Community Bancorp 10-Q for FY2022 Q1

Community Bancorp (CMTV)

10-Q 2022-05-13 For: 2022-03-31

Added on April 11, 2026

About this 10-Q

Community Bancorp filed this 10-Q on May 13, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net income: $2.41M; down 20.5% from net income of $3.03M a year earlier

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Vermont		03-0284070
(State of Incorporation)		(IRS Employer Identification Number)

4811 US Route 5, Derby, Vermont		05829
(Address of Principal Executive Offices)		(zip code)

Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
	(Not Applicable)

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

		Page
PART I	FINANCIAL INFORMATION

Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4	Controls and Procedures	46

PART II	OTHER INFORMATION

Item 1	Legal Proceedings	47
Item 1A	Risk Factors	47
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 6	Exhibits	48
	Signatures	49
	Exhibit Index	50

Community Bancorp. and Subsidiary	March 31,			December 31,
Consolidated Balance Sheets	2022			2021
	(Unaudited)

Assets
Cash and due from banks	$	17,330,851		$	17,839,374
Federal funds sold and overnight deposits		67,121,921			92,519,552
Total cash and cash equivalents		84,452,772			110,358,926
Securities available-for-sale		185,755,566			182,342,459
Restricted equity securities, at cost		1,390,950			1,434,450
Loans held-for-sale		246,000			339,000
Loans		696,293,182			689,988,533
Allowance for loan losses		(7,890,648	)		(7,710,256	)
Deferred net loan cost (fees)		274,346			(37,972	)
Net loans		688,676,880			682,240,305
Bank premises and equipment, net		13,503,142			13,767,328
Accrued interest receivable		2,719,138			2,400,560
Bank owned life insurance		5,093,288			5,073,228
Goodwill		11,574,269			11,574,269
Other assets		11,778,865			9,575,274
Total assets	$	1,005,190,870		$	1,019,105,799

Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Demand, non-interest bearing	$	203,661,459		$	209,465,151
Interest-bearing transaction accounts		258,401,561			265,513,937
Money market funds		130,731,075			129,728,954
Savings		177,994,875			168,390,905
Time deposits, $250,000 and over		17,106,871			17,463,871
Other time deposits		89,404,604			88,837,135
Total deposits		877,300,445			879,399,953
Borrowed funds		1,300,000			1,300,000
Repurchase agreements		28,744,011			32,609,875
Junior subordinated debentures		12,887,000			12,887,000
Accrued interest and other liabilities		7,514,626			8,148,703
Total liabilities		927,746,082			934,345,531

Shareholders’ Equity
Preferred stock, 1,000,000 shares authorized, 15 shares issued and outstanding at 03/31/22 and 12/31/21 ($100,000 liquidation value, per share)		1,500,000			1,500,000
Common stock - $2.50 par value; 15,000,000 shares authorized, 5,602,178 shares issued at 03/31/22 and 5,587,939 shares issued at 12/31/21		14,005,445			13,969,848
Additional paid-in capital		35,559,149			35,322,063
Retained earnings		38,914,579			37,758,105
Accumulated other comprehensive loss		(9,911,608	)		(1,166,971	)
Less: treasury stock, at cost; 210,101 shares at 03/31/22 and 12/31/21		(2,622,777	)		(2,622,777	)
Total shareholders’ equity		77,444,788			84,760,268
Total liabilities and shareholders’ equity	$	1,005,190,870		$	1,019,105,799

Book value per common share outstanding	$	14.08		$	15.48

Community Bancorp. and Subsidiary	Three Months Ended March 31,
Consolidated Statements of Income	2022		2021
(Unaudited)

Interest income
Interest and fees on loans	$	7,487,200	$	8,253,296
Interest on debt securities		667,226		265,112
Dividends		16,460		10,619
Interest on federal funds sold and overnight deposits		80,660		87,883
Total interest income		8,251,546		8,616,910

Interest expense
Interest on deposits		551,959		705,244
Interest on borrowed funds		21,965		14,941
Interest on repurchase agreements		21,040		35,442
Interest on junior subordinated debentures		98,352		98,795
Total interest expense		693,316		854,422

Net interest income		7,558,230		7,762,488
Provision for loan losses		862,500		267,497
Net interest income after provision for loan losses		6,695,730		7,494,991

Non-interest income
Service fees		862,887		788,623
Income from sold loans		203,842		185,006
Other income from loans		271,260		183,274
Other income		348,440		415,328
Total non-interest income		1,686,429		1,572,231

Non-interest expense
Salaries and wages		2,040,000		1,975,003
Employee benefits		772,052		831,210
Occupancy expenses, net		753,364		744,720
Other expenses		1,888,172		1,814,118
Total non-interest expense		5,453,588		5,365,051

Income before income taxes		2,928,571		3,702,171
Income tax expense		523,029		676,470
Net income	$	2,405,542	$	3,025,701

Earnings per common share	$	0.44	$	0.57
Weighted average number of common shares used in computing earnings per share		5,382,678		5,322,404
Dividends declared per common share	$	0.23	$	0.22

Community Bancorp. and Subsidiary
Consolidated Statements of Comprehensive Income
(Unaudited)	Three Months Ended March 31,
	2022			2021

Net income	$	2,405,542		$	3,025,701

Other comprehensive loss, net of tax:
Unrealized holding loss on securities AFS arising during the period		(11,069,161	)		(1,660,640	)
Tax effect		2,324,524			348,735
Other comprehensive loss, net of tax		(8,744,637	)		(1,311,905	)
Total comprehensive (loss) income	$	(6,339,095	)	$	1,713,796

	Three Months Ended March 31, 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 income
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

	Three Months Ended March 31, 2021
					Additional											Total
	Common		Preferred		paid-in		Retained						Treasury			shareholders’
	Stock		Stock		capital		earnings			AOCI*			stock			equity

January 1, 2021	$	13,818,450	$	1,500,000	$	34,309,646	$	29,368,046		$	915,348		$	(2,622,777	)	$	77,288,713

Issuance of common stock		42,523				222,256											264,779
Cash dividends declared
Common stock								(1,169,555	)								(1,169,555	)
Preferred stock								(12,188	)								(12,188	)
Comprehensive income
Net income								3,025,701									3,025,701
Other comprehensive loss											(1,311,905	)					(1,311,905	)
March 31, 2021	$	13,860,973	$	1,500,000	$	34,531,902	$	31,212,004		$	(396,557	)	$	(2,622,777	)	$	78,085,545

Community Bancorp. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)	Three Months Ended March 31,
	2022			2021

Cash Flows from Operating Activities:
Net income	$	2,405,542		$	3,025,701
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, bank premises and equipment		285,202			259,449
Provision for loan losses		862,500			267,497
Deferred income tax		47,344			16,608
Gain on sale of loans		(102,945	)		(114,211	)
(Income) loss from CFS Partners		(225,870	)		1,693,014
Amortization of bond premium, net		186,967			95,456
Proceeds from sales of loans held for sale		4,425,711			2,145,611
Originations of loans held for sale		(4,229,766	)		(2,435,200	)
Increase in taxes payable		408,593			569,100
Increase in interest receivable		(318,578	)		(250,630	)
(Increase) decrease in mortgage servicing rights		(2,374	)		38,280
Decrease in right-of-use assets		49,669			49,031
Decrease in operating lease liabilities		(51,283	)		(49,198	)
Increase in other assets		(173,852	)		(148,665	)
Increase in cash surrender value of BOLI		(20,060	)		(21,673	)
Amortization of limited partnerships		67,092			90,762
Change in net deferred loan fees and costs		(312,318	)		1,076,424
Decrease in interest payable		(1,332	)		(12,953	)
Decrease in accrued expenses		(567,062	)		(420,431	)
(Decrease) increase in other liabilities		(24,896	)		3,175
Net cash provided by operating activities		2,708,284			5,877,147

Cash Flows from Investing Activities:
Investments - AFS
Maturities, calls, pay downs and sales		4,434,388			4,383,743
Purchases		(19,103,623	)		(27,371,666	)
Proceeds from redemption of restricted equity securities		43,500			0
Decrease in limited partnership contributions payable		0			(150,000	)
Increase in loans, net		(6,998,537	)		(20,167,317	)
Capital expenditures net of proceeds from sales of bank premises and equipment		(70,686	)		(2,657,300	)
Recoveries of loans charged off		11,780			25,314
Net cash used in investing activities		(21,683,178	)		(45,937,226	)

	2022			2021

Cash Flows from Financing Activities:
Net (decrease) increase in demand and interest-bearing transaction accounts		(12,916,068	)		7,863,790
Net increase in money market and savings accounts		10,606,091			19,474,878
Net increase (decrease) in time deposits		210,469			(3,639,187	)
Net decrease in repurchase agreements		(3,865,864	)		(6,627,854	)
Repayments on long-term borrowings		0			(500,000	)
(Decrease) increase in finance lease obligations		(52,807	)		2,388,819
Dividends paid on preferred stock		(12,188	)		(12,188	)
Dividends paid on common stock		(900,893	)		(743,679	)
Net cash (used in) provided by financing activities		(6,931,260	)		18,204,579

Net decrease in cash and cash equivalents		(25,906,154	)		(21,855,500	)
Cash and cash equivalents:
Beginning		110,358,926			115,049,920
Ending	$	84,452,772		$	93,194,420

Supplemental Schedule of Cash Paid During the Period:
Interest	$	694,648		$	867,375

Supplemental Schedule of Noncash Investing and Financing Activities:
Change in unrealized loss on securities AFS	$	(11,069,161	)	$	(1,660,640	)

Common Shares Dividends Paid:
Dividends declared	$	1,236,880		$	1,169,555
Increase in dividends payable attributable to dividends declared		(63,304	)		(161,097	)
Dividends reinvested		(272,683	)		(264,779	)
Total dividends paid	$	900,893		$	743,679

ABS:	Asset backed security	FASB:	Financial Accounting Standards Board
AFS:	Available-for-sale	FDIC:	Federal Deposit Insurance Corporation
Agency MBS:	MBS issued by a US government agency	FHLBB:	Federal Home Loan Bank of Boston
	or GSE	FHLMC:	Federal Home Loan Mortgage Corporation
ALCO:	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
BIC:	Borrower-in-Custody	ICS:	Insured Cash Sweeps of the InterFi Network
Board:	Board of Directors	IRS:	Internal Revenue Service
BOLI:	Bank owned life insurance	JNE:	Jobs for New England
bp or bps:	Basis point(s)	Jr:	Junior
CARES ACT:	Coronavirus Aid Relief and Economic	MBS:	Mortgage-backed security
	Security Act	MSRs:	Mortgage servicing rights
CBLR:	Community Bank Leverage Ratio	NII:	Net interest income
CDARS:	Certificate of Deposit Accounts Registry	OAS:	Other amortizing security
	Service of the InterFi Network	OCI:	Other comprehensive income (loss)
CDs:	Certificates of deposit	OREO:	Other real estate owned
CDI:	Core deposit intangible	OTTI:	Other-than-temporary impairment
CECL:	Current Expected Credit Loss	PMI:	Private mortgage insurance
CFSG:	Community Financial Services Group, LLC	PPP:	Paycheck Protection Program
CFS Partners:	Community Financial Services Partners,	RD:	USDA Rural Development
	LLC	SBA:	U.S. Small Business Administration
CMO	Collateralized Mortgage Obligation	SEC:	U.S. Securities and Exchange Commission
Company:	Community Bancorp. and Subsidiary	TDR:	Troubled-debt restructuring
COVID-19:	Coronavirus Disease 2019	USDA:	U.S. Department of Agriculture
CRE:	Commercial Real Estate	VA:	U.S. Veterans Administration
DDA or DDAs:	Demand Deposit Account(s)	2018	Economic Growth, Regulatory Relief and
DTC:	Depository Trust Company	Regulatory	Consumer Protection Act of 2018
DRIP:	Dividend Reinvestment Plan	Relief Act:
Exchange Act:	Securities Exchange Act of 1934

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

March 31, 2022
U.S. GSE debt securities	$	12,001,306	$	0	$	764,922	$	11,236,384
U.S. Government securities		39,497,938		0		1,868,539		37,629,399
Taxable Municipal securities		300,000		0		26,323		273,677
Tax-Exempt Municipal securities		4,644,229		0		336,281		4,307,948
Agency MBS		132,398,698		23,491		9,482,071		122,940,118
ABS and OAS		1,847,185		4,332		22,855		1,828,662
CMO		1,422,549		0		115,921		1,306,628
Other investments		6,190,000		68,665		25,915		6,232,750
Total	$	198,301,905	$	96,488	$	12,642,827	$	185,755,566

	Less than 12 months				12 months or more				Totals
	Fair		Unrealized		Fair		Unrealized		Number of		Fair		Unrealized
	Value		Loss		Value		Loss		Securities		Value		Loss
March 31, 2022
U.S. GSE debt securities	$	6,718,245	$	283,061	$	4,518,139	$	481,861		11	$	11,236,384	$	764,922
U.S. Government securities		37,629,399		1,868,539		0		0		52		37,629,399		1,868,539
Taxable Municipal securities		273,677		26,323		0		0		1		273,677		26,323
Tax-Exempt Municipal securities		4,307,948		336,281		0		0		9		4,307,948		336,281
Agency MBS		91,645,963		6,483,880		29,071,931		2,998,191		106		120,717,894		9,482,071
ABS and OAS		1,277,498		22,855		0		0		2		1,277,498		22,855
CMO		449,231		29,845		857,397		86,076		3		1,306,628		115,921
Other investments		470,085		25,915		0		0		2		470,085		25,915
Total	$	142,772,046	$	9,076,699	$	34,447,467	$	3,566,128		186	$	177,219,513	$	12,642,827

			90 Days		Total						Non-Accrual		90 Days or More and
March 31, 2022	30-89 Days		or More		Past Due		Current		Total Loans		Loans		Accruing

Commercial & industrial	$	233,764	$	141,700	$	375,464	$	121,097,693	$	121,473,157	$	222,236	$	0
Commercial real estate		1,546,310		1,640,382		3,186,692		305,125,042		308,311,734		3,708,593		0
Municipal		0		0		0		48,660,440		48,660,440		0		0
Residential real estate
- 1st lien		1,221,885		611,883		1,833,768		179,776,526		181,610,294		1,343,723		561,440
- Jr lien		82,115		93,374		175,489		32,891,500		33,066,989		140,411		93,374
Consumer		4,028		0		4,028		3,166,540		3,170,568		0		0
Totals	$	3,088,102	$	2,487,339	$	5,575,441	$	690,717,741	$	696,293,182	$	5,414,963	$	654,814

	Amortized		Fair
	Cost		Value
March 31, 2022
Due in one year or less	$	3,718,000	$	3,739,035
Due from one to five years		45,449,014		43,386,569
Due from five to ten years		10,790,658		10,173,219
Due after ten years		5,945,535		5,516,625
Agency MBS		132,398,698		122,940,118
Total	$	198,301,905	$	185,755,566

December 31, 2021
Due in one year or less	$	3,470,000	$	3,508,582
Due from one to five years		36,860,731		36,619,130
Due from five to ten years		13,065,163		12,942,726
Due after ten years		2,132,257		2,139,500
Agency MBS		128,291,487		127,132,521
Total	$	183,819,638	$	182,342,459

	Number of loans		Balance

March 31, 2022		4	$	153,054
December 31, 2021		5		195,082

									Residential		Residential
	Commercial			Commercial					Real Estate		Real Estate
	& Industrial			Real Estate			Municipal		1st Lien		Jr Lien			Consumer			Unallocated			Total

ALL beginning balance	$	939,047		$	4,151,760		$	76,728	$	1,765,892	$	182,014		$	55,698		$	539,117		$	7,710,256
Charge-offs		(17,650	)		(667,474	)		0		0		0			(8,764	)		0			(693,888	)
Recoveries		0			0			0		2,276		1,210			8,294			0			11,780
Provision (credit)		117,903			1,159,995			10,861		46,289		(4,671	)		(19,036	)		(448,841	)		862,500
ALL ending balance	$	1,039,300		$	4,644,281		$	87,589	$	1,814,457	$	178,553		$	36,192		$	90,276		$	7,890,648

ALL evaluated for impairment
Individually	$	0		$	0		$	0	$	115,614	$	0		$	0		$	0		$	115,614
Collectively		1,039,300			4,644,281			87,589		1,698,843		178,553			36,192			90,276			7,775,034
Total	$	1,039,300		$	4,644,281		$	87,589	$	1,814,457	$	178,553		$	36,192		$	90,276		$	7,890,648

Loans evaluated for impairment
Individually	$	222,236		$	3,713,169		$	0	$	3,910,848	$	85,691		$	0					$	7,931,944
Collectively		121,250,921			304,598,565			48,660,440		177,699,446		32,981,298			3,170,568						688,361,238
Total	$	121,473,157		$	308,311,734		$	48,660,440	$	181,610,294	$	33,066,989		$	3,170,568					$	696,293,182

	As of March 31, 2022
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment(1)		Balance		Allowance		Investment(1)(2)		Recognized(2)

Related allowance recorded
Residential real estate
1st lien	$	1,113,112	$	1,129,082	$	115,614	$	907,849	$	14,387
Jr lien		0		0		0		0		51
Total with related allowance		1,113,112		1,129,082		115,614		907,849		14,438

No related allowance recorded
Commercial & industrial		222,236		261,011				157,799		204
Commercial real estate		3,713,309		4,861,145				4,133,691		1,670
Residential real estate
1st lien		2,836,069		3,845,577				2,943,358		42,714
Jr lien		85,697		131,069				87,133		37
Total with no related allowance		6,857,311		9,098,802				7,321,981		44,625

Total impaired loans	$	7,970,423	$	10,227,884	$	115,614	$	8,229,830	$	59,063

(1)	Recorded investment in impaired loans as of March 31, 2022 includes accrued interest receivable of $38,479.
(2)	For the three months ended March 31, 2022.

	As of December 31, 2021
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment(1)		Balance		Allowance		Investment(1)(2)		Recognized(2)

Related allowance recorded
Residential real estate
1st lien	$	702,586	$	716,118	$	79,978	$	858,124	$	60,769
Jr lien		0		0		0		3,452		243
Total with related allowance		702,586		716,118		79,978		861,576		61,012

No related allowance recorded
Commercial & industrial		93,362		115,414				290,181		204
Commercial real estate		4,554,074		5,108,557				2,747,193		120,996
Residential real estate
1st lien		3,050,647		4,076,352				3,331,971		205,514
Jr lien		88,570		132,802				124,803		186
Total with no related allowance		7,786,653		9,433,125				6,494,148		326,900

Total impaired loans	$	8,489,239	$	10,149,243	$	79,978	$	7,355,724	$	387,912

(1)	Recorded investment in impaired loans as of December 31, 2021 includes accrued interest receivable and deferred net loan costs of $33,077.
(2)	For the year ended December 31, 2021.

	As of March 31, 2021
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment(1)		Balance		Allowance		Investment(1)(2)		Recognized(2)

Related allowance recorded
Residential real estate
1st lien	$	1,159,129	$	1,196,306	$	119,306	$	1,029,855	$	18,650
Jr lien		4,466		4,463		255		4,622		117
Total with related allowance		1,163,595		1,200,769		119,561		1,034,477		18,767

No related allowance recorded
Commercial & industrial		420,975		485,396				417,620		204
Commercial real estate		1,645,921		2,103,732				1,794,967		2,044
Residential real estate
1st lien		3,269,662		4,132,986				3,529,314		46,958
Jr lien		138,870		180,547				134,574		0
Total with no related allowance		5,475,428		6,902,661				5,876,475		49,206

Total impaired loans	$	6,639,023	$	8,103,430	$	119,561	$	6,910,952	$	67,973

	·	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.

	Year ended December 31, 2021
			Pre-		Post-
			Modification		Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
	Contracts		Investment		Investment

Commercial & industrial		1	$	41,751	$	41,751
Commercial real estate		2		3,153,402		3,153,402
Residential real estate – 1st lien		1		67,007		67,007
		4	$	3,262,160	$	3,262,160

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.

	March 31,		December 31,
Assets: (market approach)	2022		2021

Level 1
U.S. Government securities	$	37,629,399	$	32,041,041

Level 2
U.S. GSE debt securities	$	11,236,384	$	11,828,498
Taxable Municipal securities		273,677		298,733
Tax-Exempt Municipal securities		4,307,948		831,379
Agency MBS		122,940,118		127,132,521
ABS and OAS		1,828,662		2,214,024
CMO		1,306,628		1,420,458
Other investments		6,232,750		6,575,805
Level 2 Total	$	148,126,167	$	150,301,418

Grand Total	$	185,755,566	$	182,342,459

	Three Months Ended			Year Ended
	March 31, 2022			December 31, 2021

Balance at beginning of year	$	897,720		$	922,146
MSRs capitalized		45,304			147,328
MSRs amortized		(42,930	)		(225,404	)
Change in valuation allowance		0			53,650
Balance at end of period	$	900,094		$	897,720

	·	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;
	·	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;
	·	interest rates change in such a way as to negatively affect the Company’s net income, asset valuations or margins;
	·	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;
	·	changes in federal or state tax laws or policy;
	·	changes in the level of nonperforming assets and charge-offs;
	·	changes in applicable accounting policies, practices and standards, including, without limitation, implementation of pending changes to the measurement of credit losses in financial statements under U.S. GAAP pursuant to the CECL model;
	·	changes in consumer and business spending, borrowing and savings habits;
	·	reductions in deposit levels, which necessitate increased borrowings to fund loans and investments;
	·	the geographic concentration of the Company’s loan portfolio and deposit base;
	·	losses due to the fraudulent or negligent conduct of third parties, including the Company’s service providers, customers and employees;

	·	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 the United States monetary and fiscal policies, including the interest rate policies of the FRB and its regulation of the money supply;
	·	adverse changes in the credit rating of U.S. government debt;
	·	the planned phase out of three month LIBOR by June 30, 2023, which could adversely affect the Company’s interest costs in future periods on its $12,887,000 in principal amount of Junior Subordinated Debentures due December 12, 2037, which currently bear interest at a variable rate, adjusted quarterly, equal to 3-month LIBOR, plus 2.85%;
	·	continuing the effects of COVID-19 and emerging variants of the virus on our Company, the communities where we have branches and loan production offices, the State of Vermont and the national and global economies and overall stability of the financial markets;
	·	the continuing effects of government and regulatory responses to the COVID-19 pandemic;
	·	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 increase usage by customers of online and other remote banking channels;
	·	the impact of inflation on the Company’s customers and on its financial results and performance; and
	·	the ongoing challenges to find qualified workers to maintain a stable workforce.

	·	the ALL;
	·	OREO;
	·	OTTI of debt securities;
	·	valuation of residential MSRs; and
	·	the carrying value of goodwill.

	(1)	Included in gross loans are non-accrual loans with average balances of $5,736,827 and $4,087,346 for the three months ended March 31, 2022 and 2021, respectively. Loans are stated before deduction of unearned discount and ALL, less loans held-for-sale and include tax-exempt loans to local municipalities with average balances of $49,022,025 and $52,232,117 for the three months ended March 31, 2022 and 2021, respectively.

	(2)	Included in other investments is the Company’s FHLBB Stock with average balances of $714,250 and $768,400, respectively, with a dividend rate of approximately 2.66% and 1.54%, respectively, for the three months ended March 31, 2022 and 2021, 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.

	Three Months Ended March 31,
	Variance			Variance
	Due to			Due to			Total
	Rate (1)			Volume (1)			Variance

Average Interest-Earning Assets

Loans	$	(474,426	)	$	(300,620	)	$	(775,046	)
Taxable investment securities		(31,076	)		422,241			391,165
Tax-exempt investment securities		13,859			0			13,859
Sweep and interest-earning accounts		4,617			(11,840	)		(7,223	)
Other investments		6,342			(501	)		5,841
Total	$	(480,684	)	$	109,280		$	(371,404	)

Average Interest-Bearing Liabilities

Interest-bearing transaction accounts	$	(16,859	)	$	30,419		$	13,560
Money market funds		(53,992	)		13,567			(40,425	)
Savings deposits		(20,872	)		7,039			(13,833	)
Time deposits		(101,945	)		(10,642	)		(112,587	)
Borrowed funds		(10	)		0			(10	)
Repurchase agreements		(8,140	)		(6,262	)		(14,402	)
Finance lease obligations		(11,781	)		18,815			7,034
Junior subordinated debentures		(443	)		0			(443	)
Total	$	(214,042	)	$	52,936		$	(161,106	)

Changes in net interest income	$	(266,642	)	$	56,344		$	(210,298	)

(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

	Three Months Ended
	March 31,				Change
	2022		2021		Income			Percent

Service fees	$	862,887	$	788,623	$	74,264			9.42	%
Income from sold loans		203,842		185,006		18,836			10.18	%
Other income from loans		271,260		183,274		87,986			48.01	%
Other income
Income from CFS Partners		225,870		306,986		(81,116	)		-26.42	%
Other miscellaneous income		122,570		108,342		14,228			13.13	%
Total non-interest income	$	1,686,429	$	1,572,231	$	114,198			7.26	%

	·	The increase in service fees during the comparison period is mostly due to an increase in interchange income of $21,686, or 5% and overdraft charges of $53,280, or 29.3%, year over year.

	·	The increase in income from sold loans is due to a higher volume of loans sold into the secondary market during the first three months of 2022 versus 2021.

	·	An increase in CRE loan volume in 2022 resulted in a significant increase in documentation fees collected at origination, accounting for the increase in other income from loans when comparing the two periods.

	·	Income from CFS Partners decreased between periods due in part to the impact of mark-to-market adjustments to CFS Partners equity portfolio during the first two months of 2022. The capital markets rebounded during March, but not enough to offset the decrease during the first two months.

	·	Included in Other miscellaneous income for the first three months of 2022 is income totaling $23,400 associated with a renegotiated contract with the Company’s check printing vendor.