company’s level of net interest income can fluctuate over time due to changes in the level and mix of earning assets and sources of funds (volume), and changes in the yield earned and costs of funds (rate). A portion of the Company’s income from loans to local municipalities is not subject to income taxes. Because the proportion of tax-exempt items in the Company’s balance sheet varies from year-to-year, to improve comparability of information, the non-taxable income shown in the tables below has been converted to a tax equivalent basis. The Company’s corporate tax rate is 21%; therefore, to equalize tax-free and taxable income in the comparison, we divide the tax-free income by 79%, with the result that every tax-free dollar is equivalent to $1.27 in taxable income for the periods presented.
The Company’s tax-exempt interest income of
The following tables show the reconciliation between reported NII and tax equivalent NII for the comparison periods presented.
The following tables present the daily average interest-earning assets and the daily average interest-bearing liabilities supporting earning assets for the respective comparison periods. Interest income (excluding interest on non-accrual loans) is expressed on a tax equivalent basis, both in dollars and as a rate/yield for the comparison periods presented.
The average volume of interest-earning assets for the
The average volume of loans
The average volume of the taxable investment portfolio (classified as AFS) increased 159.4% for the three-month period ended March 31, 2022 compared the same period last year, while the average yield decreased seven basis points. The increase in average volume is due primarily to management’s effort to continue to grow the investment portfolio incrementally as the balance sheet grows in order to provide additional liquidity and pledge quality assets. The average volume of the tax-exempt investment portfolio (classified as AFS) for the three-month period ended March 31, 2022 was $2.2 million, with a tax equivalent yield of 2.52%. The Company began investing in these tax-exempt bonds during December 2021. The average volume of sweep and interest-earning accounts, which consists primarily of an interest-bearing
The average volume of interest-bearing liabilities for the
The average volume of interest-bearing transaction accounts increased
The average volume of money market accounts increased
The average volume of savings accounts increased
The average volume of time deposits decreased
The average volume of borrowed funds decreased
The average volume of repurchase agreements
In summary, between the
The following table summarizes the variances in interest income and interest expense on a fully tax-equivalent basis for the interim periods presented for
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Non-interest Income
The components of non-interest income for the periods presented were as follows:
Total non-interest income increased
Non-interest Expense
The components of non-interest expense for the periods presented were as follows:
Total non-interest expense increased
APPLICABLE INCOME TAXES The provision for income taxes
Amortization expense related to limited partnership investments is included as a component of income tax expense and amounted to
CHANGES IN FINANCIAL CONDITION
The following table reflects the composition of the Company’s major categories of assets and liabilities as a percentage of total assets or liabilities and shareholders’ equity, as the case may be, as of the balance sheet dates:
The following table reflects the changes in the composition of the Company’s major categories of assets and liabilities between the balance sheet dates, as disclosed in the table above:
The
The increase in the securities AFS portfolio is attributable to the purchase of
Most of the fluctuation in demand deposits is due to a
Interest Rate Risk and Asset and Liability Management - Management actively monitors and manages the Company’s interest rate risk exposure and attempts to structure the balance sheet to maximize net interest income while controlling its exposure to interest rate risk. The Company’s ALCO is made up of the Executive Officers and certain Vice Presidents of the Bank representing major business lines. The ALCO formulates strategies to manage interest rate risk by evaluating the impact on earnings and capital of such factors as current interest rate forecasts and economic indicators, potential changes in such forecasts and indicators, liquidity and various business strategies. The ALCO meets at least quarterly to review financial statements, liquidity levels, yields and spreads to better understand, measure, monitor and control the Company’s interest rate risk. In the ALCO process, the committee members apply policy limits set forth in the Asset Liability, Liquidity and Investment policies approved and periodically reviewed by the Company’s Board of Directors. The ALCO’s methods for evaluating interest rate risk include an analysis of the effects of interest rate changes on net interest income and an analysis of the Company’s interest rate sensitivity “gap”, which provides a static analysis of the maturity and repricing characteristics of the entire balance sheet. The ALCO Policy also includes a contingency funding plan to help management prepare for unforeseen liquidity restrictions, including hypothetical severe liquidity crises.
Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with the Company’s financial instruments also change, thereby impacting NII, the primary component of the Company’s earnings. Fluctuations in interest rates can also have an impact on liquidity. The ALCO uses an outside consultant to perform rate shock simulations to the Company’s net interest income, as well as a variety of other analyses. It is the ALCO’s function to provide the assumptions used in the modeling process. Assumptions used in prior period simulation models are regularly tested by comparing projected NII with actual NII. The ALCO utilizes the results of the simulation model to quantify the estimated exposure of NII and liquidity to sustained interest rate changes. The simulation model captures the impact of changing interest rates on the interest income received and interest expense paid on all interest-earning assets and interest-bearing liabilities reflected on the Company’s balance sheet. The model also simulates the balance sheet’s sensitivity to a prolonged flat rate environment. All rate scenarios are simulated assuming a parallel shift of the yield curve; however further simulations are performed utilizing non-parallel changes in the yield curve. The results of this sensitivity analysis are compared to the ALCO policy limits which specify a maximum tolerance level for NII exposure over a 1-year horizon, assuming no balance sheet growth, given a 200
Under the Company’s interest rate sensitivity modeling, with the continued asset sensitive balance sheet, in a rising rate environment
The following table summarizes the estimated impact on the Company’s NII over a twelve month period, assuming a gradual parallel shift of the yield curve beginning
The estimated amounts shown in the table
As of
Credit Risk - As a financial institution, one of the primary risks the Company manages is credit risk, the risk of loss stemming from borrowers’ failure to repay loans or inability to meet other contractual obligations. The Company’s Board of Directors prescribes policies for managing credit risk, including Loan, Appraisal and Environmental policies. These policies are supplemented by comprehensive underwriting standards and procedures. The Company maintains a Credit Administration department whose function includes credit analysis and monitoring of and reporting on the status of the loan portfolio, including delinquent and non-performing loan trends. The Company also monitors concentration of credit risk in a variety of areas, including portfolio mix, the level of loans to individual borrowers and their related interests, loans to industry segments, and the geographic distribution of commercial real estate loans. Loans are reviewed periodically by an independent loan review firm to help ensure accuracy of the Company’s internal risk ratings and compliance with various internal policies, procedures and regulatory guidance.
Residential mortgages represented
Consistent with the strategic focus on commercial lending, the commercial & industrial and CRE loan portfolios have seen solid growth over recent years. Commercial & industrial and CRE loans together comprised
Growth in the CRE portfolio in recent years has
Risk in the Company’s commercial & industrial and CRE loan portfolios is mitigated in part by government guarantees issued by federal agencies such as the SBA and RD. At
The Company works actively with customers early in the delinquency process to help them to avoid default and foreclosure. Commercial & industrial and CRE loans are generally placed on non-accrual status when there is deterioration in the financial position of the borrower, payment in full of principal and interest is not expected, and/or principal or interest has been in default for 90 days or more. However, such a loan need not be placed on non-accrual status if it is both well secured and in the process of collection. Residential mortgages and home equity loans are considered for non-accrual status at 90 days past due and are evaluated on a case-by-case basis. The Company obtains current property appraisals or market value analyses and considers the cost to carry and sell collateral in order to assess the level of specific allocations required. Consumer loans are generally not placed in non-accrual but are charged off by the time they reach 120 days past due. When a loan is placed in non-accrual status, the Company reverses the accrued interest against current period income and discontinues the accrual of interest until the borrower clearly demonstrates the ability and intention to resume normal payments, typically demonstrated by regular timely payments for a period of not less than six months. Interest payments received on non-accrual or impaired loans are generally applied as a reduction of the loan book balance.
The Company’s
The
The remaining TDRs were performing in accordance with their modified terms as of the dates presented and consisted of the following:
As of the balance sheet dates, the Company evaluates whether it is contractually committed to lend additional funds to debtors with impaired, non-accrual or modified loans. The Company is contractually committed to lend on one SBA guaranteed line of credit to a borrower whose lending relationship was previously restructured.
ALL and provisions - The Company maintains an ALL at a level that management believes is appropriate to absorb losses inherent in the loan portfolio as of the measurement date (See Note
When establishing the ALL each quarter, the Company applies a combination of historical loss factors to loan segments, including residential first and junior lien mortgages, CRE, commercial & industrial, and consumer loan portfolios, other than the municipal loans as there has never been a loss recorded in that loan segment. The Company applies numerous qualitative factors to each segment of the loan portfolio. Those factors include the levels of and trends in delinquencies and non-accrual loans, criticized and classified assets, volumes and terms of loans, and the impact of any loan policy changes. Experience, ability and depth of lending personnel, levels of policy and documentation exceptions, national and local economic trends, the competitive environment, and concentrations of credit are also factors considered.
Specific allocations to the ALL are made for certain impaired loans. Impaired loans include all troubled debt restructurings regardless of amount, and all loans to a borrower that in aggregate are greater than $100,000 and that are in non-accrual status. A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due, including interest and principal, according to the contractual terms of the loan agreement. The Company reviews all the facts and circumstances surrounding non-accrual loans and on a case-by-case basis may consider loans below the threshold as impaired when such treatment is material to the financial statements. See Note
The following table summarizes the Company’s
The
The
Net charge-offs during the period to average loan outstanding were as follows:
In addition to credit risk in the Company’s loan portfolio and liquidity risk in its loan and deposit-taking operations, the Company’s business activities also generate market risk. Market risk is the risk of loss in a financial instrument arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and equity prices. Declining capital markets can result in fair value adjustments necessary to record decreases in the value of the investment portfolio for other-than-temporary-impairment. The Company does not have any market risk sensitive instruments acquired for trading purposes. The Company’s market risk arises primarily from interest rate risk inherent in its lending and deposit taking activities. During recessionary periods, a declining housing market can result in an increase in loan loss reserves or ultimately an increase in foreclosures. Interest rate risk is directly related to the different maturities and repricing characteristics of interest-bearing assets and liabilities, as well as to loan prepayment risks, early withdrawal of time deposits, and the fact that the speed and magnitude of responses to interest rate changes vary by product. As discussed above under “Interest Rate Risk and Asset and Liability Management”, the Company actively monitors and manages its interest rate risk through the ALCO process.
COMMITMENTS, CONTINGENCIES AND OFF-BALANCE-SHEET ARRANGEMENTS
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, standby letters of credit and risk-sharing commitments on certain sold loans. Such instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. During the first
LIQUIDITY AND CAPITAL RESOURCES
Managing liquidity risk is essential to maintaining both depositor confidence and stability in earnings. Liquidity management refers to the ability of the Company to adequately cover fluctuations in assets and liabilities. Meeting loan demand (assets) and covering the withdrawal of deposit funds (liabilities) are two key components of the liquidity management process. The Company’s principal sources of funds are deposits, amortization and prepayment of loans and securities, maturities of investment securities, sales of loans available-for-sale, and earnings and funds provided from operations. Maintaining a relatively stable funding base, which is achieved by diversifying funding sources, competitively pricing deposit products, and extending the contractual maturity of liabilities, reduces the Company’s exposure to rollover risk on deposits and limits reliance on volatile short-term borrowed funds. Short-term funding needs arise from declines in deposits or other funding sources and from funding requirements for loan commitments. The Company’s strategy is to fund assets to the maximum extent possible with core deposits that provide a sizable source of relatively stable and low-cost funds.
The Company recognizes that, at times, when loan demand exceeds deposit growth or the Company has other liquidity demands, it may be desirable to utilize alternative sources of deposit funding to augment retail deposits and borrowings. One-way deposits acquired through the CDARS program provide an alternative funding source when needed. At
At
The Company has a BIC arrangement with the FRBB secured by eligible commercial & industrial loans, CRE loans and home equity loans, resulting in an available credit line of
The following table reflects the Company’s outstanding FHLBB and FRBB advances against the respective lines as of the dates indicated:
The Company has unsecured lines of credit with
The following table illustrates the changes in shareholders’ equity from December 31,
The primary objective of the Company’s capital planning process is to balance appropriately the retention of capital to support operations and future growth, with the goal of providing shareholders an attractive return on their investment. To that end, management monitors capital retention and dividend policies on an ongoing basis.
As described in more detail in Note 23 to the audited consolidated financial statements contained in the Company’s
The following table shows the Company’s actual capital ratios and those of its subsidiary, as well as currently applicable regulatory capital requirements, as of the dates indicated.
The Company’s ability to pay dividends to its shareholders is largely dependent on the Bank’s ability to pay dividends to the Company. In general, a national bank may not pay dividends that exceed net income for the current and preceding two years regardless of statutory restrictions, as a matter of regulatory policy, banks and bank holding companies should pay dividends only out of current earnings and only if, after paying such dividends, they remain adequately capitalized.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Omitted, in accordance with the regulatory relief available to smaller reporting companies in SEC Release Nos. 33-10513 and 34-83550.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). As of
For this purpose, the term “disclosure controls and procedures” means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
In the normal course of business, the Company is involved in litigation that is considered incidental to their business. Management does not expect that any such litigation will be material to the Company’s consolidated financial condition or results of operations.
ITEM 1A. Risk Factors
In management’s view, the Risk Factors identified in our Annual Report on Form 10-K for the year ended December 31,
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information as to the purchases of the Company’s common stock during the three months ended
ITEM 6. Exhibits
The following exhibits are filed with, or incorporated by reference in, this report:
*This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
COMMUNITY BANCORP.
EXHIBITS
EXHIBIT INDEX
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act.
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