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 September 30, 2017
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 | |
(Exact name of Registrant as Specified in its Charter) |
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 ( X )☒ No ( )
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 ( X )Yes ☒ NO ( )
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | 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. ( )
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
At November 02, 2017,06, 2023, there were 5,099,4795,493,658 shares outstanding of the Corporation's common stock.
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55 |
2 |
Table of Contents |
ITEM 1. Financial Statements (Unaudited)
The following are the unaudited consolidated financial statements for Community Bancorp. and Subsidiary, "the Company".
Community Bancorp. and Subsidiary | September 30, | December 31, | September 30, |
Consolidated Balance Sheets | 2017 | 2016 | 2016 |
(Unaudited) | (Unaudited) | ||
Assets | |||
Cash and due from banks | $13,655,114 | $10,943,344 | $11,705,902 |
Federal funds sold and overnight deposits | 16,064,422 | 18,670,942 | 673,911 |
Total cash and cash equivalents | 29,719,536 | 29,614,286 | 12,379,813 |
Securities held-to-maturity (HTM) (fair value $54,571,000 at | |||
09/30/17, $51,035,000 at 12/31/16 and $57,592,000 at 09/30/16) | 53,882,287 | 49,886,631 | 56,837,100 |
Securities available-for-sale (AFS) | 36,719,673 | 33,715,051 | 29,412,216 |
Restricted equity securities, at cost | 1,700,050 | 2,755,850 | 1,855,850 |
Loans held-for-sale | 687,100 | 0 | 708,975 |
Loans | 506,048,119 | 487,249,226 | 470,186,895 |
Allowance for loan losses (ALL) | (5,436,313) | (5,278,445) | (5,179,965) |
Deferred net loan costs | 318,452 | 310,130 | 312,565 |
Net loans | 500,930,258 | 482,280,911 | 465,319,495 |
Bank premises and equipment, net | 10,542,790 | 10,830,556 | 10,833,164 |
Accrued interest receivable | 1,893,478 | 1,818,510 | 1,649,964 |
Bank owned life insurance (BOLI) | 4,697,837 | 4,625,406 | 4,599,301 |
Core deposit intangible | 68,166 | 272,691 | 340,861 |
Goodwill | 11,574,269 | 11,574,269 | 11,574,269 |
Other real estate owned (OREO) | 324,235 | 394,000 | 409,000 |
Other assets | 8,799,392 | 9,885,504 | 9,870,422 |
Total assets | $661,539,071 | $637,653,665 | $605,790,430 |
Liabilities and Shareholders' Equity | |||
Liabilities | |||
Deposits: | |||
Demand, non-interest bearing | $115,930,899 | $104,472,268 | $101,259,470 |
Interest-bearing transaction accounts | 127,426,517 | 118,053,360 | 119,981,648 |
Money market funds | 85,947,545 | 79,042,619 | 76,976,376 |
Savings | 99,439,616 | 86,776,856 | 91,274,380 |
Time deposits, $250,000 and over | 18,097,628 | 19,274,880 | 10,848,979 |
Other time deposits | 109,910,115 | 97,115,049 | 103,466,053 |
Total deposits | 556,752,320 | 504,735,032 | 503,806,906 |
Borrowed funds | 3,550,000 | 31,550,000 | 5,795,000 |
Repurchase agreements | 27,458,927 | 30,423,195 | 25,834,249 |
Capital lease obligations | 409,147 | 483,161 | 493,810 |
Junior subordinated debentures | 12,887,000 | 12,887,000 | 12,887,000 |
Accrued interest and other liabilities | 3,260,937 | 3,123,760 | 3,129,831 |
Total liabilities | 604,318,331 | 583,202,148 | 551,946,796 |
Shareholders' Equity | |||
Preferred stock, 1,000,000 shares authorized, 25 shares issued | |||
and outstanding ($100,000 liquidation value) | 2,500,000 | 2,500,000 | 2,500,000 |
Common stock - $2.50 par value; 15,000,000 shares authorized, | |||
5,310,776 shares issued at 09/30/17, 5,269,053 shares issued | |||
at 12/31/16 and 5,253,090 shares issued at 09/30/16 | 13,276,940 | 13,172,633 | 13,132,725 |
Additional paid-in capital | 31,434,250 | 30,825,658 | 30,639,268 |
Retained earnings | 12,711,488 | 10,666,782 | 9,991,842 |
Accumulated other comprehensive (loss) income | (79,161) | (90,779) | 202,576 |
Less: treasury stock, at cost; 210,101 shares at 09/30/17, | |||
12/31/16, and 09/30/16 | (2,622,777) | (2,622,777) | (2,622,777) |
Total shareholders' equity | 57,220,740 | 54,451,517 | 53,843,634 |
Total liabilities and shareholders' equity | $661,539,071 | $637,653,665 | $605,790,430 |
Book value per common share outstanding | $10.73 | $10.27 | $10.18 |
Community Bancorp. and Subsidiary |
| September 30, |
|
| December 31, |
| ||
Consolidated Balance Sheets |
| 2023 |
|
| 2022 |
| ||
|
| (Unaudited) |
|
|
| |||
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Cash and due from banks |
| $ | 12,267,270 |
|
| $ | 12,302,771 |
|
Federal funds sold and overnight deposits |
|
| 5,265,072 |
|
|
| 58,837,557 |
|
Total cash and cash equivalents |
|
| 17,532,342 |
|
|
| 71,140,328 |
|
Securities available-for-sale |
|
| 181,928,461 |
|
|
| 192,918,109 |
|
Restricted equity securities, at cost |
|
| 1,423,550 |
|
|
| 1,411,750 |
|
Loans held-for-sale |
|
| 56,700 |
|
|
| 0 |
|
Loans |
|
| 838,572,268 |
|
|
| 748,548,608 |
|
Allowance for credit losses |
|
| (9,487,973 | ) |
|
| (8,709,225 | ) |
Deferred net loan costs |
|
| 550,230 |
|
|
| 493,275 |
|
Net loans |
|
| 829,634,525 |
|
|
| 740,332,658 |
|
Bank premises and equipment, net |
|
| 12,597,756 |
|
|
| 13,042,468 |
|
Accrued interest receivable |
|
| 3,830,129 |
|
|
| 3,214,332 |
|
Bank owned life insurance |
|
| 5,212,622 |
|
|
| 5,153,387 |
|
Goodwill |
|
| 11,574,269 |
|
|
| 11,574,269 |
|
Other assets |
|
| 19,499,790 |
|
|
| 17,244,846 |
|
Total assets |
| $ | 1,083,290,144 |
|
| $ | 1,056,032,147 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
|
|
|
|
Demand, non-interest bearing |
| $ | 205,188,102 |
|
| $ | 216,093,534 |
|
Interest-bearing transaction accounts |
|
| 284,744,064 |
|
|
| 294,050,079 |
|
Money market funds |
|
| 137,192,956 |
|
|
| 140,117,086 |
|
Savings |
|
| 159,409,376 |
|
|
| 171,072,921 |
|
Time deposits, $250,000 and over |
|
| 21,306,259 |
|
|
| 15,632,058 |
|
Other time deposits |
|
| 93,364,162 |
|
|
| 86,006,601 |
|
Total deposits |
|
| 901,204,919 |
|
|
| 922,972,279 |
|
Borrowed funds |
|
| 49,150,000 |
|
|
| 1,300,000 |
|
Repurchase agreements |
|
| 31,580,426 |
|
|
| 33,077,829 |
|
Junior subordinated debentures |
|
| 12,887,000 |
|
|
| 12,887,000 |
|
Accrued interest and other liabilities |
|
| 9,661,103 |
|
|
| 10,618,676 |
|
Total liabilities |
|
| 1,004,483,448 |
|
|
| 980,855,784 |
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|
Preferred stock, 1,000,000 shares authorized, 15 shares issued and outstanding |
|
|
|
|
|
|
|
|
at 09/30/23 and 12/31/22 ($100,000 liquidation value, per share) |
|
| 1,500,000 |
|
|
| 1,500,000 |
|
Common stock - $2.50 par value; 15,000,000 shares authorized, 5,700,828 |
|
|
|
|
|
|
|
|
shares issued at 09/30/23 and 5,647,710 shares issued at 12/31/22 |
|
| 14,252,070 |
|
|
| 14,119,275 |
|
Additional paid-in capital |
|
| 37,242,239 |
|
|
| 36,383,235 |
|
Retained earnings |
|
| 51,959,399 |
|
|
| 46,464,447 |
|
Accumulated other comprehensive loss |
|
| (23,524,235 | ) |
|
| (20,667,817 | ) |
Less: treasury stock, at cost; 210,101 shares at 09/30/23 and 12/31/22 |
|
| (2,622,777 | ) |
|
| (2,622,777 | ) |
Total shareholders' equity |
|
| 78,806,696 |
|
|
| 75,176,363 |
|
Total liabilities and shareholders' equity |
| $ | 1,083,290,144 |
|
| $ | 1,056,032,147 |
|
|
|
|
|
|
|
|
|
|
Book value per common share outstanding |
| $ | 14.08 |
|
| $ | 13.55 |
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements
Community Bancorp. and Subsidiary | Three Months Ended September 30, | |
Consolidated Statements of Income | 2017 | 2016 |
(Unaudited) | ||
Interest income | ||
Interest and fees on loans | $6,244,899 | $5,732,855 |
Interest on debt securities | ||
Taxable | 171,880 | 128,767 |
Tax-exempt | 332,102 | 339,999 |
Dividends | 41,320 | 49,429 |
Interest on federal funds sold and overnight deposits | 29,964 | 3,048 |
Total interest income | 6,820,165 | 6,254,098 |
Interest expense | ||
Interest on deposits | 628,534 | 504,170 |
Interest on borrowed funds | 12,213 | 53,404 |
Interest on repurchase agreements | 20,564 | 18,820 |
Interest on junior subordinated debentures | 134,881 | 115,349 |
Total interest expense | 796,192 | 691,743 |
Net interest income | 6,023,973 | 5,562,355 |
Provision for loan losses | 150,000 | 150,000 |
Net interest income after provision for loan losses | 5,873,973 | 5,412,355 |
Non-interest income | ||
Service fees | 773,419 | 719,341 |
Income from sold loans | 185,844 | 230,623 |
Other income from loans | 222,026 | 209,882 |
Net realized gain on sale of securities available-for-sale | 1,246 | 0 |
Other income | 266,712 | 323,674 |
Total non-interest income | 1,449,247 | 1,483,520 |
Non-interest expense | ||
Salaries and wages | 1,653,751 | 1,725,000 |
Employee benefits | 682,944 | 679,762 |
Occupancy expenses, net | 614,817 | 605,378 |
Other expenses | 1,890,604 | 1,780,363 |
Total non-interest expense | 4,842,116 | 4,790,503 |
Income before income taxes | 2,481,104 | 2,105,372 |
Income tax expense | 688,155 | 589,472 |
Net income | $1,792,949 | $1,515,900 |
Earnings per common share | $0.35 | $0.30 |
Weighted average number of common shares | ||
used in computing earnings per share | 5,091,283 | 5,032,156 |
Dividends declared per common share | $0.17 | $0.16 |
3 |
Table of Contents |
Community Bancorp. and Subsidiary |
| Three Months Ended September 30, |
| |||||
Consolidated Statements of Income |
| 2023 |
|
| 2022 |
| ||
(Unaudited) |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Interest income |
|
|
|
|
|
| ||
Interest and fees on loans |
| $ | 10,919,330 |
|
| $ | 8,182,209 |
|
Interest on taxable debt securities |
|
| 941,956 |
|
|
| 799,856 |
|
Interest on tax-exempt debt securities |
|
| 90,659 |
|
|
| 68,155 |
|
Dividends |
|
| 39,904 |
|
|
| 23,029 |
|
Interest on federal funds sold and overnight deposits |
|
| 94,515 |
|
|
| 358,907 |
|
Total interest income |
|
| 12,086,364 |
|
|
| 9,432,156 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
Interest on deposits |
|
| 2,501,243 |
|
|
| 837,983 |
|
Interest on borrowed funds |
|
| 676,837 |
|
|
| 21,363 |
|
Interest on repurchase agreements |
|
| 201,518 |
|
|
| 45,153 |
|
Interest on junior subordinated debentures |
|
| 276,707 |
|
|
| 154,091 |
|
Total interest expense |
|
| 3,656,305 |
|
|
| 1,058,590 |
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
| 8,430,059 |
|
|
| 8,373,566 |
|
Provision for credit losses |
|
| 240,889 |
|
|
| 125,000 |
|
Net interest income after provision for credit losses |
|
| 8,189,170 |
|
|
| 8,248,566 |
|
|
|
|
|
|
|
|
|
|
Non-interest income |
|
|
|
|
|
|
|
|
Service fees |
|
| 937,890 |
|
|
| 939,807 |
|
Income from sold loans |
|
| 144,747 |
|
|
| 109,411 |
|
Other income from loans |
|
| 310,645 |
|
|
| 301,710 |
|
Other income |
|
| 318,309 |
|
|
| 180,675 |
|
Total non-interest income |
|
| 1,711,591 |
|
|
| 1,531,603 |
|
|
|
|
|
|
|
|
|
|
Non-interest expense |
|
|
|
|
|
|
|
|
Salaries and wages |
|
| 2,164,760 |
|
|
| 1,984,000 |
|
Employee benefits |
|
| 797,304 |
|
|
| 629,681 |
|
Occupancy expenses, net |
|
| 662,277 |
|
|
| 677,805 |
|
Other expenses |
|
| 2,190,203 |
|
|
| 2,049,423 |
|
Total non-interest expense |
|
| 5,814,544 |
|
|
| 5,340,909 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
| 4,086,217 |
|
|
| 4,439,260 |
|
Income tax expense |
|
| 723,708 |
|
|
| 828,754 |
|
Net income |
| $ | 3,362,509 |
|
| $ | 3,610,506 |
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
| $ | 0.61 |
|
| $ | 0.66 |
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
used in computing earnings per share |
|
| 5,478,960 |
|
|
| 5,409,612 |
|
Dividends declared per common share |
| $ | 0.23 |
|
| $ | 0.23 |
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
Community Bancorp. and Subsidiary | Nine Months Ended September 30, | |
Consolidated Statements of Income | 2017 | 2016 |
(Unaudited) | ||
Interest income | ||
Interest and fees on loans | $17,737,531 | $16,582,276 |
Interest on debt securities | ||
Taxable | 488,250 | 384,413 |
Tax-exempt | 992,831 | 942,246 |
Dividends | 117,979 | 108,141 |
Interest on federal funds sold and overnight deposits | 84,802 | 18,654 |
Total interest income | 19,421,393 | 18,035,730 |
Interest expense | ||
Interest on deposits | 1,734,432 | 1,529,465 |
Interest on borrowed funds | 92,492 | 106,807 |
Interest on repurchase agreements | 64,326 | 56,125 |
Interest on junior subordinated debentures | 388,855 | 339,603 |
Total interest expense | 2,280,105 | 2,032,000 |
Net interest income | 17,141,288 | 16,003,730 |
Provision for loan losses | 450,000 | 400,000 |
Net interest income after provision for loan losses | 16,691,288 | 15,603,730 |
Non-interest income | ||
Service fees | 2,293,773 | 1,992,560 |
Income from sold loans | 560,210 | 683,114 |
Other income from loans | 616,931 | 616,473 |
Net realized gain on sale of securities available-for-sale | 4,647 | 0 |
Other income | 725,635 | 747,923 |
Total non-interest income | 4,201,196 | 4,040,070 |
Non-interest expense | ||
Salaries and wages | 5,068,626 | 5,175,000 |
Employee benefits | 2,016,923 | 2,049,926 |
Occupancy expenses, net | 1,963,543 | 1,857,482 |
Other expenses | 5,416,710 | 5,065,565 |
Total non-interest expense | 14,465,802 | 14,147,973 |
Income before income taxes | 6,426,682 | 5,495,827 |
Income tax expense | 1,720,003 | 1,515,234 |
Net income | $4,706,679 | $3,980,593 |
Earnings per common share | $0.91 | $0.78 |
Weighted average number of common shares | ||
used in computing earnings per share | 5,077,473 | 5,016,191 |
Dividends declared per common share | $0.51 | $0.48 |
4 |
Table of Contents |
Community Bancorp. and Subsidiary |
| Nine Months Ended September 30, |
| |||||
Consolidated Statements of Income |
| 2023 |
|
| 2022 |
| ||
(Unaudited) |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Interest income |
|
|
|
|
|
| ||
Interest and fees on loans |
| $ | 30,310,324 |
|
| $ | 23,300,119 |
|
Interest on taxable debt securities |
|
| 2,815,397 |
|
|
| 2,192,540 |
|
Interest on tax-exempt debt securities |
|
| 271,975 |
|
|
| 112,890 |
|
Dividends |
|
| 104,556 |
|
|
| 56,121 |
|
Interest on federal funds sold and overnight deposits |
|
| 568,803 |
|
|
| 609,532 |
|
Total interest income |
|
| 34,071,055 |
|
|
| 26,271,202 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
|
|
Interest on deposits |
|
| 6,570,373 |
|
|
| 1,975,401 |
|
Interest on borrowed funds |
|
| 953,799 |
|
|
| 64,993 |
|
Interest on repurchase agreements |
|
| 548,300 |
|
|
| 88,322 |
|
Interest on junior subordinated debentures |
|
| 776,296 |
|
|
| 373,506 |
|
Total interest expense |
|
| 8,848,768 |
|
|
| 2,502,222 |
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
| 25,222,287 |
|
|
| 23,768,980 |
|
Provision for credit losses |
|
| 808,557 |
|
|
| 1,325,000 |
|
Net interest income after provision for credit losses |
|
| 24,413,730 |
|
|
| 22,443,980 |
|
|
|
|
|
|
|
|
|
|
Non-interest income |
|
|
|
|
|
|
|
|
Service fees |
|
| 2,757,629 |
|
|
| 2,739,076 |
|
Income from sold loans |
|
| 358,942 |
|
|
| 508,795 |
|
Other income from loans |
|
| 1,081,093 |
|
|
| 895,884 |
|
Other income |
|
| 1,111,136 |
|
|
| 708,574 |
|
Total non-interest income |
|
| 5,308,800 |
|
|
| 4,852,329 |
|
|
|
|
|
|
|
|
|
|
Non-interest expense |
|
|
|
|
|
|
|
|
Salaries and wages |
|
| 6,718,280 |
|
|
| 6,058,000 |
|
Employee benefits |
|
| 2,363,444 |
|
|
| 2,106,356 |
|
Occupancy expenses, net |
|
| 2,133,492 |
|
|
| 2,104,346 |
|
Other expenses |
|
| 6,342,955 |
|
|
| 5,960,259 |
|
Total non-interest expense |
|
| 17,558,171 |
|
|
| 16,228,961 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
| 12,164,359 |
|
|
| 11,067,348 |
|
Income tax expense |
|
| 2,266,751 |
|
|
| 2,030,148 |
|
Net income |
| $ | 9,897,608 |
|
| $ | 9,037,200 |
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
| $ | 1.80 |
|
| $ | 1.67 |
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
used in computing earnings per share |
|
| 5,461,660 |
|
|
| 5,396,215 |
|
Dividends declared per common share |
| $ | 0.69 |
|
| $ | 0.69 |
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
Community Bancorp. and Subsidiary | ||
Consolidated Statements of Comprehensive Income | ||
(Unaudited) | Three Months Ended September 30, | |
2017 | 2016 | |
Net income | $1,792,949 | $1,515,900 |
Other comprehensive income, net of tax: | ||
Unrealized holding loss on available-for-sale securities | ||
arising during the period | (55,963) | (46,840) |
Reclassification adjustment for gain realized in income | (1,246) | 0 |
Unrealized loss during the period | (57,209) | (46,840) |
Tax effect | 19,451 | 15,926 |
Other comprehensive loss, net of tax | (37,758) | (30,914) |
Total comprehensive income | $1,755,191 | $1,484,986 |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Net income | $4,706,679 | $3,980,593 |
Other comprehensive income, net of tax: | ||
Unrealized holding gain on available-for-sale securities | ||
arising during the period | 22,250 | 375,713 |
Reclassification adjustment for gain realized in income | (4,647) | 0 |
Unrealized gain during the period | 17,603 | 375,713 |
Tax effect | (5,985) | (127,742) |
Other comprehensive income, net of tax | 11,618 | 247,971 |
Total comprehensive income | $4,718,297 | $4,228,564 |
5 |
Table of Contents |
Community Bancorp. and Subsidiary |
|
|
|
|
|
| ||
Consolidated Statements of Comprehensive Income (Loss) |
|
|
|
|
|
| ||
(Unaudited) |
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Net income |
| $ | 3,362,509 |
|
| $ | 3,610,506 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax: |
|
|
|
|
|
|
|
|
Unrealized holding loss on securities AFS arising during the period |
|
| (5,155,445 | ) |
|
| (8,978,128 | ) |
Tax effect |
|
| 1,082,645 |
|
|
| 1,885,407 |
|
Other comprehensive loss, net of tax |
|
| (4,072,800 | ) |
|
| (7,092,721 | ) |
Total comprehensive loss |
| $ | (710,291 | ) |
| $ | (3,482,215 | ) |
|
| Nine Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Net income |
| $ | 9,897,608 |
|
| $ | 9,037,200 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss, net of tax: |
|
|
|
|
|
|
|
|
Unrealized holding loss on securities AFS arising during the period |
|
| (3,615,720 | ) |
|
| (27,078,956 | ) |
Tax effect |
|
| 759,302 |
|
|
| 5,686,580 |
|
Other comprehensive loss, net of tax |
|
| (2,856,418 | ) |
|
| (21,392,376 | ) |
Total comprehensive income (loss) |
| $ | 7,041,190 |
|
| $ | (12,355,176 | ) |
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
Community Bancorp. and Subsidiary | ||
Consolidated Statements of Cash Flows | ||
(Unaudited) | Nine Months Ended September 30, | |
2017 | 2016 | |
Cash Flows from Operating Activities: | ||
Net income | $4,706,679 | $3,980,593 |
Adjustments to reconcile net income to net cash provided by | ||
operating activities: | ||
Depreciation and amortization, bank premises and equipment | 772,344 | 779,240 |
Provision for loan losses | 450,000 | 400,000 |
Deferred income tax | 8,937 | (132,862) |
Gain on sale of securities available-for-sale | (4,647) | 0 |
Gain on sale of loans | (250,826) | (351,824) |
Loss on sale of bank premises and equipment | 1,580 | 0 |
(Gain) loss on sale of OREO | (143) | 4,965 |
Income from Trust LLC | (314,572) | (326,675) |
Amortization of bond premium, net | 86,467 | 90,099 |
Write down of OREO | 0 | 26,000 |
Proceeds from sales of loans held for sale | 11,163,180 | 18,648,432 |
Originations of loans held for sale | (11,599,454) | (17,806,183) |
Increase in taxes payable | 298,146 | 358,630 |
Increase in interest receivable | (74,968) | (16,751) |
Decrease in mortgage servicing rights | 97,661 | 77,768 |
Decrease (increase) in other assets | 1,013,781 | (17,149) |
Increase in cash surrender value of BOLI | (72,431) | (78,815) |
Amortization of core deposit intangible | 204,525 | 204,525 |
Amortization of limited partnerships | 462,924 | 439,470 |
(Increase) decrease in unamortized loan costs | (8,322) | 3,926 |
Increase (decrease) in interest payable | 36,179 | (8,421) |
Increase in accrued expenses | 457,667 | 93,410 |
(Decrease) increase in other liabilities | (860,426) | 17,835 |
Net cash provided by operating activities | 6,574,281 | 6,386,213 |
Cash Flows from Investing Activities: | ||
Investments - held-to-maturity | ||
Maturities and pay downs | 30,488,706 | 28,312,853 |
Purchases | (34,484,362) | (41,795,534) |
Investments - available-for-sale | ||
Maturities, calls, pay downs and sales | 9,737,133 | 4,550,645 |
Purchases | (12,805,972) | (7,206,847) |
Proceeds from redemption of restricted equity securities | 1,055,800 | 1,866,400 |
Purchases of restricted equity securities | 0 | (1,280,600) |
Increase (decrease) in limited partnership contributions payable | 459,250 | (687,500) |
Investments in limited partnerships | (486,750) | 0 |
Increase in loans, net | (19,492,075) | (12,747,728) |
Capital expenditures for bank premises and equipment | (486,158) | (152,199) |
Proceeds from sales of OREO | 399,123 | 217,143 |
Recoveries of loans charged off | 71,835 | 53,242 |
Net cash used in investing activities | (25,543,470) | (28,870,125) |
2017 | 2016 | |
Cash Flows from Financing Activities: | ||
Net increase (decrease) in demand and interest-bearing transaction accounts | 20,831,788 | (3,019,738) |
Net increase in money market and savings accounts | 19,567,686 | 4,588,578 |
Net increase in time deposits | 11,617,814 | 6,752,504 |
Net (decrease) increase in repurchase agreements | (2,964,268) | 3,761,011 |
Net decrease in short-term borrowings | (30,000,000) | (4,755,000) |
Proceeds from long-term borrowings | 2,000,000 | 550,000 |
Decrease in capital lease obligations | (74,014) | (64,555) |
Dividends paid on preferred stock | (75,000) | (65,625) |
Dividends paid on common stock | (1,829,567) | (1,735,340) |
Net cash provided by financing activities | 19,074,439 | 6,011,835 |
Net increase (decrease) in cash and cash equivalents | 105,250 | (16,472,077) |
Cash and cash equivalents: | ||
Beginning | 29,614,286 | 28,851,890 |
Ending | $29,719,536 | $12,379,813 |
Supplemental Schedule of Cash Paid During the Period: | ||
Interest | $2,243,926 | $2,040,421 |
Income taxes, net of refunds | $950,000 | $850,000 |
Supplemental Schedule of Noncash Investing and Financing Activities: | ||
Change in unrealized gain on securities available-for-sale | $17,603 | $375,713 |
Loans transferred to OREO | $329,215 | $395,108 |
Common Shares Dividends Paid: | ||
Dividends declared | $2,586,973 | $2,405,222 |
(Increase) decrease in dividends payable attributable to dividends declared | (44,507) | 1,380 |
Dividends reinvested | (712,899) | (671,262) |
$1,829,567 | $1,735,340 |
6 |
Table of Contents |
Community Bancorp. and Subsidiary |
Consolidated Statements of Changes in Shareholders' Equity |
(Unaudited) |
|
| Nine Months Ended September 30, 2023 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||
|
| Common |
|
| Preferred |
|
| paid-in |
|
| Retained |
|
|
|
|
| Treasury |
|
| shareholders' |
| |||||||
|
| Stock |
|
| Stock |
|
| capital |
|
| earnings |
|
| AOCI* |
|
| stock |
|
| equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
January 1, 2023 |
| $ | 14,119,275 |
|
| $ | 1,500,000 |
|
| $ | 36,383,235 |
|
| $ | 46,464,447 |
|
| $ | (20,667,817 | ) |
| $ | (2,622,777 | ) |
| $ | 75,176,363 |
|
Cumulative change in accounting principle (Note 2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (549,113 | ) |
|
|
|
|
|
|
|
|
|
| (549,113 | ) |
Balance at January 1, 2023 (as adjusted for change |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 45,915,334 |
|
|
|
|
|
|
|
|
|
|
| 74,627,250 |
|
in accounting principle) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
| 43,693 |
|
|
|
|
|
|
| 276,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 319,877 |
|
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,250,794 | ) |
|
|
|
|
|
|
|
|
|
| (1,250,794 | ) |
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (28,125 | ) |
|
|
|
|
|
|
|
|
|
| (28,125 | ) |
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,338,761 |
|
|
|
|
|
|
|
|
|
|
| 3,338,761 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,672,818 |
|
|
|
|
|
|
| 2,672,818 |
|
March 31, 2023 |
| $ | 14,162,968 |
|
| $ | 1,500,000 |
|
| $ | 36,659,419 |
|
| $ | 47,975,176 |
|
| $ | (17,994,999 | ) |
| $ | (2,622,777 | ) |
| $ | 79,679,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
| 45,720 |
|
|
|
|
|
|
| 336,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 382,247 |
|
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,254,836 | ) |
|
|
|
|
|
|
|
|
|
| (1,254,836 | ) |
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (30,000 | ) |
|
|
|
|
|
|
|
|
|
| (30,000 | ) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,196,340 |
|
|
|
|
|
|
|
|
|
|
| 3,196,340 |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,456,436 | ) |
|
|
|
|
|
| (1,456,436 | ) |
June 30, 2023 |
| $ | 14,208,688 |
|
| $ | 1,500,000 |
|
| $ | 36,995,946 |
|
| $ | 49,886,680 |
|
| $ | (19,451,435 | ) |
| $ | (2,622,777 | ) |
| $ | 80,517,102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
| 43,382 |
|
|
|
|
|
|
| 246,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 289,675 |
|
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,258,852 | ) |
|
|
|
|
|
|
|
|
|
| (1,258,852 | ) |
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (30,938 | ) |
|
|
|
|
|
|
|
|
|
| (30,938 | ) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,362,509 |
|
|
|
|
|
|
|
|
|
|
| 3,362,509 |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4,072,800 | ) |
|
|
|
|
|
| (4,072,800 | ) |
September 30, 2023 |
| $ | 14,252,070 |
|
| $ | 1,500,000 |
|
| $ | 37,242,239 |
|
| $ | 51,959,399 |
|
| $ | (23,524,235 | ) |
| $ | (2,622,777 | ) |
| $ | 78,806,696 |
|
*Accumulated other comprehensive loss
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
7 |
Table of Contents |
Community Bancorp. and Subsidiary |
Consolidated Statements of Changes in Shareholders' Equity |
(Unaudited) |
|
| Nine Months Ended September 30, 2022 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
|
|
|
|
|
| Total |
| |||||||
|
| Common |
|
| Preferred |
|
| paid-in |
|
| Retained |
|
|
|
|
| Treasury |
|
| shareholders' |
| |||||||
|
| Stock |
|
| Stock |
|
| capital |
|
| earnings |
|
| AOCI* |
|
| stock |
|
| equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
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 |
|
| 35,597 |
|
|
|
|
|
|
| 237,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 272,683 |
|
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,236,880 | ) |
|
|
|
|
|
|
|
|
|
| (1,236,880 | ) |
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (12,188 | ) |
|
|
|
|
|
|
|
|
|
| (12,188 | ) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,405,542 |
|
|
|
|
|
|
|
|
|
|
| 2,405,542 |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8,744,637 | ) |
|
|
|
|
|
| (8,744,637 | ) |
March 31, 2022 |
| $ | 14,005,445 |
|
| $ | 1,500,000 |
|
| $ | 35,559,149 |
|
| $ | 38,914,579 |
|
| $ | (9,911,608 | ) |
| $ | (2,622,777 | ) |
| $ | 77,444,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
| 33,048 |
|
|
|
|
|
|
| 287,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 320,930 |
|
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,240,049 | ) |
|
|
|
|
|
|
|
|
|
| (1,240,049 | ) |
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13,124 | ) |
|
|
|
|
|
|
|
|
|
| (13,124 | ) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,021,152 |
|
|
|
|
|
|
|
|
|
|
| 3,021,152 |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (5,555,018 | ) |
|
|
|
|
|
| (5,555,018 | ) |
June 30, 2022 |
| $ | 14,038,493 |
|
| $ | 1,500,000 |
|
| $ | 35,847,031 |
|
| $ | 40,682,558 |
|
| $ | (15,466,626 | ) |
| $ | (2,622,777 | ) |
| $ | 73,978,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
| 33,780 |
|
|
|
|
|
|
| 270,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 304,361 |
|
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,243,187 | ) |
|
|
|
|
|
|
|
|
|
| (1,243,187 | ) |
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (17,813 | ) |
|
|
|
|
|
|
|
|
|
| (17,813 | ) |
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,610,506 |
|
|
|
|
|
|
|
|
|
|
| 3,610,506 |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,092,721 | ) |
|
|
|
|
|
| (7,092,721 | ) |
September 30, 2022 |
| $ | 14,072,273 |
|
| $ | 1,500,000 |
|
| $ | 36,117,612 |
|
| $ | 43,032,064 |
|
| $ | (22,559,347 | ) |
| $ | (2,622,777 | ) |
| $ | 69,539,825 |
|
*Accumulated other comprehensive loss
The accompanying notes are an integral part of Content
8 |
Table of Contents |
Community Bancorp. and Subsidiary |
|
|
|
|
|
| ||
Consolidated Statements of Cash Flows |
|
|
|
|
|
| ||
(Unaudited) |
| Nine Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net income |
| $ | 9,897,608 |
|
| $ | 9,037,200 |
|
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
|
|
|
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization, bank premises and equipment |
|
| 809,560 |
|
|
| 853,685 |
|
Provision for credit losses |
|
| 808,557 |
|
|
| 1,325,000 |
|
Deferred income tax |
|
| (269,192 | ) |
|
| (38,020 | ) |
Gain on sale of loans |
|
| (114,912 | ) |
|
| (218,501 | ) |
Loss on sale of bank premises and equipment |
|
| 449 |
|
|
| 0 |
|
Income from CFS Partners |
|
| (705,342 | ) |
|
| (386,217 | ) |
Amortization of bond premium, net |
|
| 201,050 |
|
|
| 518,833 |
|
Proceeds from sales of loans held for sale |
|
| 5,597,777 |
|
|
| 10,756,242 |
|
Originations of loans held for sale |
|
| (5,539,565 | ) |
|
| (10,328,741 | ) |
(Decrease) increase in taxes payable |
|
| (271,441 | ) |
|
| 251,872 |
|
Increase in interest receivable |
|
| (615,797 | ) |
|
| (309,185 | ) |
Decrease in mortgage servicing rights |
|
| 48,123 |
|
|
| 17,084 |
|
Decrease in right-of-use assets |
|
| 150,971 |
|
|
| 149,011 |
|
Decrease in operating lease liabilities |
|
| (161,271 | ) |
|
| (153,871 | ) |
Increase in other assets |
|
| (71,207 | ) |
|
| (209,618 | ) |
Increase in cash surrender value of BOLI |
|
| (59,235 | ) |
|
| (60,433 | ) |
Amortization of limited partnerships |
|
| 201,384 |
|
|
| 201,537 |
|
Change in net deferred loan fees and costs |
|
| (56,955 | ) |
|
| (504,574 | ) |
Increase (decrease) in interest payable |
|
| 720,343 |
|
|
| (25,558 | ) |
Decrease in accrued expenses |
|
| (310,304 | ) |
|
| (4,198 | ) |
Increase in other liabilities |
|
| 369,059 |
|
|
| 12,439 |
|
Net cash provided by operating activities |
|
| 10,629,660 |
|
|
| 10,883,987 |
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Investments - AFS |
|
|
|
|
|
|
|
|
Maturities, calls, pay downs and sales |
|
| 11,164,002 |
|
|
| 14,994,113 |
|
Purchases |
|
| (3,991,124 | ) |
|
| (47,476,763 | ) |
Proceeds from redemption of restricted equity securities |
|
| 3,516,500 |
|
|
| 43,500 |
|
Purchases of restricted equity securities |
|
| (3,528,300 | ) |
|
| 0 |
|
Decrease in limited partnership contributions payable |
|
| (1,823,301 | ) |
|
| 0 |
|
Investments in limited liability entities |
|
| (282,000 | ) |
|
| 0 |
|
Increase in loans, net |
|
| (90,497,664 | ) |
|
| (34,956,148 | ) |
Capital expenditures net of proceeds from sales of bank |
|
|
|
|
|
|
|
|
premises and equipment |
|
| (516,267 | ) |
|
| (398,378 | ) |
Recoveries of loans charged off |
|
| 159,827 |
|
|
| 147,510 |
|
Net cash used in investing activities |
|
| (85,798,327 | ) |
|
| (67,646,166 | ) |
9 |
Table of Contents |
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Financing Activities: |
|
|
|
|
|
| ||
Net (decrease) increase in demand and interest-bearing transaction accounts |
|
| (20,211,447 | ) |
|
| 5,391,362 |
|
Net (decrease) increase in money market and savings accounts |
|
| (14,587,675 | ) |
|
| 19,373,851 |
|
Net increase (decrease) in time deposits |
|
| 13,031,762 |
|
|
| (1,124,017 | ) |
Net decrease in repurchase agreements |
|
| (1,497,403 | ) |
|
| (354,951 | ) |
Net increase in short-term borrowings |
|
| 3,550,000 |
|
|
| 0 |
|
Proceeds from long-term borrowings |
|
| 44,500,000 |
|
|
| 0 |
|
Repayments on long-term borrowings |
|
| (200,000 | ) |
|
| 0 |
|
Decrease in finance lease obligations |
|
| (164,420 | ) |
|
| (159,333 | ) |
Dividends paid on preferred stock |
|
| (89,063 | ) |
|
| (43,125 | ) |
Dividends paid on common stock |
|
| (2,771,073 | ) |
|
| (2,778,271 | ) |
Net cash provided by financing activities |
|
| 21,560,681 |
|
|
| 20,305,516 |
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
| (53,607,986 | ) |
|
| (36,456,663 | ) |
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning |
|
| 71,140,328 |
|
|
| 110,358,926 |
|
Ending |
| $ | 17,532,342 |
|
| $ | 73,902,263 |
|
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Cash Paid During the Period: |
|
|
|
|
|
|
|
|
Interest |
| $ | 8,128,425 |
|
| $ | 2,527,780 |
|
|
|
|
|
|
|
|
|
|
Income taxes, net of refunds |
| $ | 2,606,000 |
|
| $ | 1,614,759 |
|
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Noncash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Change in unrealized loss on securities AFS |
| $ | (3,615,720 | ) |
| $ | (27,078,956 | ) |
|
|
|
|
|
|
|
|
|
Common Shares Dividends Paid: |
|
|
|
|
|
|
|
|
Dividends declared |
| $ | 3,764,480 |
|
| $ | 3,720,116 |
|
Increase in dividends payable attributable to dividends declared |
|
| (1,608 | ) |
|
| (43,871 | ) |
Dividends reinvested |
|
| (991,799 | ) |
|
| (897,974 | ) |
Total dividends paid |
| $ | 2,771,073 |
|
| $ | 2,778,271 |
|
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
10 |
Table of Contents |
Notes to Consolidated Financial Statements
Note 1. Basis of Presentation and Consolidation
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, 20162022, contained in the Company's Annual Report on Form 10-K. Certain amounts in the 2022 consolidated financial statements were reclassified to conform to the current period presentation. The reclassification had no effect on net income or shareholders’ equity as previously reported. 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, 2017, or2023.
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 consolidated statements of income, comprehensive income, cash flows and changes in shareholders’ equity for anya two year, rather than a three year, period, and provides certain other interim period.
In addition to the 2017 presentation. Reclassifications had no effect on prior period net income or shareholders’ equity.
ABS: | Asset backed security | FDIC: | Federal Deposit Insurance Corporation |
AFS: | Available-for-sale | FDICIA: | Federal Deposit Insurance Corporation |
Agency MBS: | MBS issued by a US government agency | Improvement Act of 1991 | |
or GSE | FHLBB: | Federal Home Loan Bank of Boston | |
ACL: | Allowance for Credit Losses | FHLMC: | Federal Home Loan Mortgage Corporation |
ALCO: | Asset Liability Committee | FOMC: | Federal Open Market Committee |
ALL: | Allowance for Loan Losses | FRB: | Federal Reserve Board |
AOCI: | Accumulated other comprehensive income | FRBB: | Federal Reserve Bank of Boston |
ASC: | Accounting Standards Codification | GAAP: | Generally Accepted Accounting Principles |
ASU: | Accounting Standards Update | in the United States | |
Bancorp: | Community Bancorp. | GSE: | Government sponsored enterprise |
Bank: | Community National Bank | HTM: | Held-to-maturity |
BHG: | Bankers Healthcare Group | ICS: | Insured Cash Sweeps of the IntraFi Network |
BIC: | Borrower-in-Custody | IRS: | Internal Revenue Service |
Board: | Board of Directors | JNE: | Jobs for New England |
BOLI: | Bank owned life insurance | Jr: | Junior |
bp or bps: | Basis point(s) | LIBOR | London Interbank Offered Rate |
BTFP: | Bank Term Funding Program | MBS: | Mortgage-backed security |
CDARS: | Certificate of Deposit Accounts Registry | MSRs: | Mortgage servicing rights |
Service of the IntraFi Network | NII: | Net interest income | |
CDs: | Certificates of deposit | OAS: | Other amortizing security |
CDI: | Core deposit intangible | OBS: | Off-balance sheet |
CECL: | Current Expected Credit Loss | OCI: | Other comprehensive income (loss) |
CFSG: | Community Financial Services Group, LLC | OREO: | Other real estate owned |
CFS Partners: | Community Financial Services Partners, | OTTI: | Other-than-temporary impairment |
LLC | PMI: | Private mortgage insurance | |
CMO: | Collateralized Mortgage Obligations | PPP: | Paycheck Protection Program |
Company: | Community Bancorp. and Subsidiary | RD: | USDA Rural Development |
CRE: | Commercial Real Estate | SBA: | U.S. Small Business Administration |
DCF: | Discounted cash flow | SEC: | U.S. Securities and Exchange Commission |
DDA or DDAs: | Demand Deposit Account(s) | SOFR: | Secured Overnight Financing Rate |
DTC: | Depository Trust Company | TDR: | Troubled-debt restructuring |
DRIP: | Dividend Reinvestment Plan | USDA: | U.S. Department of Agriculture |
Exchange Act: | Securities Exchange Act of 1934 | VA: | U.S. Veterans Administration |
FASB: | Financial Accounting Standards Board |
11 |
Table of Contents |
Note 2. Recent Accounting Developments
In January 2016,March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Accounting Standards Board (FASB)Reporting, and has issued Accounting Standards Update (ASU) 2016-01, Financial Instruments—Overall (Subtopic 825-10)subsequent amendments thereto, which provide 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. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): RecognitionDeferral of the Sunset Date of Topic 848, which extended the sunset date of December 31, 2022, to December 31, 2024. The guidance is effective for all entities as of March 12, 2020, through December 31, 2024. The Company is assessing ASU No. 2020-04 and Measurementits 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. That transition became effective for the Debentures as of the first London banking day after June 30, 2023 (see the Interest Rate Risk and Asset and Liability Management section of the accompanying Management’s Discussion and Analysis of Financial AssetsCondition and Financial LiabilitiesResults of Operations following these Notes).
In March 2023, the FASB issued ASU No. 2023-02, Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. This guidance changes how entitiesASU No. 2014-01, Investments-Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects, previously introduced the option to apply the proportional amortization method to account for equity investments that do not resultmade primarily for the purpose of receiving income tax credits and other income tax benefits when certain requirements are met; however, this guidance limited the proportional amortization method to investments in consolidationlow-income-housing tax credit (LIHTC) structures. The proportional amortization method results in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization of the investment and the income tax credits being presented net in the income statement as a component of net income tax expense (benefit). Equity investments in other tax credit structures are nottypically accounted for underusing the equity method, which results in investment income, gains and losses, and tax credits being presented gross on the income statement in their respective line items. The amendments in this update permit reporting entities to elect to account for their tax equity investments, regardless of accounting. This guidance also changesthe tax credit program from which the income tax credits are received, using the proportional amortization method if certain disclosure requirements and other aspects of current accounting principles generally acceptedconditions are met. The amendments in this update are effective for the United States of America (US GAAP). Public businesses must use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. This guidance is effectiveCompany for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the ASU on its consolidated financial statements.
Accounting Standards Adopted in 2023
The Company adopted the following accounting standards effective January 1, 2023, and applied them to the Company’s interim unaudited consolidated financial statements beginning with the quarter ended March 31, 2023. Prior periods have not been restated as a result of adoption of the these accounting standards.
ASU on its consolidated financial statements.
ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. 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
12 |
Table of Contents |
Note 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 September 30, | ||
2017 | 2016 | |
Net income, as reported | $1,792,949 | $1,515,900 |
Less: dividends to preferred shareholders | 26,562 | 21,875 |
Net income available to common shareholders | $1,766,387 | $1,494,025 |
Weighted average number of common shares | ||
used in calculating earnings per share | 5,091,283 | 5,032,156 |
Earnings per common share | $0.35 | $0.30 |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Net income, as reported | $4,706,679 | $3,980,593 |
Less: dividends to preferred shareholders | 75,000 | 65,625 |
Net income available to common shareholders | $4,631,679 | $3,914,968 |
Weighted average number of common shares | ||
used in calculating earnings per share | 5,077,473 | 5,016,191 |
Earnings per common share | $0.91 | $0.78 |
Three Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Net income, as reported |
| $ | 3,362,509 |
|
| $ | 3,610,506 |
|
Less: dividends to preferred shareholders |
|
| 30,938 |
|
|
| 17,813 |
|
Net income available to common shareholders |
| $ | 3,331,571 |
|
| $ | 3,592,693 |
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
used in calculating earnings per share |
|
| 5,478,960 |
|
|
| 5,409,612 |
|
Earnings per common share |
| $ | 0.61 |
|
| $ | 0.66 |
|
Nine Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Net income, as reported |
| $ | 9,897,608 |
|
| $ | 9,037,200 |
|
Less: dividends to preferred shareholders |
|
| 89,063 |
|
|
| 43,125 |
|
Net income available to common shareholders |
| $ | 9,808,545 |
|
| $ | 8,994,075 |
|
Weighted average number of common shares |
|
|
|
|
|
|
|
|
used in calculating earnings per share |
|
| 5,461,660 |
|
|
| 5,396,215 |
|
Earnings per common share |
| $ | 1.80 |
|
| $ | 1.67 |
|
Note 4. Investment Securities
Debt securities AFS and HTM as of the balance sheet dates consisted of the following:
Gross | Gross | |||
Amortized | Unrealized | Unrealized | Fair | |
Securities AFS | Cost | Gains | Losses | Value |
September 30, 2017 | ||||
U.S. Government sponsored enterprise (GSE) debt securities | $15,316,323 | $9,140 | $68,619 | $15,256,844 |
Agency mortgage-backed securities (Agency MBS) | 16,568,291 | 29,716 | 89,963 | 16,508,044 |
Other investments | 4,955,000 | 11,831 | 12,046 | 4,954,785 |
$36,839,614 | $50,687 | $170,628 | $36,719,673 | |
December 31, 2016 | ||||
U.S. GSE debt securities | $17,365,805 | $24,854 | $73,331 | $17,317,328 |
Agency MBS | 13,265,790 | 3,896 | 115,458 | 13,154,228 |
Other investments | 3,221,000 | 24,947 | 2,452 | 3,243,495 |
$33,852,595 | $53,697 | $191,241 | $33,715,051 | |
September 30, 2016 | ||||
U.S. GSE debt securities | $13,751,867 | $96,874 | $5,247 | $13,843,494 |
Agency MBS | 12,380,416 | 164,771 | 18,571 | 12,526,616 |
Other investments | 2,973,000 | 69,106 | 0 | 3,042,106 |
$29,105,283 | $330,751 | $23,818 | $29,412,216 |
Gross | Gross | |||
Amortized | Unrealized | Unrealized | Fair | |
Securities HTM | Cost | Gains | Losses | Value* |
September 30, 2017 | ||||
States and political subdivisions | $53,882,287 | $688,713 | $0 | $54,571,000 |
December 31, 2016 | ||||
States and political subdivisions | $49,886,631 | $1,148,369 | $0 | $51,035,000 |
September 30, 2016 | ||||
States and political subdivisions | $56,837,100 | $754,900 | $0 | $57,592,000 |
|
|
|
|
| Gross |
|
| Gross |
|
|
|
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. GSE debt securities |
| $ | 12,000,000 |
|
| $ | 0 |
|
| $ | 1,601,656 |
|
| $ | 10,398,344 |
|
U.S. Government securities |
|
| 41,247,775 |
|
|
| 0 |
|
|
| 2,705,620 |
|
|
| 38,542,155 |
|
Taxable Municipal securities |
|
| 300,000 |
|
|
| 0 |
|
|
| 66,286 |
|
|
| 233,714 |
|
Tax-exempt Municipal securities |
|
| 11,994,655 |
|
|
| 0 |
|
|
| 1,398,268 |
|
|
| 10,596,387 |
|
Agency MBS |
|
| 130,156,068 |
|
|
| 0 |
|
|
| 23,333,064 |
|
|
| 106,823,004 |
|
ABS and OAS |
|
| 2,533,447 |
|
|
| 0 |
|
|
| 234,381 |
|
|
| 2,299,066 |
|
CMO |
|
| 11,740,029 |
|
|
| 0 |
|
|
| 374,375 |
|
|
| 11,365,654 |
|
Other investments |
|
| 1,734,000 |
|
|
| 0 |
|
|
| 63,863 |
|
|
| 1,670,137 |
|
Total |
| $ | 211,705,974 |
|
| $ | 0 |
|
| $ | 29,777,513 |
|
| $ | 181,928,461 |
|
13 |
Table of Contents |
|
|
|
|
| Gross |
|
| Gross |
|
|
|
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. GSE debt securities |
| $ | 12,000,000 |
|
| $ | 0 |
|
| $ | 1,624,709 |
|
| $ | 10,375,291 |
|
U.S. Government securities |
|
| 41,368,624 |
|
|
| 0 |
|
|
| 3,137,035 |
|
|
| 38,231,589 |
|
Taxable Municipal securities |
|
| 300,000 |
|
|
| 0 |
|
|
| 65,142 |
|
|
| 234,858 |
|
Tax-exempt Municipal securities |
|
| 12,042,410 |
|
|
| 40,513 |
|
|
| 759,356 |
|
|
| 11,323,567 |
|
Agency MBS |
|
| 135,193,097 |
|
|
| 69,447 |
|
|
| 20,030,945 |
|
|
| 115,231,599 |
|
ABS and OAS |
|
| 2,929,740 |
|
|
| 0 |
|
|
| 236,134 |
|
|
| 2,693,606 |
|
CMO |
|
| 12,278,033 |
|
|
| 581 |
|
|
| 342,689 |
|
|
| 11,935,925 |
|
Other investments |
|
| 2,968,000 |
|
|
| 0 |
|
|
| 76,326 |
|
|
| 2,891,674 |
|
Total |
| $ | 219,079,904 |
|
| $ | 110,541 |
|
| $ | 26,272,336 |
|
| $ | 192,918,109 |
|
The Company had investments in Agency MBS exceeding 10% of shareholders’ equity with a book value of $130.2 million and $135.2 million, respectively, and a fair value of HTM$106.8 million and $115.2 million, respectively, at September 30, 2023 and December 31, 2022.
Investment securities rounds values to nearest thousand.
Amortized | Fair | |
Cost | Value | |
September 30, 2017 | $36,839,614 | $36,719,673 |
December 31, 2016 | 33,604,595 | 33,469,254 |
September 30, 2016 | 29,105,283 | 29,412,216 |
There were no sales of debt securities during the first nine months of 2023 or 2022.
The scheduled maturities of debt securities AFS as of the balance sheet dates were as follows:
Amortized | Fair | |
Cost | Value | |
September 30, 2017 | ||
Due in one year or less | $2,250,000 | $2,245,258 |
Due from one to five years | 13,029,323 | 13,009,642 |
Due from five to ten years | 4,992,000 | 4,956,729 |
Agency MBS | 16,568,291 | 16,508,044 |
$36,839,614 | $36,719,673 | |
December 31, 2016 | ||
Due in one year or less | $2,006,027 | $2,010,287 |
Due from one to five years | 17,335,778 | 17,329,503 |
Due from five to ten years | 1,245,000 | 1,221,033 |
Agency MBS | 13,265,790 | 13,154,228 |
$33,852,595 | $33,715,051 | |
September 30, 2016 | ||
Due in one year or less | $1,000,000 | $1,001,865 |
Due from one to five years | 14,479,867 | 14,630,210 |
Due from five to ten years | 1,245,000 | 1,253,525 |
Agency MBS | 12,380,416 | 12,526,616 |
$29,105,283 | $29,412,216 |
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
September 30, 2023 |
|
|
|
|
|
| ||
Due in one year or less |
| $ | 15,695,850 |
|
| $ | 15,361,820 |
|
Due from one to five years |
|
| 47,182,358 |
|
|
| 43,290,817 |
|
Due from five to ten years |
|
| 4,509,457 |
|
|
| 4,030,167 |
|
Due after ten years |
|
| 14,162,241 |
|
|
| 12,422,653 |
|
Agency MBS |
|
| 130,156,068 |
|
|
| 106,823,004 |
|
Total |
| $ | 211,705,974 |
|
| $ | 181,928,461 |
|
|
|
|
|
|
|
|
|
|
December 31, 2022 |
|
|
|
|
|
|
|
|
Due in one year or less |
| $ | 1,976,000 |
|
| $ | 1,966,767 |
|
Due from one to five years |
|
| 58,875,224 |
|
|
| 54,736,949 |
|
Due from five to ten years |
|
| 8,631,626 |
|
|
| 7,591,761 |
|
Due after ten years |
|
| 14,403,957 |
|
|
| 13,391,033 |
|
Agency MBS |
|
| 135,193,097 |
|
|
| 115,231,599 |
|
Total |
| $ | 219,079,904 |
|
| $ | 192,918,109 |
|
Agency MBS usually differ from their contractual maturities due to the right of borrowers to prepay the underlying mortgage loans, usually without penalty, those securities are not presented in the table by contractualdue at a single maturity date.
Amortized | Fair | |
Cost | Value* | |
September 30, 2017 | ||
Due in one year or less | $28,773,116 | $28,773,000 |
Due from one to five years | 4,866,604 | 5,039,000 |
Due from five to ten years | 3,990,576 | 4,163,000 |
Due after ten years | 16,251,991 | 16,596,000 |
$53,882,287 | $54,571,000 | |
December 31, 2016 | ||
Due in one year or less | $25,368,725 | $25,369,000 |
Due from one to five years | 4,030,900 | 4,318,000 |
Due from five to ten years | 4,013,242 | 4,300,000 |
Due after ten years | 16,473,764 | 17,048,000 |
$49,886,631 | $51,035,000 | |
September 30, 2016 | ||
Due in one year or less | $35,141,204 | $35,141,000 |
Due from one to five years | 4,029,095 | 4,218,000 |
Due from five to ten years | 3,430,921 | 3,620,000 |
Due after ten years | 14,235,880 | 14,613,000 |
$56,837,100 | $57,592,000 |
14 |
Table of Contents |
Debt securities AFS with unrealized losses as of the balance sheet dates are presented in the table below.
Less than 12 months | 12 months or more | Total | |||||
Fair | Unrealized | Fair | Unrealized | Number of | Fair | Unrealized | |
Value | Loss | Value | Loss | Securities | Value | Loss | |
September 30, 2017 | |||||||
U.S. GSE debt securities | $9,702,979 | $41,405 | $1,972,786 | $27,214 | 10 | $11,675,765 | $68,619 |
Agency MBS | 11,618,020 | 86,230 | 209,545 | 3,733 | 15 | 11,827,565 | 89,963 |
Other investments | 1,969,953 | 12,046 | 0 | 0 | 8 | 1,969,953 | 12,046 |
$23,290,952 | $139,681 | $2,182,331 | $30,947 | 33 | $25,473,283 | $170,628 | |
December 31, 2016 | |||||||
U.S. GSE debt securities | $5,176,669 | $73,331 | $0 | $0 | 4 | $5,176,669 | $73,331 |
Agency MBS | 10,704,717 | 115,458 | 0 | 0 | 15 | 10,704,717 | 115,458 |
Other investments | 493,548 | 2,452 | 0 | 0 | 2 | 493,548 | 2,452 |
$16,374,934 | $191,241 | $0 | $0 | 21 | $16,374,934 | $191,241 | |
September 30, 2016 | |||||||
U.S. GSE debt securities | $1,994,753 | $5,247 | $0 | $0 | 1 | $1,994,753 | $5,247 |
Agency MBS | 2,054,035 | 18,571 | 0 | 0 | 4 | 2,054,035 | 18,571 |
$4,048,788 | $23,818 | $0 | $0 | 5 | $4,048,788 | $23,818 |
|
| Less than 12 months |
|
| 12 months or more |
|
| Totals |
| |||||||||||||||||||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Number of |
|
| Fair |
|
| Unrealized |
| |||||||
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Securities |
|
| Value |
|
| Loss |
| |||||||
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
U.S. GSE debt securities |
| $ | 0 |
|
| $ | 0 |
|
| $ | 10,398,344 |
|
| $ | 1,601,656 |
|
|
| 11 |
|
| $ | 10,398,344 |
|
| $ | 1,601,656 |
|
U.S. Government securities |
|
| 0 |
|
|
| 0 |
|
|
| 38,542,155 |
|
|
| 2,705,620 |
|
|
| 54 |
|
|
| 38,542,155 |
|
|
| 2,705,620 |
|
Taxable Municipal securities |
|
| 0 |
|
|
| 0 |
|
|
| 233,714 |
|
|
| 66,286 |
|
|
| 1 |
|
|
| 233,714 |
|
|
| 66,286 |
|
Tax-exempt Municipal securities |
|
| 6,459,331 |
|
|
| 426,299 |
|
|
| 4,137,056 |
|
|
| 971,969 |
|
|
| 23 |
|
|
| 10,596,387 |
|
|
| 1,398,268 |
|
Agency MBS |
|
| 7,854,937 |
|
|
| 203,432 |
|
|
| 98,968,067 |
|
|
| 23,129,632 |
|
|
| 123 |
|
|
| 106,823,004 |
|
|
| 23,333,064 |
|
ABS and OAS |
|
| 0 |
|
|
| 0 |
|
|
| 2,299,066 |
|
|
| 234,381 |
|
|
| 4 |
|
|
| 2,299,066 |
|
|
| 234,381 |
|
CMO |
|
| 3,891,798 |
|
|
| 28,927 |
|
|
| 7,473,856 |
|
|
| 345,448 |
|
|
| 10 |
|
|
| 11,365,654 |
|
|
| 374,375 |
|
Other investments |
|
| 0 |
|
|
| 0 |
|
|
| 1,670,137 |
|
|
| 63,863 |
|
|
| 7 |
|
|
| 1,670,137 |
|
|
| 63,863 |
|
Total |
| $ | 18,206,066 |
|
| $ | 658,658 |
|
| $ | 163,722,395 |
|
| $ | 29,118,855 |
|
|
| 233 |
|
| $ | 181,928,461 |
|
| $ | 29,777,513 |
|
|
| 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, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
U.S. GSE debt securities |
| $ | 2,723,388 |
|
| $ | 276,611 |
|
| $ | 7,651,903 |
|
| $ | 1,348,098 |
|
|
| 11 |
|
| $ | 10,375,291 |
|
| $ | 1,624,709 |
|
U.S. Government securities |
|
| 4,837,891 |
|
|
| 169,501 |
|
|
| 33,393,698 |
|
|
| 2,967,534 |
|
|
| 54 |
|
|
| 38,231,589 |
|
|
| 3,137,035 |
|
Taxable Municipal securities |
|
| 0 |
|
|
| 0 |
|
|
| 234,858 |
|
|
| 65,142 |
|
|
| 1 |
|
|
| 234,858 |
|
|
| 65,142 |
|
Tax-exempt Municipal securities |
|
| 8,608,507 |
|
|
| 522,128 |
|
|
| 592,388 |
|
|
| 237,228 |
|
|
| 19 |
|
|
| 9,200,895 |
|
|
| 759,356 |
|
Agency MBS |
|
| 14,541,901 |
|
|
| 810,356 |
|
|
| 97,718,436 |
|
|
| 19,220,589 |
|
|
| 120 |
|
|
| 112,260,337 |
|
|
| 20,030,945 |
|
ABS and OAS |
|
| 2,693,606 |
|
|
| 236,134 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4 |
|
|
| 2,693,606 |
|
|
| 236,134 |
|
CMO |
|
| 8,954,323 |
|
|
| 232,398 |
|
|
| 1,014,910 |
|
|
| 110,291 |
|
|
| 9 |
|
|
| 9,969,233 |
|
|
| 342,689 |
|
Other investments |
|
| 2,451,892 |
|
|
| 20,108 |
|
|
| 439,782 |
|
|
| 56,218 |
|
|
| 12 |
|
|
| 2,891,674 |
|
|
| 76,326 |
|
Total |
| $ | 44,811,508 |
|
| $ | 2,267,236 |
|
| $ | 141,045,975 |
|
| $ | 24,005,100 |
|
|
| 230 |
|
| $ | 185,857,483 |
|
| $ | 26,272,336 |
|
The Company adopted ASU No. 2016-13 effective January 1, 2023, which requires credit losses on debt securities AFS to be recorded in an allowance for credit losses and eliminates the concept of OTTI for debt securities AFS. Under the ASU, if the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, then the credit loss is recorded through an allowance rather than as a write-down of the security. As of September 30, 2023, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell any of the debt securities AFS in an unrealized loss position prior to recovery and determined that no individual debt securities in an unrealized loss position represented credit losses that would require an allowance for credit losses. The Company concluded that the unrealized losses for all periods presented were principally attributableprimarily attributed to changesincreases in prevailingmarket interest rates for similar typessince these securities were purchased under other market conditions.
As of December 31, 2022, in management’s view the unrealized losses on securities and notAFS were due to market conditions rather than reduced estimated cash flows or deterioration in the creditworthiness of the issuer.
15 |
Table of Contents |
Note 5. Loans, Allowance for LoanCredit Losses, and Credit Quality
The composition of net loans as of the balance sheet dates was as follows:
September 30, | December 31, | September 30, | |
2017 | 2016 | 2016 | |
Commercial & industrial | $77,604,260 | $68,730,573 | $69,791,331 |
Commercial real estate | 210,983,668 | 201,728,280 | 190,246,590 |
Residential real estate - 1st lien | 167,185,874 | 166,691,962 | 161,277,406 |
Residential real estate - Junior (Jr) lien | 43,962,578 | 42,927,335 | 41,739,827 |
Consumer | 6,311,739 | 7,171,076 | 7,131,741 |
Gross Loans | 506,048,119 | 487,249,226 | 470,186,895 |
Deduct (add): | |||
Allowance for loan losses | 5,436,313 | 5,278,445 | 5,179,965 |
Deferred net loan costs | (318,452) | (310,130) | (312,565) |
Net Loans | $500,930,258 | $482,280,911 | $465,319,495 |
Three Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Provision for loan losses |
| $ | 264,009 |
|
| $ | 125,000 |
|
Provision for credit losses on OBS credit exposure |
|
| (23,120 | ) |
|
| 0 |
|
Provision for credit losses |
| $ | 240,889 |
|
| $ | 125,000 |
|
Nine Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Provision for loan losses |
| $ | 849,549 |
|
| $ | 1,325,000 |
|
Provision for credit losses on OBS credit exposure |
|
| (40,992 | ) |
|
| 0 |
|
Provision for credit losses |
| $ | 808,557 |
|
| $ | 1,325,000 |
|
The following tables present the activity in the ACL on loans for the three- and nine-month periods following adoption of ASU 2016-13 (CECL) on January 1, 2023 and select information on impairment evaluation by portfolio segment for those interim periods.
As of or for the three months ended September 30, 2023
|
| Commercial & Industrial |
|
| Purchased |
|
| Commercial Real Estate |
|
| Municipal |
|
| Residential Real Estate 1st Lien |
|
| Residential Real Estate Jr Lien |
|
| Consumer |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
ACL beginning balance |
| $ | 1,054,342 |
|
| $ | 18,337 |
|
| $ | 5,271,521 |
|
| $ | 69,360 |
|
| $ | 2,314,554 |
|
| $ | 493,236 |
|
| $ | 34,151 |
|
| $ | 9,255,501 |
|
Charge-offs |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (42,985 | ) |
|
| (42,985 | ) |
Recoveries |
|
| 1,585 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,237 |
|
|
| 8,626 |
|
|
| 11,448 |
|
Provision (credit) |
|
| 9,401 |
|
|
| (170 | ) |
|
| 43,638 |
|
|
| 77,508 |
|
|
| 122,263 |
|
|
| (17,723 | ) |
|
| 29,092 |
|
|
| 264,009 |
|
ACL ending balance |
| $ | 1,065,328 |
|
| $ | 18,167 |
|
| $ | 5,315,159 |
|
| $ | 146,868 |
|
| $ | 2,436,817 |
|
| $ | 476,750 |
|
| $ | 28,884 |
|
| $ | 9,487,973 |
|
16 |
Table of Contents |
As of or for the nine months ended September 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Commercial |
|
|
|
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| |||||||||
|
| & Industrial |
|
| Purchased |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
ACL beginning balance |
| $ | 1,116,322 |
|
| $ | 53,090 |
|
| $ | 5,061,813 |
|
| $ | 62,339 |
|
| $ | 2,001,836 |
|
| $ | 241,950 |
|
| $ | 69,686 |
|
| $ | 102,189 |
|
| $ | 8,709,225 |
|
Impact of adopting CECL |
|
| (164,115 | ) |
|
| (29,196 | ) |
|
| (22,467 | ) |
|
| 24,243 |
|
|
| 273,167 |
|
|
| 297,746 |
|
|
| (33,813 | ) |
|
| (102,189 | ) |
|
| 243,376 |
|
Charge-offs |
|
| (361,578 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (112,426 | ) |
|
| 0 |
|
|
| (474,004 | ) |
Recoveries |
|
| 3,935 |
|
|
| 0 |
|
|
| 22,058 |
|
|
| 0 |
|
|
| 72,588 |
|
|
| 28,015 |
|
|
| 33,231 |
|
|
| 0 |
|
|
| 159,827 |
|
Provision (credit) |
|
| 470,764 |
|
|
| (5,727 | ) |
|
| 253,755 |
|
|
| 60,286 |
|
|
| 89,226 |
|
|
| (90,961 | ) |
|
| 72,206 |
|
|
| 0 |
|
|
| 849,549 |
|
ACL ending balance |
| $ | 1,065,328 |
|
| $ | 18,167 |
|
| $ | 5,315,159 |
|
| $ | 146,868 |
|
| $ | 2,436,817 |
|
| $ | 476,750 |
|
| $ | 28,884 |
|
| $ | 0 |
|
| $ | 9,487,973 |
|
|
| Commercial & Industrial |
|
| Purchased |
|
| Commercial Real Estate |
|
| Municipal |
|
| Residential Real Estate 1st Lien |
|
| Residential Real Estate Jr Lien |
|
| Consumer |
|
| Total |
| ||||||||
ACL evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Individually |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Collectively |
|
| 1,065,328 |
|
|
| 18,167 |
|
|
| 5,315,159 |
|
|
| 146,868 |
|
|
| 2,436,817 |
|
|
| 476,750 |
|
|
| 28,884 |
|
|
| 9,487,973 |
|
Total |
| $ | 1,065,328 |
|
| $ | 18,167 |
|
| $ | 5,315,159 |
|
| $ | 146,868 |
|
| $ | 2,436,817 |
|
| $ | 476,750 |
|
| $ | 28,884 |
|
| $ | 9,487,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 3,619,626 |
|
| $ | 0 |
|
| $ | 2,897,499 |
|
| $ | 0 |
|
| $ | 614,502 |
|
| $ | 66,962 |
|
| $ | 0 |
|
| $ | 7,198,589 |
|
Collectively |
|
| 122,541,408 |
|
|
| 5,977,866 |
|
|
| 404,141,594 |
|
|
| 58,747,359 |
|
|
| 205,483,601 |
|
|
| 30,987,369 |
|
|
| 3,494,482 |
|
|
| 831,373,679 |
|
Total |
| $ | 126,161,034 |
|
| $ | 5,977,866 |
|
| $ | 407,039,093 |
|
| $ | 58,747,359 |
|
| $ | 206,098,103 |
|
| $ | 31,054,331 |
|
| $ | 3,494,482 |
|
| $ | 838,572,268 |
|
The following tables present activity in the ALL and select loan information on impairment evaluation, by portfolio segment, under the incurred loss methodology, for the periods indicated:
As of or for the year ended December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Commercial |
|
|
|
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| |||||||||
|
| & Industrial |
|
| Purchased |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
ALL beginning balance |
| $ | 870,392 |
|
| $ | 68,655 |
|
| $ | 4,151,760 |
|
| $ | 76,728 |
|
| $ | 1,765,892 |
|
| $ | 182,014 |
|
| $ | 55,698 |
|
| $ | 539,117 |
|
| $ | 7,710,256 |
|
Charge-offs |
|
| (76,875 | ) |
|
| 0 |
|
|
| (667,474 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (63,625 | ) |
|
| 0 |
|
|
| (807,974 | ) |
Recoveries |
|
| 14,112 |
|
|
| 0 |
|
|
| 667,474 |
|
|
| 0 |
|
|
| 111,763 |
|
|
| 5,089 |
|
|
| 30,505 |
|
|
| 0 |
|
|
| 828,943 |
|
Provision (credit) |
|
| 308,693 |
|
|
| (15,565 | ) |
|
| 910,053 |
|
|
| (14,389 | ) |
|
| 124,181 |
|
|
| 54,847 |
|
|
| 47,108 |
|
|
| (436,928 | ) |
|
| 978,000 |
|
ALL ending balance |
| $ | 1,116,322 |
|
| $ | 53,090 |
|
| $ | 5,061,813 |
|
| $ | 62,339 |
|
| $ | 2,001,836 |
|
| $ | 241,950 |
|
| $ | 69,686 |
|
| $ | 102,189 |
|
| $ | 8,709,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 2,322 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 106,280 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 108,602 |
|
Collectively |
|
| 1,114,000 |
|
|
| 53,090 |
|
|
| 5,061,813 |
|
|
| 62,339 |
|
|
| 1,895,556 |
|
|
| 241,950 |
|
|
| 69,686 |
|
|
| 102,189 |
|
|
| 8,600,623 |
|
Total |
| $ | 1,116,322 |
|
| $ | 53,090 |
|
| $ | 5,061,813 |
|
| $ | 62,339 |
|
| $ | 2,001,836 |
|
| $ | 241,950 |
|
| $ | 69,686 |
|
| $ | 102,189 |
|
| $ | 8,709,225 |
|
| ||||||||||||||||||||||||||||||||||||
Loans evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 3,442,124 |
|
| $ | 0 |
|
| $ | 3,176,835 |
|
| $ | 0 |
|
| $ | 3,816,012 |
|
| $ | 77,416 |
|
| $ | 0 |
|
|
|
|
|
| $ | 10,512,387 |
|
Collectively |
|
| 109,509,749 |
|
|
| 7,530,458 |
|
|
| 353,716,151 |
|
|
| 34,633,055 |
|
|
| 194,927,363 |
|
|
| 33,679,456 |
|
|
| 4,039,989 |
|
|
|
|
|
|
| 738,036,221 |
|
Total |
| $ | 112,951,873 |
|
| $ | 7,530,458 |
|
| $ | 356,892,986 |
|
| $ | 34,633,055 |
|
| $ | 198,743,375 |
|
| $ | 33,756,872 |
|
| $ | 4,039,989 |
|
|
|
|
|
| $ | 748,548,608 |
|
17 |
Table of Contents |
As of or for the nine months ended September 30, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Commercial |
|
| Purchased |
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
|
|
|
| |||||||||
|
| & Industrial |
|
| Loans |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Unallocated |
|
| Total |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
ALL beginning balance |
| $ | 870,392 |
|
| $ | 68,655 |
|
| $ | 4,151,760 |
|
| $ | 76,728 |
|
| $ | 1,765,892 |
|
| $ | 182,014 |
|
| $ | 55,698 |
|
| $ | 539,117 |
|
| $ | 7,710,256 |
|
Charge-offs |
|
| (47,500 | ) |
|
| 0 |
|
|
| (667,474 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (35,706 | ) |
|
| 0 |
|
|
| (750,680 | ) |
Recoveries |
|
| 12,862 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 111,163 |
|
|
| 3,728 |
|
|
| 19,757 |
|
|
| 0 |
|
|
| 147,510 |
|
Provision (credit) |
|
| 255,773 |
|
|
| (12,107 | ) |
|
| 1,419,813 |
|
|
| (4,432 | ) |
|
| (63,658 | ) |
|
| (2,998 | ) |
|
| 13,171 |
|
|
| (280,562 | ) |
|
| 1,325,000 |
|
ALL ending balance |
| $ | 1,091,527 |
|
| $ | 56,548 |
|
| $ | 4,904,099 |
|
| $ | 72,296 |
|
| $ | 1,813,397 |
|
| $ | 182,744 |
|
| $ | 52,920 |
|
| $ | 258,555 |
|
| $ | 8,432,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 4,259 |
|
| $ | 0 |
|
| $ | 8,867 |
|
| $ | 0 |
|
| $ | 96,784 |
|
| $ | 4 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 109,914 |
|
Collectively |
|
| 1,087,268 |
|
|
| 56,548 |
|
|
| 4,895,232 |
|
|
| 72,296 |
|
|
| 1,716,613 |
|
|
| 182,740 |
|
|
| 52,920 |
|
|
| 258,555 |
|
|
| 8,322,172 |
|
Total |
| $ | 1,091,527 |
|
| $ | 56,548 |
|
| $ | 4,904,099 |
|
| $ | 72,296 |
|
| $ | 1,813,397 |
|
| $ | 182,744 |
|
| $ | 52,920 |
|
| $ | 258,555 |
|
| $ | 8,432,086 |
|
| ||||||||||||||||||||||||||||||||||||
Loans evaluated for impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually |
| $ | 3,408,207 |
|
| $ | 0 |
|
| $ | 3,812,657 |
|
| $ | 0 |
|
| $ | 3,670,995 |
|
| $ | 79,742 |
|
| $ | 0 |
|
|
|
|
|
| $ | 10,971,601 |
|
Collectively |
|
| 117,815,855 |
|
|
| 8,078,281 |
|
|
| 320,514,503 |
|
|
| 40,164,698 |
|
|
| 188,895,584 |
|
|
| 33,693,729 |
|
|
| 4,059,750 |
|
|
|
|
|
|
| 713,222,400 |
|
Total |
| $ | 121,224,062 |
|
| $ | 8,078,281 |
|
| $ | 324,327,160 |
|
| $ | 40,164,698 |
|
| $ | 192,566,579 |
|
| $ | 33,773,471 |
|
| $ | 4,059,750 |
|
|
|
|
|
| $ | 724,194,001 |
|
The following is an age analysis of past due loans (including non-accrual) as of the balance sheet dates, by portfolio segment:
90 Days or | |||||||
90 Days | Total | Non-Accrual | More and | ||||
September 30, 2017 | 30-89 Days | or More | Past Due | Current | Total Loans | Loans | Accruing |
Commercial & industrial | $76,185 | $0 | $76,185 | $77,528,075 | $77,604,260 | $48,385 | $0 |
Commercial real estate | 1,186,687 | 228,621 | 1,415,308 | 209,568,360 | 210,983,668 | 714,720 | 15,011 |
Residential real estate | |||||||
- 1st lien | 1,366,466 | 1,823,490 | 3,189,956 | 163,995,918 | 167,185,874 | 1,511,891 | 725,581 |
- Jr lien | 454,613 | 261,256 | 715,869 | 43,246,709 | 43,962,578 | 450,192 | 64,292 |
Consumer | 53,597 | 2,777 | 56,374 | 6,255,365 | 6,311,739 | 0 | 2,777 |
$3,137,548 | $2,316,144 | $5,453,692 | $500,594,427 | $506,048,119 | $2,725,188 | $807,661 |
90 Days or | |||||||
90 Days | Total | Non-Accrual | More and | ||||
December 31, 2016 | 30-89 Days | or More | Past Due | Current | Total Loans | Loans | Accruing |
Commercial & industrial | $328,684 | $26,042 | $354,726 | $68,375,847 | $68,730,573 | $143,128 | $26,042 |
Commercial real estate | 824,836 | 222,738 | 1,047,574 | 200,680,706 | 201,728,280 | 765,584 | 0 |
Residential real estate | |||||||
- 1st lien | 4,881,496 | 1,723,688 | 6,605,184 | 160,086,778 | 166,691,962 | 1,227,220 | 1,068,083 |
- Jr lien | 984,849 | 116,849 | 1,101,698 | 41,825,637 | 42,927,335 | 338,602 | 27,905 |
Consumer | 53,972 | 2,176 | 56,148 | 7,114,928 | 7,171,076 | 0 | 2,176 |
$7,073,837 | $2,091,493 | $9,165,330 | $478,083,896 | $487,249,226 | $2,474,534 | $1,124,206 |
90 Days or | |||||||
90 Days | Total | Non-Accrual | More and | ||||
September 30, 2016 | 30-89 Days | or More | Past Due | Current | Total Loans | Loans | Accruing |
Commercial & industrial | $236,510 | $116,720 | $353,230 | $69,438,101 | $69,791,331 | $205,358 | $116,720 |
Commercial real estate | 655,874 | 249,749 | 905,623 | 189,340,967 | 190,246,590 | 759,332 | 227,302 |
Residential real estate | |||||||
- 1st lien | 1,837,612 | 1,005,342 | 2,842,954 | 158,434,452 | 161,277,406 | 1,289,968 | 744,379 |
- Jr lien | 203,174 | 91,420 | 294,594 | 41,445,233 | 41,739,827 | 343,766 | 91,420 |
Consumer | 66,776 | 0 | 66,776 | 7,064,965 | 7,131,741 | 0 | 0 |
$2,999,946 | $1,463,231 | $4,463,177 | $465,723,718 | $470,186,895 | $2,598,424 | $1,179,821 |
|
|
|
|
| 90 Days |
|
| Total |
|
|
|
|
|
|
| |||||
September 30, 2023 |
| 30-89 Days |
|
| or More |
|
| Past Due |
|
| Current |
|
| Total Loans |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & industrial |
| $ | 0 |
|
| $ | 3,093,578 |
|
| $ | 3,093,578 |
|
| $ | 123,067,456 |
|
| $ | 126,161,034 |
|
Purchased |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5,977,866 |
|
|
| 5,977,866 |
|
Commercial real estate |
|
| 585,102 |
|
|
| 1,092,154 |
|
|
| 1,677,256 |
|
|
| 405,361,837 |
|
|
| 407,039,093 |
|
Municipal |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 58,747,359 |
|
|
| 58,747,359 |
|
Residential real estate - 1st lien |
|
| 303,985 |
|
|
| 787,911 |
|
|
| 1,091,896 |
|
|
| 205,006,207 |
|
|
| 206,098,103 |
|
Residential real estate - Jr lien |
|
| 187,736 |
|
|
| 25,007 |
|
|
| 212,743 |
|
|
| 30,841,588 |
|
|
| 31,054,331 |
|
Consumer |
|
| 24,779 |
|
|
| 0 |
|
|
| 24,779 |
|
|
| 3,469,703 |
|
|
| 3,494,482 |
|
Totals |
| $ | 1,101,602 |
|
| $ | 4,998,650 |
|
| $ | 6,100,252 |
|
| $ | 832,472,016 |
|
| $ | 838,572,268 |
|
|
|
|
|
| 90 Days |
|
| Total |
|
|
|
|
|
|
| |||||
December 31, 2022 |
| 30-89 Days |
|
| or More |
|
| Past Due |
|
| Current |
|
| Total Loans |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & industrial |
| $ | 2,377,668 |
|
| $ | 879,802 |
|
| $ | 3,257,470 |
|
| $ | 109,694,403 |
|
| $ | 112,951,873 |
|
Purchased |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,530,458 |
|
|
| 7,530,458 |
|
Commercial real estate |
|
| 1,395,444 |
|
|
| 353,842 |
|
|
| 1,749,286 |
|
|
| 355,143,700 |
|
|
| 356,892,986 |
|
Municipal |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 34,633,055 |
|
|
| 34,633,055 |
|
Residential real estate - 1st lien |
|
| 1,517,653 |
|
|
| 641,141 |
|
|
| 2,158,794 |
|
|
| 196,584,581 |
|
|
| 198,743,375 |
|
Residential real estate - Jr lien |
|
| 321,579 |
|
|
| 25,007 |
|
|
| 346,586 |
|
|
| 33,410,286 |
|
|
| 33,756,872 |
|
Consumer |
|
| 18,745 |
|
|
| 0 |
|
|
| 18,745 |
|
|
| 4,021,244 |
|
|
| 4,039,989 |
|
Totals |
| $ | 5,631,089 |
|
| $ | 1,899,792 |
|
| $ | 7,530,881 |
|
| $ | 741,017,727 |
|
| $ | 748,548,608 |
|
For all loan segments, loans over 30 days past due are considered delinquent.
18 |
Table of Contents |
The following tables present the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing as of the dates presented. There were no nonaccrual loans with an ACL at September 30, 2023.
|
|
|
|
| 90 Days or |
| ||
|
| Total |
|
| More and |
| ||
September 30, 2023 |
| Nonaccrual |
|
| Accruing |
| ||
|
|
|
|
|
|
| ||
Commercial & industrial |
| $ | 3,619,626 |
|
| $ | 64,311 |
|
Commercial real estate |
|
| 2,900,078 |
|
|
| 315,826 |
|
Residential real estate - 1st lien |
|
| 574,302 |
|
|
| 619,469 |
|
Residential real estate - Jr lien |
|
| 120,786 |
|
|
| 0 |
|
Totals |
| $ | 7,214,792 |
|
| $ | 999,606 |
|
|
|
|
|
|
|
|
|
|
|
| 90 Days or |
| ||||
|
| Nonaccrual |
|
| Nonaccrual |
|
| Total |
|
| More and |
| ||||
December 31, 2022 |
| with an ALL |
|
| with No ALL |
|
| Nonaccrual |
|
| Accruing |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial & industrial |
| $ | 452,963 |
|
| $ | 2,989,161 |
|
| $ | 3,442,124 |
|
| $ | 0 |
|
Commercial real estate |
|
| 0 |
|
|
| 3,180,478 |
|
|
| 3,180,478 |
|
|
| 324,927 |
|
Residential real estate - 1st lien |
|
| 278,026 |
|
|
| 858,304 |
|
|
| 1,136,330 |
|
|
| 248,157 |
|
Residential real estate - Jr lien |
|
| 0 |
|
|
| 131,088 |
|
|
| 131,088 |
|
|
| 0 |
|
Totals |
| $ | 730,989 |
|
| $ | 7,159,031 |
|
| $ | 7,890,020 |
|
| $ | 573,084 |
|
As of the balance sheet dates presented, residential mortgagereal estate loans in process of foreclosure consisted of the following:
Number of loans | Balance | |
September 30, 2017 | 7 | $443,099 |
December 31, 2016 | 8 | 322,663 |
September 30, 2016 | 6 | 250,413 |
|
| Number of loans |
|
| Balance |
| ||
|
|
|
|
|
|
| ||
September 30, 2023 |
|
| 1 |
|
| $ | 33,825 |
|
December 31, 2022 |
|
| 1 |
|
| $ | 19,746 |
|
Allowance for loan losses
Please refer to Note 4 to the audited consolidated financial statements contained in the Company’s 2022 Annual Report on Form 10-K for a description of the ALL, isunder previously applicable GAAP, prior to adoption of CECL.
Allowance for credit losses
Effective January 1, 2023, with the adoption of CECL, the Company established the ACL through a provision for loancredit losses charged to earnings. LoanCredit losses are charged against the allowance when management believes the uncollectibilitythat future payments of a loan balance is probable.are unlikely. Subsequent recoveries, if any, are credited to the allowance.
Unsecured loans, primarily consumer 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. ValueThe value of the collateral is determined in accordance with the Company’s appraisal policy.
As described below, the allowance consists of general specific and unallocatedspecific components. However, the entire allowance is available to absorb losses in the loan portfolio, regardless of specific, general and unallocatedor specific components considered in determining the amount of the allowance.
19 |
Table of Contents |
General component
The general component of the ALLACL is based on historical loss experiencemethodologies, inputs, and various qualitative factors and is stratified byassumptions utilized to estimate lifetime credit losses when applied to the following loan segments: commercial and industrial, commercial real estate,purchased loans, 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.
The Company utilizes a discounted cash flow (DCF) approach to calculate the expected loss for each portfolio segment. Within the DCF model, probability of default (PD) and loss given default (LGD) assumptions are calculated byapplied to calculate the expected loss for each segment. PD is management’s estimate of the probability the asset will default within a given timeframe and LGD is management’s estimate of the percentage of assets not expected to be collected due to default. The Company's PD and LGD assumptions may be derived from internal historical default and loss experience or from external data where there are not statistically meaningful loss events for a loan segment, foror it does not have default and loss data that covers a full economic cycle.
As of September 30, 2023, the primary macroeconomic drivers used within the DCF model included forecasts of civilian unemployment and changes in national gross domestic product (GDP). Management monitors and assesses its macroeconomic drivers at least annually (generally in the fourth quarter, or more frequently as circumstances warrant) to determine whether they continue to be the most predictive indicator of losses within the Company's loan portfolio, and these macroeconomic drivers may change from time to time.
To determine its reasonable and supportable forecast, management may leverage macroeconomic forecasts obtained from various reputable sources, which may include, but are not limited to, the FOMC forecast and other publicly available forecasts from well recognized, leading economists or firms. The Company's reasonable and supportable forecast period generally ranges from one year, two year,to three year, four yearyears, depending on the facts and five year look back periods.circumstances of the current state of the economy, portfolio segment, and management's judgment of what can be reasonably supported. The model reversion period generally ranges from one to six years, and it also depends on the current state of the economy and management's judgments of such. Management uses an averagemonitors and assesses the forecast and reversion period at least annually, or more frequently as circumstances warrant. The Company used a one-year forecast and reversion period to calculate the ACL on loans as of historicalSeptember 30, 2023.
When the DCF method is used to determine the ACL, management does not adjust the effective interest rate used to discount expected cash flows to incorporate expected prepayments.
Expected credit losses are estimated over the contractual term of the loans. For term loans, the contractual life is calculated based on the maturity date. For commercial revolving loans with no stated maturity date, the contractual life is calculated based on the internal review date. For all other revolving loans, the contractual life is based on either the estimated maturity date or a time framedefault date. The contractual term excludes expected extensions, renewals, and modifications.
In calculating the ACL on loans, the contractual life of a loan must be adjusted for prepayments in order to arrive at expected cash flows. The Company models term loans using an annualized prepayment. When the Company has a specific expectation of differing payment behavior for a given loan, the loan may be evaluated individually. For revolving loans that do not have a principal payment schedule, a curtailment rate is factored into the expected cash flow.
Management has elected to use loss rate methodologies appropriate to capture relevant loss data for each loan segment. The DCF method was chosen for the commercial and industrial, CRE, residential real estate 1st lien, residential real estate Jr Lien and consumer loans. The DCF model, being periodic in nature, allows for effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner. For the purchased loans segment, ina long-term average loss rate is calculated and applied on a quarterly basis for the current economic climate. During periodsremaining life of economic stability,the pool. Due to the lack of any historical loss data, a relatively longer period (e.g., five years) may be appropriate. During periodsmanual entry methodology was chosen for the municipal loans given the immaterial nature of significant expansionthe pool when considering prior loss history as well as the inability to reasonably forecast a PD or contraction,LGD for the Company may appropriately shorten the historical time period. The Company is currently using an extended look back period of five years.
Qualitative factors are also applied to 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 commercial real estateCRE 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:
20 |
Table of Contents |
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 impactPurchased –Loans in this segment are loans purchased through a loan purchasing program with Bankers Healthcare Group (BHG). BHG originates commercial loans to medical professionals nationwide and sells them individually to a secondary market, primarily banks, through a bid process. The Bank has established conservative credit parameters and expects a low risk of default in this portfolio.
Commercial Real Estate –
Loans in this segment are principally made to businesses and are generally secured by either owner-occupied, or non-owner occupiedResidential Real Estate – 1st- 1st Lien –
Residential Real Estate – Jr Lien –
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
Loans that do not share risk characteristics are impaired. Impaired loans include all troubled debt restructurings (TDR) regardless of amount and all loans to a borrower thatevaluated on an individual basis. Loans evaluated individually are also not included in the aggregate arecollective evaluation. In general, loans individually evaluated for estimated credit losses include those (i) greater than $100,000 and thatwith a nonaccrual status or (ii) have other unique characteristics differing from the portfolio segment. Specific reserves are in non-accrual status. A specific allowance is established when appropriate for an impaired loan when its estimated impaired basis is less than the total recorded investment in the loan. For all loan segments, except consumersuch 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 discountedof the loan. However, when management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the loan’s effective interest rate,reporting date and repayment is expected to be provided substantially through the loan’s obtainable market price,operation or sale of the collateral expected credit losses are based on the fair value of the collateral ifat the loan is collateral dependent.
21 |
Table of Contents |
The following table presents 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 transferamortized cost basis 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.
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $695,663 | $2,530,215 | $1,363,324 | $374,364 | $51,295 | $359,517 | $5,374,378 |
Charge-offs | 0 | 0 | (84,098) | 0 | (35,825) | 0 | (119,923) |
Recoveries | 19,151 | 0 | 4,621 | 60 | 8,026 | 0 | 31,858 |
Provision (credit) | (41,481) | 113,047 | 136,764 | 11,115 | 28,115 | (97,560) | 150,000 |
Ending balance | $673,333 | $2,643,262 | $1,420,611 | $385,539 | $51,611 | $261,957 | $5,436,313 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $726,848 | $2,496,085 | $1,369,757 | $371,176 | $83,973 | $230,606 | $5,278,445 |
Charge-offs | 0 | (160,207) | (88,833) | (15,311) | (99,617) | 0 | (363,968) |
Recoveries | 23,469 | 231 | 14,838 | 180 | 33,118 | 0 | 71,836 |
Provision (credit) | (76,984) | 307,153 | 124,849 | 29,494 | 34,137 | 31,351 | 450,000 |
Ending balance | $673,333 | $2,643,262 | $1,420,611 | $385,539 | $51,611 | $261,957 | $5,436,313 |
Allowance for loan losses | |||||||
Evaluated for impairment | |||||||
Individually | $0 | $65,150 | $153,570 | $119,224 | $0 | $0 | $337,944 |
Collectively | 673,333 | 2,578,112 | 1,267,041 | 266,315 | 51,611 | 261,957 | 5,098,369 |
$673,333 | $2,643,262 | $1,420,611 | $385,539 | $51,611 | $261,957 | $5,436,313 | |
Loans evaluated for impairment | |||||||
Individually | $48,385 | $1,936,399 | $3,760,913 | $379,777 | $0 | $6,125,474 | |
Collectively | 77,555,875 | 209,047,269 | 163,424,961 | 43,582,801 | 6,311,739 | 499,922,645 | |
$77,604,260 | $210,983,668 | $167,185,874 | $43,962,578 | $6,311,739 | $506,048,119 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $712,902 | $2,152,678 | $1,368,028 | $422,822 | $75,689 | $279,759 | $5,011,878 |
Charge-offs | (49,009) | 0 | (244,149) | 0 | (15,404) | 0 | (308,562) |
Recoveries | 36,032 | 0 | 23,712 | 240 | 15,145 | 0 | 75,129 |
Provision (credit) | 26,923 | 343,407 | 222,166 | (51,886) | 8,543 | (49,153) | 500,000 |
Ending balance | $726,848 | $2,496,085 | $1,369,757 | $371,176 | $83,973 | $230,606 | $5,278,445 |
Allowance for loan losses | |||||||
Evaluated for impairment | |||||||
Individually | $0 | $86,400 | $6,200 | $114,800 | $0 | $0 | $207,400 |
Collectively | 726,848 | 2,409,685 | 1,363,557 | 256,376 | 83,973 | 230,606 | 5,071,045 |
$726,848 | $2,496,085 | $1,369,757 | $371,176 | $83,973 | $230,606 | $5,278,445 | |
Loans evaluated for impairment | |||||||
Individually | $48,385 | $687,495 | $946,809 | $224,053 | $0 | $1,906,742 | |
Collectively | 68,682,188 | 201,040,785 | 165,745,153 | 42,703,282 | 7,171,076 | 485,342,484 | |
$68,730,573 | $201,728,280 | $166,691,962 | $42,927,335 | $7,171,076 | $487,249,226 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $825,242 | $2,316,966 | $1,294,272 | $414,082 | $80,560 | $146,298 | $5,077,420 |
Charge-offs | (1,358) | 0 | (42,000) | 0 | (14,438) | 0 | (57,796) |
Recoveries | 2,174 | 0 | 3,974 | 60 | 4,133 | 0 | 10,341 |
Provision (credit) | (54,384) | 34,435 | 82,396 | (32,861) | (11,915) | 132,329 | 150,000 |
Ending balance | $771,674 | $2,351,401 | $1,338,642 | $381,281 | $58,340 | $278,627 | $5,179,965 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $712,902 | $2,152,678 | $1,368,028 | $422,822 | $75,689 | $279,759 | $5,011,878 |
Charge-offs | (12,194) | 0 | (234,549) | 0 | (38,412) | 0 | (285,155) |
Recoveries | 22,650 | 0 | 9,660 | 180 | 20,752 | 0 | 53,242 |
Provision (credit) | 48,316 | 198,723 | 195,503 | (41,721) | 311 | (1,132) | 400,000 |
Ending balance | $771,674 | $2,351,401 | $1,338,642 | $381,281 | $58,340 | $278,627 | $5,179,965 |
Allowance for loan losses | |||||||
Evaluated for impairment | |||||||
Individually | $0 | $92,900 | $19,000 | $115,600 | $0 | $0 | $227,500 |
Collectively | 771,674 | 2,258,501 | 1,319,642 | 265,681 | 58,340 | 278,627 | 4,952,465 |
$771,674 | $2,351,401 | $1,338,642 | $381,281 | $58,340 | $278,627 | $5,179,965 | |
Loans evaluated for impairment | |||||||
Individually | $188,528 | $703,852 | $1,064,752 | $226,590 | $0 | $2,183,722 | |
Collectively | 69,602,803 | 189,542,738 | 160,212,654 | 41,513,237 | 7,131,741 | 468,003,173 | |
$69,791,331 | $190,246,590 | $161,277,406 | $41,739,827 | $7,131,741 | $470,186,895 |
|
| Business |
|
| Commercial |
|
| Residential |
| |||
|
| Assets (1) |
|
| Real Estate |
|
| Real Estate |
| |||
|
|
|
|
|
|
|
|
|
| |||
Commercial & industrial |
| $ | 1,548,677 |
|
| $ | 0 |
|
| $ | 0 |
|
Commercial real estate |
|
| 0 |
|
|
| 776,329 |
|
|
| 0 |
|
Residential real estate - 1st lien |
|
| 0 |
|
|
| 0 |
|
|
| 311,338 |
|
Totals |
| $ | 1,548,677 |
|
| $ | 776,329 |
|
| $ | 311,338 |
|
(1) | Including, but not limited to, inventory, equipment and accounts receivable, but excluding real estate. |
Impaired loans, by portfolio segment, prior to adoption of ASU 2022-02 (Troubled Debt Restructurings and Vintage Disclosures), were as follows:
As of September 30, 2017 | ||||||
Unpaid | Average | Average | Interest | |||
Recorded | Principal | Related | Recorded | Recorded | Income | |
Investment | Balance | Allowance | Investment (1) | Investment (2) | Recognized (2) | |
Related allowance recorded | ||||||
Commercial real estate | $204,645 | $225,681 | $65,150 | $207,572 | $212,451 | $0 |
Residential real estate | ||||||
- 1st lien | 1,071,713 | 1,108,286 | 153,570 | 1,055,232 | 608,943 | 20,535 |
- Jr lien | 224,957 | 293,638 | 119,224 | 254,291 | 238,679 | 305 |
1,501,315 | 1,627,605 | 337,944 | 1,517,095 | 1,060,073 | 20,840 | |
No related allowance recorded | ||||||
Commercial & industrial | 48,385 | 62,498 | 91,882 | 70,133 | 0 | |
Commercial real estate | 1,735,982 | 2,305,028 | 1,749,498 | 1,105,573 | 50,123 | |
Residential real estate | ||||||
- 1st lien | 2,705,775 | 3,006,813 | 2,630,926 | 1,587,592 | 87,720 | |
- Jr lien | 154,839 | 154,918 | 145,830 | 107,120 | 0 | |
4,644,981 | 5,529,257 | 4,618,136 | 2,870,418 | 137,843 | ||
$6,146,296 | $7,156,862 | $337,944 | $6,135,231 | $3,930,491 | $158,683 |
As of December 31, 2016 | 2016 | |||
Unpaid | Average | |||
Recorded | Principal | Related | Recorded | |
Investment | Balance | Allowance | Investment | |
Related allowance recorded | ||||
Commercial real estate | $220,257 | $232,073 | $86,400 | $89,664 |
Residential real estate - 1st lien | 271,962 | 275,118 | 6,200 | 350,709 |
Residential real estate - Jr lien | 224,053 | 284,342 | 114,800 | 241,965 |
716,272 | 791,533 | 207,400 | 682,338 | |
No related allowance recorded | ||||
Commercial & industrial | 48,385 | 62,498 | 183,925 | |
Commercial real estate | 467,238 | 521,991 | 1,059,542 | |
Residential real estate - 1st lien | 674,847 | 893,741 | 877,237 | |
Residential real estate - Jr lien | 0 | 0 | 15,888 | |
1,190,470 | 1,478,230 | 2,136,592 | ||
$1,906,742 | $2,269,763 | $207,400 | $2,818,930 |
As of September 30, 2016 | |||||
Unpaid | Average | Average | |||
Recorded | Principal | Related | Recorded | Recorded | |
Investment | Balance | Allowance | Investment(1) | Investment(2) | |
Related allowance recorded | |||||
Commercial real estate | $228,062 | $235,152 | $92,900 | $0 | $45,612 |
Residential real estate | |||||
- 1st lien | 436,191 | 579,182 | 19,000 | 435,802 | 296,316 |
- Jr lien | 226,590 | 284,314 | 115,600 | 262,589 | 197,154 |
890,843 | 1,098,648 | 227,500 | 698,391 | 539,082 | |
No related allowance recorded | |||||
Commercial & industrial | 188,528 | 262,297 | 198,137 | 174,248 | |
Commercial real estate | 475,790 | 523,245 | 901,468 | 966,095 | |
Residential real estate | |||||
- 1st lien | 628,561 | 729,602 | 918,378 | 742,267 | |
- Jr lien | 0 | 0 | 39,721 | 15,888 | |
1,292,879 | 1,515,144 | 2,057,704 | 1,898,498 | ||
$2,183,722 | $2,613,792 | $227,500 | $2,756,095 | $2,437,580 |
|
| As of December 31, 2022 |
| |||||||||
|
|
|
|
| Unpaid |
|
|
|
| |||
|
| Recorded |
|
| Principal |
|
| Related |
| |||
|
| Investment (1) |
|
| Balance |
|
| Allowance |
| |||
|
|
|
|
|
|
|
|
|
| |||
Related allowance recorded |
|
|
|
|
|
|
|
|
| |||
Commercial & industrial |
| $ | 452,963 |
|
| $ | 462,745 |
|
| $ | 2,322 |
|
Residential real estate – 1st lien |
|
| 1,041,730 |
|
|
| 1,073,350 |
|
|
| 106,280 |
|
Total with related allowance |
|
| 1,494,693 |
|
|
| 1,536,095 |
|
|
| 108,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 2,989,161 |
|
|
| 3,078,769 |
|
|
|
|
|
Commercial real estate |
|
| 3,176,962 |
|
|
| 3,671,196 |
|
|
|
|
|
Residential real estate - 1st lien |
|
| 2,785,669 |
|
|
| 3,805,682 |
|
|
|
|
|
Residential real estate - Jr lien |
|
| 77,419 |
|
|
| 126,250 |
|
|
|
|
|
Total with no related allowance |
|
| 9,029,211 |
|
|
| 10,681,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 10,523,904 |
|
| $ | 12,217,992 |
|
| $ | 108,602 |
|
(1) | Recorded investment in impaired loans in the table above includes accrued interest receivable and deferred net loan costs of $11,517. |
22 |
Table of Contents |
|
| As of September 30, 2022 |
| |||||||||
|
|
|
|
| Unpaid |
|
|
|
| |||
|
| Recorded |
|
| Principal |
|
| Related |
| |||
|
| Investment (1) |
|
| Balance |
|
| Allowance |
| |||
|
|
|
|
|
|
|
|
|
| |||
Related allowance recorded |
|
|
|
|
|
|
|
|
| |||
Commercial & industrial |
| $ | 954,098 |
|
| $ | 965,266 |
|
| $ | 4,259 |
|
Commercial real estate |
|
| 249,709 |
|
|
| 252,806 |
|
|
| 8,867 |
|
Residential real estate - 1st lien |
|
| 1,172,194 |
|
|
| 1,192,445 |
|
|
| 96,784 |
|
Residential real estate - Jr lien |
|
| 2,532 |
|
|
| 2,529 |
|
|
| 4 |
|
Total with related allowance |
|
| 2,378,533 |
|
|
| 2,413,046 |
|
|
| 109,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 2,454,109 |
|
|
| 2,525,175 |
|
|
|
|
|
Commercial real estate |
|
| 3,563,089 |
|
|
| 4,751,499 |
|
|
|
|
|
Residential real estate - 1st lien |
|
| 2,511,284 |
|
|
| 3,515,246 |
|
|
|
|
|
Residential real estate - Jr lien |
|
| 77,213 |
|
|
| 124,795 |
|
|
|
|
|
Total with no related allowance |
|
| 8,605,695 |
|
|
| 10,916,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 10,984,228 |
|
| $ | 13,329,761 |
|
| $ | 109,914 |
|
(1) | Recorded investment in impaired loans in the table above includes accrued interest receivable and deferred net loan costs of $12,627. |
|
| As of September 30, 2022 |
| |||||||||||||
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| Average |
|
| Interest |
|
| Average |
|
| Interest |
| ||||
|
| Recorded |
|
| Income |
|
| Recorded |
|
| Income |
| ||||
|
| Investment |
|
| Recognized |
|
| Investment |
|
| Recognized |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial & industrial |
| $ | 477,049 |
|
| $ | 0 |
|
| $ | 238,525 |
|
| $ | 0 |
|
Commercial real estate |
|
| 124,854 |
|
|
| 0 |
|
|
| 62,427 |
|
|
| 0 |
|
Residential real estate - 1st lien |
|
| 1,031,145 |
|
|
| 31,349 |
|
|
| 969,497 |
|
|
| 58,306 |
|
Residential real estate - Jr lien |
|
| 1,266 |
|
|
| 147 |
|
|
| 633 |
|
|
| 247 |
|
Total with related allowance |
|
| 1,634,314 |
|
|
| 31,496 |
|
|
| 1,271,082 |
|
|
| 58,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No related allowance recorded |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 1,299,959 |
|
|
| 0 |
|
|
| 728,879 |
|
|
| 204 |
|
Commercial real estate |
|
| 3,479,786 |
|
|
| 72,754 |
|
|
| 3,806,739 |
|
|
| 74,245 |
|
Residential real estate - 1st lien |
|
| 2,686,280 |
|
|
| 27,154 |
|
|
| 2,814,818 |
|
|
| 119,663 |
|
Residential real estate - Jr lien |
|
| 79,809 |
|
|
| 0 |
|
|
| 83,471 |
|
|
| 0 |
|
Total with no related allowance |
|
| 7,545,834 |
|
|
| 99,908 |
|
|
| 7,433,907 |
|
|
| 194,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans |
| $ | 9,180,148 |
|
| $ | 131,404 |
|
| $ | 8,704,989 |
|
| $ | 252,665 |
|
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 future payments are considered by management to be reasonably assured.
23 |
Table of Contents |
Credit Quality Grouping
In developing the ALL,ACL, management uses credit quality groupinggroupings 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
Group B loans – Management Involved
Group C loans – Unacceptable Risk
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. TheRisk ratings are assessed on an ongoing basis and at various points, including delinquency or at the time of other adverse events. For larger, more complex or adversely rated loans, risk ratings of larger or more complex loans, and Group B and C rated loans, are also assessed at the time of their respective annual reviews, during quarterly updates, in action plans or at any other time that relevant information warrants update.periodic review. Lenders are required to make immediate disclosure to the Chief CreditLending Officer of any known increase in loan risk, even if considered temporary in nature.
24 |
Table of Contents |
The risk ratings within the loan portfolio and current period gross charge-offs, by loan segment and origination year were as follows:
As of or for the nine months ended, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revolving |
|
| Revolving |
|
|
|
| |||||||||
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans |
|
| Loans |
|
|
|
| |||||||||
|
| Term Loans Amortized Cost Basis by Origination Year |
|
| Amortized |
|
| Converted |
|
|
|
| ||||||||||||||||||||||||
(In thousands) |
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| Prior |
|
| Cost Basis |
|
| to Term |
|
| Total |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commercial & Industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 10,874 |
|
| $ | 20,286 |
|
| $ | 13,821 |
|
| $ | 3,108 |
|
| $ | 4,176 |
|
| $ | 4,795 |
|
| $ | 58,359 |
|
| $ | 0 |
|
| $ | 115,419 |
|
Special mention |
|
| 0 |
|
|
| 0 |
|
|
| 777 |
|
|
| 0 |
|
|
| 13 |
|
|
| 2 |
|
|
| 4,631 |
|
|
| 0 |
|
|
| 5,423 |
|
Substandard/Doubtful |
|
| 0 |
|
|
| 429 |
|
|
| 132 |
|
|
| 482 |
|
|
| 271 |
|
|
| 1,565 |
|
|
| 2,440 |
|
|
| 0 |
|
|
| 5,319 |
|
Total commercial |
| $ | 10,874 |
|
| $ | 20,715 |
|
| $ | 14,730 |
|
| $ | 3,590 |
|
| $ | 4,460 |
|
| $ | 6,362 |
|
| $ | 65,430 |
|
| $ | 0 |
|
| $ | 126,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs |
| $ | 0 |
|
| $ | 150 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 212 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 337 |
|
| $ | 97 |
|
| $ | 1,641 |
|
| $ | 1,521 |
|
| $ | 2,382 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5,978 |
|
Total purchased |
| $ | 337 |
|
| $ | 97 |
|
| $ | 1,641 |
|
| $ | 1,521 |
|
| $ | 2,382 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 5,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 64,005 |
|
| $ | 85,851 |
|
| $ | 39,398 |
|
| $ | 43,929 |
|
| $ | 35,241 |
|
| $ | 87,004 |
|
| $ | 41,990 |
|
| $ | 0 |
|
| $ | 397,418 |
|
Special mention |
|
| 0 |
|
|
| 377 |
|
|
| 1,485 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,258 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,120 |
|
Substandard/Doubtful |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,344 |
|
|
| 1,381 |
|
|
| 1,776 |
|
|
| 0 |
|
|
| 0 |
|
|
| 6,501 |
|
Total commercial real estate |
| $ | 64,005 |
|
| $ | 86,228 |
|
| $ | 40,883 |
|
| $ | 47,273 |
|
| $ | 36,622 |
|
| $ | 90,038 |
|
| $ | 41,990 |
|
| $ | 0 |
|
| $ | 407,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 32,286 |
|
| $ | 838 |
|
| $ | 3,327 |
|
| $ | 5,042 |
|
| $ | 631 |
|
| $ | 10,707 |
|
| $ | 5,916 |
|
| $ | 0 |
|
| $ | 58,747 |
|
Total municipal |
| $ | 32,286 |
|
| $ | 838 |
|
| $ | 3,327 |
|
| $ | 5,042 |
|
| $ | 631 |
|
| $ | 10,707 |
|
| $ | 5,916 |
|
| $ | 0 |
|
| $ | 58,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate - 1st lien: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 22,995 |
|
| $ | 39,726 |
|
| $ | 41,687 |
|
| $ | 33,854 |
|
| $ | 10,516 |
|
| $ | 52,682 |
|
| $ | 1,956 |
|
| $ | 0 |
|
| $ | 203,416 |
|
Special mention |
|
| 0 |
|
|
| 301 |
|
|
| 130 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 431 |
|
Substandard/Doubtful |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,842 |
|
|
| 40 |
|
|
| 369 |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,251 |
|
Total residential real estate - 1st lien |
| $ | 22,995 |
|
| $ | 40,027 |
|
| $ | 41,817 |
|
| $ | 35,696 |
|
| $ | 10,556 |
|
| $ | 53,051 |
|
| $ | 1,956 |
|
| $ | 0 |
|
| $ | 206,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate - Jr lien: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 1,424 |
|
| $ | 1,967 |
|
| $ | 355 |
|
| $ | 609 |
|
| $ | 645 |
|
| $ | 1,121 |
|
| $ | 23,142 |
|
| $ | 1,710 |
|
| $ | 30,973 |
|
Special mention |
|
| 0 |
|
|
| 50 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 50 |
|
Substandard/Doubtful |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 31 |
|
|
| 0 |
|
|
| 0 |
|
|
| 31 |
|
Total residential real estate - Jr lien |
| $ | 1,424 |
|
| $ | 2,017 |
|
| $ | 355 |
|
| $ | 609 |
|
| $ | 645 |
|
| $ | 1,152 |
|
| $ | 23,142 |
|
| $ | 1,710 |
|
| $ | 31,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 1,580 |
|
| $ | 969 |
|
| $ | 470 |
|
| $ | 248 |
|
| $ | 133 |
|
| $ | 95 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3,495 |
|
Total consumer |
| $ | 1,580 |
|
| $ | 969 |
|
| $ | 470 |
|
| $ | 248 |
|
| $ | 133 |
|
| $ | 95 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs |
| $ | 31 |
|
| $ | 27 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1 |
|
| $ | 53 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans |
| $ | 133,501 |
|
| $ | 150,891 |
|
| $ | 103,223 |
|
| $ | 93,979 |
|
| $ | 55,429 |
|
| $ | 161,405 |
|
| $ | 138,434 |
|
| $ | 1,710 |
|
| $ | 838,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current period gross charge-offs |
| $ | 31 |
|
| $ | 177 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 1 |
|
| $ | 265 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 474 |
|
As of or for the nine months ended, September 30, 2023, there were (i) no current period gross charge-offs within the Purchased, CRE, Municipal, Residential real estate 1st lien and Residential real estate Jr lien loan segments and (ii) no Special mention or Substandard/Doubtful loans within the Purchased, Municipal and Consumer loan segments.
25 |
Table of Contents |
Before the adoption of ASC 326 (CECL), the risk ratings within the loan portfolio, by segment, as of the balance sheet datesDecember 31, 2022, were as follows:
Residential | Residential | |||||
Commercial | Commercial | Real Estate | Real Estate | |||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Total | |
Group A | $74,066,398 | $201,257,154 | $164,684,918 | $43,235,529 | $6,308,962 | $489,552,961 |
Group B | 277,046 | 877,021 | 0 | 154,942 | 0 | 1,309,009 |
Group C | 3,260,816 | 8,849,493 | 2,500,956 | 572,107 | 2,777 | 15,186,149 |
$77,604,260 | $210,983,668 | $167,185,874 | $43,962,578 | $6,311,739 | $506,048,119 |
Residential | Residential | |||||
Commercial | Commercial | Real Estate | Real Estate | |||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Total | |
Group A | $67,297,983 | $191,755,393 | $164,708,778 | $42,289,062 | $7,168,901 | $473,220,117 |
Group B | 512,329 | 2,971,364 | 0 | 169,054 | 0 | 3,652,747 |
Group C | 920,261 | 7,001,523 | 1,983,184 | 469,219 | 2,175 | 10,376,362 |
$68,730,573 | $201,728,280 | $166,691,962 | $42,927,335 | $7,171,076 | $487,249,226 |
Residential | Residential | |||||
Commercial | Commercial | Real Estate | Real Estate | |||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Total | |
Group A | $67,062,235 | $179,855,087 | $158,989,152 | $41,124,097 | $7,131,741 | $454,162,312 |
Group B | 1,551,890 | 3,270,984 | 451,736 | 146,896 | 0 | 5,421,506 |
Group C | 1,177,206 | 7,120,519 | 1,836,518 | 468,834 | 0 | 10,603,077 |
| $69,791,331 | $190,246,590 | $161,277,406 | $41,739,827 | $7,131,741 | $470,186,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential |
|
| Residential |
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
|
|
|
| Commercial |
|
|
|
|
| Real Estate |
|
| Real Estate |
|
|
|
|
|
|
| ||||||||
|
| & Industrial |
|
| Purchased |
|
| Real Estate |
|
| Municipal |
|
| 1st Lien |
|
| Jr Lien |
|
| Consumer |
|
| Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Group A |
| $ | 104,697,047 |
|
| $ | 7,530,458 |
|
| $ | 347,732,935 |
|
| $ | 34,633,055 |
|
| $ | 195,269,893 |
|
| $ | 33,538,767 |
|
| $ | 4,039,989 |
|
| $ | 727,442,144 |
|
Group B |
|
| 6,296,411 |
|
|
| 0 |
|
|
| 2,754,649 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 9,051,060 |
|
Group C |
|
| 1,958,415 |
|
|
| 0 |
|
|
| 6,405,402 |
|
|
| 0 |
|
|
| 3,473,482 |
|
|
| 218,105 |
|
|
| 0 |
|
|
| 12,055,404 |
|
Total |
| $ | 112,951,873 |
|
| $ | 7,530,458 |
|
| $ | 356,892,986 |
|
| $ | 34,633,055 |
|
| $ | 198,743,375 |
|
| $ | 33,756,872 |
|
| $ | 4,039,989 |
|
| $ | 748,548,608 |
|
Modifications of Loans and TDRs
A loan is classified as a TDRconsidered modified 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.modified. 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 accountconsideration 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 TDRsmodified loans are principally a result of extending loan repayment terms to relieve cash flow difficulties. The Company has only, on a limited basis, reduced accrued interest or reduced interest rates for borrowers below the current market rate for the borrower. The Company has not generally 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 situationpotential loan modification on its own merits and does not foreclose the granting of any particular type of concession.
There were no loan modifications for the first nine months of 2023.
Prior to adoption of ASU 2022-02, new TDRs, by portfolio segment, during the periods presented below were as follows:
Three months ended September 30, 2017 | Nine months ended September 30, 2017 | |||||
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 | 1 | $80,323 | $87,844 | 2 | $122,180 | $145,262 |
Year ended December 31, 2016 | Pre- | Post- | |
Modification | Modification | ||
Outstanding | Outstanding | ||
Number of | Recorded | Recorded | |
Contracts | Investment | Investment | |
Residential real estate | |||
- 1st lien | 8 | $572,418 | $598,030 |
- Jr lien | 2 | 62,819 | 64,977 |
10 | $635,237 | $663,007 |
Three months ended September 30, 2016 | Nine months ended September 30, 2016 | |||||
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 | $177,182 | $185,107 | 8 | $572,418 | $598,030 |
- Jr lien | 0 | 0 | 0 | 2 | 62,819 | 64,977 |
| 3 | $177,182 | $185,107 | 10 | $635,237 | $663,007 |
|
| Year ended December 31, 2022 |
| |||||||||
|
|
|
|
| Pre- |
|
| Post- |
| |||
|
|
|
|
| Modification |
|
| Modification |
| |||
|
|
|
|
| Outstanding |
|
| Outstanding |
| |||
|
| Number of |
|
| Recorded |
|
| Recorded |
| |||
|
| Contracts |
|
| Investment |
|
| Investment |
| |||
|
|
|
|
|
|
|
|
|
| |||
Residential real estate – 1st lien |
|
| 2 |
|
| $ | 562,592 |
|
| $ | 562,592 |
|
26 |
Table of Contents |
|
| Nine months ended September 30, 2022 |
| |||||||||
|
|
|
|
| Pre- |
|
| Post- |
| |||
|
|
|
|
| Modification |
|
| Modification |
| |||
|
|
|
|
| Outstanding |
|
| Outstanding |
| |||
|
| Number of |
|
| Recorded |
|
| Recorded |
| |||
|
| Contracts |
|
| Investment |
|
| Investment |
| |||
|
|
|
|
|
|
|
|
|
| |||
Residential real estate – 1st lien |
|
| 1 |
|
| $ | 292,592 |
|
| $ | 292,592 |
|
There were no new TDRs for the three months ended September 30, 2022.
There were no TDRs for which there was a payment default during the twelve month periods presentedtwelve-month period ended December 31, 2022. The TDRs for which there was a payment default during the twelve-month period ended September 30, 2022 were as follows:
Twelve months ended September 30, 2017 | Number of | Recorded |
Contracts | Investment | |
Residential real estate – 1st lien | 1 | $87,844 |
Twelve months ended December 31, 2016 | Number of | Recorded |
Contracts | Investment | |
Residential real estate - 1st lien | 2 | $93,230 |
Residential real estate - Jr lien | 1 | 54,557 |
3 | $147,787 |
Twelve months ended September 30, 2016 | Number of | Recorded |
Contracts | Investment | |
Commercial | 1 | $71,808 |
Commercial real estate | 1 | 228,063 |
Residential real estate - 1st lien | 2 | 94,004 |
Residential real estate - Jr lien | 1 | 54,557 |
| 5 | $448,432 |
|
| Number of |
|
| Recorded |
| ||
|
| Contracts |
|
| Investment |
| ||
|
|
|
|
|
|
| ||
Commercial real estate |
|
| 1 |
|
| $ | 818,570 |
|
Prior to adoption of ASU 2022-02, TDRs arewere treated as other impaired loans and carrycarried individual specific reserves with respect to the calculation of the ALL. These loans arewere categorized as non-performing, may behave been past due, and arewere generally adversely risk rated. The TDRs that havehad defaulted under their restructured terms arewere generally in collection status and their ALL reserve iswas typically calculated using the fair value of collateral method.
September 30, | December 31, | September 30, | |
2017 | 2016 | 2016 | |
Specific Allocation(1) | $216,939 | $92,600 | $98,600 |
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 Small Business Administration (SBA)SBA guaranteed line of credit to a borrower whose lending relationship was previously restructured.
Off-Balance Sheet Credit Exposures
In the ordinary course of business, the Company enters into commitments to extend credit, including commercial letters of credit and standby letters of credit. Such financial instruments are recorded as loans when they are funded.
Allowance for Credit Losses on OBS Credit Exposures
Effective January 1, 2023, with the adoption of ASU No. 2016-13 (CECL), the Company estimates expected credit losses on OBS credit exposures over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on OBS credit exposures is adjusted through credit loss expense. To appropriately measure expected credit losses, management disaggregates the loan portfolio into similar risk characteristics, identical to those determined for the loan portfolio. An estimated funding rate is then applied to the qualifying unfunded loan commitments and letters of credit using the Company's own historical experience to estimate the expected funded amount for each loan segment as of the reporting date. Once the expected funded amount for each loan segment is determined, the loss rate, which is the calculated expected loan loss as a percent of the amortized cost basis for each loan segment, is applied to calculate the ACL on OBS credit exposures as of the reporting date. The ACL on OBS credit exposures is presented within accrued interest and other liabilities on the consolidated balance sheets.
Note 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 goodwillGoodwill is not amortizable and is not deductible for tax purposes.
As of the date ofDecember 31, 2022, the most recent evaluation, (December 31, 2016), management concluded that no impairment existed in either category.
27 |
Table of Contents |
Note 7. Fair Value
Certain assets and liabilities are recorded at fair value to provide additional insight into the Company’s quality of earnings.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 1 | 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 2 | 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 3 | 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. |
The following methods and assumptions were used by the Company in estimating its fair value measurements and disclosures:
Debt Securities AFS and HTM:
Individually analyzed loans:Individually analyzed 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.ACL. Accordingly, certain impairedindividually analyzed loans may be subject to measurement at fair value on a non-recurring basis. Management has estimated the fair valuesvalue of collateral-dependent loans using Level 2 inputs, such as the fair value of collateral based on independent third-party appraisals. All other loans are valued using Level 3 inputs.
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 endquarter-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 2.28 |
Table of Contents |
Assets and bank properties no longer used as bank premises are initially recordedLiabilities Recorded at Fair Value on a Recurring Basis
Assets measured at fair value. Thevalue 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 OREO is basedthe balance sheet dates presented, nor were there any transfers of assets between Levels during either of the periods presented for 2023 or 2022.
|
| September 30, |
|
| December 31, |
| ||
Assets: (market approach) |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Level 1 |
|
|
|
|
|
| ||
U.S. Government securities |
| $ | 38,542,155 |
|
| $ | 38,231,589 |
|
|
|
|
|
|
|
|
|
|
Level 2 |
|
|
|
|
|
|
|
|
U.S. GSE debt securities |
| $ | 10,398,344 |
|
| $ | 10,375,291 |
|
Taxable Municipal securities |
|
| 233,714 |
|
|
| 234,858 |
|
Tax-exempt Municipal securities |
|
| 10,596,387 |
|
|
| 11,323,567 |
|
Agency MBS |
|
| 106,823,004 |
|
|
| 115,231,599 |
|
ABS and OAS |
|
| 2,299,066 |
|
|
| 2,693,606 |
|
CMO |
|
| 11,365,654 |
|
|
| 11,935,925 |
|
Other investments |
|
| 1,670,137 |
|
|
| 2,891,674 |
|
Level 2 Total |
| $ | 143,386,306 |
|
| $ | 154,686,520 |
|
|
|
|
|
|
|
|
|
|
Grand Total |
| $ | 181,928,461 |
|
| $ | 192,918,109 |
|
Assets and Liabilities Recorded at Fair Value on property appraisalsa 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. Individually analyzed loans measured at fair value only include those loans with a partial write-down or with a related specific ACL and an analysisare presented net of similar properties currently available. The Company records OREOthe specific allowances as disclosed in Note 5. Assets measured at fair value on a non-recurring Level 2.
|
| September 30, |
|
| December 31, |
| ||
Level 2 |
| 2023 |
|
| 2022 |
| ||
Assets: (market approach) |
|
|
|
|
|
| ||
Individually analyzed loans, net of related allowance |
| $ | 679,802 |
|
| $ | 94,458 |
|
Loans held-for-sale |
|
| 56,700 |
|
|
| 0 |
|
MSRs (1) |
|
| 814,470 |
|
|
| 862,593 |
|
(1) | Represents MSRs at lower of cost or fair value. |
FASB Accounting Standards Codification (ASC)ASC Topic 825, “Financial Instruments”, requires disclosuresdisclosure 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.
29 | |
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:
September 30, 2017 | Fair | Fair | Fair | Fair | |
Carrying | Value | Value | Value | Value | |
Amount | Level 1 | Level 2 | Level 3 | Total | |
(Dollars in Thousands) | |||||
Financial assets: | |||||
Cash and cash equivalents | $29,720 | $29,720 | $0 | $0 | $29,720 |
Securities held-to-maturity | 53,882 | 0 | 54,571 | 0 | 54,571 |
Securities available-for-sale | 36,720 | 0 | 36,720 | 0 | 36,720 |
Restricted equity securities | 1,700 | 0 | 1,700 | 0 | 1,700 |
Loans and loans held-for-sale | |||||
Commercial & industrial | 76,890 | 0 | 0 | 77,533 | 77,533 |
Commercial real estate | 208,232 | 0 | 0 | 209,648 | 209,648 |
Residential real estate - 1st lien | 166,366 | 0 | 0 | 168,903 | 168,903 |
Residential real estate - Jr lien | 43,555 | 0 | 0 | 43,931 | 43,931 |
Consumer | 6,256 | 0 | 0 | 6,491 | 6,491 |
MSRs (1) | 1,113 | 0 | 1,289 | 0 | 1,289 |
Accrued interest receivable | 1,893 | 0 | 1,893 | 0 | 1,893 |
Financial liabilities: | |||||
Deposits | |||||
Other deposits | 502,963 | 0 | 502,203 | 0 | 502,203 |
Brokered deposits | 53,789 | 0 | 53,786 | 0 | 53,786 |
Long-term borrowings | 3,550 | 0 | 3,219 | 0 | 3,219 |
Repurchase agreements | 27,459 | 0 | 27,459 | 0 | 27,459 |
Capital lease obligations | 409 | 0 | 409 | 0 | 409 |
Subordinated debentures | 12,887 | 0 | 12,844 | 0 | 12,844 |
Accrued interest payable | 109 | 0 | 109 | 0 | 109 |
December 31, 2016 | Fair | Fair | Fair | Fair | |
Carrying | Value | Value | Value | Value | |
Amount | Level 1 | Level 2 | Level 3 | Total | |
(Dollars in Thousands) | |||||
Financial assets: | |||||
Cash and cash equivalents | $29,614 | $29,614 | $0 | $0 | $29,614 |
Securities held-to-maturity | 49,887 | 0 | 51,035 | 0 | 51,035 |
Securities available-for-sale | 33,715 | 0 | 33,715 | 0 | 33,715 |
Restricted equity securities | 2,756 | 0 | 2,756 | 0 | 2,756 |
Loans and loans held-for-sale | |||||
Commercial & industrial | 67,972 | 0 | 48 | 68,727 | 68,775 |
Commercial real estate | 199,136 | 0 | 601 | 201,560 | 202,161 |
Residential real estate - 1st lien | 165,243 | 0 | 941 | 166,858 | 167,799 |
Residential real estate - Jr lien | 42,536 | 0 | 109 | 42,948 | 43,057 |
Consumer | 7,084 | 0 | 0 | 7,371 | 7,371 |
MSRs(1) | 1,211 | 0 | 1,302 | 0 | 1,302 |
Accrued interest receivable | 1,819 | 0 | 1,819 | 0 | 1,819 |
Financial liabilities: | |||||
Deposits | |||||
Other deposits | 470,002 | 0 | 469,323 | 0 | 469,323 |
Brokered deposits | 34,733 | 0 | 34,745 | 0 | 34,745 |
Short-term borrowings | 30,000 | 0 | 30,000 | 0 | 30,000 |
Long-term borrowings | 1,550 | 0 | 1,376 | 0 | 1,376 |
Repurchase agreements | 30,423 | 0 | 30,423 | 0 | 30,423 |
Capital lease obligations | 483 | 0 | 483 | 0 | 483 |
Subordinated debentures | 12,887 | 0 | 12,849 | 0 | 12,849 |
Accrued interest payable | 73 | 0 | 73 | 0 | 73 |
September 30, 2016 | Fair | Fair | Fair | Fair | |
Carrying | Value | Value | Value | Value | |
Amount | Level 1 | Level 2 | Level 3 | Total | |
(Dollars in Thousands) | |||||
Financial assets: | |||||
Cash and cash equivalents | $12,380 | $12,380 | $0 | $0 | $12,380 |
Securities held-to-maturity | 56,837 | 0 | 57,592 | 0 | 57,592 |
Securities available-for-sale | 29,412 | 0 | 29,412 | 0 | 29,412 |
Restricted equity securities | 1,856 | 0 | 1,856 | 0 | 1,856 |
Loans and loans held-for-sale | |||||
Commercial & industrial | 68,978 | 0 | 189 | 69,957 | 70,146 |
Commercial real estate | 187,783 | 0 | 611 | 192,329 | 192,940 |
Residential real estate - 1st lien | 160,552 | 0 | 1,046 | 163,770 | 164,816 |
Residential real estate - Jr lien | 41,334 | 0 | 111 | 41,826 | 41,937 |
Consumer | 7,069 | 0 | 0 | 7,358 | 7,358 |
MSRs (1) | 1,215 | 0 | 1,333 | 0 | 1,333 |
Accrued interest receivable | 1,650 | 0 | 1,650 | 0 | 1,650 |
Financial liabilities: | |||||
Deposits | |||||
Other deposits | 470,587 | 0 | 470,785 | 0 | 470,785 |
Brokered deposits | 33,220 | 0 | 33,223 | 0 | 33,223 |
Federal funds purchased and short-term borrowings | 5,245 | 0 | 5,245 | 0 | 5,245 |
Long-term borrowings | 550 | 0 | 503 | 0 | 503 |
Repurchase agreements | 25,834 | 0 | 25,834 | 0 | 25,834 |
Capital lease obligations | 494 | 0 | 494 | 0 | 494 |
Subordinated debentures | 12,887 | 0 | 12,852 | 0 | 12,852 |
Accrued interest payable | 44 | 0 | 44 | 0 | 44 |
September 30, 2023 |
|
|
|
| Fair |
|
| Fair |
|
| Fair |
|
| Fair |
| |||||
|
| Carrying |
|
| Value |
|
| Value |
|
| Value |
|
| Value |
| |||||
|
| Amount |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| |||||
|
| (Dollars in Thousands) |
| |||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 17,532 |
|
| $ | 17,532 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 17,532 |
|
Debt securities AFS |
|
| 181,928 |
|
|
| 38,542 |
|
|
| 143,386 |
|
|
| 0 |
|
|
| 181,928 |
|
Restricted equity securities |
|
| 1,424 |
|
|
| 0 |
|
|
| 1,424 |
|
|
| 0 |
|
|
| 1,424 |
|
Loans and loans held-for-sale, net of ACL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 125,074 |
|
|
| 0 |
|
|
| 680 |
|
|
| 120,780 |
|
|
| 121,460 |
|
Purchased |
|
| 5,960 |
|
|
| 0 |
|
|
| 0 |
|
|
| 5,537 |
|
|
| 5,537 |
|
Commercial real estate |
|
| 401,695 |
|
|
| 0 |
|
|
| 0 |
|
|
| 376,490 |
|
|
| 376,490 |
|
Municipal |
|
| 58,600 |
|
|
| 0 |
|
|
| 0 |
|
|
| 55,681 |
|
|
| 55,681 |
|
Residential real estate - 1st lien |
|
| 204,319 |
|
|
| 0 |
|
|
| 0 |
|
|
| 184,617 |
|
|
| 184,617 |
|
Residential real estate - Jr lien |
|
| 30,577 |
|
|
| 0 |
|
|
| 0 |
|
|
| 30,109 |
|
|
| 30,109 |
|
Consumer |
|
| 3,466 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,473 |
|
|
| 3,473 |
|
MSRs (1) |
|
| 814 |
|
|
| 0 |
|
|
| 1,286 |
|
|
| 0 |
|
|
| 1,286 |
|
Accrued interest receivable |
|
| 3,830 |
|
|
| 0 |
|
|
| 3,830 |
|
|
| 0 |
|
|
| 3,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other deposits |
|
| 900,956 |
|
|
| 0 |
|
|
| 897,998 |
|
|
| 0 |
|
|
| 897,998 |
|
Brokered deposits |
|
| 249 |
|
|
| 0 |
|
|
| 227 |
|
|
| 0 |
|
|
| 227 |
|
Short-term borrowings |
|
| 3,550 |
|
|
| 0 |
|
|
| 3,550 |
|
|
| 0 |
|
|
| 3,550 |
|
Long-term borrowings |
|
| 45,600 |
|
|
| 0 |
|
|
| 45,223 |
|
|
| 0 |
|
|
| 45,223 |
|
Repurchase agreements |
|
| 31,580 |
|
|
| 0 |
|
|
| 31,580 |
|
|
| 0 |
|
|
| 31,580 |
|
Operating lease obligations |
|
| 497 |
|
|
| 0 |
|
|
| 497 |
|
|
| 0 |
|
|
| 497 |
|
Finance lease obligations |
|
| 3,480 |
|
|
| 0 |
|
|
| 3,480 |
|
|
| 0 |
|
|
| 3,480 |
|
Subordinated debentures |
|
| 12,887 |
|
|
| 0 |
|
|
| 12,694 |
|
|
| 0 |
|
|
| 12,694 |
|
Accrued interest payable |
|
| 794 |
|
|
| 0 |
|
|
| 794 |
|
|
| 0 |
|
|
| 794 |
|
(1) | Reported fair value represents all MSRs for loans serviced by the Company, regardless of carrying amount. |
30 |
Table of Contents |
December 31, 2022 |
|
|
|
| Fair |
|
| Fair |
|
| Fair |
|
| Fair |
| |||||
|
| Carrying |
|
| Value |
|
| Value |
|
| Value |
|
| Value |
| |||||
|
| Amount |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| |||||
|
| (Dollars in Thousands) |
| |||||||||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents |
| $ | 71,140 |
|
| $ | 71,140 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 71,140 |
|
Debt securities AFS |
|
| 192,918 |
|
|
| 38,232 |
|
|
| 154,686 |
|
|
| 0 |
|
|
| 192,918 |
|
Restricted equity securities |
|
| 1,412 |
|
|
| 0 |
|
|
| 1,412 |
|
|
| 0 |
|
|
| 1,412 |
|
Loans and loans held-for-sale, net of ACL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
| 111,792 |
|
|
| 0 |
|
|
| 0 |
|
|
| 109,534 |
|
|
| 109,534 |
|
Purchased |
|
| 7,476 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,119 |
|
|
| 7,119 |
|
Commercial real estate |
|
| 351,738 |
|
|
| 0 |
|
|
| 29 |
|
|
| 340,254 |
|
|
| 340,283 |
|
Municipal |
|
| 34,566 |
|
|
| 0 |
|
|
| 0 |
|
|
| 34,558 |
|
|
| 34,558 |
|
Residential real estate - 1st lien |
|
| 197,281 |
|
|
| 0 |
|
|
| 65 |
|
|
| 180,879 |
|
|
| 180,944 |
|
Residential real estate - Jr lien |
|
| 33,510 |
|
|
| 0 |
|
|
| 0 |
|
|
| 33,218 |
|
|
| 33,218 |
|
Consumer |
|
| 3,970 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,949 |
|
|
| 3,949 |
|
MSRs (1) |
|
| 863 |
|
|
| 0 |
|
|
| 1,287 |
|
|
| 0 |
|
|
| 1,287 |
|
Accrued interest receivable |
|
| 3,214 |
|
|
| 0 |
|
|
| 3,214 |
|
|
| 0 |
|
|
| 3,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other deposits |
|
| 922,723 |
|
|
| 0 |
|
|
| 918,882 |
|
|
| 0 |
|
|
| 918,882 |
|
Brokered deposits |
|
| 249 |
|
|
| 0 |
|
|
| 225 |
|
|
| 0 |
|
|
| 225 |
|
Long-term borrowings |
|
| 1,300 |
|
|
| 0 |
|
|
| 1,025 |
|
|
| 0 |
|
|
| 1,025 |
|
Repurchase agreements |
|
| 33,078 |
|
|
| 0 |
|
|
| 33,078 |
|
|
| 0 |
|
|
| 33,078 |
|
Operating lease obligations |
|
| 658 |
|
|
| 0 |
|
|
| 658 |
|
|
| 0 |
|
|
| 658 |
|
Finance lease obligations |
|
| 3,645 |
|
|
| 0 |
|
|
| 3,645 |
|
|
| 0 |
|
|
| 3,645 |
|
Subordinated debentures |
|
| 12,887 |
|
|
| 0 |
|
|
| 12,740 |
|
|
| 0 |
|
|
| 12,740 |
|
Accrued interest payable |
|
| 74 |
|
|
| 0 |
|
|
| 74 |
|
|
| 0 |
|
|
| 74 |
|
(1) | Reported fair value represents all MSRs for loans serviced by the Company, regardless of carrying amount. |
Note 8. Loan Servicing
The following table shows the changes in the carrying amount of the mortgage servicing rights,MSRs, included in other assets in the consolidated balance sheets, for the periods indicated:
Nine Months Ended | Year Ended | Nine Months Ended | |
September 30, 2017 | December 31, 2016 | September 30, 2016 | |
Balance at beginning of year | $1,210,695 | $1,293,079 | $1,293,079 |
Mortgage servicing rights capitalized | 82,686 | 176,705 | 152,900 |
Mortgage servicing rights amortized | (180,347) | (266,603) | (208,706) |
Change in valuation allowance | 0 | 7,514 | (21,962) |
Balance at end of period | $1,113,034 | $1,210,695 | $1,215,311 |
|
| Nine Months Ended |
|
| Year Ended |
| ||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
|
|
|
|
|
|
| ||
Balance at beginning of year |
| $ | 862,593 |
|
| $ | 897,720 |
|
MSRs capitalized |
|
| 55,666 |
|
|
| 120,629 |
|
MSRs amortized |
|
| (103,789 | ) |
|
| (155,756 | ) |
Balance at end of period |
| $ | 814,470 |
|
| $ | 862,593 |
|
Note 9. Legal Proceedings
In the normal course of business, the Company and its subsidiary areis involved in litigation that is considered incidental to theirits business. Management does not expect that any such litigation will be material to the Company's consolidated financial condition or results of operations.
Note 10. Subsequent Event
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 US GAAP. On September 22, 2017,21, 2023, the CompanyCompany’s Board declared a cash dividend of $0.17$0.23 per common share, payable November 1, 20172023, to shareholders of record as of October 15, 2017.2023. This dividend amounting to $864,746, was accrued at September 30, 2017.
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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 September 30, 2017
The following discussion analyzes the consolidated financial condition of Community Bancorp. (the Company) and its wholly-owned subsidiary, Community National Bank, (the Bank), as of September 30, 2017,2023 and December 31, 2016 and September 30, 2016,2022, and its consolidated results of operations for the three- and nine-month interim periods and one year period presented. Under applicable regulationsThe Company is considered a “smaller reporting company” and a “non-accelerated filer” under the disclosure rules of the Securities and Exchange Commission (SEC),SEC. Accordingly, the Company is eligiblehas elected to provide its statements of income, comprehensive income, cash flows and changes in shareholders’ equity for relief froma two-year, rather than a three-year, period and provide certain disclosure requirements available toother smaller reporting companies untilcompany scaled disclosures where management deems it files its first quarterly report on Form 10-Q for 2018.
The following discussion should be read in conjunction with the Company’s audited consolidated financial statements and related notes contained in its 20162022 Annual Report on Form 10-K filed with the SEC.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains certain forward-looking statements aboutwithin 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," or“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. Future results of the Company may differ materially from those expressed in these forward-looking statements. Examples of forward looking statements included in this discussion include, but are not limited to, statements regarding the estimated contingent liability related to assumptions made within the asset/liability management process,process; management's expectations as to the future interest rate environment and the Company's related liquidity level,level; credit risk expectations relating to the Company's loan portfolio and its participation in the Federal Home Loan Bank of Boston (FHLBB) Mortgage Partnership Finance (MPF) program,off-balance sheet commitments; and management's general outlook for the future performance of the Company orand the local or national economy. Although forward-looking statements are based on management's current expectations and estimates as of the date they are made, many of the factors that could influence or determine actual results are unpredictable and not within the Company's control.
Factors that may cause actual results to differ materially from those contemplated by these forward-looking statements include, among others, the following possibilities:
· | interest rates change in such a way as to negatively affect loan demand, the local economy or the Company's net income, asset valuations or margins; | |
· | general economic or business conditions, either nationally, regionally or locally, deteriorate, resulting in a decline in credit quality or a diminished demand for the Company's products and services; | |
· | the impact of inflation and slowing economic growth on the Company’s customers and on its financial results and performance; | |
· | the effect of United States monetary and fiscal policies, including deficit spending and the interest rate policies of the FRB and its regulation of the money supply; | |
· | changes in applicable accounting policies, practices and standards; | |
· | the geographic concentration of the Company’s loan portfolio and deposit base; | |
· | reductions in deposit levels, which necessitate increased borrowings to fund loans and sale of investment securities; | |
· | increases in the level of nonperforming assets and charge-offs; | |
· | changes in federal or state tax laws or policy; | |
· | changes in laws or government rules, including the rules of the federal Consumer Financial Protection Bureau, or the way in which courts or government agencies interpret or implement those laws or rules, increase our costs of doing business, causing us to limit or change our product offerings or pricing, or otherwise adversely affect the Company's business; | |
· | regulatory responses to recent high profile bank failures increase our costs of operation, including through regulatory compliance changes and higher FDIC deposit insurance assessments to replenish the Bank Insurance Fund (BIF); |
32 |
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· | competitive pressures increase among financial service providers in the Company's northern New England market area or in the financial services industry generally, including competitive pressures from non-bank financial service providers, from increasing consolidation and integration of financial service providers, and from changes in technology and delivery systems; | |
· | cybersecurity risks could adversely affect the Company’s business, financial performance or reputation and could result in financial liability for losses incurred by customers or others due to data breaches or other compromise of the Company’s information security systems; | |
· | higher-than-expected costs are incurred relating to information technology or difficulties arise in implementing technological enhancements; | |
· | management’s risk management measures may not be completely effective; | |
· | changes in consumer and business spending, borrowing and savings habits; | |
· | operational and internal system failures due to changes in normal business practices, including remote working for Company staff; | |
· | increased cybercrime and payment system risk due to increased usage by customers of online, mobile and other remote banking channels; | |
· | the ongoing challenges to find qualified workers to maintain a stable workforce; | |
· | losses due to the fraudulent or negligent conduct of third parties, including the Company’s service providers, customers and employees; and | |
· | adverse changes in the credit rating of U.S. government debt. |
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 generally accepted accounting principles in the United States (US GAAP or 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 (Net Interest Income)(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 onat September 30, 20172023, were $661,539,071,$1.08 billion compared to $1.06 billion at December 31, 2022, an increase of $23,885,406, or 3.8%, from December 31, 2016 and2.6%. Significant changes in the asset base were due to an increase in loans of $55,748,641,$90.0 million, or 9.2%12.0%, from September 30, 2016. Net loans increased $18,649,347,which was partially offset by a decrease of $53.6 million, or 3.9%75.4%, since December 31, 2016in cash and $35,610,763,cash equivalents and a decrease of $11.0 million, or 7.7%, since September 30, 2016.5.7% in investment securities. This change in the asset base reflects the Company’s efforts to deploy cash into higher earning assets. The year over year increase in the loan portfolio iswas primarily attributable to growthan increase of $13.2 million in commercial & industrial loans, $50.1 million in CRE loans, $24.1 million in municipal loans and $7.4 million in residential first lien loans, which was funded primarily through an increasepartially offset by a decrease of $2.7 million in deposit accountsresidential junior lien loans and wholesale funding$1.6 million in the form of brokered deposits.
Total deposits increased $52,017,288, or 10.3%, sinceat September 30, 2023, were $901.2 million compared to $923.0 million at December 31, 2016 due to increases in most components including $11.52022, a decrease of $21.8 million, or 11.0%,2.4%. Year to date, demand and interest-bearing transaction accounts decreased in non-interest bearing demand accounts, $12.7total by $20.2 million or 14.6%4.0%, followed by a decrease of $11.7 million, or 6.8%, in savings accounts and $12.8$2.9 million, or 13.2%2.1%, in other time deposits. In the year over year comparison, deposits increased $52,945,414, or 10.5%. Core deposits saw increases in all areas in the year over year comparison, and increases are noted in money market accounts andfunds. This was partially offset by an increase of $13.0 million, or 12.8%, in time deposits. The Company has been offering some competitive interest rates for retail time deposits, as well. Some ofaccounting for the increase in time depositsthese funds. The decrease in both comparison periods is attributable todeposit balances combined with the Company’sloan growth, has required the use of brokered deposits, both from purchases on the national certificate of deposit (CD) market and through the Certificate of Deposit Account Registry Service (CDARS).
33 |
Table of Contents |
Total interest rates remain at historically low levels, and the yield curve is still not providing any meaningful relief on margin pressure as long-term rates have stayed in a tight range. Growth of the commercial loan portfolio in recent years, which typically carries higher yields than residential and consumer loans, has helped to maintain a stable level of interest income. This shift in asset mix is in line with the Company’s strategic plan to increase its concentration in commercial loans while maintaining a stable residential loan portfolio. While commercial loans inherently carry more risk, the Company has dedicated significant resources in the credit administration department to mitigate the additional risk. The opportunities for growth continue to be primarily in the Central Vermont market, where economic activity is more robust than in the Company’s Orleans and Caledonia county markets, and where the Company is increasing its presence and market share. The Company opened a loan production office in Chittenden County, Vermont’s most populous county and economic hub, during the first quarter of 2017, which should further drive commercial loan activity.
Total interest expense increased $104,449,$2.6 million, or 15.1%,245.4% for the third quarter of 2017 compared to the same quarter in 2016,2023, and $248,105,$6.3 million, or 12.2%253.6%, for the first nine months of 20172023, compared to the same periodperiods in 2016.2022. The increase in interest income year over year reflects the higher balances in net loans, which exceeded the prior year by $35.6 million, or 7.7%. While therecent increases in interest incomethe fed funds rate have increased borrowing costs and have put more pressure on competitive deposit pricing, resulting in both comparison periods are largely due to thean increase in the asset base,Company’s money market and time deposit rates. Please refer to the increaseinterest rate sensitivity discussion in short-termthe Interest Rate Risk and Asset and Liability Management section for more information on the impact that the actions of the FRB’s FOMC in regulating interest rates, is starting toand changes in the yield curve, could have an impact as well, as is reflected inon net interest incomeincome.
The provision for credit losses for the three and nine months ended September 30, 2017 when compared to2023, was determined under ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, commonly referenced as the three months ended September 30, 2016. The increase in interest paid on deposits duringCurrent Expected Credit Losses, or CECL, which the first three months and nine months of 2017 is partially attributable to a higher utilization of brokered time deposits, which carry higher rates than core non-maturity deposits, as well as to increases in the volume of all categories of interest-bearing deposits. Company adopted effective January 1, 2023.
The increases in the federal funds rate have also impacted interest expense on borrowed funds and the Company’s junior subordinated debentures.
Consolidated net income for the third quarter of 2017 was $1,792,949,2023 decreased $247,997 to $3.4 million compared to $3.6 million for the same quarter of 2022, while an increase of $277,049, or 18.3%, over net income of $1,515,900 for the third quarter of 2016. Net income$860,408 is noted for the first nine months of 2017 was $4,706,679, an increase of $726,086, or 18.2%, over net income of $3,980,593 for the same period in 2016. As stated above, net interest income contributed significantly2023 to the Company’s increase in earnings. A decrease in non-interest income of $34,273, or 2.3%, for the quarter and an increase of $161,126, or 4.0% year to date are noted, while total non-interest expense increased in both periods by $51,613, or 1.1%, for the quarter and $317,829, or 2.3%, year to date. The decrease in non-interest income for the third quarter of 2017 is attributable, in part, to activity associated with the Bank’s Supplemental Employee Retirement Program (SERP). While income was reported from fair market value adjustments of SERP assets in 2016, the Company reported a net loss on the liquidation of the SERP assets during the third quarter of 2017 following the final payout to the last retired participant. The increase in non-interest income year to date is attributable mostly to the courtesy overdraft program implemented in the third quarter of 2016. With the increase in market rates, the opportunity for refinancing has diminished and the mortgage business is primarily from new purchase financing, resulting in lower levels of residential mortgage lending activity in 2017$9.9 million compared to 2016. Residential mortgage originations totaled $34,486,938 for the first nine months of 2017 compared to $35,257,580 for$9.0 million in the same period of 2016, which2022. Year over year, a $7.8 million increase in interest income was partially offset by an increase of $6.3 million in interest expense and coupled with a decrease of $516,443 in the provision for credit losses between periods, resulted in an increase of $2.0 million in net interest income after provision for credit losses. These changes, along with other significant changes in non-interest income and non-interest expense are discussed in the appropriate sections of this MD&A.
Equity capital increased to $78.8 million, with a book value per share of $14.08 as of September 30, 2023, compared to $75.2 million and a book value per share of $13.55 as of December 31, 2022. Equity capital increased between periods despite a cumulative effect charge to retained earnings of $549,113 upon the transition to CECL effective on January 1, 2023. The increase in equity capital reflects year to date net income, but is alsopartially offset by an increase in unrealized losses in the investment portfolio of $2.9 million, net of tax, reflected in the decreaseaccumulated other comprehensive loss component of the shareholders’ equity portion of the balance sheet. This position is considered by management as temporary and, unlike the charge to retained earnings in connection with the transition to CECL, does not impact the Company’s regulatory capital ratios.
Heavy rainfall in the Company’s loan fee income. Of those originations duringmonth of July caused extensive flooding across much of the first nine monthsstate of 2017, secondary market sales totaled $10,912,354, comparedVermont leading to $18,296,608Governor Phil Scott declaring a state of emergency. While the impact was considerable, the impact to the Bank’s customers was manageable with many having flood insurance coverage and or qualifying for the first nine monthsvarious assistance programs offered at the state and federal level. The portion of 2016, providing pointsthe Company’s service area most impacted was central Vermont, including one of the Bank’s branches which sustained extensive flooding. The branch was immediately closed for restoration and premiums fromrepairs although night depository and ATM services were restored soon thereafter, and the salesdrive up was reopened with limited hours on October 25, 2023. A full-service opening of these mortgages of $250,826 and $351,824, respectively, a decrease of 28.7%.
On September 22, 2017,21, 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.17$0.23 per common share, payable on November 1, 20172023, to shareholders of record on October 15, 2017. This represents2023.
As of September 30, 2023, all the Company’s capital ratios, and those of our subsidiary Bank, were in excess of applicable regulatory requirements. While we believe that we have sufficient capital to withstand an increaseeconomic downturn from any headwinds related to inflation or recessionary periods, should one occur, our equity capital and regulatory capital ratios could be adversely impacted, including as a result of credit losses and other adverse impacts of deteriorating economic conditions, or government monetary policy.
CRITICAL ACCOUNTING POLICIES
The Company’s consolidated financial statements are prepared according to U.S. GAAP. The preparation of such financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities in the quarterly dividend of $0.01 per share, compared to 2016consolidated financial statements and is attributablerelated notes. The SEC has defined a company’s critical accounting policies as those that are most important to the Bank’s strong performance in 2016, demonstrating the confidenceportrayal of the Board of DirectorsCompany’s financial condition and management team in the Company’s ability to generate shareholder value. The Company is focused on increasing the profitability of the balance sheet, and prudently managing operating expenses and risk, particularly credit risk, in order to remain a well-capitalized bank in this challenging interest rate environment.
34 |
Table of Contents |
The Company’s critical accounting policies govern:
· | the ACL; |
· | OREO; |
· | credit losses on debt securities; |
· | valuation of residential MSRs; and |
· | the carrying value of goodwill. |
These policies are described further in the Company’s 20162022 Annual Report on Form 10-K in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” and in Note 1 (Significant Accounting Policies) to the audited consolidated financial statements. Except for certain changes inWith the Company’s methodology for calculatingexception of the ALL, which were adopted during the second quarter of 2017 and which are described below in the Credit Risk section of this MD&A, and in Note 5 (Loans, Allowance for Loan Losses and Credit Quality),ACL policy, there were no material changes during the first nine months of 20172023 in the Company’s critical accounting policies.
A modified version of these requirements applies to debt securities classified as available for sale, which eliminates OTTI impairment analysis and requires that if a decline in the fair value of debt securities AFS is deemed by management to be the result of credit losses rather than other factors, the credit losses on those securities is recorded through an allowance for credit losses rather than a write-down of the security. The Company’s securities portfolio is evaluated for impairment on a quarterly basis.
RESULTS OF OPERATIONS
The Company’s net income for the third quarter of 20172023 was $1,792,949$3.4 million or $0.35$0.61 per common share, compared to $1,515,900$3.6 million or $0.30$0.66 per common share for the same quarter of 2016, and net2022. Net income for the first nine months of 20172023 was $4,706,679$9.9 million or $0.91$1.80 per common share, compared to $3,980,593$9.0 million or $0.78$1.67 per common share for the same period in 2016.of 2022. Core earnings (net interest income)(NII) were $8.43 million for the third quarter of 20172023 compared to $8.37 million for the same quarter of 2022, and $25.2 million for the first nine months of 2023 compared to $23.8 million for the same period in 2022. Interest and fees on loans, the major component of interest income, increased $461,618,$2.7 million, or 8.3%33.5%, for the third quarter of 2023 compared to the same quarter in 2016of 2022, and $1,137,558,$7.0 million, or 7.1%30.1%, for the nine months ended September 30, 2017 compared to the prior year. In light of the continued pressure on net interest margin and spread in this flat yield curve environment, the Company is pleased with these increases. To help offset this pressure, the Company has focused on growing the commercial loan portfolio, and shifting a portion of the investment portfolio to higher yielding Small Business Administration securities (SBA) and agency mortgage-backed securities (Agency MBS) within its available-for-sale (AFS) portfolio. FDIC insured Certificates of Deposit have also been an attractive investment class that have seen increased volume. Compared to the same period last year, during the first nine months of 2017,2023 compared to the loan mix continued to shiftsame period in favor of higher yielding commercial loans, while the deposit mix experienced an increase in lower cost non-maturity deposits, both of which have benefitted the Company’s net interest income.2022. Interest paid on deposits, which is the major component of total interest expense, increased $124,364,$1.7 million, or 24.7%198.5%, for the third quarter of 20172023 compared to the same quarter of 2016,2022, and $204,967,increased $4.6 million, or 13.4%232.6%, year over year, driven primarily by the increases in the fed funds rate during 2022 and into the first nine months of 2017 compared to2023. Market pressures on deposit rates along with an increased use of wholesale funding is driving up the same periodcost of 2016, reflecting the increased deposit balances and increases in rates on wholesale funds and brokered deposits. The Company recorded a provision for loan losses of $150,000 forcompressing the third quarters of 2017 and 2016, and nine month provisions for loan losses of $450,000 and $400,000, respectively. Non-interest income decreased $34,273, or 2.3%, for the third quarter of 2017 compared to the same quarter of 2016 and increased $161,126, or 4.0%, for the first nine months of 2017 compared to 2016. Non-interest expense increased $51,613, or 1.1%, for the third quarter of 2017 compared to the same quarter of 2016 and $317,829, or 2.3%, for the first nine months of 2017 compared to the prior year. The section labeled Non-Interest Income and Non-Interest Expense provides a more detailed discussion on the significant components of these items.
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.
35 |
Table of Contents |
The following table showstables show these ratios annualized, as well as other equity ratios monitored by management, for the comparison periods.
Three Months Ended September 30, | ||
2017 | 2016 | |
Return on Average Assets | 1.09% | 0.99% |
Return on Average Equity | 12.53% | 11.29% |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Return on Average Assets | 0.98% | 0.89% |
Return on Average Equity | 11.29% | 10.08% |
SELECTED FINANCIAL DATA (Unaudited) | |||
September 30, | December 31, | September 30, | |
2017 | 2016 | 2016 | |
Balance Sheet Data | |||
Net loans | $500,930,258 | $482,280,911 | $465,319,495 |
Total assets | 661,539,071 | 637,653,665 | 605,790,430 |
Total deposits | 556,752,320 | 504,735,032 | 503,806,906 |
Borrowed funds | 3,550,000 | 31,550,000 | 5,795,000 |
Total liabilities | 604,318,331 | 583,202,148 | 551,946,796 |
Total shareholders' equity | 57,220,740 | 54,451,517 | 53,843,634 |
Book value per common share outstanding | $10.73 | $10.27 | $10.18 |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Operating Data | ||
Total interest income | $19,421,393 | $18,035,730 |
Total interest expense | 2,280,105 | 2,032,000 |
Net interest income | 17,141,288 | 16,003,730 |
Provision for loan losses | 450,000 | 400,000 |
Net interest income after provision for loan losses | 16,691,288 | 15,603,730 |
Non-interest income | 4,201,196 | 4,040,070 |
Non-interest expense | 14,465,802 | 14,147,973 |
Income before income taxes | 6,426,682 | 5,495,827 |
Applicable income tax expense(1) | 1,720,003 | 1,515,234 |
Net Income | $4,706,679 | $3,980,593 |
Per Common Share Data | ||
Earnings per common share (2) | $0.91 | $0.78 |
Dividends declared per common share | $0.51 | $0.48 |
Weighted average number of common shares outstanding | 5,077,473 | 5,016,191 |
Number of common shares outstanding, period end | 5,100,675 | 5,042,989 |
Three Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Return on average assets |
|
| 1.24 | % |
|
| 1.41 | % |
Return on average equity |
|
| 16.48 | % |
|
| 19.06 | % |
Dividend payout ratio (1) |
|
| 37.70 | % |
|
| 34.85 | % |
Average equity to average assets |
|
| 7.55 | % |
|
| 7.38 | % |
Nine Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Return on average assets |
|
| 1.27 | % |
|
| 1.19 | % |
Return on average equity |
|
| 16.68 | % |
|
| 15.55 | % |
Dividend payout ratio (1) |
|
| 38.33 | % |
|
| 41.32 | % |
Average equity to average assets |
|
| 7.60 | % |
|
| 7.68 | % |
(1) | Dividends declared per common share divided by earnings per common share. |
INTEREST INCOME VERSUS INTEREST EXPENSE (NET INTEREST INCOME)
The largest component of the Company’s operating income is net interest income,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. other, 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 from changes in the yield earned and costs of funds (rate). A portion of the Company’s income from municipal investmentsloans to local municipalities is not subject to income taxes. Because the proportion of tax-exempt items in the Company's portfoliobalance 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. Because theThe Company’s corporate tax rate is 34%,21%; therefore, to equalize tax-free and taxable income in the comparison, we divide the tax-free income by 66%79%, with the result that every tax-free dollar is equivalent to $1.52$1.27 in taxable income.
The Company’s tax-exempt interest income of $332,102$559,985 and $284,618 for the three months ended September 30, 20172023 and $992,8312022, respectively, and $1.2 million and $777,314 for the first nine months of 2017, compared to $339,999ended September 30, 2023 and $942,246,2022, respectively, for the same periods last year, was derived from loans to local municipalities of $58.7 million and $40.2 million, and tax-exempt municipal investments which comprised the entire held-to-maturity (HTM) portfolio of $53,882,287$10.6 million and $10.3 million at September 30, 2017,2023 and $56,837,100 at September 30, 2016.
The following table showstables show the reconciliation between reported net interest incomeNII and tax equivalent net interest incomeNII for the comparison periods presented.
Three Months Ended September 30, | ||
2017 | 2016 | |
Net interest income as presented | $6,023,973 | $5,562,355 |
Effect of tax-exempt income | 171,083 | 175,151 |
Net interest income, tax equivalent | $6,195,056 | $5,737,506 |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Net interest income as presented | $17,141,288 | $16,003,730 |
Effect of tax-exempt income | 511,458 | 485,399 |
Net interest income, tax equivalent | $17,652,746 | $16,489,129 |
Three Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Net interest income as presented |
| $ | 8,430,059 |
|
| $ | 8,373,566 |
|
Effect of tax-exempt income |
|
| 148,857 |
|
|
| 75,658 |
|
Net interest income, tax equivalent |
| $ | 8,578,916 |
|
| $ | 8,449,224 |
|
Nine Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Net interest income as presented |
| $ | 25,222,287 |
|
| $ | 23,768,980 |
|
Effect of tax-exempt income |
|
| 306,315 |
|
|
| 206,628 |
|
Net interest income, tax equivalent |
| $ | 25,528,602 |
|
| $ | 23,975,608 |
|
36 |
Table of Contents |
The following tables present the daily average assets and the daily average liabilities, including the yields on interest-earning assets and average interest-bearing liabilities supporting earning assets.for the respective comparison periods. Interest income (excluding interest on non-accrual loans) and interest expense are bothis expressed on a tax equivalent basis, both in dollars and as a rate/yieldyield/rate for the comparison periods presented.
Three Months Ended September 30, | ||||||
2017 | 2016 | |||||
Average | Average | |||||
Average | Income/ | Rate/ | Average | Income/ | Rate/ | |
Balance | Expense | Yield | Balance | Expense | Yield | |
Interest-Earning Assets | ||||||
Loans (1) | $506,853,347 | $6,244,899 | 4.89% | $476,137,513 | $5,732,855 | 4.79% |
Taxable investment securities | 35,519,175 | 171,880 | 1.92% | 27,393,741 | 128,767 | 1.87% |
Tax-exempt investment securities | 49,608,712 | 503,185 | 4.02% | 55,195,067 | 515,150 | 3.71% |
Sweep and interest-earning accounts | 10,355,461 | 29,964 | 1.15% | 2,591,082 | 3,048 | 0.47% |
Other investments (2) | 2,195,121 | 41,320 | 7.47% | 3,176,788 | 49,429 | 6.19% |
$604,531,816 | $6,991,248 | 4.59% | $564,494,191 | $6,429,249 | 4.53% | |
Interest-Bearing Liabilities | ||||||
Interest-bearing transaction accounts | $115,801,161 | $91,951 | 0.32% | $107,853,436 | $51,580 | 0.19% |
Money market accounts | 84,791,867 | 187,889 | 0.88% | 81,796,244 | 209,212 | 1.02% |
Savings deposits | 99,061,882 | 32,277 | 0.13% | 88,078,948 | 27,216 | 0.12% |
Time deposits | 133,068,701 | 316,417 | 0.94% | 105,959,177 | 216,162 | 0.81% |
Borrowed funds | 4,535,815 | 3,644 | 0.32% | 31,398,913 | 42,412 | 0.54% |
Repurchase agreements | 27,263,645 | 20,564 | 0.30% | 25,387,081 | 18,820 | 0.29% |
Capital lease obligations | 418,393 | 8,569 | 8.19% | 501,328 | 10,992 | 8.77% |
Junior subordinated debentures | 12,887,000 | 134,881 | 4.15% | 12,887,000 | 115,349 | 3.56% |
$477,828,464 | $796,192 | 0.66% | $453,862,127 | $691,743 | 0.61% | |
Net interest income | $6,195,056 | $5,737,506 | ||||
Net interest spread (3) | 3.93% | 3.92% | ||||
Net interest margin (4) | 4.07% | 4.04% |
|
| Three Months Ended September 30, |
| |||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||
|
|
|
|
|
| Average |
|
|
|
|
|
| Average |
| ||||||||||
|
| Average |
|
| Income/ |
|
| Yield/ |
|
| Average |
|
| Income/ |
|
| Yield/ |
| ||||||
|
| Balance |
|
| Expense |
|
| Rate |
|
| Balance |
|
| Expense |
|
| Rate |
| ||||||
Average Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, net (1) |
| $ | 813,431,805 |
|
| $ | 11,044,088 |
|
|
| 5.39 | % |
| $ | 709,936,691 |
|
| $ | 8,239,751 |
|
|
| 4.60 | % |
Taxable investment securities |
|
| 176,104,770 |
|
|
| 941,956 |
|
|
| 2.12 | % |
|
| 182,586,203 |
|
|
| 799,856 |
|
|
| 1.74 | % |
Tax-exempt investment securities |
|
| 11,353,244 |
|
|
| 114,758 |
|
|
| 4.01 | % |
|
| 9,135,697 |
|
|
| 86,271 |
|
|
| 3.75 | % |
Sweep and interest-earning accounts |
|
| 7,796,502 |
|
|
| 94,515 |
|
|
| 4.81 | % |
|
| 58,264,306 |
|
|
| 358,907 |
|
|
| 2.44 | % |
Other investments (2) |
|
| 2,074,630 |
|
|
| 39,904 |
|
|
| 7.63 | % |
|
| 1,777,950 |
|
|
| 23,029 |
|
|
| 5.14 | % |
Total interest-earning assets |
| $ | 1,010,760,951 |
|
| $ | 12,235,221 |
|
|
| 4.80 | % |
| $ | 961,700,847 |
|
| $ | 9,507,814 |
|
|
| 3.92 | % |
Cash and due from banks |
|
| 10,653,464 |
|
|
|
|
|
|
|
|
|
|
| 11,034,240 |
|
|
|
|
|
|
|
|
|
Premises and equipment |
|
| 12,655,076 |
|
|
|
|
|
|
|
|
|
|
| 13,217,724 |
|
|
|
|
|
|
|
|
|
BOLI |
|
| 5,199,896 |
|
|
|
|
|
|
|
|
|
|
| 5,120,380 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 11,574,269 |
|
|
|
|
|
|
|
|
|
|
| 11,574,269 |
|
|
|
|
|
|
|
|
|
Other assets |
|
| 21,142,242 |
|
|
|
|
|
|
|
|
|
|
| 15,500,345 |
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 1,071,985,898 |
|
|
|
|
|
|
|
|
|
| $ | 1,018,147,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction accounts |
| $ | 263,787,094 |
|
| $ | 1,116,811 |
|
|
| 1.68 | % |
| $ | 252,413,763 |
|
| $ | 382,833 |
|
|
| 0.60 | % |
Money market funds |
|
| 136,210,933 |
|
|
| 695,234 |
|
|
| 2.02 | % |
|
| 138,497,037 |
|
|
| 197,849 |
|
|
| 0.57 | % |
Savings deposits |
|
| 164,695,504 |
|
|
| 34,076 |
|
|
| 0.08 | % |
|
| 181,818,265 |
|
|
| 27,930 |
|
|
| 0.06 | % |
Time deposits |
|
| 109,526,390 |
|
|
| 655,122 |
|
|
| 2.37 | % |
|
| 105,915,323 |
|
|
| 229,371 |
|
|
| 0.86 | % |
Borrowed funds |
|
| 51,964,152 |
|
|
| 656,726 |
|
|
| 5.01 | % |
|
| 1,301,120 |
|
|
| 8 |
|
|
| 0.00 | % |
Repurchase agreements |
|
| 34,056,695 |
|
|
| 201,518 |
|
|
| 2.35 | % |
|
| 33,402,748 |
|
|
| 45,153 |
|
|
| 0.54 | % |
Finance lease obligations |
|
| 3,499,404 |
|
|
| 20,111 |
|
|
| 2.30 | % |
|
| 3,716,571 |
|
|
| 21,355 |
|
|
| 2.30 | % |
Junior subordinated debentures |
|
| 12,887,000 |
|
|
| 276,707 |
|
|
| 8.52 | % |
|
| 12,887,000 |
|
|
| 154,091 |
|
|
| 4.74 | % |
Total interest-bearing liabilities |
| $ | 776,627,172 |
|
| $ | 3,656,305 |
|
|
| 1.87 | % |
| $ | 729,951,827 |
|
| $ | 1,058,590 |
|
|
| 0.58 | % |
Noninterest bearing deposits |
|
| 207,879,544 |
|
|
|
|
|
|
|
|
|
|
| 208,681,213 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
| 6,519,520 |
|
|
|
|
|
|
|
|
|
|
| 4,473,162 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 991,026,236 |
|
|
|
|
|
|
|
|
|
|
| 943,106,202 |
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
| 80,959,662 |
|
|
|
|
|
|
|
|
|
|
| 75,041,603 |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 1,071,985,898 |
|
|
|
|
|
|
|
|
|
| $ | 1,018,147,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
| $ | 8,578,916 |
|
|
|
|
|
|
|
|
|
| $ | 8,449,224 |
|
|
|
|
|
Net interest spread (3) |
|
|
|
|
|
|
|
|
|
| 2.93 | % |
|
|
|
|
|
|
|
|
|
| 3.34 | % |
Net interest margin (4) |
|
|
|
|
|
|
|
|
|
| 3.37 | % |
|
|
|
|
|
|
|
|
|
| 3.49 | % |
(1) | Included in |
months ended September 30, | |
(2) | Included in other investments is the Company’s FHLBB Stock with |
$712,800 for the three months ended September 30, | |
(3) | Net interest spread is the difference between the average yield on average interest-earning assets and the average |
rate paid on average interest-bearing liabilities. | |
(4) | Net interest margin is net interest income divided by average earning assets. |
Nine Months Ended September 30, | ||||||
2017 | 2016 | |||||
Average | Average | |||||
Average | Income/ | Rate/ | Average | Income/ | Rate/ | |
Balance | Expense | Yield | Balance | Expense | Yield | |
Interest-Earning Assets | ||||||
Loans (1) | $495,170,740 | $17,737,531 | 4.79% | $465,314,118 | $16,582,276 | 4.76% |
Taxable investment securities | 35,001,161 | 488,250 | 1.87% | 29,210,491 | 384,413 | 1.76% |
Tax-exempt investment securities | 51,924,841 | 1,504,289 | 3.87% | 50,577,436 | 1,427,645 | 3.77% |
Sweep and interest-earning accounts | 11,938,565 | 84,802 | 0.95% | 5,225,968 | 18,654 | 0.48% |
Other investments (2) | 2,545,091 | 117,979 | 6.20% | 2,766,541 | 108,141 | 5.22% |
$596,580,398 | $19,932,851 | 4.47% | $553,094,554 | $18,521,129 | 4.47% | |
Interest-Bearing Liabilities | ||||||
Interest-bearing transaction accounts | $116,594,941 | $216,227 | 0.25% | $111,223,384 | $155,413 | 0.19% |
Money market accounts | 85,819,418 | 595,162 | 0.93% | 84,974,840 | 637,818 | 1.00% |
Savings deposits | 96,382,338 | 91,597 | 0.13% | 85,668,159 | 79,225 | 0.12% |
Time deposits | 125,015,108 | 831,446 | 0.89% | 107,919,364 | 657,009 | 0.81% |
Borrowed funds | 12,140,165 | 65,311 | 0.72% | 18,588,663 | 74,046 | 0.53% |
Repurchase agreements | 28,768,193 | 64,326 | 0.30% | 25,393,136 | 56,125 | 0.30% |
Capital lease obligations | 442,977 | 27,181 | 8.18% | 522,708 | 32,761 | 8.36% |
Junior subordinated debentures | 12,887,000 | 388,855 | 4.03% | 12,887,000 | 339,603 | 3.52% |
$478,050,140 | $2,280,105 | 0.64% | $447,177,254 | $2,032,000 | 0.61% | |
Net interest income | $17,652,746 | $16,489,129 | ||||
Net interest spread (3) | 3.83% | 3.86% | ||||
Net interest margin (4) | 3.96% | 3.98% |
37 |
Table of Contents |
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
| Average |
| ||||||
|
| Average |
|
| Income/ |
|
| Yield/ |
|
| Average |
|
| Income/ |
|
| Yield/ |
| ||||||
|
| Balance |
|
| Expense |
|
| Rate |
|
| Balance |
|
| Expense |
|
| Rate |
| ||||||
Average Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, net (1) |
| $ | 774,050,459 |
|
| $ | 30,544,342 |
|
|
| 5.28 | % |
| $ | 697,118,020 |
|
| $ | 23,476,738 |
|
|
| 4.50 | % |
Taxable investment securities |
|
| 178,750,212 |
|
|
| 2,815,397 |
|
|
| 2.11 | % |
|
| 183,417,294 |
|
|
| 2,192,540 |
|
|
| 1.60 | % |
Tax-exempt investment securities |
|
| 11,456,678 |
|
|
| 344,272 |
|
|
| 4.02 | % |
|
| 5,628,689 |
|
|
| 142,899 |
|
|
| 3.39 | % |
Sweep and interest-earning accounts |
|
| 16,880,174 |
|
|
| 568,803 |
|
|
| 4.51 | % |
|
| 68,303,360 |
|
|
| 609,532 |
|
|
| 1.19 | % |
Other investments (2) |
|
| 1,912,446 |
|
|
| 104,556 |
|
|
| 7.31 | % |
|
| 1,778,428 |
|
|
| 56,121 |
|
|
| 4.22 | % |
Total interest-earning assets |
|
| 983,049,969 |
|
| $ | 34,377,370 |
|
|
| 4.68 | % |
|
| 956,245,791 |
|
| $ | 26,477,830 |
|
|
| 3.70 | % |
Cash and due from banks |
|
| 10,584,558 |
|
|
|
|
|
|
|
|
|
|
| 10,631,909 |
|
|
|
|
|
|
|
|
|
Premises and equipment |
|
| 12,798,118 |
|
|
|
|
|
|
|
|
|
|
| 13,416,551 |
|
|
|
|
|
|
|
|
|
BOLI |
|
| 5,180,070 |
|
|
|
|
|
|
|
|
|
|
| 5,100,385 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 11,574,269 |
|
|
|
|
|
|
|
|
|
|
| 11,574,269 |
|
|
|
|
|
|
|
|
|
Other assets |
|
| 20,013,956 |
|
|
|
|
|
|
|
|
|
|
| 14,177,372 |
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 1,043,200,940 |
|
|
|
|
|
|
|
|
|
| $ | 1,011,146,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction accounts |
| $ | 271,528,726 |
|
| $ | 3,254,644 |
|
|
| 1.60 | % |
| $ | 256,909,959 |
|
| $ | 754,189 |
|
|
| 0.39 | % |
Money market funds |
|
| 130,690,426 |
|
|
| 1,699,425 |
|
|
| 1.74 | % |
|
| 132,391,636 |
|
|
| 446,751 |
|
|
| 0.45 | % |
Savings deposits |
|
| 168,151,363 |
|
|
| 98,104 |
|
|
| 0.08 | % |
|
| 178,709,726 |
|
|
| 77,373 |
|
|
| 0.06 | % |
Time deposits |
|
| 106,178,078 |
|
|
| 1,518,200 |
|
|
| 1.91 | % |
|
| 106,235,079 |
|
|
| 697,088 |
|
|
| 0.88 | % |
Borrowed funds |
|
| 24,875,392 |
|
|
| 892,522 |
|
|
| 4.80 | % |
|
| 1,301,132 |
|
|
| 14 |
|
|
| 0.00 | % |
Repurchase agreements |
|
| 35,611,331 |
|
|
| 548,300 |
|
|
| 2.06 | % |
|
| 30,752,887 |
|
|
| 88,322 |
|
|
| 0.38 | % |
Finance lease obligations |
|
| 3,553,782 |
|
|
| 61,277 |
|
|
| 2.30 | % |
|
| 3,769,459 |
|
|
| 64,979 |
|
|
| 2.30 | % |
Junior subordinated debentures |
|
| 12,887,000 |
|
|
| 776,296 |
|
|
| 8.05 | % |
|
| 12,887,000 |
|
|
| 373,506 |
|
|
| 3.88 | % |
Total interest-bearing liabilities |
|
| 753,476,098 |
|
| $ | 8,848,768 |
|
|
| 1.57 | % |
|
| 722,956,878 |
|
| $ | 2,502,222 |
|
|
| 0.46 | % |
Noninterest bearing deposits |
|
| 203,639,925 |
|
|
|
|
|
|
|
|
|
|
| 206,574,381 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
| 6,766,501 |
|
|
|
|
|
|
|
|
|
|
| 3,920,106 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 963,882,524 |
|
|
|
|
|
|
|
|
|
|
| 933,451,365 |
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
| 79,318,416 |
|
|
|
|
|
|
|
|
|
|
| 77,694,912 |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 1,043,200,940 |
|
|
|
|
|
|
|
|
|
| $ | 1,011,146,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
| $ | 25,528,602 |
|
|
|
|
|
|
|
|
|
| $ | 23,975,608 |
|
|
|
|
|
Net interest spread (3) |
|
|
|
|
|
|
|
|
|
| 3.11 | % |
|
|
|
|
|
|
|
|
|
| 3.24 | % |
Net interest margin (4) |
|
|
|
|
|
|
|
|
|
| 3.47 | % |
|
|
|
|
|
|
|
|
|
| 3.35 | % |
(1) | Included in |
months ended September 30, | |
(2) | Included in other investments is the Company’s FHLBB Stock with average balances of |
$713,278, respectively, | |
(3) | Net interest spread is the difference between the average yield on average interest-earning assets and the average |
rate paid on average interest-bearing liabilities. | |
(4) | Net interest margin is net interest income divided by average earning assets. |
38 |
Table of Contents |
The average volume of interest-earning assets for the three- and nine-month periods ended September 30, 20172023, increased 7.1%5.1% and 7.9%2.8%, respectively, compared to the same periods last year. Averageyear, and the average yield on interest-earning assets for the third quarter increased six basis points, to 4.59%, compared to 4.53% for the same period last year,88 bps and remained unchanged at 4.47% for the nine months ended September 30, 2017, compared to the same period last year.
The average volume of loans increased over the three- and nine-month comparison periods of 20172023 versus 2016,2022 by 6.5%14.6% and 6.4%11.0%, respectively, whileand the average yield on loans increased 10 basis points79 bps and 78 bps, respectively. Loans accounted for 80.5% and 78.7%, respectively, of the average interest-earning asset portfolio for the third quarter, to 4.89%, compared to 4.79% for the third quarter of 2016,three- and increased three basis points for the nine monthsnine- month periods ended September 30, 2017, to 4.79%2023, compared to 4.76%73.8% and 72.9%, respectively, for the same period in 2016. These increases were due to a combination of the steadily increasing federal funds rate over the periods noted, and a shift in asset mix toward commercial loans; however, this has been partially offset by continued pressure on medium term (5-10 year) fixed rates.last year. Interest earned on the loan portfolio as a percentage of total interest income increased slightlywas 90.3% and 88.9%, respectively, for the third quarterthree- and decreased slightly for the nine-month period ended September 30, 2017, comprising approximately 89.3%periods in 2023 compared to 86.7% and 89.0% of total interest income in the two periods respectively, versus 89.2% and 89.5%88.7%, respectively, for the same periods last year.
The average volume of the taxable investment portfolio (classified as available-for-sale) increased 29.7%AFS) decreased 3.6% and 2.5% during the third quarter of 2017three- and 19.8% year to date, compared to the samenine-month periods last year. Average yields on the taxable investment portfolio increased five basis points and 11 basis points, for the third quarter of 2017 and year to date, respectively, compared to the same periods last year. These increases are due primarily to an effort to continue to incrementally grow the investment portfolio as the balance sheet grows in order to provide additional liquidity and pledge quality assets. The average volume of the tax exempt portfolio (classified as held-to-maturity and consisting of municipal securities) decreased 10.1% during the third quarter of 2017 and increased 2.7% year to date, compared to the same periods last year. The average tax-equivalent yield on the tax exempt portfolio increased 31 basis points during the third quarter of 2017 and increased 10 basis points for the nine-month period ended September 30, 2017,2023, compared to the same periods last year, reflectingwhile the increasesaverage yield increased 38 bps and 51 bps, respectively, between periods. There were no purchases of taxable AFS investment securities during the first nine months of 2023, accounting for the decrease year over year.
The average volume of the tax-exempt investment portfolio (classified as AFS) for the three- and nine-month periods ended September 30, 2023, increased $2.2 million and $5.8 million, respectively, and the tax equivalent yield increased 26 bps and 63 bps, respectively. The Company purchased several bonds during 2023, accounting for the increase in short term market rates.
The average volume of sweep and interest-earning accounts, which consists primarily of an interest-bearing account at the Federal Reserve Bank of Boston (FRBB) and two correspondent banks, increased 299.7% duringFRBB, decreased 86.6% for the three-month period and 128.5% during the nine-month periodthree-months ended September 30, 20172023, compared to the same periods lastperiod in 2022, and 75.3% for the nine-months ended September 30, 2023, compared to the same period in 2022. The decrease in average volume year over year is attributable to the funding of loan growth, and theto a decrease in customer deposit accounts. The average yield on these funds increased 68 basis points237 bps and 47 basis points, respectively. This increase332 bps for the three- and nine-month periods ended September 30, 2023, versus the same periods in volume is attributable2022, directly related to a higher balance of cash periodically held on handthe increases in anticipation of funding loan growththe fed funds rate throughout 2022 and other liquidity needs.
The average volume of interest-bearing liabilities for the three- and nine-month periods ended September 30, 20172023 increased 5.4%6.5% and 6.9%4.2%, respectively, compared to the same periods last year. Thein 2022, and the average rate paid on interest-bearing liabilities increased five basis points during the third quarter of 2017129 bps and three basis points during the first nine months of 2017, compared to the same periods last year.
The average volume of interest-bearing transaction accounts increased 7.4%4.5% and 4.8%5.7%, respectively duringfor the third quarterthree- and first nine months of 2017,nine-month periods ended September 30, 2023, compared to the same periods lastof 2022, reflecting deposit growth year over year. The average rate paid on these accounts increased 108 bps and 121 bps, respectively, between comparison periods. Interest paid on these funds accounted for 30.5% and 36.8% of total interest expense for the three- and nine-month periods of 2023, respectively.
The average volume of money market accounts decreased 1.7% and 1.3%, respectively, for the three- and nine-month periods ended September 30, 2023, compared to the same periods of 2022, while the average rate paid on these deposits increased 145 bps and 129 bps, respectively.
The average volume of savings accounts decreased 9.4% and 5.9%, respectively, for the three- and nine-month periods ended September 30, 2023, compared to the same periods in 2022, while the average rate paid on these accounts increased 13 basis points and six basis points, respectively. two bps in both comparison periods.
The average volume of money market accountstime deposits increased 3.7% during3.4% and decreased 0.1%, respectively, for the three-month periodthree- and nine-month periods ended September 30, 2017, and 1.0% during the nine-month period ended September 30, 2017,2023, compared to the same periods in 2016,2022, and the average rate paid increased 151 bps and 103 bps, respectively.
As a result of the decrease in deposits, the Company has had to rely on these deposits decreased 14 basis pointsborrowed funds to fund loan growth during the first nine months of 2023, particularly during the second and third quarterquarters of 2017 and seven basis points in the year to date comparison periods. The average volume of savings accounts increased by 12.5%2023, accounting for the three-month and nine-month comparison periodsincrease of 2017 versus 2016, partially due to several escrow accounts for deposits held$50.7 million for the future purchase of properties inthree months ended September 30, 2023, and $23.6 million for the Stowe area which account for approximately half of the increase. Some of the increase is due in partnine months ended September 30, 2023, compared to the continued shift in product mix from retail time deposits to savings accounts as consumers anticipate higher rates in the near future. Compared to the samerespective periods in 2016, the average volume of retail time deposits increased 0.6% during the third quarter, and decreased 0.4% year to date 2017, while the average volume of wholesale time deposits increased during both the three- and nine-month comparison periods in 2017. With the recent increases in short term rates, there has been modest pressure for higher rates from the more rate sensitive deposit holders. Otherwise, the local market is not yet showing any signs of higher rates being paid on deposit products. Wholesale time deposits have been an increasingly beneficial source of funding throughout 2016 and into 2017 as they have provided large blocks of funding without the need to disrupt pricing in the Company’s local markets. These funds can be obtained relatively quickly on an as-needed basis, making them a valuable alternative to traditional term borrowings from the FHLBB.
39 |
Table of Contents |
The average volume of repurchase agreements increased 7.4%2.0% and 13.3%15.8%, respectively, for the three- and nine-month periods ended September 30, 2017,2023, compared to the same periods in 2016, while2022 and the average rate paid on repurchase agreements increased one basis point during181 bps and 168 bps, respectively, between comparison periods.
In summary, between the three-month periodthree- and nine-month periods ended September 30, 2017, but remained flat for the first nine months of 2017, compared to the same periods in 2016.
The following table summarizes the variances in interest income and interest expense on a fully tax-equivalent basis for the interim periods presented for 20172023 and 20162022 resulting from volume changes in daily average assets and daily average liabilities and fluctuations in average rates earned and paid.
Changes in Interest Income and Interest Expense | ||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||
Variance | Variance | Variance | Variance | |||
Due to | Due to | Total | Due to | Due to | Total | |
Rate (1) | Volume (1) | Variance | Rate (1) | Volume (1) | Variance | |
Average Interest-Earning Assets | ||||||
Loans | $142,212 | $369,832 | $512,044 | $91,315 | $1,063,940 | $1,155,255 |
Taxable investment securities | 4,919 | 38,194 | 43,113 | 27,539 | 76,298 | 103,837 |
Tax-exempt investment securities | 44,639 | (56,604) | (11,965) | 38,616 | 38,028 | 76,644 |
Sweep and interest-earning accounts | 17,743 | 9,173 | 26,916 | 42,027 | 24,121 | 66,148 |
Other investments | 10,374 | (18,483) | (8,109) | 20,107 | (10,269) | 9,838 |
$219,887 | $342,112 | $561,999 | $219,604 | $1,192,118 | $1,411,722 | |
Average Interest-Bearing Liabilities | ||||||
Interest-bearing transaction accounts | $36,575 | $3,796 | $40,371 | $53,173 | $7,641 | $60,814 |
Money market accounts | (29,004) | 7,681 | (21,323) | (48,979) | 6,323 | (42,656) |
Savings deposits | 1,748 | 3,313 | 5,061 | 2,747 | 9,625 | 12,372 |
Time deposits | 45,058 | 55,197 | 100,255 | 70,770 | 103,667 | 174,437 |
Borrowed funds | (17,101) | (21,667) | (38,768) | 25,991 | (34,726) | (8,735) |
Repurchase agreements | 376 | 1,368 | 1,744 | 621 | 7,580 | 8,201 |
Capital lease obligations | (711) | (1,712) | (2,423) | (702) | (4,878) | (5,580) |
Junior subordinated debentures | 19,532 | 0 | 19,532 | 49,252 | 0 | 49,252 |
$56,473 | $47,976 | $104,449 | $152,873 | $95,232 | $248,105 | |
Changes in net interest income | $163,414 | $294,136 | $457,550 | $66,731 | $1,096,886 | $1,163,617 |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||
|
| Variance |
|
| Variance |
|
|
|
|
| Variance |
|
| Variance |
|
|
|
| ||||||
|
| Due to |
|
| Due to |
|
| Total |
|
| Due to |
|
| Due to |
|
| Total |
| ||||||
|
| Rate (1) |
|
| Volume (1) |
|
| Variance |
|
| Rate (1) |
|
| Volume (1) |
|
| Variance |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Average Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, net |
| $ | 1,604,361 |
|
| $ | 1,199,976 |
|
| $ | 2,804,337 |
|
| $ | 4,478,248 |
|
| $ | 2,589,356 |
|
| $ | 7,067,604 |
|
Taxable investment securities |
|
| 176,734 |
|
|
| (34,634 | ) |
|
| 142,100 |
|
|
| 696,511 |
|
|
| (73,654 | ) |
|
| 622,857 |
|
Tax-exempt investment securities |
|
| 7,527 |
|
|
| 20,960 |
|
|
| 28,487 |
|
|
| 53,602 |
|
|
| 147,771 |
|
|
| 201,373 |
|
Sweep and interest-earning accounts |
|
| 347,471 |
|
|
| (611,863 | ) |
|
| (264,392 | ) |
|
| 1,693,895 |
|
|
| (1,734,624 | ) |
|
| (40,729 | ) |
Other investments |
|
| 13,031 |
|
|
| 3,844 |
|
|
| 16,875 |
|
|
| 44,205 |
|
|
| 4,230 |
|
|
| 48,435 |
|
Total |
| $ | 2,149,124 |
|
| $ | 578,283 |
|
| $ | 2,727,407 |
|
| $ | 6,966,461 |
|
| $ | 933,079 |
|
| $ | 7,899,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Interest-Bearing Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction accounts |
| $ | 716,778 |
|
| $ | 17,200 |
|
| $ | 733,978 |
|
| $ | 2,457,812 |
|
| $ | 42,643 |
|
| $ | 2,500,455 |
|
Money market funds |
|
| 509,025 |
|
|
| (11,640 | ) |
|
| 497,385 |
|
|
| 1,274,814 |
|
|
| (22,140 | ) |
|
| 1,252,674 |
|
Savings deposits |
|
| 9,599 |
|
|
| (3,453 | ) |
|
| 6,146 |
|
|
| 27,049 |
|
|
| (6,318 | ) |
|
| 20,731 |
|
Time deposits |
|
| 417,923 |
|
|
| 7,828 |
|
|
| 425,751 |
|
|
| 821,925 |
|
|
| (814 | ) |
|
| 821,111 |
|
Borrowed funds |
|
| 656,718 |
|
|
| 0 |
|
|
| 656,718 |
|
|
| 892,509 |
|
|
| 0 |
|
|
| 892,509 |
|
Repurchase agreements |
|
| 155,475 |
|
|
| 890 |
|
|
| 156,365 |
|
|
| 446,169 |
|
|
| 13,809 |
|
|
| 459,978 |
|
Finance lease obligations |
|
| 15 |
|
|
| (1,259 | ) |
|
| (1,244 | ) |
|
| 8 |
|
|
| (3,710 | ) |
|
| (3,702 | ) |
Junior subordinated debentures |
|
| 122,616 |
|
|
| 0 |
|
|
| 122,616 |
|
|
| 402,790 |
|
|
| 0 |
|
|
| 402,790 |
|
Total |
| $ | 2,588,149 |
|
| $ | 9,566 |
|
| $ | 2,597,715 |
|
| $ | 6,323,076 |
|
| $ | 23,470 |
|
| $ | 6,346,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net interest income |
| $ | (439,025 | ) |
| $ | 568,717 |
|
| $ | 129,692 |
|
| $ | 643,385 |
|
| $ | 909,609 |
|
| $ | 1,552,994 |
|
(1) | Items which have shown a year-to-year increase in volume have variances allocated as follows: |
Variance due to rate = Change in rate x new volume | |
Variance due to volume = Change in volume x old rate | |
Items which have shown a year-to-year decrease in volume have variances allocated as follows: | |
Variance due to rate = Change in rate x old volume | |
Variances due to volume = Change in volume x new rate |
40 |
Table of Contents |
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Non-interest Income
The components of non-interest income for the periods presented arewere as follows:
Three Months Ended | Nine Months Ended | |||||||
September 30, | Change | September 30, | Change | |||||
2017 | 2016 | Income | Percent | 2017 | 2016 | Income | Percent | |
Service fees | $773,419 | $719,341 | $54,078 | 7.52% | $2,293,773 | $1,992,560 | $301,213 | 15.12% |
Income from sold loans | 185,844 | 230,623 | (44,779) | -19.42% | 560,210 | 683,114 | (122,904) | -17.99% |
Other income from loans | 222,026 | 209,882 | 12,144 | 5.79% | 616,931 | 616,473 | 458 | 0.07% |
Net realized gain on sale of | ||||||||
securities available-for-sale | 1,246 | 0 | 1,246 | 100.00% | 4,647 | 0 | 4,647 | 100.00% |
Income from CFSG Partners | 116,059 | 143,095 | (27,036) | -18.89% | 314,573 | 326,676 | (12,103) | -3.70% |
Currency exchange income | 22,000 | 27,000 | (5,000) | -18.52% | 66,500 | 78,500 | (12,000) | -15.29% |
SERP fair value adjustment | (2,179) | 32,352 | (34,531) | -106.74% | 45,312 | 46,758 | (1,446) | -3.09% |
Other income | 130,832 | 121,227 | 9,605 | 7.92% | 299,250 | 295,989 | 3,261 | 1.10% |
Total non-interest income | $1,449,247 | $1,483,520 | $(34,273) | -2.31% | $4,201,196 | $4,040,070 | $161,126 | 3.99% |
|
| Three Months Ended |
|
|
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
|
|
| ||||||||||||||
|
| September 30, |
|
| Change |
|
| September 30, |
|
| Change |
| ||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| Income |
|
| Percent |
|
| 2023 |
|
| 2022 |
|
| Income |
|
| Percent |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Service fees |
| $ | 937,890 |
|
| $ | 939,807 |
|
| $ | (1,917 | ) |
|
| -0.20 | % |
| $ | 2,757,629 |
|
| $ | 2,739,076 |
|
| $ | 18,553 |
|
|
| 0.68 | % |
Income from sold loans |
|
| 144,747 |
|
|
| 109,411 |
|
|
| 35,336 |
|
|
| 32.30 | % |
|
| 358,942 |
|
|
| 508,795 |
|
|
| (149,853 | ) |
|
| -29.45 | % |
Other income from loans |
|
| 310,645 |
|
|
| 301,710 |
|
|
| 8,935 |
|
|
| 2.96 | % |
|
| 1,081,093 |
|
|
| 895,884 |
|
|
| 185,209 |
|
|
| 20.67 | % |
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CFS Partners |
|
| 150,140 |
|
|
| 87,386 |
|
|
| 62,754 |
|
|
| 71.81 | % |
|
| 705,343 |
|
|
| 386,217 |
|
|
| 319,126 |
|
|
| 82.63 | % |
Exchange income |
|
| 29,500 |
|
|
| 5,000 |
|
|
| 24,500 |
|
|
| 490.00 | % |
|
| 63,500 |
|
|
| 19,950 |
|
|
| 43,550 |
|
|
| 218.30 | % |
VISA card commission |
|
| 73,176 |
|
|
| 23,576 |
|
|
| 49,600 |
|
|
| 210.38 | % |
|
| 140,841 |
|
|
| 70,728 |
|
|
| 70,113 |
|
|
| 99.13 | % |
Other miscellaneous income |
|
| 65,493 |
|
|
| 64,713 |
|
|
| 780 |
|
|
| 1.21 | % |
|
| 201,452 |
|
|
| 231,679 |
|
|
| (30,227 | ) |
|
| -13.05 | % |
Total non-interest income |
| $ | 1,711,591 |
|
| $ | 1,531,603 |
|
| $ | 179,988 |
|
|
| 11.75 | % |
| $ | 5,308,800 |
|
| $ | 4,852,329 |
|
| $ | 456,471 |
|
|
| 9.41 | % |
Total non-interest income decreased $34,273,increased $179,988, or 2.3%11.8%, for the third quarter of 2017three months ended September 30, 2023, and increased $161,126,$456,471, or 4.0%,9.4% for the first nine months of 2017 versusended September 30, 2023, compared to the same periods in 2016,2022, with significant changes noted in the following:
· | The volume of loans sold into the secondary market increased during the third quarter of 2023, but not enough to make up for the lower volume during the first two quarters of 2023, thereby accounting for the increase in the three- month comparison periods and the decrease year over year in income from sold loans. | |
· | Although the volume was lower in the third quarter of 2023, an increase in year to date CRE loan volume in 2023 resulted in a significant increase in documentation fees collected at origination as well as commercial rate lock fees collected, accounting for the increase in other income from loansfor both comparison periods of 2023 versus 2022. | |
· | Income from CFS Partners increased between periods due in part to a rebound of market prices during the latter part of the first quarter of 2023 and an increase in managed accounts. CFS Partners has a small portion of its equity capital invested in the stock market, and as a result is sensitive to general stock market conditions. | |
· | The Company has seen an increase in volume of Canadian funds purchased accounting for the increase in exchange income. | |
· | The increase in VISA card commission is attributable to additional income from a renegotiated contract in June of 2023, including a renewal incentive payment as well as an increase in the monthly commission beginning in July 2023. | |
· | Included in other miscellaneous income for 2022 is a one-time credit totaling $23,400 associated with a renegotiated contract with the Company’s check printing vendor, accounting for the decrease year over year. |
41 |
Table of Contents |
Non-interest Expense
The components of non-interest expense for the periods presented arewere as follows:
Three Months Ended | Nine Months Ended | |||||||
September 30, | Change | September 30, | Change | |||||
2017 | 2016 | Expense | Percent | 2017 | 2016 | Expense | Percent | |
Salaries and wages | $1,653,751 | $1,725,000 | $(71,249) | -4.13% | $5,068,626 | $5,175,000 | $(106,374) | -2.06% |
Employee benefits | 682,944 | 679,762 | 3,182 | 0.47% | 2,016,923 | 2,049,926 | (33,003) | -1.61% |
Occupancy expenses, net | 614,817 | 605,378 | 9,439 | 1.56% | 1,963,543 | 1,857,482 | 106,061 | 5.71% |
Other expenses | ||||||||
Computer outsourcing | 130,938 | 128,910 | 2,028 | 1.57% | 408,044 | 376,885 | 31,159 | 8.27% |
Service contracts - administrative | 116,863 | 106,747 | 10,116 | 9.48% | 313,526 | 292,663 | 20,863 | 7.13% |
Marketing expense | 135,498 | 98,339 | 37,159 | 37.79% | 382,996 | 283,139 | 99,857 | 35.27% |
Consultant services | 61,113 | 51,833 | 9,280 | 17.90% | 162,935 | 116,293 | 46,642 | 40.11% |
Collection & non-accruing loan | ||||||||
expense | 15,455 | 46,500 | (31,045) | -66.76% | 36,165 | 84,500 | (48,335) | -57.20% |
Miscellaneous computer expense | 54,010 | 28,383 | 25,627 | 90.29% | 110,822 | 54,246 | 56,576 | 104.30% |
OREO expense | 5,240 | 5,498 | (258) | -4.69% | 18,044 | 37,467 | (19,423) | -51.84% |
Other miscellaneous expenses | 1,371,487 | 1,314,153 | 57,334 | 4.36% | 3,984,178 | 3,820,372 | 163,806 | 4.29% |
Total non-interest expense | $4,842,116 | $4,790,503 | $51,613 | 1.08% | $14,465,802 | $14,147,973 | $317,829 | 2.25% |
|
| Three Months Ended |
|
|
|
|
|
|
|
| Nine Months Ended |
|
|
|
|
|
|
| ||||||||||||||
|
| September 30, |
|
| Change |
|
| September 30, |
|
| Change |
| ||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| Expense |
|
| Percent |
|
| 2023 |
|
| 2022 |
|
| Expense |
|
| Percent |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Salaries and wages |
| $ | 2,164,760 |
|
| $ | 1,984,000 |
|
| $ | 180,760 |
|
|
| 9.11 | % |
| $ | 6,718,280 |
|
| $ | 6,058,000 |
|
| $ | 660,280 |
|
|
| 10.90 | % |
Employee benefits |
|
| 797,304 |
|
|
| 629,681 |
|
|
| 167,623 |
|
|
| 26.62 | % |
|
| 2,363,444 |
|
|
| 2,106,356 |
|
|
| 257,088 |
|
|
| 12.21 | % |
Occupancy expenses, net |
|
| 662,277 |
|
|
| 677,805 |
|
|
| (15,528 | ) |
|
| -2.29 | % |
|
| 2,133,492 |
|
|
| 2,104,346 |
|
|
| 29,146 |
|
|
| 1.39 | % |
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
Outsourcing expense |
|
| 157,191 |
|
|
| 137,929 |
|
|
| 19,262 |
|
|
| 13.97 | % |
|
| 434,541 |
|
|
| 402,891 |
|
|
| 31,650 |
|
|
| 7.86 | % |
Service contracts - administrative |
|
| 159,437 |
|
|
| 142,081 |
|
|
| 17,356 |
|
|
| 12.22 | % |
|
| 467,926 |
|
|
| 428,254 |
|
|
| 39,672 |
|
|
| 9.26 | % |
Telephone expense |
|
| 38,493 |
|
|
| 33,039 |
|
|
| 5,454 |
|
|
| 16.51 | % |
|
| 110,674 |
|
|
| 101,388 |
|
|
| 9,286 |
|
|
| 9.16 | % |
Travel, entertainment and meals expense |
|
| 27,363 |
|
|
| 26,794 |
|
|
| 569 |
|
|
| 2.12 | % |
|
| 97,532 |
|
|
| 70,744 |
|
|
| 26,788 |
|
|
| 37.87 | % |
Audit fees |
|
| 137,232 |
|
|
| 122,034 |
|
|
| 15,198 |
|
|
| 12.45 | % |
|
| 382,841 |
|
|
| 337,790 |
|
|
| 45,051 |
|
|
| 13.34 | % |
FDIC insurance |
|
| 104,000 |
|
|
| 90,637 |
|
|
| 13,363 |
|
|
| 14.74 | % |
|
| 360,343 |
|
|
| 277,047 |
|
|
| 83,296 |
|
|
| 30.07 | % |
Collection & non-accruing loan expense |
|
| 25,500 |
|
|
| (14,000 | ) |
|
| 39,500 |
|
|
| -282.14 | % |
|
| 61,500 |
|
|
| 33,000 |
|
|
| 28,500 |
|
|
| 86.36 | % |
Other miscellaneous expenses |
|
| 1,540,987 |
|
|
| 1,510,909 |
|
|
| 30,078 |
|
|
| 1.99 | % |
|
| 4,427,598 |
|
|
| 4,309,145 |
|
|
| 118,453 |
|
|
| 2.75 | % |
Total non-interest expense |
| $ | 5,814,544 |
|
| $ | 5,340,909 |
|
| $ | 473,635 |
|
|
| 8.87 | % |
| $ | 17,558,171 |
|
| $ | 16,228,961 |
|
| $ | 1,329,210 |
|
|
| 8.19 | % |
Total non-interest expense increased $51,613,$473,635, or 1.1%8.9% for the three months ended September 30, 2023, and $1,329,210, or 8.2%, for the nine months ended September 30, 2023, compared to the same periods in 2022, with significant changes noted in the following:
· | In addition to normal salary increases, the increase in salaries and wages year over year is attributable to new hires in the area of commercial lending and operations during the last quarter of 2022. Also contributing to the increase was a one-time salary adjustment in November of 2022 of $2,000 to all employees below vice president status that impacted the year over year comparison by $57,500. | |
· | The increase in employee benefits is attributable to an increase in health insurance claims year over year under the Company’s self-insured health insurance plan. | |
· | The increase in outsourcing expense is attributable to normal increases in costs associated with these arrangements. | |
· | The increase in service contracts - administrative is due to a combination of an increase in transaction-based pricing for certain contracts and contractual inflationary adjustment factors that are higher than historical increase adjustments. | |
· | The increase in telephone expense is attributable to a new phone system with advanced technology. | |
· | The increase in travel, entertainment and meals expenses is attributable to an increase in travel expenses as more seminars and training sessions return to in-person attendance. | |
· | The increase in audit fees reflects increased audit services due to additional audit requirements required by FDICIA due to the Company surpassing $1.0 billion asset size. | |
· | The Company increased the 2023 monthly accrual for FDIC insurance in anticipation of an increase in the assessment multiplier, as announced by the FDIC in late 2022. | |
· | Collection & non-accruing loan expenses were lower year over year due to a decrease in expenses associated with properties in the Company’s non-accruing loan portfolio. |
42 |
Table of Contents |
APPLICABLE INCOME TAXES
The provision for income taxes decreased $105,046, or 12.7% for the third quarter of 2017 and $317,829,2023 compared to the same quarter of 2022, as a result of the decrease in income before income taxes. An increase of $236,603, or 2.3%11.7%, is noted for the first nine months of 20172023 compared to the same periodsperiod in 20162022, which is consistent with significant changes notedthe increase in the following:
Amortization expense related to limited partnership investments is included as a component of income tax expense and amounted to $105,414$67,128 and $102,006,$67,353, respectively, for the third quarter of 20172023 compared to the same quarter of 2022, and 2016,$201,384 and $316,242 and $306,018$201,537 for the first nine months of 20172023 and 2016,2022, respectively. These investments provide tax benefits, including tax credits, and are designed to provide ana targeted effective annual yield of between 8%7% and 10%.
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:
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans |
| $ | 838,572,268 |
|
|
| 77.41 | % |
| $ | 748,548,608 |
|
|
| 70.88 | % |
AFS securities |
|
| 181,928,461 |
|
|
| 16.79 | % |
|
| 192,918,109 |
|
|
| 18.27 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
| 205,188,102 |
|
|
| 18.94 | % |
|
| 216,093,534 |
|
|
| 20.46 | % |
Interest-bearing transaction accounts |
|
| 284,744,064 |
|
|
| 26.29 | % |
|
| 294,050,079 |
|
|
| 27.84 | % |
Money market funds |
|
| 137,192,956 |
|
|
| 12.66 | % |
|
| 140,117,086 |
|
|
| 13.27 | % |
Savings deposits |
|
| 159,409,376 |
|
|
| 14.72 | % |
|
| 171,072,921 |
|
|
| 16.20 | % |
Time deposits |
|
| 114,670,421 |
|
|
| 10.59 | % |
|
| 101,638,659 |
|
|
| 9.62 | % |
Overnight borrowings |
|
| 3,550,000 |
|
|
| 0.33 | % |
|
| 0 |
|
|
| 0.00 | % |
Long-term advances |
|
| 45,600,000 |
|
|
| 4.21 | % |
|
| 1,300,000 |
|
|
| 0.12 | % |
The following table reflects the changes in the composition of the Company's major categories of assets and liabilities between the balance sheet dates, indicated:
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Assets | ||||||
Loans | $506,048,119 | 76.50% | $487,249,226 | 76.41% | $470,186,895 | 77.62% |
Securities available-for-sale | 36,719,673 | 5.55% | 33,715,051 | 5.29% | 29,412,216 | 4.86% |
Securities held-to-maturity | 53,882,287 | 8.14% | 49,886,631 | 7.82% | 56,837,100 | 9.38% |
Liabilities | ||||||
Demand deposits | 115,930,899 | 17.52% | 104,472,268 | 16.38% | 101,259,470 | 16.72% |
Interest-bearing transaction accounts | 127,426,517 | 19.26% | 118,053,360 | 18.51% | 119,981,648 | 19.81% |
Money market accounts | 85,947,545 | 12.99% | 79,042,619 | 12.40% | 76,976,376 | 12.71% |
Savings deposits | 99,439,616 | 15.03% | 86,776,856 | 13.61% | 91,274,380 | 15.07% |
Time deposits | 128,007,743 | 19.35% | 116,389,929 | 18.25% | 114,315,032 | 18.87% |
Borrowed Funds | 0 | 0.00% | 0 | 0.00% | 5,245,000 | 0.87% |
Short-term advances | 0 | 0.00% | 30,000,000 | 4.70% | 0 | 0.00% |
Long-term advances | 3,550,000 | 0.54% | 1,550,000 | 0.24% | 550,000 | 0.09% |
|
| Volume Change |
|
| Percentage |
| ||
Assets |
|
|
|
|
|
| ||
Loans |
| $ | 90,023,660 |
|
|
| 12.03 | % |
AFS securities |
|
| (10,989,648 | ) |
|
| -5.70 | % |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Demand deposits |
|
| (10,905,432 | ) |
|
| -5.05 | % |
Interest-bearing transaction accounts |
|
| (9,306,015 | ) |
|
| -3.16 | % |
Money market funds |
|
| (2,924,130 | ) |
|
| -2.09 | % |
Savings deposits |
|
| (11,663,545 | ) |
|
| -6.82 | % |
Time deposits |
|
| 13,031,762 |
|
|
| 12.82 | % |
Overnight borrowings |
|
| 3,550,000 |
|
|
| 100.00 | % |
Long-term advances |
|
| 44,300,000 |
|
|
| 3407.69 | % |
The Company's totalincrease in the loan portfolio at September 30, 2017 increased $18,798,893, or 3.9%, from December 31, 2016during the first nine months of 2023 was attributable to increases of $50.1 million in CRE loans, $13.2 million in commercial & industrial, $24.1 million in municipal loans and $35,861,224, or 7.6%, year over year. Securities available-for-sale (AFS) increased $3,004,622 or 8.9%, year to date,$7.4 million in residential 1st lien loans, which was partially offset by decreases of $1.6 million in purchased loans, and $7,307,457, or 24.8%, year over year. Securities held-to-maturity increased $3,995,656 or 8.0%, year to date, and decreased $2,954,813, or 5.2%, year over year. Held-to-maturity securities are made up of investments from the Company’s municipal customers$2.7 million in its service areas. While theresidential junior lien loans. The Company has used maturingexperienced strong loan activity among its commercial customers, but only minimal consumer loan activity.
The decrease in the securities to fund loan growth in recent periods, the liquidity provided by these investments is very important. As a result, the AFS portfolio has been expandingduring the first nine months of 2023 is attributable to purchases of $4.0 million, which was offset by maturities amounting to $1.2 million and principal payments on various securities totaling $9.9 million and an increase of $3.6 million in recent periods to keepunrealized losses arising during the Company’s on-balance-sheet liquidityfirst nine months of 2023, which is reflected in OCI. In management’s view, the size of the securities AFS portfolio is appropriate and proportional to the overall asset base.
43 |
Table of Contents |
The decrease in the demand deposit accounts reflected a $9.3 million, or 10.3%5.7%, from December 31, 2016 to September 30, 2017,decrease in business DDAs and a $1.6 million, or 3.1%, decrease in retail DDAs. The decrease in interest-bearing transaction accounts consisted of a decrease of $5.9 million, or 4.86%, in consumer interest-bearing transaction accounts, a decrease of $6.4 million, or 16.0%, in municipal deposit accounts and a decrease of $5.4 million, or 6.3% in ICS deposit accounts. These decreases were partially offset by a combined increase of $8.4 million, or 18.9%, in health savings accounts and the deposit account of the Company’s trust and asset management affiliate, CFSG. The decrease in money market funds was driven by decreases of $12.3 million, or 41.8%, in ICS accounts, $6.4 million, or 6.3%, in retail money market funds, which was partially offset by an increase of $52,945,414,$3.0 million, or 10.5%33.6%, in municipal deposits. The increase in time deposits is noted year over year. Demand deposits increased $11,458,631, or 11.0%,attributable to customer response to periodic certificate of deposit specials that have been offered. As a result of the year to date and $14,671,429, or 14.5%, year over year, split between growthdecrease in business checking ($13.5 million, or 21.8%) and consumer checking ($1.2 million, or 3.1%). Theaggregate deposits, the Company is seeing growth inhad to rely on borrowed funds, including long-term advances, as a supplemental funding source, accounting for the business customer base and improvements in financial health of existing business customers. Money market accounts increased $6,904,926, or 8.7%, year to date, and $8,971,169, or 11.7% year over year. Savings deposits increased significantly in both periods, with increases of $12,662,760, or 14.6%, year to date and $8,165,236, or 9.0%, year over year. As mentioned earlier, this is partially due to multiple construction escrow accounts. Time deposits increased $11,617,814, or 10.0%, year to date and $13,692,711, or 12.0%, year over year, which is entirely attributable to ansignificant increase in wholesale purchasedthese funds.
UNINSURED DEPOSITS
The estimated balances of uninsured time deposits. There were no overnight purchases and short-term advances from the FHLBBdeposits at September 30, 2017, $30,000,0002023 were made up of time CDs of $18,313,231 and retirement accounts of $2,993,028. Increments of maturity of these time deposits are summarized as follows:
3 months or less |
| $ | 2,162,576 |
|
Over 3 through 6 months |
|
| 6,390,509 |
|
Over 6 through 12 months |
|
| 9,014,818 |
|
Over 12 months |
|
| 3,738,356 |
|
Total |
| $ | 21,306,259 |
|
Estimated deposits in excess of the FDIC insurance level amounted to $319,620,273 at September 30, 2023 and $331,530,619 at December 31, 2016 and $5,245,000 at September 30, 2016. In addition, there were outstanding long-term advances from the FHLBB of $3,550,000 at September 30, 2017, $1,550,000 at December 31, 2016, and $550,000 at September 30, 2016.
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'sInterest 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 net interest income (NII),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 basis point (bp)bp shift upward and a 100 bp shift downward in interest rates.
Under the Company’s interest rate sensitivity modeling, with the continued asset sensitive balance sheet, in a rising rate environment NII is expected to trendinitially trends upward as the short-term asset base (cash and adjustable rateadjustable-rate loans) quickly cycle upward while the retail funding base (deposits) lags the market. If rates paid on deposits have tomust be increased more and/or more quickly than projected due to competitive pressures, the expected benefit to rising rates would be reduced. In a falling rate environment, NII is expected to trend slightly downward compared with the current rate environment scenario for the first year of the simulation as asset yield erosion is not fully offset by decreasing funding costs. Thereafter, net interest income is projected to experience sustained downward pressure as funding costs reach their assumed floors and asset yields continue to reprice into the lower rate environment. The recent increases in the federal fundscurrent rising rate have generatedenvironment has had a positive impact toon the Company’s NII, in 2017 as variable rate loans reprice; however the behavior of the long end of the yield curve will also be very importantmarket expectations for higher deposit rates and increased borrowing costs are applying increasing pressure to the Company’s margins going forward, as funding costs continue to risespread between interest income and the long end remains relatively anchored.
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The following table summarizes the estimated impact on the Company's NII over a twelve monthtwelve-month period, assuming a gradual parallel shift of the yield curve beginning September 30, 2017:
Rate Change | Percent Change in NII |
Down 100 | 0.5% |
Up 200 | -3.1% |
The estimated amounts shown in the table above are well within the ALCO Policy limits. However, those amounts do not represent a forecast and should not be relied upon as indicative of future results. The ALCO model also provides alternate scenarios including a sustained flat, or inverted yield curve. While assumptions used in the ALCO process, including the interest rate simulation analyses, are developed based upon current economic and local market conditions, and expected future conditions, the Company cannot provide any assurances as to the predictive nature of these assumptions, including how customer preferences or competitor influences might change.
As of September 30, 2023, the Company had outstanding $12,887,000 in principal amount of Junior Subordinated Debentures due December 15, 2037, which previously bore a quarterly floating rate of interest equal to the 3-month London Interbank Offered Rate (LIBOR), plus 2.85%. As previously announced, 3-month LIBOR for U.S. dollar denominated deposits was phased out as of June 30, 2023. In accordance with the federal Adjustable Interest Rate (LIBOR) Act enacted in March 2022 (the “LIBOR Act”), the interest rate provisions under the Company’s debenture documents were replaced as a matter of law, as of the first London banking day after June 30, 2023 (the “LIBOR Replacement Date”) with a benchmark interest rate identified in regulations promulgated by the FRB. As required under the LIBOR Act, the Federal Reserve-identified benchmark rates specified in the final regulations for various tenors of LIBOR are based on the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York and each includes an appropriate “tenor spread adjustment” to reflect historical spreads between LIBOR and SOFR. In accordance with the LIBOR Act and its implementing regulations, as of the LIBOR Replacement Date, the Company’s Junior Subordinated Debentures bear interest at a quarterly floating rate equal to 3-month CME SOFR, as adjusted by a spread adjustment factor of 0.26161, plus 2.85%.
Aside from the Debentures, the Company does not have any other exposures to the phase out of LIBOR. The Company has not generally utilized LIBOR as an interest rate benchmark for its variable rate commercial, residential or other loans and has not utilized derivatives or other financial instruments tied to LIBOR for hedging or investment purposes. Accordingly, the Company’s exposure to the phase out of LIBOR is limited to the effect on the interest rate paid on its Debentures.
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 relatedResidential mortgages represent a little less than halfmortgage loans represented 28.3% of the Company’s loan balances; that level has been on a gradual decline in recent years, with a strategic shiftbalances at September 30, 2023, compared to commercial lending.31.1% at December 31, 2022. The Company maintains a residential mortgage loan portfolio of traditional mortgage products and does not engage inoffer higher risk loansloan products, such as option adjustable rateadjustable-rate mortgage products, high loan-to-value products, interest only mortgages, subprime loans and products with deeply discounted teaser rates. Residential mortgages with loan-to-valuesloan-to-value ratios exceeding 80% are generally covered by private mortgage insurance (“PMI”).PMI. A 90% loan-to-value residential mortgage product without PMI is only available to borrowers with excellent credit and low debt-to-income ratios and has not been widely originated. JuniorAs of September 30, 2023, junior lien home equity products makemade up 20.8%13.1% of the residential mortgage portfolio with maximum loan-to-value ratios (including prior liens) of 80%. The Company also originates some home equity loans greater than 80% under an insured loan program with stringent underwriting criteria.
45 |
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Consistent with the strategic focus on commercial lending, both segments sawthe commercial & industrial and CRE loan portfolios have seen solid growth during 2016 despite some significant loan payoffs during the year. The 2016 growth included balances being drawn on commercial constructionover recent years. Commercial & industrial, purchased, CRE and municipal loans and higher balances on commercial lines of credit. Commercial and commercial real estate loan demand has continued into 2017 and is increasing with the funding of construction projects and draws on lines of credit. Commercial and commercial real estate loans togethercollectively comprised 57.0%71.3% of the Company’s loan portfolio at September 30, 2017, 55.5%2023, compared to 68.4% at December 31, 20162022. The largest components of the CRE portfolio were $115.0 million in owner-occupied CRE and 55.3%$161.8 million in non-owner occupied CRE at September 30, 2016. The increase in the absolute and relative size of the commercial loan portfolio has also increased geographic diversification, with much of the growth in commercial loans occurring along the I-89 corridor from White River Junction through Chittenden County.
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Commercial & industrial | $77,604,260 | 15.33% | $68,730,573 | 14.11% | $69,791,331 | 14.84% |
Commercial real estate | 210,983,668 | 41.69% | 201,728,280 | 41.40% | 190,246,590 | 40.46% |
1 - 4 family residential - 1st lien | 167,185,874 | 33.04% | 166,691,962 | 34.21% | 161,277,406 | 34.30% |
1 - 4 family residential - Jr lien | 43,962,578 | 8.69% | 42,927,335 | 8.81% | 41,739,827 | 8.88% |
Consumer | 6,311,739 | 1.25% | 7,171,076 | 1.47% | 7,131,741 | 1.52% |
Total loans | 506,048,119 | 100.00% | 487,249,226 | 100.00% | 470,186,895 | 100.00% |
Deduct (add): | ||||||
Allowance for loan losses | 5,436,313 | 5,278,445 | 5,179,965 | |||
Deferred net loan costs | (318,452) | (310,130) | (312,565) | |||
Net loans | $500,930,258 | $482,280,911 | $465,319,495 |
Risk in the Company’s commercial & industrial and commercial real estateCRE loan portfolios is mitigated in part by government guarantees issued by federal agencies such as the U.S. Small Business Administration (SBA)SBA and U.S. Department of Agriculture (USDA) Rural Development.RD. At September 30, 2017,2023, the Company had $26,557,438$25.1 million in guaranteed loans with guaranteed balances of $19,693,638,$16.8 million, compared to $23,929,426$27.0 million in guaranteed loans with guaranteed balances of $18,128,676$18.3 million at December 31, 2016 and $26,476,719 in guaranteed2022. PPP loans with guaranteedoutstanding balances of $20,070,993$95,529 at September 30, 2016.
The Company works actively with customers early in the delinquency process to help them to avoid default and foreclosure. Commercial & industrial and commercial real estateCRE 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 carryof carrying and sellselling 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.
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
| Change |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| $ |
|
| % |
| ||||
Provision for credit losses on loans |
| $ | 264,009 |
|
| $ | 125,000 |
|
| $ | 139,009 |
|
|
| 111.21 | % |
Provision for credit losses on OBS credit exposure |
|
| (23,120 | ) |
|
| 0 |
|
|
| (23,120 | ) |
|
| 100.00 | % |
Provision for credit losses |
| $ | 240,889 |
|
| $ | 125,000 |
|
| $ | 115,889 |
|
|
| 92.71 | % |
|
| Nine Months Ended |
|
|
|
|
|
|
| |||||||
|
| September 30, |
|
| Change |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| $ |
|
| % |
| ||||
Provision for credit losses on loans |
| $ | 849,549 |
|
| $ | 1,325,000 |
|
| ($475,451) |
|
|
| -35.88 | % | |
Provision for credit losses on OBS credit exposure |
|
| (40,992 | ) |
|
| 0 |
|
|
| (40,992 | ) |
|
| 100.00 | % |
Provision for credit losses |
| $ | 808,557 |
|
| $ | 1,325,000 |
|
| ($516,443) |
|
|
| -38.98 | % |
The Company’s non-performing assets decreased $135,656, or 3.4%, duringincrease in the first nineprovision for credit losses for the three months of 2017. The change in non-performing assetsended September 30, 2023, was due to a shiftreduction of residential mortgage loans moving outthe provision in the third quarter of ninety days past due and into non-accrual,2022, which was offset,the result of an increase in recoveries during that quarter, as well as loan growth that exceeded budget in 2023. The decrease of $516,443 year over year was driven in part by a decreasewrite-down totaling $667,474, on a single non-performing loan, in commercial & industrial loansMarch of 2022.
ACL and commercial real estate loansprovisions – As stated in Note 2 of the accompanying notes to the Company’s unaudited interim consolidated financial statements, effective January 1, 2023, the Company was required to recognize credit losses under the guidance of ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, rather than under the incurred loss model. 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. The adjustment from the adoption of CECL amounted to $549,113, net of tax and was recorded as an adjustment to retained earnings, which affects calculation of regulatory capital ratios. Changes in forecasts used in the non-accrual portfolio. Claims receivable on related government guarantees were $0 at September 30, 2017 comparedCECL model could produce different results, quarter to $56,319 at December 31, 2016 and $0 at September 30, 2016, with numerous USDA and SBA claims settled and paid throughout 2016 and 2017. Non-performing loans as of September 30, 2017 carried USDA and SBA guarantees totaling $49,153, compared to $146,323 at December 31, 2016 and $168,861 at September 30, 2016.
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Loans past due 90 days or more | ||||||
and still accruing | ||||||
Commercial & industrial | $0 | 0.00% | $26,042 | 0.65% | $116,720 | 2.79% |
Commercial real estate | 15,011 | 0.39% | 0 | 0.00% | 227,302 | 5.43% |
Residential real estate - 1st lien | 725,581 | 18.81% | 1,068,083 | 26.75% | 744,379 | 17.78% |
Residential real estate - Jr lien | 64,292 | 1.67% | 27,905 | 0.70% | 91,420 | 2.18% |
Consumer | 2,777 | 0.07% | 2,176 | 0.05% | 0 | 0.00% |
807,661 | 20.94% | 1,124,206 | 28.15% | 1,179,821 | 28.18% | |
Non-accrual loans (1) | ||||||
Commercial & industrial | 48,385 | 1.25% | 143,128 | 3.59% | 205,358 | 4.90% |
Commercial real estate | 714,720 | 18.53% | 765,584 | 19.17% | 759,332 | 18.13% |
Residential real estate - 1st lien | 1,511,891 | 39.20% | 1,227,220 | 30.74% | 1,289,968 | 30.81% |
Residential real estate - Jr lien | 450,192 | 11.67% | 338,602 | 8.48% | 343,766 | 8.21% |
2,725,188 | 70.65% | 2,474,534 | 61.98% | 2,598,424 | 62.05% | |
Other real estate owned | 324,235 | 8.41% | 394,000 | 9.87% | 409,000 | 9.77% |
$3,857,084 | 100.00% | $3,992,740 | 100.00% | $4,187,245 | 100.00% |
46 |
Table of Contents |
The Company’s OREO portfolio at September 30, 2017 consistedboard of one residential propertydirectors has approved an ACL policy that provides guidance in maintaining an adequate methodology for establishing, estimating and one commercial property comparedmaintaining allowances for credit losses under ASC 326. The policy creates a measurement model to two residential properties at December 31, 2016 and two residential properties at September 30, 2016. All of the residential properties were acquired through the normal foreclosure process. The Company took control of two commercial properties in 2017, one in January and the other in March. One of the commercial properties sold in April, 2017 and the other failed to sell at auction in May, 2017 and is listed for sale.
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Number of | Principal | Number of | Principal | Number of | Principal | |
Loans | Balance | Loans | Balance | Loans | Balance | |
Commercial & industrial | 1 | $48,385 | 2 | $143,127 | 3 | $191,919 |
Commercial real estate | 2 | 329,149 | 2 | 354,811 | 2 | 373,767 |
Residential real estate - 1st lien | 7 | 343,519 | 9 | 516,886 | 10 | 684,636 |
Residential real estate - Jr lien | 0 | 0 | 2 | 117,158 | 1 | 52,130 |
10 | $721,053 | 15 | $1,131,982 | 16 | $1,302,452 |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Number of | Principal | Number of | Principal | Number of | Principal | |
Loans | Balance | Loans | Balance | Loans | Balance | |
Commercial & industrial | 0 | $0 | 0 | $0 | 2 | $35,340 |
Commercial real estate | 5 | 1,291,887 | 5 | 1,350,480 | 5 | 1,391,990 |
Residential real estate - 1st lien | 53 | 2,811,263 | 28 | 2,722,973 | 27 | 2,558,079 |
Residential real estate - Jr lien | 1 | 8,645 | 2 | 63,971 | 3 | 132,822 |
59 | $4,111,795 | 35 | $4,137,424 | 37 | $4,118,231 |
The Company maintains an ALLACL at a level that management believes is appropriate to absorb losses inherent in the loan portfolio as of the measurement date (See Note 5 toof the accompanying unaudited interim consolidated financial statements). Although the Company, in establishing the ALL,ACL, considers the inherent losses in individual loans and pools of loans, the ALLACL is a general reserve available to absorb all credit losses in the loan portfolio. No part of the ALLACL is segregated to absorb losses from any particular loan or segment of loans.
When establishing the ALLACL each quarter, the Company applies a combination of historical loss factorssignificant key assumptions and qualitative factors to loan segments, including residential firstmethodologies, as discussed in the ACL section under Critical Accounting Policies in this MD&A and junior lien mortgages, commercial real estate, commercial & industrial, and consumer loan portfolios. The Company applies numerous qualitative factors to each segment of the loan portfolio. Those factors include the levels of and trendspresented 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.
The following table summarizes the Company's loan loss experienceCompany’s credit risk ratios for the periodsbalance sheet dates presented:
As of or for the Nine Months Ended September 30, | ||
2017 | 2016 | |
Loans outstanding, end of period | $506,048,119 | $470,186,895 |
Average loans outstanding during period | $495,170,740 | $465,314,118 |
Non-accruing loans, end of period | $2,725,188 | $2,598,424 |
Non-accruing loans, net of government guarantees | $2,676,035 | $2,429,563 |
Allowance, beginning of period | $5,278,445 | $5,011,878 |
Loans charged off: | ||
Commercial & industrial | 0 | (12,194) |
Commercial real estate | (160,207) | 0 |
Residential real estate - 1st lien | (88,833) | (234,549) |
Residential real estate - Jr lien | (15,311) | 0 |
Consumer loans | (99,617) | (38,412) |
Total loans charged off | (363,968) | (285,155) |
Recoveries: | ||
Commercial & industrial | 23,469 | 22,650 |
Commercial real estate | 231 | 0 |
Residential real estate - 1st lien | 14,838 | 9,660 |
Residential real estate - Jr lien | 180 | 180 |
Consumer loans | 33,118 | 20,752 |
Total recoveries | 71,836 | 53,242 |
Net loans charged off | (292,132) | (231,913) |
Provision charged to income | 450,000 | 400,000 |
Allowance, end of period | $5,436,313 | $5,179,965 |
Net charge offs to average loans outstanding | 0.059% | 0.050% |
Provision charged to income as a percent of average loans | 0.091% | 0.086% |
Allowance to average loans outstanding | 1.098% | 1.113% |
Allowance to non-accruing loans | 199.484% | 199.350% |
Allowance to non-accruing loans net of government guarantees | 203.148% | 213.206% |
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
ACL to total loans outstanding |
|
| 1.13 | % |
|
| 1.16 | % |
ACL |
| $ | 9,487,973 |
|
| $ | 8,709,225 |
|
Loans outstanding |
| $ | 838,572,268 |
|
| $ | 748,548,608 |
|
|
|
|
|
|
|
|
|
|
Non-accruing loans to loans outstanding |
|
| 0.86 | % |
|
| 1.05 | % |
Non-accruing loans |
| $ | 7,214,792 |
|
| $ | 7,890,020 |
|
Loans outstanding |
| $ | 838,572,268 |
|
| $ | 748,548,608 |
|
|
|
|
|
|
|
|
|
|
ACL to non-accruing loans |
|
| 131.51 | % |
|
| 110.38 | % |
ACL |
| $ | 9,487,973 |
|
| $ | 8,709,225 |
|
Non-accruing loans |
| $ | 7,214,792 |
|
| $ | 7,890,020 |
|
The third quarter ALLACL analysis showsindicates that the reserve balance of $5,436,313$9.5 million at September 30, 20172023, is sufficient to cover expected credit losses that are probable and estimable with an unallocated reserveas of $261,957. Thethe measurement date. Included in the ACL calculation for September 30, 2023, is a decrease to the qualitative factor adjustment for collateral within the CRE pool of loans. Management feels that the economic forecasts adequately quantify the risk in this area. Management believes the reserve balance and unallocated amount continuecontinues to be directionally consistent with the overall risk profile of the Company’s loan portfolio and credit risk appetite. The portion of the ALL termed "unallocated" is established to absorb inherent losses that exist as of the measurement date although not specifically identified through management's process for estimating credit losses. While the ALLACL is described as consisting of separate allocated portions, the entire ALLACL is available to support loan losses, regardless of category. Unallocated reserves are considered by management to be appropriate in light of the Company’s continued growth strategy and shift in the portfolio from residential loans to commercial and commercial real estate loans and the risk associated with the relatively new, unseasoned loans in those portfolios. The adequacy of the ALLACL is reviewed quarterly by the risk management committee of the Board of Directors and then presented to the full Board of Directors for approval.
47 |
Table of Contents |
Net charge-offs during the periods presented to average loans outstanding were as follows:
For the Nine Months Ended September 30, |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Commercial & industrial |
|
| -0.29 | % |
|
| -0.03 | % |
Net charge-offs during the period |
| $ | (357,643 | ) |
| $ | (34,638 | ) |
Average amount outstanding |
| $ | 121,805,882 |
|
| $ | 115,489,717 |
|
|
|
|
|
|
|
|
|
|
Purchased |
|
| 0.00 | % |
|
| 0.00 | % |
Net charge-offs during the period |
| $ | 0 |
|
| $ | 0 |
|
Average amount outstanding |
| $ | 6,503,285 |
|
| $ | 8,782,234 |
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
| 0.01 | % |
|
| -0.21 | % |
Net recoveries (charge-offs) during the period |
| $ | 22,058 |
|
| $ | (667,474 | ) |
Average amount outstanding |
| $ | 376,591,108 |
|
| $ | 313,919,164 |
|
|
|
|
|
|
|
|
|
|
Municipal |
|
| 0.00 | % |
|
| 0.00 | % |
Net charge-offs during the period |
| $ | 0 |
|
| $ | 0 |
|
Average amount outstanding |
| $ | 42,203,207 |
|
| $ | 45,161,639 |
|
|
|
|
|
|
|
|
|
|
Residential real estate - 1st lien |
|
| 0.04 | % |
|
| 0.06 | % |
Net recoveries during the period |
| $ | 72,588 |
|
| $ | 111,163 |
|
Average amount outstanding |
| $ | 199,778,580 |
|
| $ | 184,548,015 |
|
|
|
|
|
|
|
|
|
|
Residential real estate - Jr lien |
|
| 0.09 | % |
|
| 0.01 | % |
Net recoveries during the period |
| $ | 28,015 |
|
| $ | 3,728 |
|
Average amount outstanding |
| $ | 32,110,911 |
|
| $ | 33,260,177 |
|
|
|
|
|
|
|
|
|
|
Consumer |
|
| -2.16 | % |
|
| -0.45 | % |
Net charge-offs during the period |
| $ | (79,195 | ) |
| $ | (15,949 | ) |
Average amount outstanding |
| $ | 3,674,543 |
|
| $ | 3,513,004 |
|
|
|
|
|
|
|
|
|
|
Total loans |
|
| -0.04 | % |
|
| -0.09 | % |
Net charge-offs during the period |
| $ | (314,177 | ) |
| $ | (603,170 | ) |
Average amount outstanding |
| $ | 782,667,516 |
|
| $ | 704,673,950 |
|
In addition to credit risk in the Company’s loan portfolioand investment portfolios and its off-balance sheet commitments, 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 and changes in interest rates can result in fair value adjustments necessary to record decreases inasset valuations or the value of the investment portfolio for other-than-temporary-impairment.need to create a related reserve or allowance. 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 and investment 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. Rapid changes in prevailing interest rates, particularly after a long period of relative stability, create a challenging interest rate environment. 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 nine months of 2017,2023, the Company did not engage in any activity that created any additional types of off-balance sheet risk.
48 |
Table of Contents |
With the adoption of ASU 2016-13 (CECL), the Company generally requires collateral or other securityis required to support financial instruments withestablish an allowance for expected credit risk. The Company's financial instruments whose contract amount representslosses on OBS credit exposures. Expected credit losses are estimated by management over the contractual period during which the Company is exposed to credit risk were as follows:
Contract or Notional Amount | ||
September 30, | December 31, | |
2017 | 2016 | |
Unused portions of home equity lines of credit | $28,640,161 | $25,535,104 |
Residential construction lines of credit | 4,160,338 | 3,676,176 |
Commercial real estate and other construction lines of credit | 30,022,030 | 25,951,345 |
Commercial and industrial commitments | 35,776,104 | 36,227,213 |
Other commitments to extend credit | 52,666,605 | 42,459,454 |
Standby letters of credit and commercial letters of credit | 1,651,759 | 2,009,788 |
Recourse on sale of credit card portfolio | 309,155 | 258,555 |
MPF credit enhancement obligation, net of liability recorded | 596,642 | 748,239 |
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. These sources are supplemented by short-term and long-term borrowings as needed. 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-costlower-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. Such deposits are generally considered a form of brokered deposits. At September 30, 2017,2023, and December 31, 2022, the Company had no one-way CDARS outstanding totaling $17,906,763 compared to no one way CDARS at December 31, 2016 and $10,000,000 at September 30, 2016.outstanding. In addition, two-way (reciprocal) CDARS deposits, allowas well as reciprocal ICS money market and demand deposits, enhance the Company’s ability to retain larger deposit balances by allowing the Company to provide Federal Deposit Insurance Corporation (FDIC)FDIC deposit insurance to its customers in excess of account coverage limits by exchangingthrough the exchange of deposits with other CDARS members.participating FDIC-insured financial institutions. At September 30, 2017,2023 and December 31, 2022, the Company reported $2,809,923$2.4 million and $2.8 million, respectively, in two-wayreciprocal CDARS deposits, representing exchanged deposits with other CDARS participating banks, compared to $3,141,773 at December 31, 2016 and $3,213,916 at September 30, 2016.deposits. The balance in insured cash sweep (ICS)ICS reciprocal money market deposits was $14,920,480$17.1 million at September 30, 2017,2023, compared to $11,909,300$29.5 million at December 31, 2016 and $11,559,412 at September 30, 2016,2022, and the balance in ICS reciprocal demand deposits as of those dates was $8,116,095, $5,706,882$79.9 million and $7,205,672,$85.3 million, respectively.
On September 30, 2017,2023 and December 31, 2016 and September 30, 2016,2022, borrowing capacity of $112,919,448, $68,163,543$107.9 million and $67,359,726,$112.3 million, respectively, was available through the FHLBB, secured by the Company's qualifying loan portfolio (generally, residential mortgage and commercial loans), reduced by outstanding advances and by collateral pledges securing FHLBB letters of credit collateralizing public unit deposits. Duringdeposits of $23.1 million and $52.4 million, respectively.
The following table reflects the second quarterCompany’s outstanding advances with FHLBB as of 2017, the Company began pledging residential mortgage loans in a detail listing instead of a summary listing, and also began pledging qualifying multifamily and other commercial real estate loans, accounting for the increase in the portfolio of qualifying loans in 2017 compared to both periods in 2016. dates indicated:
|
| September 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
FHLBB Advances (1) |
|
|
|
|
|
| ||
FHLBB term advance, 0.00%, due September 22, 2023 |
| $ | 0 |
|
| $ | 200,000 |
|
FHLBB term advance, 0.00%, due November 12, 2025 |
|
| 300,000 |
|
|
| 300,000 |
|
FHLBB term advance, 0.00%, due November 13, 2028 |
|
| 800,000 |
|
|
| 800,000 |
|
Total FRBB Advances |
|
| 1,100,000 |
|
|
| 1,300,000 |
|
|
|
|
|
|
|
|
|
|
Overnight borrowings at 5.57% |
|
| 3,550,000 |
|
|
| 0 |
|
|
| $ | 4,650,000 |
|
| $ | 1,300,000 |
|
(1) | Under the JNE program, the FHLBB provides a subsidy, funded by the FHLBB’s earnings, to write down interest rates to zero percent on advances that finance qualifying loans to small businesses. JNE advances must support small business in New England that create and/or retain jobs, or otherwise contribute to overall economic development activities. |
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The Company also has an unsecured Federal Funds credit line with the FHLBB with an available balance of $500,000 andwith no outstanding advances during anyeither of the respective comparison periods. Interest is chargeable at a rate determined daily, approximately 25 basis pointsbps higher than the rate paid on federal funds sold.
September 30, | December 31, | September 30, | |
2017 | 2016 | 2016 | |
Long-Term Advances(1) | |||
FHLBB term advance, 0.00%, due February 26, 2021 | $350,000 | $350,000 | $350,000 |
FHLBB term advance, 0.00%, due November 22, 2021 | 1,000,000 | 1,000,000 | 0 |
FHLBB term advance, 0.00%, due June 09, 2022 | 2,000,000 | 0 | 0 |
FHLBB term advance, 0.00%, due September 22, 2023 | 200,000 | 200,000 | 200,000 |
3,550,000 | 1,550,000 | 550,000 | |
Short-Term Advances | |||
FHLBB term advance 0.77% fixed rate, due February 8, 2017 | 0 | 10,000,000 | 0 |
FHLBB term advance 0.77% fixed rate, due February 24, 2017 | 0 | 10,000,000 | 0 |
FHLBB term advance 0.92% fixed rate, due June 14, 2017 | 0 | 10,000,000 | 0 |
0 | 30,000,000 | 0 | |
Overnight Borrowings | |||
Federal funds purchased (FHLBB), 0.51% | 0 | 0 | 5,245,000 |
$3,550,000 | $31,550,000 | $5,795,000 |
The Company has a Borrower-in-Custody (BIC)BIC arrangement with the FRBB secured by eligible commercial & industrial loans, commercial real estateCRE loans and home equity loans, resulting in an available credit line of $66,804,404, $77,862,708,$59.9 million and $71,326,693,$56.1 million, respectively, at September 30, 2017,2023 and December 31, 2016 and September 30, 2016.2022. Credit advances under this FRBB lending program are overnight advances with interest chargeable at the primary credit rate (generally referred to as the discount rate), currently 175 basis points.500 bps. The Company had no outstanding advances againstthrough this creditfacility at September 30, 2023 or December 31, 2022.
As of September 30, 2023, the Company had additional potential borrowing capacity, subject to pledging of required collateral consisting of eligible U.S. Agency and U.S. Government Securities, under the FRB’s BTFP which was established in March 2023 to provide banks with an additional source of liquidity.
The Company’s advances under the BTFP were as follows:
|
| September 30, |
| |
|
| 2023 |
| |
FRBB Advances |
|
|
| |
FRB BTFP term advance, 4.92%, due April 26, 2024 |
| $ | 10,000,000 |
|
FRB BTFP term advance, 4.71%, due May 13, 2024 |
|
| 10,000,000 |
|
FRB BTFP term advance, 4.91%, due May 17, 2024 |
|
| 6,500,000 |
|
FRB BTFP term advance, 5.45%, due August 05, 2024 |
|
| 18,000.000 |
|
Total BTFP Advances |
| $ | 44,500,000 |
|
As of September 30, 2023, the Company had an unsecured line during any of the periods presented.
Management believes that the combination of high levels of potentially liquid assets, unencumbered securities, cash flows from operations, and additional borrowing capacity are sufficient to repurchase provide another funding source formeet the Company. At September 30, 2017, December 31, 2016Company’s liquidity and September 30, 2016, the Company had outstanding repurchase agreement balances of $27,458,927, $30,423,195 and $25,834,249, respectively. These repurchase agreements mature and are repriced daily.
The following table illustrates the changes in shareholders' equity from December 31, 20162022 to September 30, 2017:
Balance at December 31, 2022 (book value $13.55 per common share) |
| $ | 75,176,363 |
|
Cumulative change in accounting principle (Note 2) |
|
| (549,113 | ) |
Net income |
|
| 9,897,608 |
|
Issuance of common stock through the DRIP |
|
| 991,799 |
|
Dividends declared on common stock |
|
| (3,764,480 | ) |
Dividends declared on preferred stock |
|
| (89,063 | ) |
Change in AOCI on AFS securities, net of tax |
|
| (2,856,418 | ) |
Balance at September 30, 2023 (book value $14.08 per common share) |
| $ | 78,806,696 |
|
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 with 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 the Company’s 2016 Annual Report on Form 10-K in Note 2022 to the audited consolidated financial statements contained thereinin the Company’s 2022 Annual Report on Form 10-K and under the caption “LIQUIDITY AND CAPITAL RESOURCES” in the MD&A section of suchthat report, the Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies pursuant to which they must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
As of September 30, 2017, both the Company and the Bank exceeded the required capital conservation buffer of 1.25% and, on a pro forma basis, would be compliant with the fully phased-in capital conservation buffer requirement.
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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.
Minimum | ||||||
Minimum | To Be Well | |||||
For Capital | Capitalized Under | |||||
Adequacy | Prompt Corrective | |||||
Actual | Purposes: | Action Provisions(1): | ||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |
(Dollars in Thousands) | ||||||
September 30, 2017 | ||||||
Common equity tier 1 capital | ||||||
(to risk-weighted assets) | ||||||
Company | $58,585 | 12.48% | $21,121 | 4.50% | N/A | N/A |
Bank | $57,837 | 12.34% | $21,093 | 4.50% | $30,468 | 6.50% |
Tier 1 capital (to risk-weighted assets) | ||||||
Company | $58,585 | 12.48% | $28,161 | 6.00% | N/A | N/A |
Bank | $57,837 | 12.34% | $28,124 | 6.00% | $37,499 | 8.00% |
Total capital (to risk-weighted assets) | ||||||
Company | $64,065 | 13.65% | $37,548 | 8.00% | N/A | N/A |
Bank | $63,317 | 13.51% | $37,499 | 8.00% | $46,874 | 10.00% |
Tier 1 capital (to average assets) | ||||||
Company | $58,585 | 9.18% | $25,524 | 4.00% | N/A | N/A |
Bank | $57,837 | 9.07% | $25,502 | 4.00% | $31,877 | 5.00% |
December 31, 2016: | ||||||
Common equity tier 1 capital | ||||||
(to risk-weighted assets) | ||||||
Company | $55,690 | 12.34% | $20,304 | 4.50% | N/A | N/A |
Bank | $55,120 | 12.23% | $20,274 | 4.50% | $29,285 | 6.50% |
Tier 1 capital (to risk-weighted assets) | ||||||
Company | $55,690 | 12.34% | $27,072 | 6.00% | N/A | N/A |
Bank | $55,120 | 12.23% | $27,032 | 6.00% | $36,043 | 8.00% |
Total capital (to risk-weighted assets) | ||||||
Company | $61,012 | 13.52% | $36,096 | 8.00% | N/A | N/A |
Bank | $60,443 | 13.42% | $36,043 | 8.00% | $45,054 | 10.00% |
Tier 1 capital (to average assets) | ||||||
Company | $55,690 | 9.17% | $24,305 | 4.00% | N/A | N/A |
Bank | $55,120 | 9.08% | $24,281 | 4.00% | $30,351 | 5.00% |
|
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| Minimum |
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| Minimum |
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| Minimum |
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| For Capital |
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| To Be Well |
| |||||||||||||||||
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| For Capital |
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| Adequacy Purposes |
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| Capitalized Under |
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| Adequacy |
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| with Conservation |
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| Prompt Corrective |
| |||||||||||||||||
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| Actual |
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| Purposes |
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| Buffer (1) |
|
| Action Provisions (2) |
| ||||||||||||||||||||
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| Amount |
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| Ratio |
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| Amount |
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| Ratio |
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| Amount |
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| Ratio |
|
| Amount |
|
| Ratio |
| ||||||||
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| (Dollars in Thousands) |
| |||||||||||||||||||||||||||||
September 30, 2023 |
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Common equity tier 1 capital |
|
|
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|
|
|
|
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| ||||||||
(to risk-weighted assets) |
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Company |
| $ | 89,257 |
|
|
| 11.65 | % |
| $ | 34,467 |
|
|
| 4.50 | % |
| $ | 53,615 |
|
|
| 7.00 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 102,537 |
|
|
| 13.40 | % |
| $ | 34,438 |
|
|
| 4.50 | % |
| $ | 53,571 |
|
|
| 7.00 | % |
| $ | 49,744 |
|
|
| 6.50 | % |
Tier 1 capital (to risk-weighted assets) |
|
|
|
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|
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Company |
| $ | 103,644 |
|
|
| 13.53 | % |
| $ | 45,956 |
|
|
| 6.00 | % |
| $ | 65,104 |
|
|
| 8.50 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 102,537 |
|
|
| 13.40 | % |
| $ | 45,918 |
|
|
| 6.00 | % |
| $ | 65,050 |
|
|
| 8.50 | % |
| $ | 61,224 |
|
|
| 8.00 | % |
Total capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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Company |
| $ | 113,223 |
|
|
| 14.78 | % |
| $ | 61,274 |
|
|
| 8.00 | % |
| $ | 80,422 |
|
|
| 10.50 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 112,108 |
|
|
| 14.65 | % |
| $ | 61,224 |
|
|
| 8.00 | % |
| $ | 80,356 |
|
|
| 10.50 | % |
| $ | 76,529 |
|
|
| 10.00 | % |
Tier 1 capital (to average assets) |
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
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|
|
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|
Company |
| $ | 103,644 |
|
|
| 9.59 | % |
| $ | 43,236 |
|
|
| 4.00 | % |
|
| N/A |
|
|
| N/A |
|
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 102,537 |
|
|
| 9.49 | % |
| $ | 43,214 |
|
|
| 4.00 | % |
|
| N/A |
|
|
| N/A |
|
| $ | 54,017 |
|
|
| 5.00 | % |
|
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|
December 31, 2022: |
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Common equity tier 1 capital |
|
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|
(to risk-weighted assets) |
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|
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Company |
| $ | 82,770 |
|
|
| 11.74 | % |
| $ | 31,731 |
|
|
| 4.50 | % |
| $ | 49,359 |
|
|
| 7.00 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 96,112 |
|
|
| 13.64 | % |
| $ | 31,703 |
|
|
| 4.50 | % |
| $ | 49,315 |
|
|
| 7.00 | % |
| $ | 45,793 |
|
|
| 6.50 | % |
Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
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Company |
| $ | 97,157 |
|
|
| 13.78 | % |
| $ | 42,308 |
|
|
| 6.00 | % |
| $ | 59,936 |
|
|
| 8.50 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 96,112 |
|
|
| 13.64 | % |
| $ | 42,270 |
|
|
| 6.00 | % |
| $ | 59,883 |
|
|
| 8.50 | % |
| $ | 56,361 |
|
|
| 8.00 | % |
Total capital (to risk-weighted assets) |
|
|
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|
|
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Company |
| $ | 105,971 |
|
|
| 15.03 | % |
| $ | 56,410 |
|
|
| 8.00 | % |
| $ | 74,038 |
|
|
| 10.50 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 104,918 |
|
|
| 14.89 | % |
| $ | 56,361 |
|
|
| 8.00 | % |
| $ | 73,973 |
|
|
| 10.50 | % |
| $ | 70,451 |
|
|
| 10.00 | % |
Tier 1 capital (to average assets) |
|
|
|
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|
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|
Company |
| $ | 97,157 |
|
|
| 9.24 | % |
| $ | 42,047 |
|
|
| 4.00 | % |
|
| N/A |
|
|
| N/A |
|
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 96,112 |
|
|
| 9.15 | % |
| $ | 42,025 |
|
|
| 4.00 | % |
|
| N/A |
|
|
| N/A |
|
| $ | 52,531 |
|
|
| 5.00 | % |
(1) | Conservation Buffer is calculated based on risk-weighted assets and does not apply to calculations of average assets. |
(2) | Applicable to banks, but not bank holding companies. |
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 regardlessyears. 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.
Omitted, in accordance with the credit, liquidityregulatory relief available to smaller reporting companies in SEC Release Nos. 33-10513 and market risk inherent in its business operations is discussed in Part 1, Item 2 of this report under the captions "CHANGES IN FINANCIAL CONDITION", “COMMITMENTS, CONTINGENCIES AND OFF-BALANCE-SHEET ARRANGEMENTS” and “LIQUIDITY & CAPITAL RESOURCES”, which are incorporated herein by reference. Management does not believe that there have been any material changes in the nature or categories of the Company's risk exposures from those disclosed in the Company’s 2016 Annual Report on Form 10-K.
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”)Exchange Act). As of September 30, 2017,2023, an evaluation was performed under the supervision and with the participation of management, including the principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, management concluded that its disclosure controls and procedures as of September 30, 2017 were effective in ensuring that material information required to be disclosed in the reports it files with the Commission under the Exchange Act was recorded, processed, summarized, and reported on a timely basis.
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 September 30, 20172023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II. OTHER INFORMATION
In the normal course of business, the Company and its subsidiary areis involved in litigation that is considered incidental to theirits business. Management does not expect that any such litigation will be material to the Company's consolidated financial condition or results of operations.
In management’s view, the Risk Factors identified in our Annual Report on Form 10-K for the year ended December 31, 2016, continue to2022 represent the most significant risks to the Company's future results of operations and financial condition.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
There were no purchases of the Company’s common stock during the three months ended September 30, 2017,2023, by the Company or by any affiliated purchaser (as defined in SEC Rule 10b-18). During the monthly periods presented,same reporting period, the Company did not have any publicly announced repurchase plans or programs.
Total Number | Average | |
of Shares | Price Paid | |
For the period: | Purchased(1)(2) | Per Share |
July 1 - July 31 | 1,494 | $18.95 |
August 1 - August 31 | 0 | 0.00 |
September 1 - September 30 | 3,021 | 18.20 |
Total | 4,515 | $18.45 |
The following exhibits are filed with, or incorporated by reference in, this report:
Exhibit 101 | The following materials from the Company’s Quarterly Report on Form 10-Q for the nine-months ended September 30, 2023 formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) the unaudited consolidated balance sheets, (ii) the unaudited consolidated statements of income for the three- and nine-month interim periods ended September 30, 2023 and 2022, (iii) the unaudited consolidated statements of comprehensive income, (iv) the unaudited consolidated statements of cash flows and (v) related notes. | |
Exhibit 104 | Cover page Interactive Data File (formatted in iXBRL and contained in Exhibit 101) |
*This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act, of 1934, 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 Securities Exchange Act of 1934.
53 |
Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act, of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COMMUNITY BANCORP. | |||
DATED: November | /s/Kathryn M. Austin | ||
Kathryn M. Austin, President | |||
& Chief Executive Officer | |||
(Principal Executive Officer) | |||
DATED: November | /s/Louise M. Bonvechio | ||
Louise M. Bonvechio, Corporate | |||
Secretary & Treasurer | |||
(Principal Financial Officer) |
54 | ||
Table of Contents |
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 September 30, 2017
COMMUNITY BANCORP.
EXHIBITS
Exhibit 101 | The following materials from the Company’s Quarterly Report on Form 10-Q for the | |
Exhibit 104 | Cover page Interactive Data File (formatted in iXBRL and contained in Exhibit 101) |
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act, of 1934, 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 Securities Exchange Act of 1934.
Community Bancorp. and Subsidiary | September 30, | December 31, | September 30, |
Consolidated Balance Sheets | 2017 | 2016 | 2016 |
(Unaudited) | (Unaudited) | ||
Assets | |||
Cash and due from banks | $13,655,114 | $10,943,344 | $11,705,902 |
Federal funds sold and overnight deposits | 16,064,422 | 18,670,942 | 673,911 |
Total cash and cash equivalents | 29,719,536 | 29,614,286 | 12,379,813 |
Securities held-to-maturity (HTM) (fair value $54,571,000 at | |||
09/30/17, $51,035,000 at 12/31/16 and $57,592,000 at 09/30/16) | 53,882,287 | 49,886,631 | 56,837,100 |
Securities available-for-sale (AFS) | 36,719,673 | 33,715,051 | 29,412,216 |
Restricted equity securities, at cost | 1,700,050 | 2,755,850 | 1,855,850 |
Loans held-for-sale | 687,100 | 0 | 708,975 |
Loans | 506,048,119 | 487,249,226 | 470,186,895 |
Allowance for loan losses (ALL) | (5,436,313) | (5,278,445) | (5,179,965) |
Deferred net loan costs | 318,452 | 310,130 | 312,565 |
Net loans | 500,930,258 | 482,280,911 | 465,319,495 |
Bank premises and equipment, net | 10,542,790 | 10,830,556 | 10,833,164 |
Accrued interest receivable | 1,893,478 | 1,818,510 | 1,649,964 |
Bank owned life insurance (BOLI) | 4,697,837 | 4,625,406 | 4,599,301 |
Core deposit intangible | 68,166 | 272,691 | 340,861 |
Goodwill | 11,574,269 | 11,574,269 | 11,574,269 |
Other real estate owned (OREO) | 324,235 | 394,000 | 409,000 |
Other assets | 8,799,392 | 9,885,504 | 9,870,422 |
Total assets | $661,539,071 | $637,653,665 | $605,790,430 |
Liabilities and Shareholders' Equity | |||
Liabilities | |||
Deposits: | |||
Demand, non-interest bearing | $115,930,899 | $104,472,268 | $101,259,470 |
Interest-bearing transaction accounts | 127,426,517 | 118,053,360 | 119,981,648 |
Money market funds | 85,947,545 | 79,042,619 | 76,976,376 |
Savings | 99,439,616 | 86,776,856 | 91,274,380 |
Time deposits, $250,000 and over | 18,097,628 | 19,274,880 | 10,848,979 |
Other time deposits | 109,910,115 | 97,115,049 | 103,466,053 |
Total deposits | 556,752,320 | 504,735,032 | 503,806,906 |
Borrowed funds | 3,550,000 | 31,550,000 | 5,795,000 |
Repurchase agreements | 27,458,927 | 30,423,195 | 25,834,249 |
Capital lease obligations | 409,147 | 483,161 | 493,810 |
Junior subordinated debentures | 12,887,000 | 12,887,000 | 12,887,000 |
Accrued interest and other liabilities | 3,260,937 | 3,123,760 | 3,129,831 |
Total liabilities | 604,318,331 | 583,202,148 | 551,946,796 |
Shareholders' Equity | |||
Preferred stock, 1,000,000 shares authorized, 25 shares issued | |||
and outstanding ($100,000 liquidation value) | 2,500,000 | 2,500,000 | 2,500,000 |
Common stock - $2.50 par value; 15,000,000 shares authorized, | |||
5,310,776 shares issued at 09/30/17, 5,269,053 shares issued | |||
at 12/31/16 and 5,253,090 shares issued at 09/30/16 | 13,276,940 | 13,172,633 | 13,132,725 |
Additional paid-in capital | 31,434,250 | 30,825,658 | 30,639,268 |
Retained earnings | 12,711,488 | 10,666,782 | 9,991,842 |
Accumulated other comprehensive (loss) income | (79,161) | (90,779) | 202,576 |
Less: treasury stock, at cost; 210,101 shares at 09/30/17, | |||
12/31/16, and 09/30/16 | (2,622,777) | (2,622,777) | (2,622,777) |
Total shareholders' equity | 57,220,740 | 54,451,517 | 53,843,634 |
Total liabilities and shareholders' equity | $661,539,071 | $637,653,665 | $605,790,430 |
Book value per common share outstanding | $10.73 | $10.27 | $10.18 |
Community Bancorp. and Subsidiary | Three Months Ended September 30, | |
Consolidated Statements of Income | 2017 | 2016 |
(Unaudited) | ||
Interest income | ||
Interest and fees on loans | $6,244,899 | $5,732,855 |
Interest on debt securities | ||
Taxable | 171,880 | 128,767 |
Tax-exempt | 332,102 | 339,999 |
Dividends | 41,320 | 49,429 |
Interest on federal funds sold and overnight deposits | 29,964 | 3,048 |
Total interest income | 6,820,165 | 6,254,098 |
Interest expense | ||
Interest on deposits | 628,534 | 504,170 |
Interest on borrowed funds | 12,213 | 53,404 |
Interest on repurchase agreements | 20,564 | 18,820 |
Interest on junior subordinated debentures | 134,881 | 115,349 |
Total interest expense | 796,192 | 691,743 |
Net interest income | 6,023,973 | 5,562,355 |
Provision for loan losses | 150,000 | 150,000 |
Net interest income after provision for loan losses | 5,873,973 | 5,412,355 |
Non-interest income | ||
Service fees | 773,419 | 719,341 |
Income from sold loans | 185,844 | 230,623 |
Other income from loans | 222,026 | 209,882 |
Net realized gain on sale of securities available-for-sale | 1,246 | 0 |
Other income | 266,712 | 323,674 |
Total non-interest income | 1,449,247 | 1,483,520 |
Non-interest expense | ||
Salaries and wages | 1,653,751 | 1,725,000 |
Employee benefits | 682,944 | 679,762 |
Occupancy expenses, net | 614,817 | 605,378 |
Other expenses | 1,890,604 | 1,780,363 |
Total non-interest expense | 4,842,116 | 4,790,503 |
Income before income taxes | 2,481,104 | 2,105,372 |
Income tax expense | 688,155 | 589,472 |
Net income | $1,792,949 | $1,515,900 |
Earnings per common share | $0.35 | $0.30 |
Weighted average number of common shares | ||
used in computing earnings per share | 5,091,283 | 5,032,156 |
Dividends declared per common share | $0.17 | $0.16 |
Community Bancorp. and Subsidiary | Nine Months Ended September 30, | |
Consolidated Statements of Income | 2017 | 2016 |
(Unaudited) | ||
Interest income | ||
Interest and fees on loans | $17,737,531 | $16,582,276 |
Interest on debt securities | ||
Taxable | 488,250 | 384,413 |
Tax-exempt | 992,831 | 942,246 |
Dividends | 117,979 | 108,141 |
Interest on federal funds sold and overnight deposits | 84,802 | 18,654 |
Total interest income | 19,421,393 | 18,035,730 |
Interest expense | ||
Interest on deposits | 1,734,432 | 1,529,465 |
Interest on borrowed funds | 92,492 | 106,807 |
Interest on repurchase agreements | 64,326 | 56,125 |
Interest on junior subordinated debentures | 388,855 | 339,603 |
Total interest expense | 2,280,105 | 2,032,000 |
Net interest income | 17,141,288 | 16,003,730 |
Provision for loan losses | 450,000 | 400,000 |
Net interest income after provision for loan losses | 16,691,288 | 15,603,730 |
Non-interest income | ||
Service fees | 2,293,773 | 1,992,560 |
Income from sold loans | 560,210 | 683,114 |
Other income from loans | 616,931 | 616,473 |
Net realized gain on sale of securities available-for-sale | 4,647 | 0 |
Other income | 725,635 | 747,923 |
Total non-interest income | 4,201,196 | 4,040,070 |
Non-interest expense | ||
Salaries and wages | 5,068,626 | 5,175,000 |
Employee benefits | 2,016,923 | 2,049,926 |
Occupancy expenses, net | 1,963,543 | 1,857,482 |
Other expenses | 5,416,710 | 5,065,565 |
Total non-interest expense | 14,465,802 | 14,147,973 |
Income before income taxes | 6,426,682 | 5,495,827 |
Income tax expense | 1,720,003 | 1,515,234 |
Net income | $4,706,679 | $3,980,593 |
Earnings per common share | $0.91 | $0.78 |
Weighted average number of common shares | ||
used in computing earnings per share | 5,077,473 | 5,016,191 |
Dividends declared per common share | $0.51 | $0.48 |
Community Bancorp. and Subsidiary | ||
Consolidated Statements of Comprehensive Income | ||
(Unaudited) | Three Months Ended September 30, | |
2017 | 2016 | |
Net income | $1,792,949 | $1,515,900 |
Other comprehensive income, net of tax: | ||
Unrealized holding loss on available-for-sale securities | ||
arising during the period | (55,963) | (46,840) |
Reclassification adjustment for gain realized in income | (1,246) | 0 |
Unrealized loss during the period | (57,209) | (46,840) |
Tax effect | 19,451 | 15,926 |
Other comprehensive loss, net of tax | (37,758) | (30,914) |
Total comprehensive income | $1,755,191 | $1,484,986 |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Net income | $4,706,679 | $3,980,593 |
Other comprehensive income, net of tax: | ||
Unrealized holding gain on available-for-sale securities | ||
arising during the period | 22,250 | 375,713 |
Reclassification adjustment for gain realized in income | (4,647) | 0 |
Unrealized gain during the period | 17,603 | 375,713 |
Tax effect | (5,985) | (127,742) |
Other comprehensive income, net of tax | 11,618 | 247,971 |
Total comprehensive income | $4,718,297 | $4,228,564 |
Community Bancorp. and Subsidiary | ||
Consolidated Statements of Cash Flows | ||
(Unaudited) | Nine Months Ended September 30, | |
2017 | 2016 | |
Cash Flows from Operating Activities: | ||
Net income | $4,706,679 | $3,980,593 |
Adjustments to reconcile net income to net cash provided by | ||
operating activities: | ||
Depreciation and amortization, bank premises and equipment | 772,344 | 779,240 |
Provision for loan losses | 450,000 | 400,000 |
Deferred income tax | 8,937 | (132,862) |
Gain on sale of securities available-for-sale | (4,647) | 0 |
Gain on sale of loans | (250,826) | (351,824) |
Loss on sale of bank premises and equipment | 1,580 | 0 |
(Gain) loss on sale of OREO | (143) | 4,965 |
Income from Trust LLC | (314,572) | (326,675) |
Amortization of bond premium, net | 86,467 | 90,099 |
Write down of OREO | 0 | 26,000 |
Proceeds from sales of loans held for sale | 11,163,180 | 18,648,432 |
Originations of loans held for sale | (11,599,454) | (17,806,183) |
Increase in taxes payable | 298,146 | 358,630 |
Increase in interest receivable | (74,968) | (16,751) |
Decrease in mortgage servicing rights | 97,661 | 77,768 |
Decrease (increase) in other assets | 1,013,781 | (17,149) |
Increase in cash surrender value of BOLI | (72,431) | (78,815) |
Amortization of core deposit intangible | 204,525 | 204,525 |
Amortization of limited partnerships | 462,924 | 439,470 |
(Increase) decrease in unamortized loan costs | (8,322) | 3,926 |
Increase (decrease) in interest payable | 36,179 | (8,421) |
Increase in accrued expenses | 457,667 | 93,410 |
(Decrease) increase in other liabilities | (860,426) | 17,835 |
Net cash provided by operating activities | 6,574,281 | 6,386,213 |
Cash Flows from Investing Activities: | ||
Investments - held-to-maturity | ||
Maturities and pay downs | 30,488,706 | 28,312,853 |
Purchases | (34,484,362) | (41,795,534) |
Investments - available-for-sale | ||
Maturities, calls, pay downs and sales | 9,737,133 | 4,550,645 |
Purchases | (12,805,972) | (7,206,847) |
Proceeds from redemption of restricted equity securities | 1,055,800 | 1,866,400 |
Purchases of restricted equity securities | 0 | (1,280,600) |
Increase (decrease) in limited partnership contributions payable | 459,250 | (687,500) |
Investments in limited partnerships | (486,750) | 0 |
Increase in loans, net | (19,492,075) | (12,747,728) |
Capital expenditures for bank premises and equipment | (486,158) | (152,199) |
Proceeds from sales of OREO | 399,123 | 217,143 |
Recoveries of loans charged off | 71,835 | 53,242 |
Net cash used in investing activities | (25,543,470) | (28,870,125) |
2017 | 2016 | |
Cash Flows from Financing Activities: | ||
Net increase (decrease) in demand and interest-bearing transaction accounts | 20,831,788 | (3,019,738) |
Net increase in money market and savings accounts | 19,567,686 | 4,588,578 |
Net increase in time deposits | 11,617,814 | 6,752,504 |
Net (decrease) increase in repurchase agreements | (2,964,268) | 3,761,011 |
Net decrease in short-term borrowings | (30,000,000) | (4,755,000) |
Proceeds from long-term borrowings | 2,000,000 | 550,000 |
Decrease in capital lease obligations | (74,014) | (64,555) |
Dividends paid on preferred stock | (75,000) | (65,625) |
Dividends paid on common stock | (1,829,567) | (1,735,340) |
Net cash provided by financing activities | 19,074,439 | 6,011,835 |
Net increase (decrease) in cash and cash equivalents | 105,250 | (16,472,077) |
Cash and cash equivalents: | ||
Beginning | 29,614,286 | 28,851,890 |
Ending | $29,719,536 | $12,379,813 |
Supplemental Schedule of Cash Paid During the Period: | ||
Interest | $2,243,926 | $2,040,421 |
Income taxes, net of refunds | $950,000 | $850,000 |
Supplemental Schedule of Noncash Investing and Financing Activities: | ||
Change in unrealized gain on securities available-for-sale | $17,603 | $375,713 |
Loans transferred to OREO | $329,215 | $395,108 |
Common Shares Dividends Paid: | ||
Dividends declared | $2,586,973 | $2,405,222 |
(Increase) decrease in dividends payable attributable to dividends declared | (44,507) | 1,380 |
Dividends reinvested | (712,899) | (671,262) |
$1,829,567 | $1,735,340 |
Three Months Ended September 30, | ||
2017 | 2016 | |
Net income, as reported | $1,792,949 | $1,515,900 |
Less: dividends to preferred shareholders | 26,562 | 21,875 |
Net income available to common shareholders | $1,766,387 | $1,494,025 |
Weighted average number of common shares | ||
used in calculating earnings per share | 5,091,283 | 5,032,156 |
Earnings per common share | $0.35 | $0.30 |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Net income, as reported | $4,706,679 | $3,980,593 |
Less: dividends to preferred shareholders | 75,000 | 65,625 |
Net income available to common shareholders | $4,631,679 | $3,914,968 |
Weighted average number of common shares | ||
used in calculating earnings per share | 5,077,473 | 5,016,191 |
Earnings per common share | $0.91 | $0.78 |
Gross | Gross | |||
Amortized | Unrealized | Unrealized | Fair | |
Securities AFS | Cost | Gains | Losses | Value |
September 30, 2017 | ||||
U.S. Government sponsored enterprise (GSE) debt securities | $15,316,323 | $9,140 | $68,619 | $15,256,844 |
Agency mortgage-backed securities (Agency MBS) | 16,568,291 | 29,716 | 89,963 | 16,508,044 |
Other investments | 4,955,000 | 11,831 | 12,046 | 4,954,785 |
$36,839,614 | $50,687 | $170,628 | $36,719,673 | |
December 31, 2016 | ||||
U.S. GSE debt securities | $17,365,805 | $24,854 | $73,331 | $17,317,328 |
Agency MBS | 13,265,790 | 3,896 | 115,458 | 13,154,228 |
Other investments | 3,221,000 | 24,947 | 2,452 | 3,243,495 |
$33,852,595 | $53,697 | $191,241 | $33,715,051 | |
September 30, 2016 | ||||
U.S. GSE debt securities | $13,751,867 | $96,874 | $5,247 | $13,843,494 |
Agency MBS | 12,380,416 | 164,771 | 18,571 | 12,526,616 |
Other investments | 2,973,000 | 69,106 | 0 | 3,042,106 |
$29,105,283 | $330,751 | $23,818 | $29,412,216 |
Gross | Gross | |||
Amortized | Unrealized | Unrealized | Fair | |
Securities HTM | Cost | Gains | Losses | Value* |
September 30, 2017 | ||||
States and political subdivisions | $53,882,287 | $688,713 | $0 | $54,571,000 |
December 31, 2016 | ||||
States and political subdivisions | $49,886,631 | $1,148,369 | $0 | $51,035,000 |
September 30, 2016 | ||||
States and political subdivisions | $56,837,100 | $754,900 | $0 | $57,592,000 |
Amortized | Fair | |
Cost | Value | |
September 30, 2017 | $36,839,614 | $36,719,673 |
December 31, 2016 | 33,604,595 | 33,469,254 |
September 30, 2016 | 29,105,283 | 29,412,216 |
Amortized | Fair | |
Cost | Value | |
September 30, 2017 | ||
Due in one year or less | $2,250,000 | $2,245,258 |
Due from one to five years | 13,029,323 | 13,009,642 |
Due from five to ten years | 4,992,000 | 4,956,729 |
Agency MBS | 16,568,291 | 16,508,044 |
$36,839,614 | $36,719,673 | |
December 31, 2016 | ||
Due in one year or less | $2,006,027 | $2,010,287 |
Due from one to five years | 17,335,778 | 17,329,503 |
Due from five to ten years | 1,245,000 | 1,221,033 |
Agency MBS | 13,265,790 | 13,154,228 |
$33,852,595 | $33,715,051 | |
September 30, 2016 | ||
Due in one year or less | $1,000,000 | $1,001,865 |
Due from one to five years | 14,479,867 | 14,630,210 |
Due from five to ten years | 1,245,000 | 1,253,525 |
Agency MBS | 12,380,416 | 12,526,616 |
$29,105,283 | $29,412,216 |
Amortized | Fair | |
Cost | Value* | |
September 30, 2017 | ||
Due in one year or less | $28,773,116 | $28,773,000 |
Due from one to five years | 4,866,604 | 5,039,000 |
Due from five to ten years | 3,990,576 | 4,163,000 |
Due after ten years | 16,251,991 | 16,596,000 |
$53,882,287 | $54,571,000 | |
December 31, 2016 | ||
Due in one year or less | $25,368,725 | $25,369,000 |
Due from one to five years | 4,030,900 | 4,318,000 |
Due from five to ten years | 4,013,242 | 4,300,000 |
Due after ten years | 16,473,764 | 17,048,000 |
$49,886,631 | $51,035,000 | |
September 30, 2016 | ||
Due in one year or less | $35,141,204 | $35,141,000 |
Due from one to five years | 4,029,095 | 4,218,000 |
Due from five to ten years | 3,430,921 | 3,620,000 |
Due after ten years | 14,235,880 | 14,613,000 |
$56,837,100 | $57,592,000 |
Less than 12 months | 12 months or more | Total | |||||
Fair | Unrealized | Fair | Unrealized | Number of | Fair | Unrealized | |
Value | Loss | Value | Loss | Securities | Value | Loss | |
September 30, 2017 | |||||||
U.S. GSE debt securities | $9,702,979 | $41,405 | $1,972,786 | $27,214 | 10 | $11,675,765 | $68,619 |
Agency MBS | 11,618,020 | 86,230 | 209,545 | 3,733 | 15 | 11,827,565 | 89,963 |
Other investments | 1,969,953 | 12,046 | 0 | 0 | 8 | 1,969,953 | 12,046 |
$23,290,952 | $139,681 | $2,182,331 | $30,947 | 33 | $25,473,283 | $170,628 | |
December 31, 2016 | |||||||
U.S. GSE debt securities | $5,176,669 | $73,331 | $0 | $0 | 4 | $5,176,669 | $73,331 |
Agency MBS | 10,704,717 | 115,458 | 0 | 0 | 15 | 10,704,717 | 115,458 |
Other investments | 493,548 | 2,452 | 0 | 0 | 2 | 493,548 | 2,452 |
$16,374,934 | $191,241 | $0 | $0 | 21 | $16,374,934 | $191,241 | |
September 30, 2016 | |||||||
U.S. GSE debt securities | $1,994,753 | $5,247 | $0 | $0 | 1 | $1,994,753 | $5,247 |
Agency MBS | 2,054,035 | 18,571 | 0 | 0 | 4 | 2,054,035 | 18,571 |
$4,048,788 | $23,818 | $0 | $0 | 5 | $4,048,788 | $23,818 |
September 30, | December 31, | September 30, | |
2017 | 2016 | 2016 | |
Commercial & industrial | $77,604,260 | $68,730,573 | $69,791,331 |
Commercial real estate | 210,983,668 | 201,728,280 | 190,246,590 |
Residential real estate - 1st lien | 167,185,874 | 166,691,962 | 161,277,406 |
Residential real estate - Junior (Jr) lien | 43,962,578 | 42,927,335 | 41,739,827 |
Consumer | 6,311,739 | 7,171,076 | 7,131,741 |
Gross Loans | 506,048,119 | 487,249,226 | 470,186,895 |
Deduct (add): | |||
Allowance for loan losses | 5,436,313 | 5,278,445 | 5,179,965 |
Deferred net loan costs | (318,452) | (310,130) | (312,565) |
Net Loans | $500,930,258 | $482,280,911 | $465,319,495 |
90 Days or | |||||||
90 Days | Total | Non-Accrual | More and | ||||
September 30, 2017 | 30-89 Days | or More | Past Due | Current | Total Loans | Loans | Accruing |
Commercial & industrial | $76,185 | $0 | $76,185 | $77,528,075 | $77,604,260 | $48,385 | $0 |
Commercial real estate | 1,186,687 | 228,621 | 1,415,308 | 209,568,360 | 210,983,668 | 714,720 | 15,011 |
Residential real estate | |||||||
- 1st lien | 1,366,466 | 1,823,490 | 3,189,956 | 163,995,918 | 167,185,874 | 1,511,891 | 725,581 |
- Jr lien | 454,613 | 261,256 | 715,869 | 43,246,709 | 43,962,578 | 450,192 | 64,292 |
Consumer | 53,597 | 2,777 | 56,374 | 6,255,365 | 6,311,739 | 0 | 2,777 |
$3,137,548 | $2,316,144 | $5,453,692 | $500,594,427 | $506,048,119 | $2,725,188 | $807,661 |
90 Days or | |||||||
90 Days | Total | Non-Accrual | More and | ||||
December 31, 2016 | 30-89 Days | or More | Past Due | Current | Total Loans | Loans | Accruing |
Commercial & industrial | $328,684 | $26,042 | $354,726 | $68,375,847 | $68,730,573 | $143,128 | $26,042 |
Commercial real estate | 824,836 | 222,738 | 1,047,574 | 200,680,706 | 201,728,280 | 765,584 | 0 |
Residential real estate | |||||||
- 1st lien | 4,881,496 | 1,723,688 | 6,605,184 | 160,086,778 | 166,691,962 | 1,227,220 | 1,068,083 |
- Jr lien | 984,849 | 116,849 | 1,101,698 | 41,825,637 | 42,927,335 | 338,602 | 27,905 |
Consumer | 53,972 | 2,176 | 56,148 | 7,114,928 | 7,171,076 | 0 | 2,176 |
$7,073,837 | $2,091,493 | $9,165,330 | $478,083,896 | $487,249,226 | $2,474,534 | $1,124,206 |
90 Days or | |||||||
90 Days | Total | Non-Accrual | More and | ||||
September 30, 2016 | 30-89 Days | or More | Past Due | Current | Total Loans | Loans | Accruing |
Commercial & industrial | $236,510 | $116,720 | $353,230 | $69,438,101 | $69,791,331 | $205,358 | $116,720 |
Commercial real estate | 655,874 | 249,749 | 905,623 | 189,340,967 | 190,246,590 | 759,332 | 227,302 |
Residential real estate | |||||||
- 1st lien | 1,837,612 | 1,005,342 | 2,842,954 | 158,434,452 | 161,277,406 | 1,289,968 | 744,379 |
- Jr lien | 203,174 | 91,420 | 294,594 | 41,445,233 | 41,739,827 | 343,766 | 91,420 |
Consumer | 66,776 | 0 | 66,776 | 7,064,965 | 7,131,741 | 0 | 0 |
$2,999,946 | $1,463,231 | $4,463,177 | $465,723,718 | $470,186,895 | $2,598,424 | $1,179,821 |
Number of loans | Balance | |
September 30, 2017 | 7 | $443,099 |
December 31, 2016 | 8 | 322,663 |
September 30, 2016 | 6 | 250,413 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $695,663 | $2,530,215 | $1,363,324 | $374,364 | $51,295 | $359,517 | $5,374,378 |
Charge-offs | 0 | 0 | (84,098) | 0 | (35,825) | 0 | (119,923) |
Recoveries | 19,151 | 0 | 4,621 | 60 | 8,026 | 0 | 31,858 |
Provision (credit) | (41,481) | 113,047 | 136,764 | 11,115 | 28,115 | (97,560) | 150,000 |
Ending balance | $673,333 | $2,643,262 | $1,420,611 | $385,539 | $51,611 | $261,957 | $5,436,313 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $726,848 | $2,496,085 | $1,369,757 | $371,176 | $83,973 | $230,606 | $5,278,445 |
Charge-offs | 0 | (160,207) | (88,833) | (15,311) | (99,617) | 0 | (363,968) |
Recoveries | 23,469 | 231 | 14,838 | 180 | 33,118 | 0 | 71,836 |
Provision (credit) | (76,984) | 307,153 | 124,849 | 29,494 | 34,137 | 31,351 | 450,000 |
Ending balance | $673,333 | $2,643,262 | $1,420,611 | $385,539 | $51,611 | $261,957 | $5,436,313 |
Allowance for loan losses | |||||||
Evaluated for impairment | |||||||
Individually | $0 | $65,150 | $153,570 | $119,224 | $0 | $0 | $337,944 |
Collectively | 673,333 | 2,578,112 | 1,267,041 | 266,315 | 51,611 | 261,957 | 5,098,369 |
$673,333 | $2,643,262 | $1,420,611 | $385,539 | $51,611 | $261,957 | $5,436,313 | |
Loans evaluated for impairment | |||||||
Individually | $48,385 | $1,936,399 | $3,760,913 | $379,777 | $0 | $6,125,474 | |
Collectively | 77,555,875 | 209,047,269 | 163,424,961 | 43,582,801 | 6,311,739 | 499,922,645 | |
$77,604,260 | $210,983,668 | $167,185,874 | $43,962,578 | $6,311,739 | $506,048,119 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $712,902 | $2,152,678 | $1,368,028 | $422,822 | $75,689 | $279,759 | $5,011,878 |
Charge-offs | (49,009) | 0 | (244,149) | 0 | (15,404) | 0 | (308,562) |
Recoveries | 36,032 | 0 | 23,712 | 240 | 15,145 | 0 | 75,129 |
Provision (credit) | 26,923 | 343,407 | 222,166 | (51,886) | 8,543 | (49,153) | 500,000 |
Ending balance | $726,848 | $2,496,085 | $1,369,757 | $371,176 | $83,973 | $230,606 | $5,278,445 |
Allowance for loan losses | |||||||
Evaluated for impairment | |||||||
Individually | $0 | $86,400 | $6,200 | $114,800 | $0 | $0 | $207,400 |
Collectively | 726,848 | 2,409,685 | 1,363,557 | 256,376 | 83,973 | 230,606 | 5,071,045 |
$726,848 | $2,496,085 | $1,369,757 | $371,176 | $83,973 | $230,606 | $5,278,445 | |
Loans evaluated for impairment | |||||||
Individually | $48,385 | $687,495 | $946,809 | $224,053 | $0 | $1,906,742 | |
Collectively | 68,682,188 | 201,040,785 | 165,745,153 | 42,703,282 | 7,171,076 | 485,342,484 | |
$68,730,573 | $201,728,280 | $166,691,962 | $42,927,335 | $7,171,076 | $487,249,226 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $825,242 | $2,316,966 | $1,294,272 | $414,082 | $80,560 | $146,298 | $5,077,420 |
Charge-offs | (1,358) | 0 | (42,000) | 0 | (14,438) | 0 | (57,796) |
Recoveries | 2,174 | 0 | 3,974 | 60 | 4,133 | 0 | 10,341 |
Provision (credit) | (54,384) | 34,435 | 82,396 | (32,861) | (11,915) | 132,329 | 150,000 |
Ending balance | $771,674 | $2,351,401 | $1,338,642 | $381,281 | $58,340 | $278,627 | $5,179,965 |
Residential | Residential | ||||||
Commercial | Commercial | Real Estate | Real Estate | ||||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Unallocated | Total | |
Allowance for loan losses | |||||||
Beginning balance | $712,902 | $2,152,678 | $1,368,028 | $422,822 | $75,689 | $279,759 | $5,011,878 |
Charge-offs | (12,194) | 0 | (234,549) | 0 | (38,412) | 0 | (285,155) |
Recoveries | 22,650 | 0 | 9,660 | 180 | 20,752 | 0 | 53,242 |
Provision (credit) | 48,316 | 198,723 | 195,503 | (41,721) | 311 | (1,132) | 400,000 |
Ending balance | $771,674 | $2,351,401 | $1,338,642 | $381,281 | $58,340 | $278,627 | $5,179,965 |
Allowance for loan losses | |||||||
Evaluated for impairment | |||||||
Individually | $0 | $92,900 | $19,000 | $115,600 | $0 | $0 | $227,500 |
Collectively | 771,674 | 2,258,501 | 1,319,642 | 265,681 | 58,340 | 278,627 | 4,952,465 |
$771,674 | $2,351,401 | $1,338,642 | $381,281 | $58,340 | $278,627 | $5,179,965 | |
Loans evaluated for impairment | |||||||
Individually | $188,528 | $703,852 | $1,064,752 | $226,590 | $0 | $2,183,722 | |
Collectively | 69,602,803 | 189,542,738 | 160,212,654 | 41,513,237 | 7,131,741 | 468,003,173 | |
$69,791,331 | $190,246,590 | $161,277,406 | $41,739,827 | $7,131,741 | $470,186,895 |
As of September 30, 2017 | ||||||
Unpaid | Average | Average | Interest | |||
Recorded | Principal | Related | Recorded | Recorded | Income | |
Investment | Balance | Allowance | Investment (1) | Investment (2) | Recognized (2) | |
Related allowance recorded | ||||||
Commercial real estate | $204,645 | $225,681 | $65,150 | $207,572 | $212,451 | $0 |
Residential real estate | ||||||
- 1st lien | 1,071,713 | 1,108,286 | 153,570 | 1,055,232 | 608,943 | 20,535 |
- Jr lien | 224,957 | 293,638 | 119,224 | 254,291 | 238,679 | 305 |
1,501,315 | 1,627,605 | 337,944 | 1,517,095 | 1,060,073 | 20,840 | |
No related allowance recorded | ||||||
Commercial & industrial | 48,385 | 62,498 | 91,882 | 70,133 | 0 | |
Commercial real estate | 1,735,982 | 2,305,028 | 1,749,498 | 1,105,573 | 50,123 | |
Residential real estate | ||||||
- 1st lien | 2,705,775 | 3,006,813 | 2,630,926 | 1,587,592 | 87,720 | |
- Jr lien | 154,839 | 154,918 | 145,830 | 107,120 | 0 | |
4,644,981 | 5,529,257 | 4,618,136 | 2,870,418 | 137,843 | ||
$6,146,296 | $7,156,862 | $337,944 | $6,135,231 | $3,930,491 | $158,683 |
As of December 31, 2016 | 2016 | |||
Unpaid | Average | |||
Recorded | Principal | Related | Recorded | |
Investment | Balance | Allowance | Investment | |
Related allowance recorded | ||||
Commercial real estate | $220,257 | $232,073 | $86,400 | $89,664 |
Residential real estate - 1st lien | 271,962 | 275,118 | 6,200 | 350,709 |
Residential real estate - Jr lien | 224,053 | 284,342 | 114,800 | 241,965 |
716,272 | 791,533 | 207,400 | 682,338 | |
No related allowance recorded | ||||
Commercial & industrial | 48,385 | 62,498 | 183,925 | |
Commercial real estate | 467,238 | 521,991 | 1,059,542 | |
Residential real estate - 1st lien | 674,847 | 893,741 | 877,237 | |
Residential real estate - Jr lien | 0 | 0 | 15,888 | |
1,190,470 | 1,478,230 | 2,136,592 | ||
$1,906,742 | $2,269,763 | $207,400 | $2,818,930 |
As of September 30, 2016 | |||||
Unpaid | Average | Average | |||
Recorded | Principal | Related | Recorded | Recorded | |
Investment | Balance | Allowance | Investment(1) | Investment(2) | |
Related allowance recorded | |||||
Commercial real estate | $228,062 | $235,152 | $92,900 | $0 | $45,612 |
Residential real estate | |||||
- 1st lien | 436,191 | 579,182 | 19,000 | 435,802 | 296,316 |
- Jr lien | 226,590 | 284,314 | 115,600 | 262,589 | 197,154 |
890,843 | 1,098,648 | 227,500 | 698,391 | 539,082 | |
No related allowance recorded | |||||
Commercial & industrial | 188,528 | 262,297 | 198,137 | 174,248 | |
Commercial real estate | 475,790 | 523,245 | 901,468 | 966,095 | |
Residential real estate | |||||
- 1st lien | 628,561 | 729,602 | 918,378 | 742,267 | |
- Jr lien | 0 | 0 | 39,721 | 15,888 | |
1,292,879 | 1,515,144 | 2,057,704 | 1,898,498 | ||
$2,183,722 | $2,613,792 | $227,500 | $2,756,095 | $2,437,580 |
Residential | Residential | |||||
Commercial | Commercial | Real Estate | Real Estate | |||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Total | |
Group A | $74,066,398 | $201,257,154 | $164,684,918 | $43,235,529 | $6,308,962 | $489,552,961 |
Group B | 277,046 | 877,021 | 0 | 154,942 | 0 | 1,309,009 |
Group C | 3,260,816 | 8,849,493 | 2,500,956 | 572,107 | 2,777 | 15,186,149 |
$77,604,260 | $210,983,668 | $167,185,874 | $43,962,578 | $6,311,739 | $506,048,119 |
Residential | Residential | |||||
Commercial | Commercial | Real Estate | Real Estate | |||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Total | |
Group A | $67,297,983 | $191,755,393 | $164,708,778 | $42,289,062 | $7,168,901 | $473,220,117 |
Group B | 512,329 | 2,971,364 | 0 | 169,054 | 0 | 3,652,747 |
Group C | 920,261 | 7,001,523 | 1,983,184 | 469,219 | 2,175 | 10,376,362 |
$68,730,573 | $201,728,280 | $166,691,962 | $42,927,335 | $7,171,076 | $487,249,226 |
Residential | Residential | |||||
Commercial | Commercial | Real Estate | Real Estate | |||
& Industrial | Real Estate | 1st Lien | Jr Lien | Consumer | Total | |
Group A | $67,062,235 | $179,855,087 | $158,989,152 | $41,124,097 | $7,131,741 | $454,162,312 |
Group B | 1,551,890 | 3,270,984 | 451,736 | 146,896 | 0 | 5,421,506 |
Group C | 1,177,206 | 7,120,519 | 1,836,518 | 468,834 | 0 | 10,603,077 |
| $69,791,331 | $190,246,590 | $161,277,406 | $41,739,827 | $7,131,741 | $470,186,895 |
Three months ended September 30, 2017 | Nine months ended September 30, 2017 | |||||
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 | 1 | $80,323 | $87,844 | 2 | $122,180 | $145,262 |
Year ended December 31, 2016 | Pre- | Post- | |
Modification | Modification | ||
Outstanding | Outstanding | ||
Number of | Recorded | Recorded | |
Contracts | Investment | Investment | |
Residential real estate | |||
- 1st lien | 8 | $572,418 | $598,030 |
- Jr lien | 2 | 62,819 | 64,977 |
10 | $635,237 | $663,007 |
Three months ended September 30, 2016 | Nine months ended September 30, 2016 | |||||
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 | $177,182 | $185,107 | 8 | $572,418 | $598,030 |
- Jr lien | 0 | 0 | 0 | 2 | 62,819 | 64,977 |
| 3 | $177,182 | $185,107 | 10 | $635,237 | $663,007 |
Twelve months ended September 30, 2017 | Number of | Recorded |
Contracts | Investment | |
Residential real estate – 1st lien | 1 | $87,844 |
Twelve months ended December 31, 2016 | Number of | Recorded |
Contracts | Investment | |
Residential real estate - 1st lien | 2 | $93,230 |
Residential real estate - Jr lien | 1 | 54,557 |
3 | $147,787 |
Twelve months ended September 30, 2016 | Number of | Recorded |
Contracts | Investment | |
Commercial | 1 | $71,808 |
Commercial real estate | 1 | 228,063 |
Residential real estate - 1st lien | 2 | 94,004 |
Residential real estate - Jr lien | 1 | 54,557 |
| 5 | $448,432 |
September 30, | December 31, | September 30, | |
2017 | 2016 | 2016 | |
Specific Allocation(1) | $216,939 | $92,600 | $98,600 |
September 30, 2017 | Fair | Fair | Fair | Fair | |
Carrying | Value | Value | Value | Value | |
Amount | Level 1 | Level 2 | Level 3 | Total | |
(Dollars in Thousands) | |||||
Financial assets: | |||||
Cash and cash equivalents | $29,720 | $29,720 | $0 | $0 | $29,720 |
Securities held-to-maturity | 53,882 | 0 | 54,571 | 0 | 54,571 |
Securities available-for-sale | 36,720 | 0 | 36,720 | 0 | 36,720 |
Restricted equity securities | 1,700 | 0 | 1,700 | 0 | 1,700 |
Loans and loans held-for-sale | |||||
Commercial & industrial | 76,890 | 0 | 0 | 77,533 | 77,533 |
Commercial real estate | 208,232 | 0 | 0 | 209,648 | 209,648 |
Residential real estate - 1st lien | 166,366 | 0 | 0 | 168,903 | 168,903 |
Residential real estate - Jr lien | 43,555 | 0 | 0 | 43,931 | 43,931 |
Consumer | 6,256 | 0 | 0 | 6,491 | 6,491 |
MSRs (1) | 1,113 | 0 | 1,289 | 0 | 1,289 |
Accrued interest receivable | 1,893 | 0 | 1,893 | 0 | 1,893 |
Financial liabilities: | |||||
Deposits | |||||
Other deposits | 502,963 | 0 | 502,203 | 0 | 502,203 |
Brokered deposits | 53,789 | 0 | 53,786 | 0 | 53,786 |
Long-term borrowings | 3,550 | 0 | 3,219 | 0 | 3,219 |
Repurchase agreements | 27,459 | 0 | 27,459 | 0 | 27,459 |
Capital lease obligations | 409 | 0 | 409 | 0 | 409 |
Subordinated debentures | 12,887 | 0 | 12,844 | 0 | 12,844 |
Accrued interest payable | 109 | 0 | 109 | 0 | 109 |
December 31, 2016 | Fair | Fair | Fair | Fair | |
Carrying | Value | Value | Value | Value | |
Amount | Level 1 | Level 2 | Level 3 | Total | |
(Dollars in Thousands) | |||||
Financial assets: | |||||
Cash and cash equivalents | $29,614 | $29,614 | $0 | $0 | $29,614 |
Securities held-to-maturity | 49,887 | 0 | 51,035 | 0 | 51,035 |
Securities available-for-sale | 33,715 | 0 | 33,715 | 0 | 33,715 |
Restricted equity securities | 2,756 | 0 | 2,756 | 0 | 2,756 |
Loans and loans held-for-sale | |||||
Commercial & industrial | 67,972 | 0 | 48 | 68,727 | 68,775 |
Commercial real estate | 199,136 | 0 | 601 | 201,560 | 202,161 |
Residential real estate - 1st lien | 165,243 | 0 | 941 | 166,858 | 167,799 |
Residential real estate - Jr lien | 42,536 | 0 | 109 | 42,948 | 43,057 |
Consumer | 7,084 | 0 | 0 | 7,371 | 7,371 |
MSRs(1) | 1,211 | 0 | 1,302 | 0 | 1,302 |
Accrued interest receivable | 1,819 | 0 | 1,819 | 0 | 1,819 |
Financial liabilities: | |||||
Deposits | |||||
Other deposits | 470,002 | 0 | 469,323 | 0 | 469,323 |
Brokered deposits | 34,733 | 0 | 34,745 | 0 | 34,745 |
Short-term borrowings | 30,000 | 0 | 30,000 | 0 | 30,000 |
Long-term borrowings | 1,550 | 0 | 1,376 | 0 | 1,376 |
Repurchase agreements | 30,423 | 0 | 30,423 | 0 | 30,423 |
Capital lease obligations | 483 | 0 | 483 | 0 | 483 |
Subordinated debentures | 12,887 | 0 | 12,849 | 0 | 12,849 |
Accrued interest payable | 73 | 0 | 73 | 0 | 73 |
September 30, 2016 | Fair | Fair | Fair | Fair | |
Carrying | Value | Value | Value | Value | |
Amount | Level 1 | Level 2 | Level 3 | Total | |
(Dollars in Thousands) | |||||
Financial assets: | |||||
Cash and cash equivalents | $12,380 | $12,380 | $0 | $0 | $12,380 |
Securities held-to-maturity | 56,837 | 0 | 57,592 | 0 | 57,592 |
Securities available-for-sale | 29,412 | 0 | 29,412 | 0 | 29,412 |
Restricted equity securities | 1,856 | 0 | 1,856 | 0 | 1,856 |
Loans and loans held-for-sale | |||||
Commercial & industrial | 68,978 | 0 | 189 | 69,957 | 70,146 |
Commercial real estate | 187,783 | 0 | 611 | 192,329 | 192,940 |
Residential real estate - 1st lien | 160,552 | 0 | 1,046 | 163,770 | 164,816 |
Residential real estate - Jr lien | 41,334 | 0 | 111 | 41,826 | 41,937 |
Consumer | 7,069 | 0 | 0 | 7,358 | 7,358 |
MSRs (1) | 1,215 | 0 | 1,333 | 0 | 1,333 |
Accrued interest receivable | 1,650 | 0 | 1,650 | 0 | 1,650 |
Financial liabilities: | |||||
Deposits | |||||
Other deposits | 470,587 | 0 | 470,785 | 0 | 470,785 |
Brokered deposits | 33,220 | 0 | 33,223 | 0 | 33,223 |
Federal funds purchased and short-term borrowings | 5,245 | 0 | 5,245 | 0 | 5,245 |
Long-term borrowings | 550 | 0 | 503 | 0 | 503 |
Repurchase agreements | 25,834 | 0 | 25,834 | 0 | 25,834 |
Capital lease obligations | 494 | 0 | 494 | 0 | 494 |
Subordinated debentures | 12,887 | 0 | 12,852 | 0 | 12,852 |
Accrued interest payable | 44 | 0 | 44 | 0 | 44 |
Nine Months Ended | Year Ended | Nine Months Ended | |
September 30, 2017 | December 31, 2016 | September 30, 2016 | |
Balance at beginning of year | $1,210,695 | $1,293,079 | $1,293,079 |
Mortgage servicing rights capitalized | 82,686 | 176,705 | 152,900 |
Mortgage servicing rights amortized | (180,347) | (266,603) | (208,706) |
Change in valuation allowance | 0 | 7,514 | (21,962) |
Balance at end of period | $1,113,034 | $1,210,695 | $1,215,311 |
Three Months Ended September 30, | ||
2017 | 2016 | |
Return on Average Assets | 1.09% | 0.99% |
Return on Average Equity | 12.53% | 11.29% |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Return on Average Assets | 0.98% | 0.89% |
Return on Average Equity | 11.29% | 10.08% |
SELECTED FINANCIAL DATA (Unaudited) | |||
September 30, | December 31, | September 30, | |
2017 | 2016 | 2016 | |
Balance Sheet Data | |||
Net loans | $500,930,258 | $482,280,911 | $465,319,495 |
Total assets | 661,539,071 | 637,653,665 | 605,790,430 |
Total deposits | 556,752,320 | 504,735,032 | 503,806,906 |
Borrowed funds | 3,550,000 | 31,550,000 | 5,795,000 |
Total liabilities | 604,318,331 | 583,202,148 | 551,946,796 |
Total shareholders' equity | 57,220,740 | 54,451,517 | 53,843,634 |
Book value per common share outstanding | $10.73 | $10.27 | $10.18 |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Operating Data | ||
Total interest income | $19,421,393 | $18,035,730 |
Total interest expense | 2,280,105 | 2,032,000 |
Net interest income | 17,141,288 | 16,003,730 |
Provision for loan losses | 450,000 | 400,000 |
Net interest income after provision for loan losses | 16,691,288 | 15,603,730 |
Non-interest income | 4,201,196 | 4,040,070 |
Non-interest expense | 14,465,802 | 14,147,973 |
Income before income taxes | 6,426,682 | 5,495,827 |
Applicable income tax expense(1) | 1,720,003 | 1,515,234 |
Net Income | $4,706,679 | $3,980,593 |
Per Common Share Data | ||
Earnings per common share (2) | $0.91 | $0.78 |
Dividends declared per common share | $0.51 | $0.48 |
Weighted average number of common shares outstanding | 5,077,473 | 5,016,191 |
Number of common shares outstanding, period end | 5,100,675 | 5,042,989 |
Three Months Ended September 30, | ||
2017 | 2016 | |
Net interest income as presented | $6,023,973 | $5,562,355 |
Effect of tax-exempt income | 171,083 | 175,151 |
Net interest income, tax equivalent | $6,195,056 | $5,737,506 |
Nine Months Ended September 30, | ||
2017 | 2016 | |
Net interest income as presented | $17,141,288 | $16,003,730 |
Effect of tax-exempt income | 511,458 | 485,399 |
Net interest income, tax equivalent | $17,652,746 | $16,489,129 |
Three Months Ended September 30, | ||||||
2017 | 2016 | |||||
Average | Average | |||||
Average | Income/ | Rate/ | Average | Income/ | Rate/ | |
Balance | Expense | Yield | Balance | Expense | Yield | |
Interest-Earning Assets | ||||||
Loans (1) | $506,853,347 | $6,244,899 | 4.89% | $476,137,513 | $5,732,855 | 4.79% |
Taxable investment securities | 35,519,175 | 171,880 | 1.92% | 27,393,741 | 128,767 | 1.87% |
Tax-exempt investment securities | 49,608,712 | 503,185 | 4.02% | 55,195,067 | 515,150 | 3.71% |
Sweep and interest-earning accounts | 10,355,461 | 29,964 | 1.15% | 2,591,082 | 3,048 | 0.47% |
Other investments (2) | 2,195,121 | 41,320 | 7.47% | 3,176,788 | 49,429 | 6.19% |
$604,531,816 | $6,991,248 | 4.59% | $564,494,191 | $6,429,249 | 4.53% | |
Interest-Bearing Liabilities | ||||||
Interest-bearing transaction accounts | $115,801,161 | $91,951 | 0.32% | $107,853,436 | $51,580 | 0.19% |
Money market accounts | 84,791,867 | 187,889 | 0.88% | 81,796,244 | 209,212 | 1.02% |
Savings deposits | 99,061,882 | 32,277 | 0.13% | 88,078,948 | 27,216 | 0.12% |
Time deposits | 133,068,701 | 316,417 | 0.94% | 105,959,177 | 216,162 | 0.81% |
Borrowed funds | 4,535,815 | 3,644 | 0.32% | 31,398,913 | 42,412 | 0.54% |
Repurchase agreements | 27,263,645 | 20,564 | 0.30% | 25,387,081 | 18,820 | 0.29% |
Capital lease obligations | 418,393 | 8,569 | 8.19% | 501,328 | 10,992 | 8.77% |
Junior subordinated debentures | 12,887,000 | 134,881 | 4.15% | 12,887,000 | 115,349 | 3.56% |
$477,828,464 | $796,192 | 0.66% | $453,862,127 | $691,743 | 0.61% | |
Net interest income | $6,195,056 | $5,737,506 | ||||
Net interest spread (3) | 3.93% | 3.92% | ||||
Net interest margin (4) | 4.07% | 4.04% |
Nine Months Ended September 30, | ||||||
2017 | 2016 | |||||
Average | Average | |||||
Average | Income/ | Rate/ | Average | Income/ | Rate/ | |
Balance | Expense | Yield | Balance | Expense | Yield | |
Interest-Earning Assets | ||||||
Loans (1) | $495,170,740 | $17,737,531 | 4.79% | $465,314,118 | $16,582,276 | 4.76% |
Taxable investment securities | 35,001,161 | 488,250 | 1.87% | 29,210,491 | 384,413 | 1.76% |
Tax-exempt investment securities | 51,924,841 | 1,504,289 | 3.87% | 50,577,436 | 1,427,645 | 3.77% |
Sweep and interest-earning accounts | 11,938,565 | 84,802 | 0.95% | 5,225,968 | 18,654 | 0.48% |
Other investments (2) | 2,545,091 | 117,979 | 6.20% | 2,766,541 | 108,141 | 5.22% |
$596,580,398 | $19,932,851 | 4.47% | $553,094,554 | $18,521,129 | 4.47% | |
Interest-Bearing Liabilities | ||||||
Interest-bearing transaction accounts | $116,594,941 | $216,227 | 0.25% | $111,223,384 | $155,413 | 0.19% |
Money market accounts | 85,819,418 | 595,162 | 0.93% | 84,974,840 | 637,818 | 1.00% |
Savings deposits | 96,382,338 | 91,597 | 0.13% | 85,668,159 | 79,225 | 0.12% |
Time deposits | 125,015,108 | 831,446 | 0.89% | 107,919,364 | 657,009 | 0.81% |
Borrowed funds | 12,140,165 | 65,311 | 0.72% | 18,588,663 | 74,046 | 0.53% |
Repurchase agreements | 28,768,193 | 64,326 | 0.30% | 25,393,136 | 56,125 | 0.30% |
Capital lease obligations | 442,977 | 27,181 | 8.18% | 522,708 | 32,761 | 8.36% |
Junior subordinated debentures | 12,887,000 | 388,855 | 4.03% | 12,887,000 | 339,603 | 3.52% |
$478,050,140 | $2,280,105 | 0.64% | $447,177,254 | $2,032,000 | 0.61% | |
Net interest income | $17,652,746 | $16,489,129 | ||||
Net interest spread (3) | 3.83% | 3.86% | ||||
Net interest margin (4) | 3.96% | 3.98% |
Changes in Interest Income and Interest Expense | ||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||
Variance | Variance | Variance | Variance | |||
Due to | Due to | Total | Due to | Due to | Total | |
Rate (1) | Volume (1) | Variance | Rate (1) | Volume (1) | Variance | |
Average Interest-Earning Assets | ||||||
Loans | $142,212 | $369,832 | $512,044 | $91,315 | $1,063,940 | $1,155,255 |
Taxable investment securities | 4,919 | 38,194 | 43,113 | 27,539 | 76,298 | 103,837 |
Tax-exempt investment securities | 44,639 | (56,604) | (11,965) | 38,616 | 38,028 | 76,644 |
Sweep and interest-earning accounts | 17,743 | 9,173 | 26,916 | 42,027 | 24,121 | 66,148 |
Other investments | 10,374 | (18,483) | (8,109) | 20,107 | (10,269) | 9,838 |
$219,887 | $342,112 | $561,999 | $219,604 | $1,192,118 | $1,411,722 | |
Average Interest-Bearing Liabilities | ||||||
Interest-bearing transaction accounts | $36,575 | $3,796 | $40,371 | $53,173 | $7,641 | $60,814 |
Money market accounts | (29,004) | 7,681 | (21,323) | (48,979) | 6,323 | (42,656) |
Savings deposits | 1,748 | 3,313 | 5,061 | 2,747 | 9,625 | 12,372 |
Time deposits | 45,058 | 55,197 | 100,255 | 70,770 | 103,667 | 174,437 |
Borrowed funds | (17,101) | (21,667) | (38,768) | 25,991 | (34,726) | (8,735) |
Repurchase agreements | 376 | 1,368 | 1,744 | 621 | 7,580 | 8,201 |
Capital lease obligations | (711) | (1,712) | (2,423) | (702) | (4,878) | (5,580) |
Junior subordinated debentures | 19,532 | 0 | 19,532 | 49,252 | 0 | 49,252 |
$56,473 | $47,976 | $104,449 | $152,873 | $95,232 | $248,105 | |
Changes in net interest income | $163,414 | $294,136 | $457,550 | $66,731 | $1,096,886 | $1,163,617 |
Three Months Ended | Nine Months Ended | |||||||
September 30, | Change | September 30, | Change | |||||
2017 | 2016 | Income | Percent | 2017 | 2016 | Income | Percent | |
Service fees | $773,419 | $719,341 | $54,078 | 7.52% | $2,293,773 | $1,992,560 | $301,213 | 15.12% |
Income from sold loans | 185,844 | 230,623 | (44,779) | -19.42% | 560,210 | 683,114 | (122,904) | -17.99% |
Other income from loans | 222,026 | 209,882 | 12,144 | 5.79% | 616,931 | 616,473 | 458 | 0.07% |
Net realized gain on sale of | ||||||||
securities available-for-sale | 1,246 | 0 | 1,246 | 100.00% | 4,647 | 0 | 4,647 | 100.00% |
Income from CFSG Partners | 116,059 | 143,095 | (27,036) | -18.89% | 314,573 | 326,676 | (12,103) | -3.70% |
Currency exchange income | 22,000 | 27,000 | (5,000) | -18.52% | 66,500 | 78,500 | (12,000) | -15.29% |
SERP fair value adjustment | (2,179) | 32,352 | (34,531) | -106.74% | 45,312 | 46,758 | (1,446) | -3.09% |
Other income | 130,832 | 121,227 | 9,605 | 7.92% | 299,250 | 295,989 | 3,261 | 1.10% |
Total non-interest income | $1,449,247 | $1,483,520 | $(34,273) | -2.31% | $4,201,196 | $4,040,070 | $161,126 | 3.99% |
Three Months Ended | Nine Months Ended | |||||||
September 30, | Change | September 30, | Change | |||||
2017 | 2016 | Expense | Percent | 2017 | 2016 | Expense | Percent | |
Salaries and wages | $1,653,751 | $1,725,000 | $(71,249) | -4.13% | $5,068,626 | $5,175,000 | $(106,374) | -2.06% |
Employee benefits | 682,944 | 679,762 | 3,182 | 0.47% | 2,016,923 | 2,049,926 | (33,003) | -1.61% |
Occupancy expenses, net | 614,817 | 605,378 | 9,439 | 1.56% | 1,963,543 | 1,857,482 | 106,061 | 5.71% |
Other expenses | ||||||||
Computer outsourcing | 130,938 | 128,910 | 2,028 | 1.57% | 408,044 | 376,885 | 31,159 | 8.27% |
Service contracts - administrative | 116,863 | 106,747 | 10,116 | 9.48% | 313,526 | 292,663 | 20,863 | 7.13% |
Marketing expense | 135,498 | 98,339 | 37,159 | 37.79% | 382,996 | 283,139 | 99,857 | 35.27% |
Consultant services | 61,113 | 51,833 | 9,280 | 17.90% | 162,935 | 116,293 | 46,642 | 40.11% |
Collection & non-accruing loan | ||||||||
expense | 15,455 | 46,500 | (31,045) | -66.76% | 36,165 | 84,500 | (48,335) | -57.20% |
Miscellaneous computer expense | 54,010 | 28,383 | 25,627 | 90.29% | 110,822 | 54,246 | 56,576 | 104.30% |
OREO expense | 5,240 | 5,498 | (258) | -4.69% | 18,044 | 37,467 | (19,423) | -51.84% |
Other miscellaneous expenses | 1,371,487 | 1,314,153 | 57,334 | 4.36% | 3,984,178 | 3,820,372 | 163,806 | 4.29% |
Total non-interest expense | $4,842,116 | $4,790,503 | $51,613 | 1.08% | $14,465,802 | $14,147,973 | $317,829 | 2.25% |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Assets | ||||||
Loans | $506,048,119 | 76.50% | $487,249,226 | 76.41% | $470,186,895 | 77.62% |
Securities available-for-sale | 36,719,673 | 5.55% | 33,715,051 | 5.29% | 29,412,216 | 4.86% |
Securities held-to-maturity | 53,882,287 | 8.14% | 49,886,631 | 7.82% | 56,837,100 | 9.38% |
Liabilities | ||||||
Demand deposits | 115,930,899 | 17.52% | 104,472,268 | 16.38% | 101,259,470 | 16.72% |
Interest-bearing transaction accounts | 127,426,517 | 19.26% | 118,053,360 | 18.51% | 119,981,648 | 19.81% |
Money market accounts | 85,947,545 | 12.99% | 79,042,619 | 12.40% | 76,976,376 | 12.71% |
Savings deposits | 99,439,616 | 15.03% | 86,776,856 | 13.61% | 91,274,380 | 15.07% |
Time deposits | 128,007,743 | 19.35% | 116,389,929 | 18.25% | 114,315,032 | 18.87% |
Borrowed Funds | 0 | 0.00% | 0 | 0.00% | 5,245,000 | 0.87% |
Short-term advances | 0 | 0.00% | 30,000,000 | 4.70% | 0 | 0.00% |
Long-term advances | 3,550,000 | 0.54% | 1,550,000 | 0.24% | 550,000 | 0.09% |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Commercial & industrial | $77,604,260 | 15.33% | $68,730,573 | 14.11% | $69,791,331 | 14.84% |
Commercial real estate | 210,983,668 | 41.69% | 201,728,280 | 41.40% | 190,246,590 | 40.46% |
1 - 4 family residential - 1st lien | 167,185,874 | 33.04% | 166,691,962 | 34.21% | 161,277,406 | 34.30% |
1 - 4 family residential - Jr lien | 43,962,578 | 8.69% | 42,927,335 | 8.81% | 41,739,827 | 8.88% |
Consumer | 6,311,739 | 1.25% | 7,171,076 | 1.47% | 7,131,741 | 1.52% |
Total loans | 506,048,119 | 100.00% | 487,249,226 | 100.00% | 470,186,895 | 100.00% |
Deduct (add): | ||||||
Allowance for loan losses | 5,436,313 | 5,278,445 | 5,179,965 | |||
Deferred net loan costs | (318,452) | (310,130) | (312,565) | |||
Net loans | $500,930,258 | $482,280,911 | $465,319,495 |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Loans past due 90 days or more | ||||||
and still accruing | ||||||
Commercial & industrial | $0 | 0.00% | $26,042 | 0.65% | $116,720 | 2.79% |
Commercial real estate | 15,011 | 0.39% | 0 | 0.00% | 227,302 | 5.43% |
Residential real estate - 1st lien | 725,581 | 18.81% | 1,068,083 | 26.75% | 744,379 | 17.78% |
Residential real estate - Jr lien | 64,292 | 1.67% | 27,905 | 0.70% | 91,420 | 2.18% |
Consumer | 2,777 | 0.07% | 2,176 | 0.05% | 0 | 0.00% |
807,661 | 20.94% | 1,124,206 | 28.15% | 1,179,821 | 28.18% | |
Non-accrual loans (1) | ||||||
Commercial & industrial | 48,385 | 1.25% | 143,128 | 3.59% | 205,358 | 4.90% |
Commercial real estate | 714,720 | 18.53% | 765,584 | 19.17% | 759,332 | 18.13% |
Residential real estate - 1st lien | 1,511,891 | 39.20% | 1,227,220 | 30.74% | 1,289,968 | 30.81% |
Residential real estate - Jr lien | 450,192 | 11.67% | 338,602 | 8.48% | 343,766 | 8.21% |
2,725,188 | 70.65% | 2,474,534 | 61.98% | 2,598,424 | 62.05% | |
Other real estate owned | 324,235 | 8.41% | 394,000 | 9.87% | 409,000 | 9.77% |
$3,857,084 | 100.00% | $3,992,740 | 100.00% | $4,187,245 | 100.00% |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Number of | Principal | Number of | Principal | Number of | Principal | |
Loans | Balance | Loans | Balance | Loans | Balance | |
Commercial & industrial | 1 | $48,385 | 2 | $143,127 | 3 | $191,919 |
Commercial real estate | 2 | 329,149 | 2 | 354,811 | 2 | 373,767 |
Residential real estate - 1st lien | 7 | 343,519 | 9 | 516,886 | 10 | 684,636 |
Residential real estate - Jr lien | 0 | 0 | 2 | 117,158 | 1 | 52,130 |
10 | $721,053 | 15 | $1,131,982 | 16 | $1,302,452 |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||
Number of | Principal | Number of | Principal | Number of | Principal | |
Loans | Balance | Loans | Balance | Loans | Balance | |
Commercial & industrial | 0 | $0 | 0 | $0 | 2 | $35,340 |
Commercial real estate | 5 | 1,291,887 | 5 | 1,350,480 | 5 | 1,391,990 |
Residential real estate - 1st lien | 53 | 2,811,263 | 28 | 2,722,973 | 27 | 2,558,079 |
Residential real estate - Jr lien | 1 | 8,645 | 2 | 63,971 | 3 | 132,822 |
59 | $4,111,795 | 35 | $4,137,424 | 37 | $4,118,231 |
As of or for the Nine Months Ended September 30, | ||
2017 | 2016 | |
Loans outstanding, end of period | $506,048,119 | $470,186,895 |
Average loans outstanding during period | $495,170,740 | $465,314,118 |
Non-accruing loans, end of period | $2,725,188 | $2,598,424 |
Non-accruing loans, net of government guarantees | $2,676,035 | $2,429,563 |
Allowance, beginning of period | $5,278,445 | $5,011,878 |
Loans charged off: | ||
Commercial & industrial | 0 | (12,194) |
Commercial real estate | (160,207) | 0 |
Residential real estate - 1st lien | (88,833) | (234,549) |
Residential real estate - Jr lien | (15,311) | 0 |
Consumer loans | (99,617) | (38,412) |
Total loans charged off | (363,968) | (285,155) |
Recoveries: | ||
Commercial & industrial | 23,469 | 22,650 |
Commercial real estate | 231 | 0 |
Residential real estate - 1st lien | 14,838 | 9,660 |
Residential real estate - Jr lien | 180 | 180 |
Consumer loans | 33,118 | 20,752 |
Total recoveries | 71,836 | 53,242 |
Net loans charged off | (292,132) | (231,913) |
Provision charged to income | 450,000 | 400,000 |
Allowance, end of period | $5,436,313 | $5,179,965 |
Net charge offs to average loans outstanding | 0.059% | 0.050% |
Provision charged to income as a percent of average loans | 0.091% | 0.086% |
Allowance to average loans outstanding | 1.098% | 1.113% |
Allowance to non-accruing loans | 199.484% | 199.350% |
Allowance to non-accruing loans net of government guarantees | 203.148% | 213.206% |
Contract or Notional Amount | ||
September 30, | December 31, | |
2017 | 2016 | |
Unused portions of home equity lines of credit | $28,640,161 | $25,535,104 |
Residential construction lines of credit | 4,160,338 | 3,676,176 |
Commercial real estate and other construction lines of credit | 30,022,030 | 25,951,345 |
Commercial and industrial commitments | 35,776,104 | 36,227,213 |
Other commitments to extend credit | 52,666,605 | 42,459,454 |
Standby letters of credit and commercial letters of credit | 1,651,759 | 2,009,788 |
Recourse on sale of credit card portfolio | 309,155 | 258,555 |
MPF credit enhancement obligation, net of liability recorded | 596,642 | 748,239 |
September 30, | December 31, | September 30, | |
2017 | 2016 | 2016 | |
Long-Term Advances(1) | |||
FHLBB term advance, 0.00%, due February 26, 2021 | $350,000 | $350,000 | $350,000 |
FHLBB term advance, 0.00%, due November 22, 2021 | 1,000,000 | 1,000,000 | 0 |
FHLBB term advance, 0.00%, due June 09, 2022 | 2,000,000 | 0 | 0 |
FHLBB term advance, 0.00%, due September 22, 2023 | 200,000 | 200,000 | 200,000 |
3,550,000 | 1,550,000 | 550,000 | |
Short-Term Advances | |||
FHLBB term advance 0.77% fixed rate, due February 8, 2017 | 0 | 10,000,000 | 0 |
FHLBB term advance 0.77% fixed rate, due February 24, 2017 | 0 | 10,000,000 | 0 |
FHLBB term advance 0.92% fixed rate, due June 14, 2017 | 0 | 10,000,000 | 0 |
0 | 30,000,000 | 0 | |
Overnight Borrowings | |||
Federal funds purchased (FHLBB), 0.51% | 0 | 0 | 5,245,000 |
$3,550,000 | $31,550,000 | $5,795,000 |
Minimum | ||||||
Minimum | To Be Well | |||||
For Capital | Capitalized Under | |||||
Adequacy | Prompt Corrective | |||||
Actual | Purposes: | Action Provisions(1): | ||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |
(Dollars in Thousands) | ||||||
September 30, 2017 | ||||||
Common equity tier 1 capital | ||||||
(to risk-weighted assets) | ||||||
Company | $58,585 | 12.48% | $21,121 | 4.50% | N/A | N/A |
Bank | $57,837 | 12.34% | $21,093 | 4.50% | $30,468 | 6.50% |
Tier 1 capital (to risk-weighted assets) | ||||||
Company | $58,585 | 12.48% | $28,161 | 6.00% | N/A | N/A |
Bank | $57,837 | 12.34% | $28,124 | 6.00% | $37,499 | 8.00% |
Total capital (to risk-weighted assets) | ||||||
Company | $64,065 | 13.65% | $37,548 | 8.00% | N/A | N/A |
Bank | $63,317 | 13.51% | $37,499 | 8.00% | $46,874 | 10.00% |
Tier 1 capital (to average assets) | ||||||
Company | $58,585 | 9.18% | $25,524 | 4.00% | N/A | N/A |
Bank | $57,837 | 9.07% | $25,502 | 4.00% | $31,877 | 5.00% |
December 31, 2016: | ||||||
Common equity tier 1 capital | ||||||
(to risk-weighted assets) | ||||||
Company | $55,690 | 12.34% | $20,304 | 4.50% | N/A | N/A |
Bank | $55,120 | 12.23% | $20,274 | 4.50% | $29,285 | 6.50% |
Tier 1 capital (to risk-weighted assets) | ||||||
Company | $55,690 | 12.34% | $27,072 | 6.00% | N/A | N/A |
Bank | $55,120 | 12.23% | $27,032 | 6.00% | $36,043 | 8.00% |
Total capital (to risk-weighted assets) | ||||||
Company | $61,012 | 13.52% | $36,096 | 8.00% | N/A | N/A |
Bank | $60,443 | 13.42% | $36,043 | 8.00% | $45,054 | 10.00% |
Tier 1 capital (to average assets) | ||||||
Company | $55,690 | 9.17% | $24,305 | 4.00% | N/A | N/A |
Bank | $55,120 | 9.08% | $24,281 | 4.00% | $30,351 | 5.00% |
Total Number | Average | |
of Shares | Price Paid | |
For the period: | Purchased(1)(2) | Per Share |
July 1 - July 31 | 1,494 | $18.95 |
August 1 - August 31 | 0 | 0.00 |
September 1 - September 30 | 3,021 | 18.20 |
Total | 4,515 | $18.45 |