Community Bancorp 10-Q for FY2021 Q1

Community Bancorp (CMTV)

10-Q 2021-05-14 For: 2021-03-31

Added on April 11, 2026

About this 10-Q

Community Bancorp filed this 10-Q on May 14, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net income: $3.03M; up 62.6% from net income of $1.86M 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)

Registrant's Telephone Number: (802) 334-7915

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	☐

FORM 10-Q
Index
		Page
PART I	FINANCIAL INFORMATION

Item 1	Financial Statements	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4	Controls and Procedures	47

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	2021			2020
	(Unaudited)

Assets
Cash and due from banks	$	15,856,794		$	10,850,787
Federal funds sold and overnight deposits		77,337,626			104,199,133
Total cash and cash equivalents		93,194,420			115,049,920
Securities available-for-sale		81,937,005			60,705,178
Restricted equity securities, at cost		1,446,550			1,446,550
Loans held-for-sale		534,200			130,400
Loans		729,489,639			709,355,330
Allowance for loan losses		(7,468,288	)		(7,208,485	)
Deferred net loan fees		(2,272,165	)		(1,195,741	)
Net loans		719,749,186			700,951,104
Bank premises and equipment, net		12,558,689			10,209,869
Accrued interest receivable		3,238,607			2,987,977
Bank owned life insurance		5,009,909			4,988,236
Goodwill		11,574,269			11,574,269
Other assets		8,279,416			10,189,781
Total assets	$	937,522,251		$	918,233,284

Liabilities and Shareholders' Equity
Liabilities
Deposits:
Demand, non-interest bearing	$	200,750,766		$	185,954,976
Interest-bearing transaction accounts		235,970,715			242,902,715
Money market funds		123,553,734			115,546,064
Savings		136,022,332			124,555,124
Time deposits, $250,000 and over		16,452,919			16,488,963
Other time deposits		93,239,855			96,842,998
Total deposits		805,990,321			782,290,840
Borrowed funds		2,300,000			2,800,000
Repurchase agreements		32,099,458			38,727,312
Junior subordinated debentures		12,887,000			12,887,000
Accrued interest and other liabilities		6,159,927			4,239,419
Total liabilities		859,436,706			840,944,571

Shareholders' Equity
Preferred stock, 1,000,000 shares authorized, 15 shares issued and outstanding
at 03/31/21 and 12/31/20 ($100,000 liquidation value, per share)		1,500,000			1,500,000
Common stock - $2.50 par value; 15,000,000 shares authorized, 5,544,389
shares issued at 03/31/21 and 5,527,380 shares issued at 12/31/20		13,860,973			13,818,450
Additional paid-in capital		34,531,902			34,309,646
Retained earnings		31,212,004			29,368,046
Accumulated other comprehensive (loss) income		(396,557	)		915,348
Less: treasury stock, at cost; 210,101 shares at 03/31/21 and 12/31/20		(2,622,777	)		(2,622,777	)
Total shareholders' equity		78,085,545			77,288,713
Total liabilities and shareholders' equity	$	937,522,251		$	918,233,284

Book value per common share outstanding	$	14.36		$	14.25

Community Bancorp. and Subsidiary	Three Months Ended March 31,
Consolidated Statements of Income	2021		2020
(Unaudited)

Interest income
Interest and fees on loans	$	8,253,296	$	7,365,961
Interest on taxable debt securities		265,112		284,756
Dividends		10,619		24,425
Interest on federal funds sold and overnight deposits		87,883		97,010
Total interest income		8,616,910		7,772,152

Interest expense
Interest on deposits		705,244		1,249,537
Interest on borrowed funds		14,941		12,795
Interest on repurchase agreements		35,442		59,535
Interest on junior subordinated debentures		98,795		154,526
Total interest expense		854,422		1,476,393

Net interest income		7,762,488		6,295,759
Provision for loan losses		267,497		376,503
Net interest income after provision for loan losses		7,494,991		5,919,256

Non-interest income
Service fees		788,623		806,211
Income from sold loans		185,006		140,463
Other income from loans		183,274		220,467
Other income		415,328		186,566
Total non-interest income		1,572,231		1,353,707

Non-interest expense
Salaries and wages		1,975,003		1,886,316
Employee benefits		831,210		798,441
Occupancy expenses, net		744,720		683,235
Other expenses		1,814,118		1,725,227
Total non-interest expense		5,365,051		5,093,219

Income before income taxes		3,702,171		2,179,744
Income tax expense		676,470		318,505
Net income	$	3,025,701	$	1,861,239

Earnings per common share	$	0.57	$	0.35
Weighted average number of common shares
used in computing earnings per share		5,322,404		5,245,216
Dividends declared per common share	$	0.22	$	0.19

Community Bancorp. and Subsidiary
Consolidated Statements of Comprehensive Income
(Unaudited)	Three Months Ended March 31,
	2021			2020

Net income	$	3,025,701		$	1,861,239

Other comprehensive income, net of tax: Unrealized holding (loss) gain on securities AFS arising during the period		(1,660,640	)		742,589
Tax effect		348,735			(155,943	)
Other comprehensive (loss) income, net of tax		(1,311,905	)		586,646
Total comprehensive income	$	1,713,796		$	2,447,885

	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

	Three Months Ended March 31, 2020
					Additional										Total
	Common		Preferred		paid-in		Retained					Treasury			shareholders'
	Stock		Stock		capital		earnings			AOCI*		stock			equity

January 1, 2020	$	13,624,643	$	1,500,000	$	33,464,381	$	22,667,949		$	260,483	$	(2,622,777)		$	68,894,679

Issuance of common stock		40,465				213,812										254,277
Cash dividends declared
Common stock								(995,536	)							(995,536	)
Preferred stock								(17,813	)							(17,813	)
Comprehensive income
Net income								1,861,239								1,861,239
Other comprehensive income											586,646					586,646

March 31, 2020	$	13,665,108	$	1,500,000	$	33,678,193	$	23,515,839		$	847,129	$	(2,622,777	)	$	70,583,492

Community Bancorp. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)	Three Months Ended March 31,
	2021			2020

Cash Flows from Operating Activities:
Net income	$	3,025,701		$	1,861,239
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, bank premises and equipment		259,449			232,759
Provision for loan losses		267,497			376,503
Deferred income tax		16,608			(61,497	)
Gain on sale of loans		(114,211	)		(51,183	)
Gain on sale of OREO		0			(7,799	)
Loss (income) from CFS Partners		1,693,014			(91,909	)
Amortization of bond premium, net		95,456			13,315
Proceeds from sales of loans held for sale		2,145,611			3,736,533
Originations of loans held for sale		(2,435,200	)		(4,352,350	)
Increase in taxes payable		569,100			295,831
Increase in interest receivable		(250,630	)		(553,999	)
Decrease in mortgage servicing rights		38,280			24,285
Decrease in right-of-use assets		49,031			60,825
Decrease in operating lease liabilities		(49,198	)		(60,219	)
Increase in other assets		(148,665	)		(143,340	)
Increase in cash surrender value of BOLI		(21,673	)		(21,078	)
Amortization of limited partnerships		90,762			84,171
Change in net deferred loan fees and costs		1,076,424			6,777
Decrease in interest payable		(12,953	)		(6,398	)
Decrease in accrued expenses		(420,431	)		(411,204	)
Increase (decrease) in other liabilities		3,175			(23,573	)
Net cash provided by operating activities		5,877,147			907,689

Cash Flows from Investing Activities:
Investments - AFS
Maturities, calls, pay downs and sales		4,383,743			5,817,816
Purchases		(27,371,666	)		(992,000	)
Proceeds from redemption of restricted equity securities		0			361,600
Purchases of restricted equity securities		0			(344,700	)
Decrease in limited partnership contributions payable		(150,000	)		(288,000	)
Increase in loans, net		(20,167,317	)		(27,559,512	)
Capital expenditures net of proceeds from sales of bank premises and equipment		(2,657,300	)		(123,900	)
Proceeds from sales of OREO		0			193,299
Recoveries of loans charged off		25,314			17,530
Net cash used in investing activities		(45,937,226	)		(22,917,867	)

	2021			2020
Cash Flows from Financing Activities:
Net increase (decrease) in demand and interest-bearing transaction accounts		7,863,790			(1,133,474	)
Net increase in money market and savings accounts		19,474,878			9,922,848
Net decrease in time deposits		(3,639,187	)		(5,666,046	)
Net decrease in repurchase agreements		(6,627,854	)		(10,279,113	)
Net increase in short-term borrowings		0			20,000,000
Repayments on long-term borrowings		(500,000	)		0
Increase (decrease) in finance lease obligations		2,388,819			(14,987	)
Dividends paid on preferred stock		(12,188	)		(17,813	)
Dividends paid on common stock		(743,679	)		(732,972	)
Net cash provided by financing activities		18,204,579			12,078,443

Net decrease in cash and cash equivalents		(21,855,500	)		(9,931,735	)
Cash and cash equivalents : Beginning		115,049,920			48,562,212
Cash and cash equivalents: Ending	$	93,194,420		$	38,630,477

Supplemental Schedule of Cash Paid During the Period:
Interest	$	867,375		$	1,482,791

Supplemental Schedule of Noncash Investing and Financing Activities:
Change in unrealized (loss) gain on securities AFS	$	(1,660,640	)	$	742,589

Common Shares Dividends Paid:
Dividends declared	$	1,169,555		$	995,536
Increase in dividends payable attributable to dividends declared		(161,097	)		(8,287	)
Dividends reinvested		(264,779	)		(254,277	)
	$	743,679		$	732,972

ABS:	Asset backed security	FASB:	Financial Accounting Standards Board
ACBB:	Atlantic Community Bankers Bank	FDIC:	Federal Deposit Insurance Corporation
AFS:	Available-for-sale	FHLBB:	Federal Home Loan Bank of Boston
Agency MBS:	MBS issued by a US government agency	FHLMC:	Federal Home Loan Mortgage Corporation
	or GSE	FOMC:	Federal Open Market Committee
ALCO:	Asset Liability Committee	FRB:	Federal Reserve Board
ALL:	Allowance for loan losses	FRBB:	Federal Reserve Bank of Boston
AOCI:	Accumulated other comprehensive income	GAAP:	Generally Accepted Accounting Principles
ASC:	Accounting Standards Codification		in the United States
ASU:	Accounting Standards Update	GSE:	Government sponsored enterprise
ATS:	Automatic transfer service	HTM:	Held-to-maturity
Bancorp:	Community Bancorp.	ICS:	Insured Cash Sweeps of the Promontory
Bank:	Community National Bank		Interfinancial Network
BHG	Bankers Healthcare Group	IRS:	Internal Revenue Service
BIC:	Borrower-in-Custody	JNE:	Jobs for New England
Board:	Board of Directors	Jr:	Junior
BOLI:	Bank owned life insurance	MBS:	Mortgage-backed security
bp or bps:	Basis point(s)	MPF:	Mortgage Partnership Finance
BSA	Bank Secrecy Act	MSRs:	Mortgage servicing rights
CARES ACT:	Coronavirus Aid Relief and Economic	NII:	Net interest income
	Security Act	OAS:	Other amortizing security
CBLR:	Community Bank Leverage Ratio	OCI:	Other comprehensive income (loss)
CDARS:	Certificate of Deposit Accounts Registry	OREO:	Other real estate owned
	Service of the Promontory Interfinancial	OTTI:	Other-than-temporary impairment
	Network	PMI:	Private mortgage insurance
CDs:	Certificates of deposit	PPP:	Paycheck Protection Program
CDI:	Core deposit intangible	PPPLF:	PPP Liquidity Facility of the FRBB
CECL:	Current Expected Credit Loss	RD:	USDA Rural Development
CFSG:	Community Financial Services Group, LLC	SBA:	U.S. Small Business Administration
CFS Partners:	Community Financial Services Partners,	SEC:	U.S. Securities and Exchange Commission
	LLC	SERP:	Supplemental Employee Retirement Plan
CMO	Collateralize Mortgage Obligation	TDR:	Troubled-debt restructuring
Company:	Community Bancorp. and Subsidiary	USDA:	U.S. Department of Agriculture
COVID-19:	Coronavirus Disease 2019	VA:	U.S. Veterans Administration
CRE:	Commercial Real Estate	2017 Tax Act:	Tax Cut and Jobs Act of 2017
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, 2021
U.S. GSE debt securities	$	11,005,847	$	124,440	$	151,334	$	10,978,953
Agency MBS		60,959,754		250,840		1,062,593		60,148,001
ABS and OAS		2,306,609		97,749		0		2,404,358
CMO		987,766		0		29,445		958,321
Other investments		7,179,000		268,372		0		7,447,372
Total	$	82,438,976	$	741,401	$	1,243,372	$	81,937,005

December 31, 2020
U.S. GSE debt securities	$	8,007,142	$	165,934	$	3,245	$	8,169,831
Agency MBS		40,861,370		547,930		30,951		41,378,349
ABS and OAS		2,508,997		160,999		0		2,669,996
Other investments		8,169,000		318,002		0		8,487,002
Total	$	59,546,509	$	1,192,865	$	34,196	$	60,705,178

	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Number of		Fair		Unrealized
	Value		Loss		Value		Loss		Securities		Value		Loss
March 31, 2021
U.S. GSE debt securities	$	4,850,521	$	151,334	$	0	$	0		5	$	4,850,521	$	151,334
Agency MBS		49,811,051		1,056,609		302,533		5,984		34		50,113,584		1,062,593
CMO		958,321		29,445		0		0		6		958,321		29,445
Total	$	55,619,893	$	1,237,388	$	302,533	$	5,984		45	$	55,922,426	$	1,243,372

December 31, 2020
U.S. GSE debt securities	$	1,999,234	$	3,245	$	0	$	0		2	$	1,999,234	$	3,245
Agency MBS		2,076,167		19,845		520,546		11,106		6		2,596,713		30,951
Total	$	4,075,401	$	23,090	$	520,546	$	11,106		8	$	4,595,947	$	34,196

			90 Days		Total						Non-Accrual		90 Days or More and
March 31, 2021	30-89 Days		or More		Past Due		Current		Total Loans		Loans		Accruing

Commercial & industrial	$	586,017	$	0	$	586,017	$	187,857,606	$	188,443,623	$	437,904	$	0
Commercial real estate		387,005		458,299		845,304		277,637,787		278,483,091		1,597,427		119,394
Municipal		0		0		0		52,207,213		52,207,213		0		0
Residential real estate
- 1st lien		2,126,285		955,890		3,082,175		166,728,043		169,810,218		1,448,109		413,575
- Jr lien		66,595		111,747		178,342		36,700,231		36,878,573		188,787		76,649
Consumer		5,627		0		5,627		3,661,294		3,666,921		0		0
Totals	$	3,171,529	$	1,525,936	$	4,697,465	$	724,792,174	$	729,489,639	$	3,672,227	$	609,618

	Amortized		Fair
	Cost		Value
March 31, 2021
Due in one year or less	$	1,485,000	$	1,501,316
Due from one to five years		5,694,000		5,946,056
Due from five to ten years		13,296,229		13,318,515
Due after ten years		1,003,993		1,023,117
Agency MBS		60,959,754		60,148,001
Total	$	82,438,976	$	81,937,005

December 31, 2020
Due in one year or less	$	2,227,000	$	2,247,603
Due from one to five years		5,942,000		6,239,399
Due from five to ten years		9,511,476		9,801,921
Due after ten years		1,004,663		1,037,906
Agency MBS		40,861,370		41,378,349
Total	$	59,546,509	$	60,705,178

	Number of loans		Balance

March 31, 2021		6	$	310,137
December 31, 2020		6		312,807

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

ALL beginning balance	$	842,547		$	3,854,153		$	82,211	$	1,735,304		$	234,896		$	60,461		$	398,913	$	7,208,485
Charge-offs		(18,847	)		0			0		0			0			(14,161	)		0		(33,008	)
Recoveries		4,761			7,000			0		1,567			528			11,458			0		25,314
Provision (credit)		60,170			(37,468	)		1,320		(69,277	)		(32,112	)		(18,136	)		363,000		267,497
ALL ending balance	$	888,631		$	3,823,685		$	83,531	$	1,667,594		$	203,312		$	39,622		$	761,913	$	7,468,288

ALL evaluated for impairment
Individually	$	0		$	0		$	0	$	119,306		$	255		$	0		$	0	$	119,561
Collectively		888,631			3,823,685			83,531		1,548,288			203,058			39,621			761,913		7,348,727
Total	$	888,631		$	3,823,685		$	83,531	$	1,667,594		$	203,313		$	39,621		$	761,913	$	7,468,288

Loans evaluated for impairment
Individually	$	420,974		$	1,645,678		$	0	$	4,394,274		$	143,333		$	0				$	6,604,259
Collectively		188,022,649			276,837,413			52,207,213		165,415,944			36,735,240			3,666,921					722,885,380
Total	$	188,443,623		$	278,483,091		$	52,207,213	$	169,810,218		$	36,878,573		$	3,666,921				$	729,489,639

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

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

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

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

(1)	Recorded investment in impaired loans as of March 31, 2021 includes accrued interest receivable and deferred net loan costs of $34,764.

(2)	For the three months ended March 31, 2021.

	As of December 31, 2020
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment(1)		Balance		Allowance		Investment(1)(2)		Recognized(2)

Related allowance recorded
Residential real estate
1st lien	$	900,581	$	950,063	$	108,474	$	889,262	$	72,713
Jr lien		4,777		4,775		307		5,416		541
Total with related allowance		905,358		954,838		108,781		894,678		73,254

No related allowance recorded
Commercial & industrial		414,266		471,405				397,136		6,396
Commercial real estate		1,944,013		2,394,284				1,746,430		14,139
Residential real estate
1st lien		3,788,965		4,607,848				3,878,829		230,838
Jr lien		130,279		169,720				163,750		4,524
Total with no related allowance		6,277,523		7,643,257				6,186,145		255,897

Total impaired loans	$	7,182,881	$	8,598,095	$	108,781	$	7,080,823	$	329,151

(1)	Recorded investment in impaired loans as of December 31, 2020 includes accrued interest receivable and deferred net loan costs of $32,789.

(2)	For the year ended December 31, 2020.

	As of March 31, 2020
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment(1)		Balance		Allowance		Investment (1)(2)		Recognized(2)
Related allowance recorded
Residential real estate
1st lien	$	968,459	$	991,113	$	119,355	$	923,449	$	20,431
Jr lien		5,686		5,683		477		5,904		144
Total with related allowance		974,145		996,796		119,832		929,353		20,575

No related allowance recorded
Commercial & industrial		392,187		424,442				406,560		0
Commercial real estate		1,651,247		2,004,694				1,675,509		3,542
Residential real estate
1st lien		3,834,253		4,609,223				3,724,607		51,612
Jr lien		308,838		350,313				229,405		0
Total with no related allowance		6,186,525		7,388,672				6,036,081		55,154

Total impaired loans	$	7,160,670	$	8,385,468	$	119,832	$	6,965,434	$	75,729

	•	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.

	Number of		Recorded
	Contracts		Investment

Commercial & industrial		1	$	41,001
Residential real estate - 1st lien		1		162,821
		2	$	203,822

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,
Level 2	2021		2020
Assets: (market approach)
U.S. GSE debt securities	$	10,978,953	$	8,169,831
Agency MBS		60,148,001		41,378,349
ABS and OAS		2,404,358		2,669,996
CMO		958,321		0
Other investments		7,447,372		8,487,002
Total	$	81,937,005	$	60,705,178

	Three Months Ended			Year Ended
	March 31, 2021			December 31, 2020

Balance at beginning of year	$	922,146		$	939,577
MSRs capitalized		16,210			292,654
MSRs amortized		(54,490	)		(256,435	)
Change in valuation allowance		0			(53,650	)
Balance at end of period	$	883,866		$	922,146

	•	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 US 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 the LIBOR by the end of 2021, 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%;
	•	the effect of COVID-19 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;
	•	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;
	•	rising unemployment rates in our markets due to the COVID-19 related business shutdowns, delays and setbacks in scheduled re-openings and other economic disruptions, which reduces our borrowers’ ability to repay their loans and reduces customer demand for our products and services; and
	•	the short-term and long-term effects of government interventions in the U.S. economy and financial system in response to the COVID-19 pandemic, including the effects of recent legislative, tax, accounting and regulatory actions and reforms, such as passage of the CARES Act, the actions of the Federal Reserve affecting monetary policy, and the temporary moratorium on foreclosures imposed by the State of Vermont in response to the COVID-19 emergency.

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

(1)	Applicable income tax expense assumes a 21% tax rate for both periods.
(2)	Computed based on the weighted average number of common shares outstanding during the periods presented.

(1)	Included in gross loans are non-accrual loans with an average balance of $4,087,346 and $4,734,924 for the three months ended March 31, 2021 and 2020, respectively. Loans are stated before deduction of unearned discount and ALL, less loans held-for-sale and includes tax-exempt loans to local municipalities with average balances of $52,232,117 and $58,579,914 for the three months ended March 31, 2021 and 2020, respectively.

(2)	Included in other investments is the Company’s FHLBB Stock with average balances of $768,400 and $826,368, respectively, and a dividend rate of approximately 1.59% and 5.24%, respectively, for the three months ended March 31, 2021 and 2020, 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	$	(435,865	)	$	1,286,855		$	850,990
Taxable investment securities		(205,337	)		185,693			(19,644	)
Sweep and interest-earning accounts		(303,780	)		294,653			(9,127	)
Other investments		(13,470	)		(336	)		(13,806	)
Total	$	(958,452	)	$	1,766,865		$	808,413

Average Interest-Bearing Liabilities
Interest-bearing transaction accounts	$	(342,445	)	$	106,474		$	(235,971	)
Money market accounts		(276,939	)		83,761			(193,178	)
Savings deposits		(17,926	)		12,185			(5,741	)
Time deposits		(109,232	)		(171	)		(109,403	)
Borrowed funds		(11,005	)		0			(11,005	)
Repurchase agreements		(49,238	)		25,145			(24,093	)
Finance lease obligations		(18,072	)		31,223			13,151
Junior subordinated debentures		(55,731	)		0			(55,731	)
Total	$	(880,588	)	$	258,617		$	(621,971	)

Changes in net interest income	$	(77,864	)	$	1,508,248		$	1,430,384

	Three Months Ended
	March 31,				Change
	2021		2020		Income			Percent

Service fees	$	788,623	$	806,211	$	(17,588	)		-2.18	%
Income from sold loans		185,006		140,463		44,543			31.71	%
Other income from loans		183,274		220,467		(37,193	)		-16.87	%
Other income
Income from CFS Partners		306,986		91,908		215,078			234.01	%
Exchange income		16,800		0		16,800			100.00	%
Other miscellaneous income		91,542		94,658		(3,116	)		-3.29	%
Total non-interest income	$	1,572,231	$	1,353,707	$	218,524			16.14	%

	•	The decrease in service fees during the comparison period is mostly due to the net effect of a decrease in overdraft fees of $101,828, or 35.9%, offset by an increase in interchange fees of $86,092, or 17.7%. The decrease in overdraft fees is likely attributable to the increases in consumer and commercial deposit account balances as a result of the federal government’s COVID-19 stimulus response package combined with a shift of consumer use of debit card payments rather than the check system.

	•	The increase in income from sold loans is due to better pricing for loans sold into the secondary market. During the first quarter of 2020, the Company experienced an increase of pair-off fees as rates declined rapidly and the ability to fulfill existing secondary market commitment contracts was more of a challenge.

	•	A decrease in CRE and residential loan volume resulted in decreases in documentation fees collected at origination accounting for the decrease in other income from loans.

	•	Income from CFS Partners increased significantly between periods due in part to the impact of a more favorable stock market on the fee income of its trust and asset management subsidiary, as well as an increase in managed assets. Also, CFS Partners has a small portion of its equity capital invested in the stock market. It was necessary to mark-to-market the portfolio to reflect the stock market decline during the first quarter of 2020 at the outset of the COVID-19 pandemic, resulting in a $106,000 mark down.

	•	The shutdown of the US/Canadian border to all non-essential travel created less demand for an exchange of Canadian cash in the first half of 2020, accounting for the lack of exchange income. After the shutdown, as the border opened to commerce related travel, the exchange of Canadian cash resumed but has yet to return to normal.