Community Bancorp 10-Q for FY2025 Q2
Community Bancorp (CMTV)
About this 10-Q
Community Bancorp filed this 10-Q on August 14, 2025, covering the quarter ended June 30, 2025 (FY2025 Q2).
Headline figures
Quarter ended June 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net income
- $4.06M
- up 48.8% from net income of $2.73M a year earlier
- Diluted EPS
- $0.72
- up 46.9% from $0.49 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
OR
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
(Exact name of Registrant as Specified in its Charter) |
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(State of Incorporation) |
| (IRS Employer Identification Number) | |
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(Address of Principal Executive Offices) |
| (zip code) | |
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Registrant's Telephone Number: ( | |||
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) |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| 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). YES
At August 04, 2025, there were
FORM 10-Q
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Table of Contents |
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
The following are the unaudited consolidated financial statements for the Company.
Community Bancorp. and Subsidiary |
| June 30, |
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| December 31, |
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Consolidated Balance Sheets |
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Assets |
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Cash and due from banks |
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Federal funds sold and overnight deposits |
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Total cash and cash equivalents |
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Securities available-for-sale (amortized cost $ |
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Restricted equity securities, at cost |
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Loans held-for-sale |
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Loans |
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Allowance for credit losses |
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Deferred net loan costs |
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Net loans |
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Bank premises and equipment, net |
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Accrued interest receivable |
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Bank owned life insurance |
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Goodwill |
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Other assets |
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Total assets |
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Liabilities and Shareholders' Equity |
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Liabilities |
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Deposits: |
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Demand, non-interest bearing |
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Interest-bearing transaction accounts |
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Money market funds |
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Savings |
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Time deposits, $ |
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Other time deposits |
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Total deposits |
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Repurchase agreements |
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Borrowed funds |
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Junior subordinated debentures |
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Accrued interest and other liabilities |
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Total liabilities |
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Shareholders' Equity |
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Preferred stock, ($ |
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Common stock - $ 5,809,035 shares issued at 12/31/24 |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Less: treasury stock, at cost; |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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Book value per common share outstanding |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
| 3 |
| Table of Contents |
Community Bancorp. and Subsidiary |
| Three Months Ended June 30, |
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Consolidated Statements of Income |
| 2025 |
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| 2024 |
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(Unaudited) |
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Interest income |
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Interest and fees on loans |
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Interest on taxable debt securities |
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Interest on tax-exempt debt securities |
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Dividends |
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Interest on federal funds sold and overnight deposits |
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Total interest income |
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Interest expense |
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Interest on deposits |
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Interest on borrowed funds |
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Interest on repurchase agreements |
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Interest on junior subordinated debentures |
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Total interest expense |
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Net interest income |
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Credit loss expense |
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Net interest income after credit loss expense |
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Non-interest income |
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Service fees |
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Income from sold loans |
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Other income from loans |
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Other income |
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Total non-interest income |
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Non-interest expense |
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Salaries and wages |
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Employee benefits |
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Occupancy expenses, net |
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Other expenses |
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Total non-interest expense |
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Income before income taxes |
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Income tax expense |
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Net income |
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Earnings per common share |
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Weighted average number of common shares used in computing earnings per share |
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Dividends declared per common share |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
| 4 |
| Table of Contents |
Community Bancorp. and Subsidiary |
| Six Months Ended June 30, |
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Consolidated Statements of Income |
| 2025 |
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| 2024 |
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(Unaudited) |
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Interest income |
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Interest and fees on loans |
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Interest on taxable debt securities |
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Interest on tax-exempt debt securities |
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Dividends |
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Interest on federal funds sold and overnight deposits |
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Total interest income |
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Interest expense |
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Interest on deposits |
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Interest on borrowed funds |
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Interest on repurchase agreements |
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Interest on junior subordinated debentures |
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Total interest expense |
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Net interest income |
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Credit loss expense |
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Net interest income after credit loss expense |
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Non-interest income |
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Service fees |
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Income from sold loans |
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Other income from loans |
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Other income |
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Total non-interest income |
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Non-interest expense |
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Salaries and wages |
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Employee benefits |
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Occupancy expenses, net |
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Other expenses |
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Total non-interest expense |
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Income before income taxes |
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Income tax expense |
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Net income |
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Earnings per common share |
| $ |
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Weighted average number of common shares used in computing earnings per share |
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Dividends declared per common share |
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| $ |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
| 5 |
| Table of Contents |
Community Bancorp. and Subsidiary |
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Consolidated Statements of Comprehensive Income |
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(Unaudited) |
| Three Months Ended June 30, |
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| 2025 |
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| 2024 |
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Net income |
| $ |
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Other comprehensive income, net of tax: |
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Unrealized holding gain on securities AFS arising during the period |
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Tax effect |
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Other comprehensive income, net of tax |
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Total comprehensive income |
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| Six Months Ended June 30, |
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| 2025 |
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| 2024 |
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Net income |
| $ |
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Other comprehensive income, net of tax: |
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Unrealized holding gain (loss) on securities AFS arising during the period |
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Tax effect |
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Other comprehensive income (loss), net of tax |
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Total comprehensive income |
| $ |
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The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
| 6 |
| Table of Contents |
Community Bancorp. and Subsidiary |
Consolidated Statements of Changes in Shareholders' Equity |
(Unaudited) |
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| Six Months Ended June 30, 2025 |
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| Additional |
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| Total |
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| Treasury |
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| Stock |
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| Stock |
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| earnings |
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| AOCI* |
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| equity |
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January 1, 2025 |
| $ |
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Issuance of common stock |
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Cash dividends declared |
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Common stock |
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Preferred stock |
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Shares purchased through stock buyback plan |
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Comprehensive income |
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Net income |
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Other comprehensive income |
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March 31, 2025 |
| $ |
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| $ |
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Issuance of common stock |
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Cash dividends declared |
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Common stock |
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Preferred stock |
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Shares purchased through stock buyback plan |
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Comprehensive income |
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Net income |
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Other comprehensive income |
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June 30, 2025 |
| $ |
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| $ |
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| $ |
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*Accumulated other comprehensive loss
| 7 |
| Table of Contents |
Community Bancorp. and Subsidiary | ||||||||||||||||||||||||||||
Consolidated Statements of Changes in Shareholders' Equity | ||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||
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| Six Months Ended June 30, 2024 |
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| Additional |
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| Total |
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| Common |
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| Retained |
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| Treasury |
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| shareholders' |
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| Stock |
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| Stock |
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| capital |
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| earnings |
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| AOCI* |
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| stock |
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| equity |
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January 1, 2024 |
| $ |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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Issuance of common stock |
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| |||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ( | ) |
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ( | ) |
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ( | ) |
March 31, 2024 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Cash dividends declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ( | ) |
Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
|
| ( | ) |
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
June 30, 2024 |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |||||
*Accumulated other comprehensive loss
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
| 8 |
| Table of Contents |
Community Bancorp. and Subsidiary |
|
|
|
|
|
| ||
Consolidated Statements of Cash Flows |
|
|
|
|
|
| ||
(Unaudited) |
| Six Months Ended June 30, |
| |||||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Operating Activities: |
|
|
|
|
|
| ||
Net income |
| $ |
|
| $ |
| ||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization, bank premises and equipment |
|
|
|
|
|
| ||
Credit loss expense |
|
|
|
|
|
| ||
Deferred income tax (benefit) provision |
|
| ( | ) |
|
|
| |
Gain on sale of loans |
|
| ( | ) |
|
| ( | ) |
Loss (gain) on sale of bank premises and equipment |
|
|
|
|
| ( | ) | |
Income from CFS Partners |
|
| ( | ) |
|
| ( | ) |
Amortization of bond premium, net |
|
|
|
|
|
| ||
Proceeds from sales of loans held for sale |
|
|
|
|
|
| ||
Originations of loans held for sale |
|
| ( | ) |
|
| ( | ) |
Decrease in taxes payable |
|
| ( | ) |
|
| ( | ) |
Decrease (increase) in interest receivable |
|
|
|
|
| ( | ) | |
Decrease in mortgage servicing rights |
|
|
|
|
|
| ||
(Increase) decrease in right-of-use assets |
|
| ( | ) |
|
|
| |
Increase in operating lease liabilities |
|
|
|
|
|
| ||
Increase in other assets |
|
| ( | ) |
|
| ( | ) |
Increase in cash surrender value of BOLI |
|
| ( | ) |
|
| ( | ) |
Amortization of limited partnerships |
|
|
|
|
|
| ||
Change in net deferred loan fees and costs |
|
| ( | ) |
|
| ( | ) |
(Decrease) increase in interest payable |
|
| ( | ) |
|
|
| |
Decrease in accrued expenses |
|
| ( | ) |
|
| ( | ) |
(Decrease) increase in other liabilities |
|
| ( | ) |
|
|
| |
Net cash provided by operating activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Investments - AFS |
|
|
|
|
|
|
|
|
Maturities, calls, pay downs and sales |
|
|
|
|
|
| ||
Purchases |
|
| ( | ) |
|
|
| |
Proceeds from redemption of restricted equity securities |
|
|
|
|
|
| ||
Purchases of restricted equity securities |
|
| ( | ) |
|
| ( | ) |
Increase in loans, net |
|
| ( | ) |
|
| ( | ) |
Capital expenditures net of proceeds from sales of bank premises and equipment |
|
| ( | ) |
|
| ( | ) |
Recoveries of loans charged off |
|
|
|
|
|
| ||
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
| 9 |
| Table of Contents |
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Cash Flows from Financing Activities: |
|
|
|
|
|
| ||
Net decrease in demand and interest-bearing transaction accounts |
|
| ( | ) |
|
| ( | ) |
Net decrease in money market and savings accounts |
|
| ( | ) |
|
| ( | ) |
Net increase in time deposits |
|
|
|
|
|
| ||
Net decrease in repurchase agreements |
|
| ( | ) |
|
| ( | ) |
Net (decrease) increase in short-term borrowings |
|
| ( | ) |
|
|
| |
Proceeds from long-term borrowings |
|
|
|
|
|
| ||
Decrease in finance lease obligations |
|
| ( | ) |
|
| ( | ) |
Shares purchased through stock buyback program |
|
| ( | ) |
|
|
| |
Dividends paid on preferred stock |
|
| ( | ) |
|
| ( | ) |
Dividends paid on common stock |
|
| ( | ) |
|
| ( | ) |
Net cash used in financing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
| ( | ) |
|
| ( | ) |
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
Beginning |
|
|
|
|
|
| ||
Ending |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Cash Paid During the Period: |
|
|
|
|
|
|
|
|
Interest |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Income taxes, net of refunds |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental Schedule of Noncash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Change in unrealized gain (loss) on securities AFS |
| $ |
|
| $ | ( | ) | |
|
|
|
|
|
|
|
|
|
Loans transferred to OREO |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Additions to operating lease liabilities |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Investment in limited partnerships, not yet paid |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Common Shares Dividends Paid: |
|
|
|
|
|
|
|
|
Dividends declared |
| $ |
|
| $ |
| ||
Increase in dividends payable attributable to dividends declared |
|
| ( | ) |
|
| ( | ) |
Dividends reinvested |
|
| ( | ) |
|
| ( | ) |
Total dividends paid |
| $ |
|
| $ |
| ||
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 and Certain Definitions
Basis of Presentation and Consolidation. The interim consolidated financial statements of Community Bancorp. and Subsidiary are unaudited. All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments necessary for the fair presentation of the consolidated financial condition and results of operations of the Company and its subsidiary, Community National Bank (the Bank), contained herein have been made. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2024, contained in the Company's Annual Report on Form 10-K. The results of operations for the interim period are not necessarily indicative of the results of operations to be expected for any other interim period or for the full annual period ending December 31, 2025.
The Company is considered a “smaller reporting company” and a “non-accelerated filer” under the disclosure rules of the SEC. Accordingly, the Company has elected to provide smaller reporting company scaled disclosures where management deems it appropriate, and to provide its audited consolidated statements of income, comprehensive income, cash flows and changes in shareholders’ equity for a two year, rather than a three year, period is considered a “smaller reporting company” under the disclosure rules of the SEC, as amended in 2018.
In addition to the definitions provided elsewhere in this quarterly report, the definitions, acronyms and abbreviations identified below are used throughout this report, including in Part I. “Financial Information” and Part II. “Other Information” and are intended to aid the reader and provide a reference page when reviewing this report.
ABS: | Asset backed security | FASB: | Financial Accounting Standards Board |
ACL: | Allowance for Credit Losses | 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 | |
ALCO: | Asset Liability Committee | FHLMC: | Federal Home Loan Mortgage Corporation |
AOCI: | Accumulated other comprehensive income | FOMC: | Federal Open Market Committee |
ASC: | Accounting Standards Codification | FRB: | Federal Reserve Board |
ASU: | Accounting Standards Update | FRBB: | Federal Reserve Bank of Boston |
Bancorp: | Community Bancorp. | GAAP: | Generally Accepted Accounting Principles |
Bank: | Community National Bank | in the United States | |
BHG: | Bankers Healthcare Group | GSE: | Government sponsored enterprise |
BIC: | Borrower-in-Custody | HTM: | Held-to-maturity |
Board: | Board of Directors | ICS: | Insured Cash Sweeps of the IntraFi Network |
BOLI: | Bank owned life insurance | IRS: | Internal Revenue Service |
bp or bps: | Basis point(s) | JNE: | Jobs for New England |
BTFP: | Bank Term Funding Program | Jr: | Junior |
CDARS: | Certificate of Deposit Accounts Registry | MBS: | Mortgage-backed security |
Service of the IntraFi Network | MSRs: | Mortgage servicing rights | |
CDs: | Certificates of deposit | NII: | Net interest income |
CECL: | Current Expected Credit Loss | OAS: | Other amortizing security |
CFSG: | Community Financial Services Group, LLC | OBS: | Off-balance sheet |
CFS Partners: | Community Financial Services Partners, | OCI: | Other comprehensive income (loss) |
LLC | OREO: | Other real estate owned | |
CME: | CME Group Benchmark Administration Ltd. | OTTI: | Other-than-temporary impairment |
CMO: | Collateralized Mortgage Obligations | PMI: | Private mortgage insurance |
Company: | Community Bancorp. and Subsidiary | PPP: | Paycheck Protection Program |
CRE: | Commercial Real Estate | RD: | USDA Rural Development |
DCF: | Discounted cash flow | SBA: | U.S. Small Business Administration |
DDA or DDAs: | Demand Deposit Account(s) | SEC: | U.S. Securities and Exchange Commission |
DTC: | Depository Trust Company | SOFR: | Secured Overnight Financing Rate |
DRIP: | Dividend Reinvestment Plan | USDA: | U.S. Department of Agriculture |
Exchange Act: | Securities Exchange Act of 1934 | VA: | U.S. Veterans Administration |
| 11 |
| Table of Contents |
Note 2. Recent Accounting Developments
In December 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires disclosure in the notes to financial statements of specified information about certain costs and expenses. Public business entities must disclose the amount of employee compensation, depreciation, and intangible asset amortization. A qualitative description of the amounts remaining in relevant expense captions must be disclosed if not disaggregated quantitatively. The ASU is effective for annual periods beginning after December 15, 2026. Management is reviewing the ASU but does not expect that it will have a material effect on the Company’s consolidated financial statements.
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 June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Net income, as reported |
| $ |
|
| $ |
| ||
Less: dividends to preferred shareholders |
|
|
|
|
|
| ||
Net income available to common shareholders |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Weighted average number of common shares used in calculating earnings per share |
|
|
|
|
|
| ||
Earnings per common share |
| $ |
|
| $ |
| ||
Six Months Ended June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Net income, as reported |
| $ |
|
| $ |
| ||
Less: dividends to preferred shareholders |
|
|
|
|
|
| ||
Net income available to common shareholders |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Weighted average number of common shares used in calculating earnings per share |
|
|
|
|
|
| ||
Earnings per common share |
| $ |
|
| $ |
| ||
Note 4. Investment Securities
Debt securities AFS as of the balance sheet dates consisted of the following:
|
|
|
|
| Gross |
|
| Gross |
|
|
|
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. GSE debt securities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
U.S. Government securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Taxable Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Tax-exempt Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Agency MBS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
ABS and OAS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
CMO |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other investments |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| 12 |
| Table of Contents |
|
|
|
|
| Gross |
|
| Gross |
|
|
|
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. GSE debt securities |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
U.S. Government securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Taxable Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Tax-exempt Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Agency MBS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
ABS and OAS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
CMO |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other investments |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
The Company had investments in Agency MBS exceeding
Investment securities pledged as collateral for repurchase agreements consisted of certain U.S. GSE debt securities, Agency MBS, ABS and OAS, and CMO. These repurchase agreements mature daily. The aggregate amortized cost and fair value of these pledged investments as of the balance sheet dates were as follows:
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
|
|
|
|
|
|
| ||
June 30, 2025 |
| $ |
|
| $ |
| ||
December 31, 2024 |
|
|
|
|
|
| ||
Investment securities pledged as collateral for BTFP borrowings as of December 31, 2024, consisted of U.S. Government securities and U.S. GSE debt securities. The aggregate amortized cost and fair value of these pledged investments were as follows:
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
|
|
|
|
|
|
| ||
December 31, 2024 |
| $ |
|
| $ |
| ||
There were no investment securities pledged as collateral for BTFP borrowings as of June 30, 2025, all of which matured and were repaid during the first quarter of 2025.
There were no sales of debt securities during the first six months of 2025 or 2024.
The scheduled maturities of debt securities as of the balance sheet dates were as follows:
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
June 30, 2025 |
|
|
|
|
|
| ||
Due in one year or less |
| $ |
|
| $ |
| ||
Due from one to five years |
|
|
|
|
|
| ||
Due from five to ten years |
|
|
|
|
|
| ||
Due after ten years |
|
|
|
|
|
| ||
Agency MBS |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
| 13 |
| Table of Contents |
|
| Amortized |
|
| Fair |
| ||
|
| Cost |
|
| Value |
| ||
|
|
|
|
|
|
| ||
December 31, 2024 |
|
|
|
|
|
| ||
Due in one year or less |
| $ |
|
| $ |
| ||
Due from one to five years |
|
|
|
|
|
| ||
Due from five to ten years |
|
|
|
|
|
| ||
Due after ten years |
|
|
|
|
|
| ||
Agency MBS |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
Agency MBS are not due at a single maturity date and have not been allocated to maturity groupings for purposes of the maturity table.
Debt securities with unrealized losses as of the balance sheet dates are presented in the table below.
|
| Less than 12 months |
|
| 12 months or more |
|
| Totals |
| |||||||||||||||||||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Number of |
|
| Fair |
|
| Unrealized |
| |||||||
|
| Value |
|
| Loss |
|
| Value |
|
| Loss |
|
| Securities |
|
| Value |
|
| Loss |
| |||||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
U.S. GSE debt securities |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||||
U.S. Government securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Taxable Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Tax-exempt Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Agency MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
ABS and OAS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
CMO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Other investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE debt securities |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||||
U.S. Government securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Taxable Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Tax-exempt Municipal securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Agency MBS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
ABS and OAS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
CMO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Other investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
|
|
|
| $ |
|
| $ |
| |||||||
As of June 30, 2025 and December 31, 2024, 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 as of such dates prior to recovery. Management determined that no individual debt securities in an unrealized loss position represented credit losses that would require an allowance for credit losses, and that the unrealized losses as of the balance sheet dates were primarily attributed to increases in market interest rates since these securities were purchased under other market conditions. Accordingly, there was no ACL on AFS debt securities as of June 30, 2025, or December 31, 2024.
Accrued interest receivable on AFS debt securities which totaled $
| 14 |
| Table of Contents |
Note 5. Loans, Allowance for Credit Losses, Credit Quality and Off-Balance Sheet Credit Exposures
The composition of net loans as of the balance sheet dates was as follows:
|
| June 30, 2025 |
|
| December 31, 2024 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial & industrial |
| $ |
|
|
| % |
| $ |
|
|
| % | ||||
Purchased (1) |
|
|
|
|
| % |
|
|
|
|
| % | ||||
Commercial real estate |
|
|
|
|
| % |
|
|
|
|
| % | ||||
Municipal |
|
|
|
|
| % |
|
|
|
|
| % | ||||
Residential real estate - 1st lien |
|
|
|
|
| % |
|
|
|
|
| % | ||||
Residential real estate - Jr lien |
|
|
|
|
| % |
|
|
|
|
| % | ||||
Consumer |
|
|
|
|
| % |
|
|
|
|
| % | ||||
Total loans |
|
|
|
|
| % |
|
|
|
|
| % | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ACL |
|
| ( | ) |
|
|
|
|
|
| ( | ) |
|
|
|
|
Deferred net loan costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net loans |
| $ |
|
|
|
|
|
| $ |
|
|
|
|
| ||
| (1) | As of June 30, 2025, purchased loans consisted of $ |
The Company purchased a block of consumer loans totaling $
Accrued interest receivable on loans totaled $
Credit loss expense
Three Months Ended June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Credit loss expense - loans |
| $ |
|
| $ |
| ||
Credit loss (reversal) expense - OBS credit exposure |
|
|
|
|
| ( | ) | |
Credit loss expense |
| $ |
|
| $ |
| ||
Six Months Ended June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Credit loss expense - loans |
| $ |
|
| $ |
| ||
Credit reversal expense - OBS credit exposure |
|
| ( | ) |
|
| ( | ) |
Credit loss expense |
| $ |
|
| $ |
| ||
| 15 |
| Table of Contents |
The following tables present the activity in the ACL on loans for the periods presented.
For the three months ended June 30, 2025
|
| Balance |
|
|
|
|
|
|
|
| Credit Loss |
|
| Balance |
| |||||
|
| March 31 |
|
|
|
|
|
|
|
| Expense |
|
| June 30 |
| |||||
|
| 2025 |
|
| Charge-offs |
|
| Recoveries |
|
| (Reversal) |
|
| 2025 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & Industrial |
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| ||||
Purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Municipal |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Residential Real Estate - 1st Lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential Real Estate - Jr Lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Totals |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ | 10,549,531 |
| |||
For the six months ended June 30, 2025
|
| Balance |
|
|
|
|
|
|
|
| Credit Loss |
|
| Balance |
| |||||
|
| December 31, |
|
|
|
|
|
|
|
| Expense |
|
| June 30 |
| |||||
|
| 2024 |
|
| Charge-offs |
|
| Recoveries |
|
| (Reversal) |
|
| 2025 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & Industrial |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||
Purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Municipal |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Residential Real Estate - 1st Lien |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Residential Real Estate - Jr Lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Totals |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| ||||
For the year ended December 31, 2024
|
| Balance |
|
|
|
|
|
|
|
| Credit Loss |
|
| Balance |
| |||||
|
| December 31, |
|
|
|
|
|
|
|
| Expense |
|
| December 31, |
| |||||
|
| 2023 |
|
| Charge-offs |
|
| Recoveries |
|
| (Reversal) |
|
| 2024 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & Industrial |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| ||||
Purchased |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Commercial Real Estate |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Municipal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential Real Estate - 1st Lien |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Residential Real Estate - Jr Lien |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Consumer |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Totals |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| ||||
| 16 |
| Table of Contents |
For the three months ended June 30, 2024
|
| Balance |
|
|
|
|
|
|
|
| Credit Loss |
|
| Balance |
| |||||
|
| March 31, |
|
|
|
|
|
|
|
| Expense |
|
| June 30, |
| |||||
|
| 2024 |
|
| Charge-offs |
|
| Recoveries |
|
| (Reversal) |
|
| 2024 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & Industrial |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
| $ |
| |||
Purchased |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Commercial Real Estate |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Municipal |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Residential Real Estate - 1st Lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential Real Estate - Jr Lien |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Consumer |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Totals |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| ||||
For the six months ended June 30, 2024
|
| Balance |
|
|
|
|
|
|
|
| Credit Loss |
|
| Balance |
| |||||
|
| December 31, |
|
|
|
|
|
|
|
| Expense |
|
| June 30, |
| |||||
|
| 2023 |
|
| Charge-offs |
|
| Recoveries |
|
| (Reversal) |
|
| 2024 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & Industrial |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ |
| ||||
Purchased |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Commercial Real Estate |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Municipal |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Residential Real Estate - 1st Lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential Real Estate - Jr Lien |
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
| ||||
Consumer |
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| ||||
Totals |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
|
| $ | 10,335,715 |
| |||
Credit Quality Grouping
In developing the ACL, management uses credit quality groupings to help evaluate trends in credit quality. The Company groups credit risk into Groups A, B and C. The manner the Company utilizes to assign risk grouping is driven by loan purpose. Commercial purpose loans are individually risk graded while the retail portion of the portfolio is generally grouped by delinquency pool.
Group A loans - Pass – are loans that are expected to perform as agreed under their respective terms. Such loans carry a normal level of risk that does not require management attention beyond that warranted by the loan or loan relationship characteristics, such as loan size or relationship size. Group A loans include commercial purpose loans that are individually risk rated and retail loans that are rated by pool. Group A retail loans include performing consumer and residential real estate loans. Residential real estate loans are loans to individuals secured by 1-4 family homes, including first mortgages, home equity and home improvement loans. Loan balances fully secured by deposit accounts or that are fully guaranteed by the federal government are considered acceptable risk.
Group B loans – Special Mention - are loans that require greater attention than the acceptable risk loans in Group A. Characteristics of such loans may include, but are not limited to, borrowers that are experiencing negative operating trends such as reduced sales or margins, borrowers that have exposure to adverse market conditions such as increased competition or regulatory burden, or borrowers that have had unexpected or adverse changes in management. These loans have a greater likelihood of migrating to an unacceptable risk level if these characteristics are left unchecked. Group B is limited to commercial purpose loans that are individually risk rated.
Group C loans – Substandard/Doubtful – are loans that have distinct shortcomings that require a greater degree of management attention. Examples of these shortcomings include a borrower's inadequate capacity to service debt, poor operating performance, or insolvency. These loans are more likely to result in repayment through collateral liquidation. Group C loans range from those that are likely to sustain some loss if the shortcomings are not corrected, to those for which loss is imminent and non-accrual treatment is warranted. Group C loans include individually rated commercial purpose loans and retail loans adversely rated in accordance with the Federal Financial Institutions Examination Council’s Uniform Retail Credit Classification Policy. Group C retail loans include 1-4 family residential real estate loans and home equity loans past due 90 days or more with loan-to-value ratios greater than 60%, home equity loans 90 days or more past due where the Bank does not hold first mortgage, irrespective of loan-to-value, loans in bankruptcy where repayment is likely but not yet established, and lastly consumer loans that are 90 days or more past due.
Commercial purpose loan ratings are assigned by the commercial account officer; for larger and more complex commercial loans, the credit rating is a collaborative assignment by the lender and the credit analyst. The credit risk rating is based on the borrower's expected performance, i.e., the likelihood that the borrower will be able to service its obligations in accordance with the loan terms. Credit risk ratings are meant to measure risk versus simply record history. Assessment of expected future payment performance requires consideration of numerous factors. While past performance is part of the overall evaluation, expected performance is based on an analysis of the borrower's financial strength, and historical and projected factors such as size and financing alternatives, capacity and cash flow, balance sheet and income statement trends, the quality and timeliness of financial reporting, and the quality of the borrower’s management. Other factors influencing the credit risk rating to a lesser degree include collateral coverage and control, guarantor strength and commitment, documentation, structure and covenants and industry conditions. There are uncertainties inherent in this process.
Credit risk ratings are dynamic and require updating whenever relevant information is received. Risk ratings are assessed on an ongoing basis and at various points, including at delinquency or at the time of other adverse events. For larger, more complex or adversely rated loans, risk ratings are also assessed at the time of annual or periodic review. Lenders are required to make immediate disclosure to the Senior Lender of any known increase in loan risk, even if considered temporary in nature.
| 17 |
| Table of Contents |
The risk ratings within the loan portfolio by loan segment and origination year, were as follows:
As of June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
| Revolving |
|
| Revolving |
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans |
|
| Loans |
|
|
| ||||||||||||||||
|
| Term Loans Amortized Cost Basis by Origination Year |
|
| Amortized |
|
| Converted |
|
|
| |||||||||||||||||||||||||
|
| 2025 |
|
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| Prior |
|
| Cost Basis |
|
| to Term |
|
| Total |
| |||||||||
|
| (Dollars in Thousands) |
| |||||||||||||||||||||||||||||||||
Commercial & Industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Substandard/Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Substandard/Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate - 1st lien: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Substandard/Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate - Jr lien: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Substandard/Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
As of June 30, 2025, there were no Special mention loans or Substandard/Doubtful loans within the Purchased, Municipal, and Consumer loan segments.
| 18 |
| Table of Contents |
As of December 31, 2024 | ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revolving |
|
| Revolving |
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans |
|
| Loans |
|
|
| ||||||||||||||||
|
| Term Loans Amortized Cost Basis by Origination Year |
|
| Amortized |
|
| Converted |
|
|
| |||||||||||||||||||||||||
|
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| Prior |
|
| Cost Basis |
|
| to Term |
|
| Total |
| |||||||||
|
| (Dollars in Thousands) |
| |||||||||||||||||||||||||||||||||
Commercial & Industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Substandard/Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Substandard/Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate - 1st lien: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Special mention |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Substandard/Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate - Jr lien: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Substandard/Doubtful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
Total |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Loans |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||||
As of December 31, 2024, there were (i) no Special mention loans within the Purchased, Municipal, Residential real estate Jr lien and Consumer loan segments, and (ii) no Substandard/Doubtful loans within the Purchased, Municipal and Consumer loan segments.
| 19 |
| Table of Contents |
Gross charge-offs, by loan segment and origination year, were as follows:
For the six months ended June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| Term Loans Amortized Cost Basis by Origination Year |
|
|
| |||||||||||||||||||||||
|
| 2025 |
|
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| Prior |
|
| Total |
| |||||||
|
| (Dollars in Thousands) |
| |||||||||||||||||||||||||
Current period gross charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial & Industrial |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total current period gross charge-offs |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
For the six months ended June 30, 2025, there were no current period gross charge-offs within the Purchased, CRE, Municipal and Residential real estate Jr lien loan segments. There was $266 in gross charge-offs in the Residential real estate 1st lien loan segment, but due to rounding in the table above it is not disclosed in this table.
For the year ended December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
| Term Loans Amortized Cost Basis by Origination Year |
|
|
|
| ||||||||||||||||||||||
|
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| Prior |
|
| Total |
| |||||||
|
| (Dollars in Thousands) |
| |||||||||||||||||||||||||
Current period gross charge-offs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial & Industrial |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total current period gross charge-offs |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||||
For the year ended, December 31, 2024, there were no current period gross charge-offs within the Purchased, Municipal, Residential real estate 1st lien and Residential real estate Jr lien loan segments.
The following table presents 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 as of June 30, 2025, or December 31, 2024.
|
|
|
|
| 90 Days or |
| ||
|
| Total |
|
| More and |
| ||
June 30, 2025 |
| Nonaccrual |
|
| Accruing |
| ||
|
|
|
|
|
|
| ||
Commercial & industrial |
| $ |
|
| $ | 0 |
| |
Commercial real estate |
|
|
|
|
| 0 |
| |
Residential real estate - 1st lien |
|
|
|
|
| 488,601 |
| |
Residential real estate - Jr lien |
|
|
|
|
| 68,042 |
| |
Totals |
| $ |
|
| $ | 556,643 |
| |
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
| $ |
|
| $ | 0 |
| |
Commercial real estate |
|
|
|
|
| 0 |
| |
Residential real estate - 1st lien |
|
|
|
|
| 806,325 |
| |
Residential real estate - Jr lien |
|
|
|
|
| 0 |
| |
Totals |
| $ |
|
| $ | 806,325 |
| |
| 20 |
| Table of Contents |
The following is an age analysis of past due loans (including non-accrual) as of the balance sheet dates, by portfolio segment:
|
|
|
|
| 90 Days |
|
| Total |
|
|
|
|
|
|
| |||||
June 30, 2025 |
| 30-89 Days |
|
| or More |
|
| Past Due |
|
| Current |
|
| Total Loans |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & industrial |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Municipal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential real estate - 1st lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential real estate - Jr lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Totals |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 90 Days |
|
| Total |
|
|
|
|
|
|
|
|
| ||
December 31, 2024 |
| 30-89 Days |
|
| or More |
|
| Past Due |
|
| Current |
|
| Total Loans |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Purchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Municipal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential real estate - 1st lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Residential real estate - Jr lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Totals |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
For all loan segments, loans over 30 days past due are considered delinquent.
The following table presents the amortized cost basis of collateral-dependent loans (e.g. repayment expected through underlying collateral, no other expected sources of repayment) as of the balance sheet dates, by collateral type:
|
| Business |
|
|
|
| ||
|
| Assets (1) |
|
| Real Estate |
| ||
June 30, 2025 |
|
|
|
|
|
| ||
Commercial & industrial |
| $ |
|
| $ |
| ||
Residential real estate - 1st lien |
|
|
|
|
|
| ||
Totals |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
December 31, 2024 |
|
|
|
|
|
|
|
|
Residential real estate - 1st lien |
| $ |
|
| $ |
| ||
Totals |
| $ |
|
| $ |
| ||
(1) Including, but not limited to, inventory, equipment, and accounts receivable, but excluding real estate.
Residential real estate loans in process of foreclosure comprised of one loan in the amount of $
Allowance for credit losses
Credit losses are charged against the allowance when management believes that future payments of a loan balance are unlikely. Subsequent recoveries, if any, are credited to the allowance. Unsecured loans are charged off when they become uncollectible and no later than 120 days past due. Unsecured loans to customers who subsequently file bankruptcy, are charged off within 30 days of receipt of the notification of filing or by the end of the month in which the loans become 120 days past due, whichever occurs first. For secured loans, both residential and commercial, the potential loss on these 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. The value of the collateral is determined in accordance with the Company’s appraisal policy. The unsecured portion of a real estate secured loan is charged off by the end of the month in which the loan becomes 180 days past due.
| 21 |
| Table of Contents |
As described below, the allowance consists of general and specific components. However, the entire allowance is available to absorb losses in the loan portfolio, regardless of general or specific components considered in determining the amount of the allowance.
General component
The general component of the ACL is based on methodologies, inputs, and assumptions utilized to estimate lifetime credit losses when applied to the following loan segments: commercial and industrial, 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 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 applied 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, or it does not have default and loss data that covers a full economic cycle.
As of June 30, 2025, 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 to three years, depending on the facts and 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 monitors 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 June 30, 2025 and 2024.
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 default 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 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 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, a long-term average loss rate is calculated and applied on a quarterly basis for the remaining life of the pool. Due to the lack of any historical loss data, a manual entry methodology was chosen for the municipal loans given the immaterial nature of the pool when considering prior loss history as well as the inability to reasonably forecast a PD or LGD for the pool.
| 22 |
| Table of Contents |
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 CRE loans. This evaluation is inherently subjective as it requires estimates that are susceptible to revision as more information becomes available. Management’s review of the ACL during the first quarter of 2025 resulted in increases in the risk status of qualitative factors to reflect increasing trends in volume and exceptions in the residential loan portfolio as well as factors related to delinquencies and non-performing loans to reflect the uncertainty as to how and when inflation or a recession will, or could, affect our customers’ ability to pay. During the second quarter of 2025, management’s review of the ACL resulted in a decrease to the qualitative factor for loan review in the commercial and CRE loan segments. This is a reflection of the strong loan review process that is in place.
The qualitative factors are determined based on the various risk characteristics of each loan segment. The Company has policies, procedures and internal controls that management believes are commensurate with the risk profile of each of these segments. Major risk characteristics relevant to each portfolio segment are as follows:
Commercial & Industrial – Loans in this segment include commercial and industrial loans and to a lesser extent loans to finance agricultural production. Commercial loans are made to businesses and are generally secured by assets of the business, including trade assets and equipment. While not the primary collateral, in many cases these loans may also be secured by the real estate of the business. Repayment is expected from the cash flows of the business. A weakened economy, soft consumer spending, unfavorable foreign trade conditions and the rising cost of labor or raw materials are examples of issues that can impact credit quality in this segment.
Purchased – Loans in this segment are loans purchased through a loan purchasing program with BHG. BHG originates commercial loans to medical professionals and consumer loans to other 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 occupied CRE. A relatively small portion of this segment includes farm loans secured by farmland and buildings. As with commercial and industrial loans, repayment of owner-occupied CRE loans is expected from the cash flows of the business and the segment would be impacted by the same risk factors as commercial and industrial loans. The non-owner occupied CRE portion includes both residential and commercial construction loans, vacant land and real estate development loans, multi-family dwelling loans and commercial rental property loans. Repayment of construction loans is expected from permanent financing takeout; the Company generally requires commitment or eligibility for the take-out financing prior to construction loan origination. Real estate development loans are generally repaid from the sale of the subject real property as the project progresses. Construction and development lending entail additional risks, including the project exceeding budget, not being constructed according to plans, not receiving permits, or the pre-leasing or occupancy rate not meeting expectations. Repayment of multi-family loans and commercial rental property loans is expected from the cash flow generated by rental payments received from the individuals or businesses occupying the real estate. CRE loans are impacted by factors such as competitive market forces, vacancy rates, cap rates, net operating incomes, lease renewals and overall economic demand. In addition, loans in the recreational and tourism sector can be affected by weather conditions, such as unseasonably low winter snowfalls. CRE lending also carries a higher degree of environmental risk than other real estate lending.
Municipal – Loans in this segment are made to local municipalities, attributable to municipal financing transactions and backed by the full faith and credit of town governments or dedicated governmental revenue sources, with no historical losses recognized by the Company. Qualitative factors are not utilized in the manual entry method for municipal loans.
Residential Real Estate - 1st Lien – Loans in this segment are collateralized by first mortgages on 1 – 4 family owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment.
Residential Real Estate – Jr Lien – Loans in this segment are collateralized by junior lien mortgages on 1 – 4 family residential real estate and repayment is primarily dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit quality of this segment.
Consumer – Loans in this segment are made to individuals for consumer and household purposes. This segment includes both loans secured by automobiles and other consumer goods, as well as loans that are unsecured. This segment also includes overdrafts, which are extensions of credit made to both individuals and businesses to cover temporary shortages in their deposit accounts and are generally unsecured. The Company maintains policies restricting the size and term of these extensions of credit. The overall health of the economy, including unemployment rates, has an impact on the credit quality of this segment.
| 23 |
| Table of Contents |
Specific component
Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are also not included in the collective evaluation. In general, loans individually evaluated for estimated credit losses include those (i) greater than $100,000 with a nonaccrual status or (ii) have other unique characteristics differing from the portfolio segment. Specific reserves are established when appropriate for such loans based on the present value of expected future cash flows of the loan. However, when management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
Modifications of Loans
A loan is considered 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. Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.
The Company is deemed to have granted such a concession if it has modified a 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 number of payments typically would not require the loan to be accounted for as modified. However, pursuant to regulatory guidance, any payment delays longer than three months is generally not considered insignificant. Management’s assessment of whether a concession has been granted also takes into consideration payments expected to be received from third parties, including third-party guarantors, provided the third party has the ability to perform on the guarantee.
The Company’s modified 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 within the terms of original restructurings, nor converted variable rate terms to fixed rate terms. However, the Company evaluates each potential loan modification on its own merits and does not foreclose the granting of any particular type of concession. In connection with modifications, the Company considers applicable regulatory guidance, including a 2023 Interagency Policy Statement on Prudent Commercial Real Estate Loan Accommodations and Workouts.
The following table presents the amortized cost basis of loans as of June 30, 2025, that were both experiencing financial difficulty and modified during the six months ended June 30, 2025, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
|
|
|
|
| Total Class |
| ||
|
| Term |
|
| of Financing |
| ||
|
| Extension |
|
| Receivable |
| ||
|
|
|
|
|
|
| ||
Commercial & Industrial |
| $ |
|
|
| % | ||
As of June 30, 2025, the Company was not committed to lend additional amounts to borrowers experiencing financial difficulty whose loans were previously modified.
| 24 |
| Table of Contents |
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the six months ended June 30, 2025.
|
| Weighted- |
| |
|
| Average |
| |
|
| Term Extension |
| |
|
| (months) |
| |
|
|
|
| |
Commercial & Industrial |
|
|
| |
The Company closely monitors the performance of loans to borrowers experiencing financial difficulty that have been modified to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified during the last twelve months.
|
|
|
|
|
|
|
| Past Due |
| |||
|
|
|
|
| 30-89 Days |
|
| 90 Days |
| |||
|
| Current |
|
| Past Due |
|
| or More |
| |||
|
|
|
|
|
|
|
|
|
| |||
Commercial & Industrial |
| $ |
|
| $ |
|
| $ |
| |||
There were no loans to borrowers experiencing financial difficulty that were modified within the previous twelve months that had subsequently defaulted during the six months ended June 30, 2025. Loans are considered defaulted at 90 days past due.
Allowance for Credit Losses on OBS 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.
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 percentage 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. As of June 30, 2025, and December 31, 2024, the ACL on OBS credit exposures totaled $
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 $
As of December 31, 2024, the most recent evaluation, management concluded that no impairment existed. Management evaluates its goodwill intangible for impairment at least annually, or more frequently as circumstances warrant.
Note 7. Loan Servicing
The following table shows the changes in the carrying amount of the MSRs, included in other assets in the consolidated balance sheets, for the periods indicated:
Six Months Ended June 30, |
| 2025 |
| |
|
|
|
| |
Balance at beginning of year |
| $ |
| |
MSRs capitalized |
|
|
| |
MSRs amortized |
|
| ( | ) |
Balance at end of period |
| $ |
| |
| 25 |
| Table of Contents |
Year Ended December 31, |
| 2024 |
| |
|
|
|
|
|
Balance at beginning of year |
| $ |
| |
MSRs capitalized |
|
|
| |
MSRs amortized |
|
| ( | ) |
Balance at end of year |
| $ |
| |
Note 8. Fair Value
Certain assets and liabilities are recorded at fair value to provide additional insight into the Company’s quality of earnings and comprehensive income. The fair values of some of these assets and liabilities are measured on a recurring basis while others are measured on a non-recurring basis, with the determination based upon applicable existing accounting pronouncements. For example, securities AFS are recorded at fair value on a recurring basis. Other assets, such as MSRs, loans held-for-sale, individually analyzed loans with a related allowance that are collateral dependent, 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, individually analyzed loans with a related allowance that are collateral dependent, loans held-for-sale, 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:
Debt Securities AFS: Fair value measurement is based upon quoted prices for similar assets, if available. If quoted prices are not available, fair values are measured using matrix pricing models, or other model-based valuation techniques requiring observable inputs other than quoted prices such as yield curves, prepayment speeds and default rates, net of any related credit allowance. Level 1 securities would include U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets. Level 2 securities include federal agency securities, municipal securities and other asset-backed securities.
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 ACL. Accordingly, certain individually analyzed loans may be subject to measurement at fair value on a non-recurring basis. Management has estimated the fair value of collateral-dependent loans using Level 2 inputs, such as the fair value of collateral based on independent third-party appraisals.
Loans held-for-sale: The fair value of loans held-for-sale is based upon an actual purchase and sale agreement between the Company and an independent market participant. The sale is executed within a reasonable period following quarter-end at the stated fair value.
MSRs: MSRs represent the value associated with servicing residential mortgage loans. Servicing assets and servicing liabilities are reported using the amortization method and compared to fair value for impairment. In evaluating the carrying values of MSRs, the Company obtains third party valuations based on loan level data including note rate, and the type and term of the underlying loans. The Company classifies MSRs as non-recurring Level 2.
| 26 |
| Table of Contents |
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Assets measured at fair value on a recurring basis and reflected in the consolidated balance sheets at the dates presented, segregated by fair value hierarchy, are summarized below. There were no Level 3 assets or liabilities measured on a recurring basis as of the balance sheet dates presented, nor were there any transfers of assets between Levels during either of the periods presented for 2025 or 2024.
|
| June 30, |
|
| December 31, |
| ||
Assets: (market approach) |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Level 1 |
|
|
|
|
|
| ||
U.S. Government securities |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Level 2 |
|
|
|
|
|
|
|
|
U.S. GSE debt securities |
| $ |
|
| $ |
| ||
Taxable Municipal securities |
|
|
|
|
|
| ||
Tax-exempt Municipal securities |
|
|
|
|
|
| ||
Agency MBS |
|
|
|
|
|
| ||
ABS and OAS |
|
|
|
|
|
| ||
CMO |
|
|
|
|
|
| ||
Other investments |
|
|
|
|
|
| ||
Level 2 Total |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Grand Total |
| $ |
|
| $ |
| ||
Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis
The following table includes assets measured at fair value on a non-recurring basis that have had a fair value adjustment since their initial recognition. Individually analyzed loans measured at fair value only include those loans with a partial write-down or with a related specific ACL and are presented net of the specific allowances as disclosed in Note 5. Assets measured at fair value on a non-recurring basis and reflected in the consolidated balance sheets at the dates presented, segregated by fair value hierarchy level, are summarized below. There were no Level 1 or Level 3 assets or liabilities measured on a non-recurring basis as of the balance sheet dates presented, nor were there any transfers of assets between levels during either of the periods presented for 2025 or 2024.
|
| June 30, |
|
| December 31, |
| ||
Level 2 |
| 2025 |
|
| 2024 |
| ||
Assets: (market approach) |
|
|
|
|
|
| ||
Individually analyzed loans, net of related allowance |
| $ |
|
| $ |
| ||
Loans held-for-sale |
|
|
|
|
|
| ||
MSRs (1) |
|
|
|
|
|
| ||
(1) Represents MSRs at lower of cost or fair value.
FASB ASC Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether 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, 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.
| 27 |
| Table of Contents |
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:
June 30, 2025 |
|
|
| 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 |
| $ |
|
| $ |
|
| $ |
|
| $ |
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| $ |
| |||||
Debt securities AFS |
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Restricted equity securities |
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Loans and loans held-for-sale, net of ACL |
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Commercial & industrial |
|
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| |||||
Purchased |
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| |||||
Commercial real estate |
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| |||||
Municipal |
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| |||||
Residential real estate - 1st lien |
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| |||||
Residential real estate - Jr lien |
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| |||||
Consumer |
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| |||||
MSRs (1) |
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| |||||
Accrued interest receivable |
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| |||||
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Financial liabilities: |
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Deposits |
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Other deposits |
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| |||||
Brokered deposits |
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| |||||
Overnight borrowings |
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| |||||
Short-term advances |
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| |||||
Long-term advances |
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| |||||
Repurchase agreements |
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| |||||
Operating lease obligations |
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| |||||
Finance lease obligations |
|
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| |||||
Subordinated debentures |
|
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| |||||
Accrued interest payable |
|
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| |||||
(1) Reported fair value represents all MSRs for loans serviced by the Company, regardless of carrying amount.
| 28 |
| Table of Contents |
December 31, 2024 |
|
|
| Fair |
|
| Fair |
|
| Fair |
|
| Fair |
| ||||||
|
| Carrying |
|
| Value |
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| Value |
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| Value |
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| Value |
| |||||
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| Amount |
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| Level 1 |
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| Level 2 |
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| Level 3 |
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| Total |
| |||||
|
| (Dollars in Thousands) |
| |||||||||||||||||
Financial assets: |
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| |||||
Cash and cash equivalents |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| |||||
Debt securities AFS |
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|
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|
| |||||
Restricted equity securities |
|
|
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|
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|
|
| |||||
Loans and loans held-for-sale, net of ACL |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & industrial |
|
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|
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|
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| |||||
Purchased |
|
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| |||||
Commercial real estate |
|
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| |||||
Municipal |
|
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| |||||
Residential real estate - 1st lien |
|
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| |||||
Residential real estate - Jr lien |
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| |||||
Consumer |
|
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| |||||
MSRs (1) |
|
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| |||||
Accrued interest receivable |
|
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| |||||
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|
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Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other deposits |
|
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|
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|
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|
|
|
| |||||
Brokered deposits |
|
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| |||||
Short-term advances |
|
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| |||||
Long-term advances |
|
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|
| |||||
Repurchase agreements |
|
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| |||||
Operating lease obligations |
|
|
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| |||||
Finance lease obligations |
|
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| |||||
Subordinated debentures |
|
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| |||||
Accrued interest payable |
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| |||||
(1) Reported fair value represents all MSRs for loans serviced by the Company, regardless of carrying amount.
Note 9. Legal Proceedings
In the normal course of business, the Company is involved in litigation that is considered incidental to its business. Management does not expect that any such litigation will be material to the Company's consolidated financial condition or results of operations.
Note 10. Subsequent Events
The Company has evaluated events and transactions through the date that the financial statements were issued for potential recognition or disclosure in these financial statements, as required by GAAP. On July 16, 2025, the Company’s Board declared a cash dividend of $
| 29 |
| Table of Contents |
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 June 30, 2025
The following discussion analyzes the consolidated financial condition of Community Bancorp. and its wholly owned subsidiary, Community National Bank, as of June 30, 2025 and December 31, 2024, and its consolidated results of operations for the three-month and six-month interim periods presented. The Company is considered a “smaller reporting company” and a “non-accelerated filer” under the disclosure rules of the SEC. Accordingly, the Company has elected to provide its statements of income, comprehensive income, cash flows and changes in shareholders’ equity for a two-year, rather than a three-year, period and provide certain other smaller reporting company scaled disclosures where management deems it appropriate.
The following discussion should be read in conjunction with the Company’s audited consolidated financial statements and related notes contained in its 2024 Annual Report on Form 10-K filed with the SEC. Please refer to Note 1 in the accompanying consolidated financial statements for a listing of acronyms and defined terms used throughout the following discussion.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the results of operations, financial condition and business of the Company and its subsidiary. Words used in the discussion below such as "believes," "expects," "anticipates," "intends," "estimates," “projects”, "plans," “assumes”, "predicts," “may”, “might”, “will”, “could”, “should” and similar expressions, indicate that management of the Company is making forward-looking statements.
Forward-looking statements are not guarantees of future performance. They necessarily involve risks, uncertainties and assumptions. Examples of forward looking statements included in this discussion include, but are not limited to, statements regarding the estimated contingent liability related to assumptions made within the asset/liability management process; management's expectations as to the future interest rate environment and the Company's related liquidity level; credit risk expectations relating to the Company's loan portfolio and off-balance sheet commitments; and management's general outlook for the future performance of the Company and the local or national economy. Although forward-looking statements are based on management's 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 internationally (including due to changing tariff policies), 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, may 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 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); |
| · | 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 lenders, payment systems and other financial service providers, from increasing consolidation and integration of financial service providers, and from changes in technology and delivery systems; |
| 30 |
| Table of Contents |
| · | cybersecurity risks, including risks to our vendors, 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 GAAP must also disclose, along with each non-GAAP financial measure, certain additional information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure. The SEC has exempted from the definition of non-GAAP financial measures certain commonly used financial measures that are not based on GAAP. However, three non-GAAP financial measures commonly used by financial institutions, namely tax-equivalent net interest income and tax-equivalent net interest margin (as presented in the tables in the section labeled Interest Income Versus Interest Expense (NII)) and core earnings (as defined and discussed in the Results of Operations section), have not been specifically exempted by the SEC, and may therefore constitute non-GAAP financial measures under Regulation G. We are unable to state with certainty whether the SEC would regard those measures as subject to Regulation G.
Management believes that these non-GAAP financial measures are useful in evaluating the Company’s financial performance and facilitate comparisons with the performance of other financial institutions. However, that information should be considered supplemental in nature and not as a substitute for related financial information prepared in accordance with GAAP.
OVERVIEW
The Company’s consolidated assets as of June 30, 2025, were $1.17 billion compared to $1.25 billion as of December 31, 2024, a decrease of 6.6%. Changes in the asset base included an increase in loans of $13.8 million. however, there was a substantial decrease in overnight deposits of $98.9 million, or 97.9%. The increase in the loan portfolio was primarily attributable to increases of $11.9 million in residential first and Jr. lien loans, $18.8 million in CRE loans, $4.1 million in commercial & industrial and $3.8 million in purchased loans, which was partially offset by a decrease of $24.7 million in municipal loans. While cash funded the increase in the loan portfolio, the decrease in overnight deposits reflects decreases in deposit balances and payoff of borrowings that matured during the first quarter of 2025.
Total deposits as of June 30, 2025, were $933.0 million compared to $1.0 billion as of December 31, 2024, a decrease of approximately $68.7 million, or 6.9%. Year to date, time deposits increased $10.1 million, or 5.4% and savings accounts increased $419 thousand, or 0.3%, while interest-bearing demand deposits decreased $44.2 million, or 14.5%, and money market funds decreased $39.1 million, or 23.1%. A decrease in deposit balances is typical in the first and second quarters of the calendar year, due in part to the timing of customers income tax obligations and the spend down of deposited funds by Vermont municipal customers prior to their June 30 fiscal year end. Borrowed funds decreased $16.8 million, or 23.1%, from December 31, 2024, due primarily to maturities in the BTFP funds, partially offset by new long-term FHLBB advances and overnight borrowings.
Total interest income increased approximately $1.7 million, or 12.5%, for the second quarter of 2025, and increased $3.3 million, or 12.7%, for the first six months of 2025, compared to the respective periods in 2024. The growth in the volume of the loan portfolio and origination of loans at higher interest rates, as well as adjustable-rate loans repricing to current market rates, helped to support the increase in interest income in both comparison periods.
| 31 |
| Table of Contents |
Total interest expense decreased $140 thousand, or 2.8%, for the second quarter of 2025, and increased $444 thousand, or 4.6%, for the first six months of 2025, compared to the respective periods in 2024. While the rate environment continues to put pressure on the Company’s funding costs, including competitive deposit pricing, the year-over-year increase of $1.7 million, or 26.7%, in interest expense on the Company’s interest bearing deposit accounts was partially offset by a decrease of $1.4 million, or 63.3% in interest expense on borrowed funds due to the decrease in the average volume of borrowed funds. Please refer to the interest rate sensitivity discussion in the Interest Rate Risk and Asset and Liability Management section of this Management’s Discussion and Analysis for more information on the impact that the actions of the FRB’s FOMC in regulating interest rates, and changes in the yield curve, could have on our net interest income.
The credit loss expense for the second quarter of 2025 was $407,046 compared to $331,582 for the same quarter of 2024 and $732,100 for the first six months of 2025 compared to $645,161 for the same period in 2024, resulting in increases between periods of $75,464, or 22.8% and $86,939, or 13.5%, respectively. In determining the current period credit loss expense management considers a number of factors, including loan growth and changes in balances of the loan categories within the current portfolio, changes in forecasts, historical loss rates and various qualitative factors, which management reviews and adjusts, as appropriate, in its ACL calculation to better reflect expected credit losses in the loan portfolio. Please refer to Note 5 of the unaudited consolidated financial statements as well as the ACL and credit loss expense discussion in the Credit Risk section of this MD&A.
Consolidated net income for the second quarter of 2025 increased $1.3 million, or 48.8%, to $4.1 million compared to $2.7 million for the same quarter of 2024, and increased $2.0 million, or 36.6%, to $7.6 million for the first six months of 2025 compared to $5.6 million for the same period in 2024. The increases in net interest income after credit loss expense of $1.7 million for the second quarter of 2025 and $2.8 million for the first six months of 2025, compared to the respective periods in 2024, were contributing factors to the increases in net income. This change, along with significant changes in non-interest income and non-interest expense, are discussed in the appropriate sections of this Management’s Discussion and Analysis.
Equity capital increased to $106.3 million, with a book value per share of $18.69 as of June 30, 2025, compared to $98.0 million and a book value per share of $17.24 as of December 31, 2024. Please refer to the section of this Management’s Discussion and Analysis titled “LIQUIDITY AND CAPITAL RESOURCES” for a discussion in of the changes in the Company’s equity capital for the six months ended June 30, 2025.
On July 16, 2025, the Company's Board of Directors declared a quarterly cash dividend of $0.24 per common share, payable on August 1, 2025, to shareholders of record on July 15, 2025.
As described in more detail below under “LIQUIDITY AND CAPITAL RESOURCES” as of June 30, 2025, the Company’s capital ratios, and those of our subsidiary Bank, were in excess of applicable regulatory requirements.
During the first quarter of 2025, CFS Partners, in which the Company held a one-third ownership interest, agreed to redeem all the limited liability company membership and distributional interests of Guaranty Bancorp, Inc. (“Guaranty”), representing a one-third ownership interest, contingent upon, and just prior to, consummation of Guaranty’s merger with and into Bar Harbor Bankshares. That merger, and the related redemption of Guaranty’s ownership interest by CFS Partners, were completed on July 31, 2025. Under the terms of the redemption agreement, beginning March 1, 2025, Guaranty Bancorp agreed to forego its distributional interest in CFS Partners through the closing date of the redemption. Accordingly, beginning March 1, 2025, the Company’s share of the profit and loss from the operations of CFS Partners’ sole subsidiary, CFSG, increased from one-third to 50%, and effective on July 31, 2025, the Company’s non-economic membership (governance) interest in CFS Partners likewise increased to 50%. The Company does not have a controlling interest in CFS Partners and will continue to account for its investment using the equity method.
Given the Company’s northern Vermont market area, management is assessing the potential risk to the local economy from recent trade policy developments between the United States and Canada. Canada is Vermont’s largest international trading partner; many businesses that rely on trade with Canada are now at risk of experiencing increased costs, reduced sales, and a sense of uncertainty about the future. Although management continues to evaluate the potential impact on the Company’s customers, trade negotiations are on-going, and the ultimate effect on these businesses remains uncertain. In light of these challenges, the Company’s own strategic focus will be to safeguard its balance sheet while supporting its customers and communities.
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 consolidated financial statements and related notes. The SEC has defined a company’s critical accounting policies as those that are most important to the portrayal of the Company’s financial condition and results of operations, and which require the Company to make its most difficult and subjective judgments, often because of the need to make estimates of matters that are inherently uncertain. Because of the significance of these estimates and assumptions, there is a high likelihood that materially different amounts would be reported for the Company under different conditions or using different assumptions or estimates. Management evaluates on an ongoing basis its judgment as to which policies are considered to be critical and communicates all evaluations with the Company’s Audit Committee.
| 32 |
| Table of Contents |
The Company’s critical accounting policies govern:
| · | the ACL; |
| · | OREO; |
| · | valuation of residential MSRs; and |
| · | the carrying value of goodwill. |
These policies are described in the Company’s 2024 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. There were no material changes during the first six months of 2025 in the Company’s critical accounting policies.
ACL - Management believes that the calculation of the ACL is a critical accounting policy that requires the most significant judgments and estimates used in the preparation of its consolidated financial statements. In estimating the ACL, management has adopted a methodology consistent with ASU No. 2016-13 that 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 at the measurement date. Further consideration is given to qualitative factors, including changes in current economic indicators and their probable impact on borrowers and collateral, trends in delinquent and non-performing loans, trends in criticized and classified assets, levels of exceptions, the impact of competition in the market, concentrations of credit risk in a variety of areas, including portfolio product mix, the level of loans to individual borrowers and their related interests, loans to industry segments and the geographic distribution of CRE loans. Management’s estimates used in calculating the ACL may increase or decrease based on changes in these factors, which in turn will affect the amount of the Company’s provision for credit losses charged against current period income. This evaluation is inherently subjective and actual results could differ significantly from these estimates under different assumptions, judgments or conditions. 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 recorded as a liability on the balance sheet within Accrued interest and other liabilities, with adjustments made through credit loss expense.
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 second quarter of 2025 was $4.1 million, or $0.72 per common share, compared to $2.7 million, or $0.49 per common share for the same quarter of 2024, and for the first six months of 2025 was $7.6 million, or $1.34 per common share, compared to $5.6 million, or $0.99 per common share, for the same period in 2024. Core earnings (NII) were $9.9 million for the second quarter of 2025, compared to $8.1 million for the same period of 2024 and $19.3 million for the first six months of 2025, compared to $16.5 million for the same period in 2024. Interest and fees on loans, the major component of interest income, increased $1.6 million, or 13.5% for the second quarter of 2025 compared to the same period of 2024 and increased $3.2 million, or 13.3% for the first six months of 2025 compared to the same period in 2024. Interest paid on deposits, which is the major component of total interest expense, increased $612 thousand, or 18.2% for the second quarter of 2025 and increased $1.7 million, or 26.7% for the first six months of 2025, compared to the respective periods in 2024, driven primarily by increased deposit balances. Interest on borrowed funds decreased $830 thousand, or 65.1%, for the second quarter of 2025 compared to the same quarter of 2024 and decreased $1.4 million, or 63.3%, for the first six months of 2025 compared to the same period in 2024, primarily due to a decrease in average volume of borrowed funds in both comparison periods. Market pressure on deposit rates has stabilized and a decrease in wholesale funding has resulted in an improved net interest margin and net interest spread.
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.
| 33 |
| Table of Contents |
The following table shows these ratios annualized, as well as other equity ratios monitored by management, for the comparison periods presented.
Three Months Ended June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Return on average assets |
|
| 1.38 | % |
|
| 0.99 | % |
Return on average equity |
|
| 15.62 | % |
|
| 12.27 | % |
Dividend payout ratio (1) |
|
| 33.33 | % |
|
| 46.94 | % |
Average equity to average assets |
|
| 8.82 | % |
|
| 8.04 | % |
Six Months Ended June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Return on average assets |
|
| 1.29 | % |
|
| 1.01 | % |
Return on average equity |
|
| 15.05 | % |
|
| 12.50 | % |
Dividend payout ratio (1) |
|
| 35.82 | % |
|
| 46.46 | % |
Average equity to average assets |
|
| 8.57 | % |
|
| 8.07 | % |
(1) Dividends declared per common share divided by earnings per common share.
INTEREST INCOME VERSUS INTEREST EXPENSE (NII)
The largest component of the Company’s operating income is NII, which is the difference between interest earned on loans and investments and the interest paid on deposits and other sources of funds (i.e., borrowings). The Company’s level of net interest income can fluctuate over time due to changes in the level and mix of earning assets and sources of funds (volume), and changes in the yield earned and costs of funds (rate). A portion of the Company’s income from loans to local municipalities and from tax-exempt municipal investment securities is not subject to income taxes. Because the proportion of tax-exempt items in the Company's balance sheet varies from year-to-year, to improve comparability of information, the non-taxable income shown in the tables below has been converted to a tax equivalent basis. The Company’s corporate tax rate is 21%; therefore, to equalize tax-free and taxable income in the comparison, we divide the tax-free income by 79%, with the result that every tax-free dollar is equivalent to $1.27 in taxable income for the periods presented.
The Company’s tax-exempt interest income of $827,746 and $617,843 for the three months ended June 30, 2025 and 2024, respectively, and $1.6 million and $1.2 million for the six months ended June 30, 2025 and 2024, respectively, was derived from loans to local municipalities of $42.4 million and $34.1 million, and tax-exempt municipal investment securities of $9.9 million and $10.3 million, as of June 30, 2025 and 2024, respectively.
The following table shows the reconciliation between reported NII and tax equivalent NII for the comparison periods presented.
Three Months Ended June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Net interest income as presented |
| $ | 9,894,542 |
|
| $ | 8,101,293 |
|
Effect of tax-exempt income |
|
| 220,034 |
|
|
| 164,237 |
|
Net interest income, tax equivalent |
| $ | 10,114,576 |
|
| $ | 8,265,530 |
|
Six Months Ended June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Net interest income as presented |
| $ | 19,332,864 |
|
| $ | 16,458,939 |
|
Effect of tax-exempt income |
|
| 437,573 |
|
|
| 317,209 |
|
Net interest income, tax equivalent |
| $ | 19,770,437 |
|
| $ | 16,776,148 |
|
| 34 |
| Table of Contents |
The following tables present the daily average assets and the daily average liabilities, including the average yields on interest-earning assets and average expense on interest-bearing liabilities for the comparison periods presented. Interest income (excluding interest on non-accrual loans) is expressed on a tax equivalent basis, both in dollars and as a yield/rate for the comparison periods presented. Net interest income, net interest spread, and net interest margin are also expressed on a tax equivalent basis.
|
| Three Months Ended June 30, |
| |||||||||||||||||||||
|
| 2025 |
|
| 2024 |
| ||||||||||||||||||
|
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
| Average |
| ||||||
|
| Average |
|
| Income/ |
|
| Yield/ |
|
| Average |
|
| Income/ |
|
| Yield/ |
| ||||||
|
| Balance |
|
| Expense |
|
| Rate |
|
| Balance |
|
| Expense |
|
| Rate |
| ||||||
Average Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, net (1) |
| $ | 941,386,340 |
|
| $ | 13,890,364 |
|
|
| 5.92 | % |
| $ | 864,882,180 |
|
| $ | 12,209,973 |
|
|
| 5.68 | % |
Taxable investment securities |
|
| 153,071,042 |
|
|
| 948,048 |
|
|
| 2.48 | % |
|
| 166,488,058 |
|
|
| 932,209 |
|
|
| 2.25 | % |
Tax-exempt investment securities |
|
| 9,905,691 |
|
|
| 101,786 |
|
|
| 4.12 | % |
|
| 10,267,118 |
|
|
| 101,786 |
|
|
| 3.99 | % |
Sweep and interest-earning accounts |
|
| 6,167,063 |
|
|
| 71,857 |
|
|
| 4.67 | % |
|
| 4,343,705 |
|
|
| 54,452 |
|
|
| 5.04 | % |
Other investments (2) |
|
| 3,421,316 |
|
|
| 58,595 |
|
|
| 6.87 | % |
|
| 3,179,253 |
|
|
| 63,270 |
|
|
| 8.00 | % |
Total interest-earning assets |
| $ | 1,113,951,452 |
|
| $ | 15,070,650 |
|
|
| 5.43 | % |
| $ | 1,049,160,314 |
|
| $ | 13,361,690 |
|
|
| 5.12 | % |
Cash and due from banks |
|
| 10,335,541 |
|
|
|
|
|
|
|
|
|
|
| 10,633,735 |
|
|
|
|
|
|
|
|
|
Premises and equipment |
|
| 12,040,591 |
|
|
|
|
|
|
|
|
|
|
| 12,578,195 |
|
|
|
|
|
|
|
|
|
BOLI |
|
| 5,345,590 |
|
|
|
|
|
|
|
|
|
|
| 5,260,952 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 11,574,269 |
|
|
|
|
|
|
|
|
|
|
| 11,574,269 |
|
|
|
|
|
|
|
|
|
Other assets |
|
| 28,454,270 |
|
|
|
|
|
|
|
|
|
|
| 22,580,312 |
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 1,181,701,713 |
|
|
|
|
|
|
|
|
|
| $ | 1,111,787,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction accounts |
| $ | 279,900,063 |
|
| $ | 1,297,716 |
|
|
| 1.86 | % |
| $ | 269,333,402 |
|
| $ | 1,266,535 |
|
|
| 1.89 | % |
Money market funds |
|
| 155,127,528 |
|
|
| 952,990 |
|
|
| 2.46 | % |
|
| 124,253,641 |
|
|
| 737,873 |
|
|
| 2.39 | % |
Savings deposits |
|
| 142,284,530 |
|
|
| 30,602 |
|
|
| 0.09 | % |
|
| 147,164,162 |
|
|
| 32,447 |
|
|
| 0.09 | % |
Time deposits |
|
| 194,362,851 |
|
|
| 1,690,700 |
|
|
| 3.49 | % |
|
| 145,399,534 |
|
|
| 1,322,980 |
|
|
| 3.66 | % |
Repurchase agreements |
|
| 46,627,866 |
|
|
| 298,057 |
|
|
| 2.56 | % |
|
| 29,128,815 |
|
|
| 177,871 |
|
|
| 2.46 | % |
Borrowed funds |
|
| 40,987,385 |
|
|
| 426,758 |
|
|
| 4.18 | % |
|
| 103,634,110 |
|
|
| 1,255,272 |
|
|
| 4.87 | % |
Finance lease obligations |
|
| 3,101,428 |
|
|
| 17,838 |
|
|
| 2.30 | % |
|
| 3,331,479 |
|
|
| 19,152 |
|
|
| 2.30 | % |
Junior subordinated debentures |
|
| 12,887,000 |
|
|
| 241,413 |
|
|
| 7.51 | % |
|
| 12,887,000 |
|
|
| 284,030 |
|
|
| 8.86 | % |
Total interest-bearing liabilities |
| $ | 875,278,651 |
|
| $ | 4,956,074 |
|
|
| 2.27 | % |
| $ | 835,132,143 |
|
| $ | 5,096,160 |
|
|
| 2.45 | % |
Noninterest bearing deposits |
|
| 193,247,249 |
|
|
|
|
|
|
|
|
|
|
| 181,445,666 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
| 8,947,041 |
|
|
|
|
|
|
|
|
|
|
| 5,793,166 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 1,077,472,941 |
|
|
|
|
|
|
|
|
|
|
| 1,022,370,975 |
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
| 104,228,772 |
|
|
|
|
|
|
|
|
|
|
| 89,416,802 |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 1,181,701,713 |
|
|
|
|
|
|
|
|
|
| $ | 1,111,787,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
| $ | 10,114,576 |
|
|
|
|
|
|
|
|
|
| $ | 8,265,530 |
|
|
|
|
|
Net interest spread (3) |
|
|
|
|
|
|
|
|
|
| 3.16 | % |
|
|
|
|
|
|
|
|
|
| 2.67 | % |
Net interest margin (4) |
|
|
|
|
|
|
|
|
|
| 3.64 | % |
|
|
|
|
|
|
|
|
|
| 3.17 | % |
(1) | Included in net loans are non-accrual loans with average balances of $8,742,987 and $6,377,110 for the three months ended June 30, 2025 and 2024, respectively. Loans are stated net of unearned discount and ACL, plus loans held-for-sale and include tax-exempt loans to local municipalities with average balances of $68,794,557 and $58,625,102 for the three months ended June 30, 2025 and 2024, respectively. |
|
|
(2) | Included in other investments is the Company’s FHLBB Stock with average balances of $2,356,166 and $2,114,103 for the three months ended June 30, 2025 and 2024, respectively, with a dividend rate of approximately 7.39% and 8.4%, respectively, per quarter. |
|
|
(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. |
| 35 |
| Table of Contents |
|
| Six Months Ended June 30, |
| |||||||||||||||||||||
|
| 2025 |
|
| 2024 |
| ||||||||||||||||||
|
|
|
|
|
| Average |
|
|
|
|
|
| Average |
| ||||||||||
|
| Average |
|
| Income/ |
|
| Yield/ |
|
| Average |
|
| Income/ |
|
| Yield/ |
| ||||||
|
| Balance |
|
| Expense |
|
| Rate |
|
| Balance |
|
| Expense |
|
| Rate |
| ||||||
Average Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, net (1) |
| $ | 935,652,854 |
|
| $ | 27,301,560 |
|
|
| 5.88 | % |
| $ | 855,916,469 |
|
| $ | 24,019,787 |
|
|
| 5.64 | % |
Taxable investment securities |
|
| 151,427,796 |
|
|
| 1,807,276 |
|
|
| 2.41 | % |
|
| 170,916,364 |
|
|
| 1,904,557 |
|
|
| 2.24 | % |
Tax-exempt investment securities |
|
| 10,062,604 |
|
|
| 203,573 |
|
|
| 4.08 | % |
|
| 10,314,582 |
|
|
| 203,573 |
|
|
| 3.97 | % |
Sweep and interest-earning accounts |
|
| 18,157,674 |
|
|
| 393,806 |
|
|
| 4.37 | % |
|
| 5,400,927 |
|
|
| 140,385 |
|
|
| 5.23 | % |
Other investments (2) |
|
| 3,157,144 |
|
|
| 106,485 |
|
|
| 6.80 | % |
|
| 2,714,732 |
|
|
| 105,655 |
|
|
| 7.83 | % |
Total interest-earning assets |
|
| 1,118,458,072 |
|
| $ | 29,812,700 |
|
|
| 5.38 | % |
| $ | 1,045,263,074 |
|
| $ | 26,373,957 |
|
|
| 5.07 | % |
Cash and due from banks |
|
| 10,220,111 |
|
|
|
|
|
|
|
|
|
|
| 10,306,442 |
|
|
|
|
|
|
|
|
|
Premises and equipment |
|
| 12,042,812 |
|
|
|
|
|
|
|
|
|
|
| 12,481,206 |
|
|
|
|
|
|
|
|
|
BOLI |
|
| 5,335,511 |
|
|
|
|
|
|
|
|
|
|
| 5,250,400 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
| 11,574,269 |
|
|
|
|
|
|
|
|
|
|
| 11,574,269 |
|
|
|
|
|
|
|
|
|
Other assets |
|
| 28,088,218 |
|
|
|
|
|
|
|
|
|
|
| 21,877,830 |
|
|
|
|
|
|
|
|
|
Total assets |
| $ | 1,185,718,993 |
|
|
|
|
|
|
|
|
|
| $ | 1,106,753,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction accounts |
| $ | 288,056,314 |
|
| $ | 2,680,558 |
|
|
| 1.88 | % |
| $ | 278,669,658 |
|
| $ | 2,635,415 |
|
|
| 1.90 | % |
Money market funds |
|
| 160,696,720 |
|
|
| 2,022,522 |
|
|
| 2.54 | % |
|
| 122,765,982 |
|
|
| 1,366,838 |
|
|
| 2.24 | % |
Savings deposits |
|
| 142,601,501 |
|
|
| 59,478 |
|
|
| 0.08 | % |
|
| 148,958,173 |
|
|
| 64,055 |
|
|
| 0.09 | % |
Time deposits |
|
| 191,963,068 |
|
|
| 3,395,357 |
|
|
| 3.57 | % |
|
| 138,139,607 |
|
|
| 2,373,699 |
|
|
| 3.46 | % |
Repurchase agreements |
|
| 46,267,496 |
|
|
| 584,016 |
|
|
| 2.55 | % |
|
| 31,275,434 |
|
|
| 376,762 |
|
|
| 2.42 | % |
Borrowed funds |
|
| 36,883,171 |
|
|
| 779,565 |
|
|
| 4.26 | % |
|
| 90,641,242 |
|
|
| 2,181,613 |
|
|
| 4.84 | % |
Finance lease obligations |
|
| 3,130,815 |
|
|
| 36,009 |
|
|
| 2.30 | % |
|
| 3,359,597 |
|
|
| 38,628 |
|
|
| 2.30 | % |
Junior subordinated debentures |
|
| 12,887,000 |
|
|
| 484,758 |
|
|
| 7.59 | % |
|
| 12,887,000 |
|
|
| 560,799 |
|
|
| 8.75 | % |
Total interest-bearing liabilities |
|
| 882,486,085 |
|
| $ | 10,042,263 |
|
|
| 2.29 | % |
|
| 826,696,693 |
|
| $ | 9,597,809 |
|
|
| 2.33 | % |
Noninterest bearing deposits |
|
| 191,995,481 |
|
|
|
|
|
|
|
|
|
|
| 185,401,062 |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
| 9,626,584 |
|
|
|
|
|
|
|
|
|
|
| 5,375,312 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
| 1,084,108,150 |
|
|
|
|
|
|
|
|
|
|
| 1,017,473,067 |
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
| 101,610,843 |
|
|
|
|
|
|
|
|
|
|
| 89,280,154 |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
| $ | 1,185,718,993 |
|
|
|
|
|
|
|
|
|
| $ | 1,106,753,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
| $ | 19,770,437 |
|
|
|
|
|
|
|
|
|
| $ | 16,776,148 |
|
|
|
|
|
Net interest spread (3) |
|
|
|
|
|
|
|
|
|
| 3.09 | % |
|
|
|
|
|
|
|
|
|
| 2.74 | % |
Net interest margin (4) |
|
|
|
|
|
|
|
|
|
| 3.56 | % |
|
|
|
|
|
|
|
|
|
| 3.23 | % |
(1) | Included in net loans are non-accrual loans with average balances of $8,736,815 and $6,450,580 for the six months ended June 30, 2025 and 2024, respectively. Loans are stated net of unearned discount and ACL, and include loans held-for-sale and tax-exempt loans to local municipalities with average balances of $68,549,058 and $57,613,672 for the six months ended June 30, 2025 and 2024, respectively. |
|
|
(2) | Included in other investments is the Company’s FHLBB Stock with average balances of $2,091,994 and $1,649,582, respectively, with a dividend rate of approximately 7.02% and 8.4%, respectively, for the six months ended June 30, 2025 and 2024, 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. |
| 36 |
| Table of Contents |
The average volume of interest-earning assets for the three-and six-month periods ended June 30, 2025 increased 6.2% and 7.0%, respectively, compared to the same periods last year, and the average yield on interest-earning assets increased 31 bps in both periods.
The average volume of loans increased over the three- and six-month comparison periods of 2025 versus 2024 by 8.9% and 9.3%, respectively, and the average yield on loans increased 24 bps in both periods. Loans accounted for 84.5% and 83.7% of the average interest-earning asset portfolio for the three- and six-month periods ended June 30, 2025, compared to 82.4% and 81.9%, respectively, for the same periods last year. Interest earned on the loan portfolio as a percentage of total interest income was 92.2% and 91.6%, respectively, for the three- and six-month periods in 2025 compared to 91.4% and 91.1%, respectively, for the same periods in 2024.
The average volume of the taxable investment portfolio (classified as AFS) decreased 8.1% and 11.4%, respectively, during the three- and six-month periods ended June 30, 2025, compared to the same periods last year, while the average yield increased 23 bps and 17 bps, respectively, between periods. There were purchases of taxable AFS investment securities during the first three months of 2025, however maturities and paydowns on this portfolio in 2024 and into 2025 exceeded purchases during the same time period, accounting for the decrease in average volume year over year.
The average volume of the tax-exempt investment portfolio (classified as AFS) for the three- and six-month periods ended June 30, 2025 decreased 0.2% in both periods, while the tax equivalent yield increased 13 bps and 11 bps, respectively. There were no tax-exempt bond purchases during the first six months of 2025, accounting for the decrease in average volume in this portfolio.
The average volume of sweep and interest-earning accounts, which consists primarily of an interest-bearing account at the FRBB, increased 42.0% and 236.2%, respectively, for the three- and six-months ended June 30, 2025, compared to the same periods in 2024. The average volume grew steadily during the last half of 2024 with the influx of customer deposit accounts, primarily municipal deposit accounts. The average yield on these funds decreased 37 bps and 86 bps, respectively, for the three- and six-month periods ended June 30, 2025, versus the same periods in 2024.
The average volume of interest-bearing liabilities for the three- and six-month periods ended June 30, 2025 increased 4.9% and 6.8%, respectively, compared to the same periods in 2024, while the average rate paid on interest-bearing liabilities decreased 18 bps and four bps, respectively.
The average volume of interest-bearing transaction accounts increased 3.9% and 3.4%, respectively, for the three- and six-month periods ended June 30, 2025, compared to the same periods of 2024, reflecting moderate growth year over year. The average rate paid on these accounts decreased three bps and two bps, respectively, between comparison periods. Interest-bearing transaction accounts comprised 32.0% and 32.6% of the average interest-bearing liabilities portfolio for the three- and six-month periods ended June 30, 2025, compared to 32.3% and 33.7%, respectively, for the same periods last year. Interest paid on these funds accounted for 26.2% and 26.7%, respectively, of total interest expense for the three- and six-month periods of 2025 compared to 24.9% and 27.5%, respectively, for the same periods in 2024.
The average volume of money market accounts increased 24.9% and 30.9%, respectively, for the three- and six-month periods ended June 30, 2025, compared to the same periods in 2024, while the average rate paid on these deposits increased seven bps and 30 bps, respectively.
The average volume of savings accounts decreased 3.3% and 4.3%, respectively, for the three- and six-month periods ended June 30, 2025, compared to the same periods in 2024. There was no change in the average rate paid on these accounts in the three-month period ended June 30, 2025 compared to 2024, while the average rate paid on these accounts decreased one bp in the six-month period ended June 30, 2025 compared to 2024.
The average volume of time deposits increased 33.7% and 39.0%, respectively, for the three- and six-month periods ended June 30, 2025, compared to the same periods in 2024, and the average rate paid decreased 17 bps and increased 11 bps, respectively.
The average volume of repurchase agreements increased 60.1% and 47.9%, respectively, for the three- and six-month periods ended June 30, 2025, compared to the same periods in 2024, and the average rate paid increased 10 bps and 13 bps, respectively, between comparison periods.
The Company utilized borrowed funds to fund loan growth and cover deposit outflows during 2023 and into the first and second quarters of 2024, but as deposit accounts began to increase, the need for these funds decreased, accounting for the 60.5% and 59.3% decrease in average volume of borrowed funds during the three- and six-month periods ended June 30, 2025, respectively, compared to the same periods in 2024. The average rate paid on borrowed funds decreased as well by 69 bps and 58 bps for the three- and six-month periods ended June 30, 2025, respectively, compared to the same periods in 2024.
| 37 |
| Table of Contents |
In summary, between the three- and six-month periods ended June 30, 2025 and 2024, the average yield on interest-earning assets increased 31 bps in both periods and the average rate paid on interest-bearing liabilities decreased 18 bps and four bps, respectively. Net interest spread increased 49 bps and 35 bps, respectively, for the three- and six-month periods ended June 30, 2025 versus the same periods in 2024, and the net interest margin increased 47 bps and 34 bps, respectively.
The following table summarizes the variances in interest income and interest expense on a fully tax-equivalent basis for the interim periods presented for 2025 and 2024 resulting from volume changes in daily average assets and daily average liabilities and fluctuations in average rates earned and paid.
|
| Three Months Ended June 30, 2025 |
|
| Six Months Ended June 30, 2025 |
| ||||||||||||||||||
|
| Compared to |
|
| Compared to |
| ||||||||||||||||||
|
| Three Months Ended June 30, 2024 |
|
| Six Months Ended June 30, 2024 |
| ||||||||||||||||||
|
| 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 |
| $ | 599,968 |
|
| $ | 1,080,423 |
|
| $ | 1,680,391 |
|
| $ | 1,045,494 |
|
| $ | 2,236,279 |
|
| $ | 3,281,773 |
|
Taxable investment securities |
|
| 98,797 |
|
|
| (82,958 | ) |
|
| 15,839 |
|
|
| 135,626 |
|
|
| (232,907 | ) |
|
| (97,281 | ) |
Tax-exempt investment securities |
|
| 3,712 |
|
|
| (3,712 | ) |
|
| 0 |
|
|
| 5,098 |
|
|
| (5,098 | ) |
|
| 0 |
|
Sweep and interest-earning accounts |
|
| (5,444 | ) |
|
| 22,849 |
|
|
| 17,405 |
|
|
| (78,345 | ) |
|
| 331,766 |
|
|
| 253,421 |
|
Other investments |
|
| (9,490 | ) |
|
| 4,815 |
|
|
| (4,675 | ) |
|
| (16,396 | ) |
|
| 17,226 |
|
|
| 830 |
|
Total |
| $ | 687,543 |
|
| $ | 1,021,417 |
|
| $ | 1,708,960 |
|
| $ | 1,091,477 |
|
| $ | 2,347,266 |
|
| $ | 3,438,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Interest-Bearing Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction accounts |
| $ | (18,474 | ) |
| $ | 49,655 |
|
| $ | 31,181 |
|
| $ | (43,543 | ) |
| $ | 88,686 |
|
| $ | 45,143 |
|
Money market funds |
|
| 31,654 |
|
|
| 183,463 |
|
|
| 215,117 |
|
|
| 233,181 |
|
|
| 422,503 |
|
|
| 655,684 |
|
Savings deposits |
|
| (750 | ) |
|
| (1,095 | ) |
|
| (1,845 | ) |
|
| (2,055 | ) |
|
| (2,522 | ) |
|
| (4,577 | ) |
Time deposits |
|
| (77,846 | ) |
|
| 445,566 |
|
|
| 367,720 |
|
|
| 95,600 |
|
|
| 926,058 |
|
|
| 1,021,658 |
|
Repurchase agreements |
|
| 13,155 |
|
|
| 107,031 |
|
|
| 120,186 |
|
|
| 26,841 |
|
|
| 180,413 |
|
|
| 207,254 |
|
Borrowed funds |
|
| (175,649 | ) |
|
| (652,865 | ) |
|
| (828,514 | ) |
|
| (266,412 | ) |
|
| (1,135,636 | ) |
|
| (1,402,048 | ) |
Finance lease obligations |
|
| 5 |
|
|
| (1,319 | ) |
|
| (1,314 | ) |
|
| (10 | ) |
|
| (2,609 | ) |
|
| (2,619 | ) |
Junior subordinated debentures |
|
| (42,617 | ) |
|
| 0 |
|
|
| (42,617 | ) |
|
| (76,041 | ) |
|
| 0 |
|
|
| (76,041 | ) |
Total |
| $ | (270,522 | ) |
| $ | 130,436 |
|
| $ | (140,086 | ) |
| $ | (32,439 | ) |
| $ | 476,893 |
|
| $ | 444,454 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net interest income |
| $ | 958,065 |
|
| $ | 890,981 |
|
| $ | 1,849,046 |
|
| $ | 1,123,916 |
|
| $ | 1,870,373 |
|
| $ | 2,994,289 |
|
(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
| 38 |
| Table of Contents |
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Non-interest Income
The components of non-interest income for the periods presented were as follows:
|
| Three Months Ended |
|
|
|
|
|
|
|
| Six Months Ended |
|
|
|
|
|
|
| ||||||||||||||
|
| June 30, |
|
| Change |
|
| June 30, |
|
| Change |
| ||||||||||||||||||||
|
| 2025 |
|
| 2024 |
|
| Income |
|
| Percent |
|
| 2025 |
|
| 2024 |
|
| Income |
|
| Percent |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Service fees |
| $ | 969,775 |
|
| $ | 964,181 |
|
| $ | 5,594 |
|
|
| 0.58 | % |
| $ | 1,856,557 |
|
| $ | 1,862,101 |
|
| $ | (5,544 | ) |
|
| -0.30 | % |
Income from sold loans |
|
| 96,705 |
|
|
| 98,469 |
|
|
| (1,764 | ) |
|
| -1.79 | % |
|
| 166,082 |
|
|
| 177,573 |
|
|
| (11,491 | ) |
|
| -6.47 | % |
Other income from loans |
|
| 331,759 |
|
|
| 278,223 |
|
|
| 53,536 |
|
|
| 19.24 | % |
|
| 601,927 |
|
|
| 532,824 |
|
|
| 69,103 |
|
|
| 12.97 | % |
Other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CFS Partners |
|
| 548,308 |
|
|
| 328,598 |
|
|
| 219,710 |
|
|
| 66.86 | % |
|
| 797,658 |
|
|
| 622,925 |
|
|
| 174,733 |
|
|
| 28.05 | % |
Other miscellaneous income |
|
| 112,164 |
|
|
| 102,946 |
|
|
| 9,218 |
|
|
| 8.95 | % |
|
| 215,096 |
|
|
| 210,901 |
|
|
| 4,195 |
|
|
| 1.99 | % |
Total non-interest income |
| $ | 2,058,711 |
|
| $ | 1,772,417 |
|
| $ | 286,294 |
|
|
| 16.15 | % |
| $ | 3,637,320 |
|
| $ | 3,406,324 |
|
| $ | 230,996 |
|
|
| 6.78 | % |
Total non-interest income increased $286,294, or 16.2%, and $230,996 or 6.8%, respectively, for the three and six months ended June 30, 2025, compared to the same periods in 2024, with significant changes noted in the following:
| · | The volume of loans sold into the secondary market during the first six months of 2025 decreased by $171 thousand compared to the same period last year, accounting for the decrease in income from sold loans between periods. |
|
|
|
| · | Increases in Commercial LOC annual renewal fees and residential doc fees amounting to $50 thousand and $14 thousand, respectively, account for the moderate increase in other income from loans year over year. |
|
|
|
| · | Income from CFS Partners increased between periods due in part to a strong equity market and successful retention of managed accounts, as well as an increase, commencing March 1, 2025, in the Company’s share of CFSG’s net income from 33.3% to 50%. CFSG’s income is derived primarily from asset-based fees on managed accounts and in addition, CFS Partners has a small portion of its equity capital invested in the stock market, with performance generally reflecting stock market conditions. |
| 39 |
| Table of Contents |
Non-interest Expense
The components of non-interest expense for the periods presented were as follows:
|
| Three Months Ended |
|
|
|
|
|
| Six Months Ended |
|
|
|
|
| ||||||||||||||||||
|
| June 30, |
|
| Change |
|
| June 30, |
|
| Change |
| ||||||||||||||||||||
|
| 2025 |
|
| 2024 |
|
| Expense |
|
| Percent |
|
| 2025 |
|
| 2024 |
|
| Expense |
|
| Percent |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Salaries and wages |
| $ | 2,392,661 |
|
| $ | 2,288,000 |
|
| $ | 104,661 |
|
|
| 4.57 | % |
| $ | 4,712,727 |
|
| $ | 4,746,000 |
|
| $ | (33,273 | ) |
|
| -0.70 | % |
Employee benefits |
|
| 1,056,273 |
|
|
| 954,154 |
|
|
| 102,119 |
|
|
| 10.70 | % |
|
| 2,074,245 |
|
|
| 1,853,390 |
|
|
| 220,855 |
|
|
| 11.92 | % |
Occupancy expenses, net |
|
| 794,451 |
|
|
| 694,230 |
|
|
| 100,221 |
|
|
| 14.44 | % |
|
| 1,576,307 |
|
|
| 1,416,733 |
|
|
| 159,574 |
|
|
| 11.26 | % |
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged-off checks |
|
| 563 |
|
|
| 5,471 |
|
|
| (4,908 | ) |
|
| -89.71 | % |
|
| (44,950 | ) |
|
| 39,527 |
|
|
| (84,477 | ) |
|
| -213.72 | % |
Outsourcing expense |
|
| 71,243 |
|
|
| 145,503 |
|
|
| (74,260 | ) |
|
| -51.04 | % |
|
| 187,872 |
|
|
| 285,889 |
|
|
| (98,017 | ) |
|
| -34.28 | % |
Service contracts - administrative |
|
| 184,260 |
|
|
| 201,875 |
|
|
| (17,615 | ) |
|
| -8.73 | % |
|
| 406,331 |
|
|
| 384,639 |
|
|
| 21,692 |
|
|
| 5.64 | % |
Consultant services |
|
| 91,241 |
|
|
| 59,709 |
|
|
| 31,532 |
|
|
| 52.81 | % |
|
| 182,990 |
|
|
| 119,418 |
|
|
| 63,572 |
|
|
| 53.23 | % |
FDIC insurance |
|
| 146,714 |
|
|
| 140,531 |
|
|
| 6,183 |
|
|
| 4.40 | % |
|
| 344,674 |
|
|
| 296,637 |
|
|
| 48,037 |
|
|
| 16.19 | % |
Collection & non-accruing loan expense |
|
| 5,000 |
|
|
| 90,500 |
|
|
| (85,500 | ) |
|
| -94.48 | % |
|
| 7,000 |
|
|
| 138,500 |
|
|
| (131,500 | ) |
|
| -94.95 | % |
ATM & debit card expense |
|
| 193,358 |
|
|
| 174,727 |
|
|
| 18,631 |
|
|
| 10.66 | % |
|
| 374,766 |
|
|
| 339,333 |
|
|
| 35,433 |
|
|
| 10.44 | % |
State deposit tax |
|
| 270,767 |
|
|
| 255,222 |
|
|
| 15,545 |
|
|
| 6.09 | % |
|
| 534,341 |
|
|
| 510,752 |
|
|
| 23,589 |
|
|
| 4.62 | % |
Other miscellaneous expenses |
|
| 1,460,869 |
|
|
| 1,261,649 |
|
|
| 199,220 |
|
|
| 15.79 | % |
|
| 2,814,707 |
|
|
| 2,440,898 |
|
|
| 373,809 |
|
|
| 15.31 | % |
Total non-interest expense |
| $ | 6,667,400 |
|
| $ | 6,271,571 |
|
| $ | 395,829 |
|
|
| 6.31 | % |
| $ | 13,171,010 |
|
| $ | 12,571,716 |
|
| $ | 599,294 |
|
|
| 4.77 | % |
Total non-interest expense increased $395,829, or 6.3%, and $599,294 or 4.8%, for the three and six months ended June 30, 2025, compared to the same periods in 2024, with significant changes noted in the following:
| · | Although an increase is noted in salaries and wages for the second quarter of 2025, a decrease is noted year over year which reflects changes in senior leadership as well as unfilled positions in 2025. |
|
|
|
| · | 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 occupancy expense year over year is primarily due to normal increases in contracted services, including increased expenses for plowing and sanding during the winter months as well as increases in maintenance on buildings. |
|
|
|
| · | The Company received a recovery for a $53 thousand fraudulent check during the first quarter of 2025 that was charged off in 2024, accounting for most of the decrease in charged-off checks year over year. |
|
|
|
| · | The decrease in outsourcing expense is attributable to a renegotiated contract from the Company’s core provider. |
|
|
|
| · | The year over year increase in service contracts - administrative is due to a combination of new contracts, an increase in transaction-based pricing for certain contracts, and contractual inflationary adjustment factors that are higher than historical increase adjustments. The quarter over quarter decrease is due to the timing of credits from a vendor to correct prior year invoices. |
|
|
|
| · | The increase in FDIC insurance is attributable to an increase in the assessment multiplier. |
|
|
|
| · | The increase in consultant services is attributable to an increased utilization of these services for branch network and technology projects during 2025. |
|
|
|
| · | Collection & non-accruing loan expenses were lower year over year due to the recovery of expenses associated with properties in foreclosure that were resolved. |
|
|
|
| · | ATM & debit card expenses are transaction-based and reflect increased customer activity year over year, as well as annual contractual price adjustments. |
|
|
|
| · | The increase in state deposit tax is attributable to an increase in average deposits which is used in the calculation of taxes due. |
| 40 |
| Table of Contents |
APPLICABLE INCOME TAXES
The provision for income taxes increased $276,660, or 51.0%, for the second quarter of 2025 and $384,544, or 35.0%, for the first six months of 2025 compared to the same periods in 2024, which is consistent with the increase in income before income taxes. Tax credits, which consist of credits from affordable housing investments and NMTC, amounted to $249,612 and $174,612, for the second quarter of 2025 and 2024, and $499,224 and $349,224, respectively, for the first six months of 2025 and 2024. The Company’s investment in a project during the last quarter of 2024 generated NMTC for that quarter and for the six months of 2025, accounting for the increase in tax credits between comparison periods.
Amortization expense related to the affordable housing investments and NMTC is included as a component of income tax expense and amounted to $148,890 and $149,202, for the second quarter of 2025 and 2024 and $297,780 and $298,404, respectively, for the first six months of 2025 and 2024. These investments provide tax benefits, including tax credits, and are designed to provide a targeted effective annual yield between 5% and 7%.
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 of the balance sheet dates:
|
| June 30, 2025 |
|
| December 31, 2024 |
| ||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans |
| $ | 941,762,995 |
|
|
| 80.73 | % |
| $ | 927,940,805 |
|
|
| 74.30 | % |
AFS securities |
|
| 158,882,445 |
|
|
| 13.62 | % |
|
| 159,697,420 |
|
|
| 12.79 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits |
|
| 201,784,574 |
|
|
| 17.30 | % |
|
| 197,697,470 |
|
|
| 15.83 | % |
Interest-bearing transaction accounts |
|
| 260,019,923 |
|
|
| 22.29 | % |
|
| 304,212,085 |
|
|
| 24.36 | % |
Money market funds |
|
| 130,403,424 |
|
|
| 11.18 | % |
|
| 169,533,067 |
|
|
| 13.57 | % |
Savings deposits |
|
| 143,344,871 |
|
|
| 12.29 | % |
|
| 142,925,828 |
|
|
| 11.44 | % |
Time deposits |
|
| 197,413,067 |
|
|
| 16.92 | % |
|
| 187,276,308 |
|
|
| 14.99 | % |
Overnight borrowings |
|
| 19,700,000 |
|
|
| 1.69 | % |
|
| 0 |
|
|
| 0.00 | % |
Long-term advances |
|
| 36,100,000 |
|
|
| 3.09 | % |
|
| 72,600,000 |
|
|
| 5.81 | % |
The following table reflects the changes in the composition of the Company's major categories of assets and liabilities between the balance sheet dates, as disclosed in the table above:
|
| Volume Change |
|
| Percentage |
| ||
Assets |
|
|
|
|
|
| ||
Loans |
| $ | 13,822,190 |
|
|
| 1.49 | % |
AFS securities |
|
| (814,975 | ) |
|
| -0.51 | % |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Demand deposits |
|
| 4,087,104 |
|
|
| 2.07 | % |
Interest-bearing transaction accounts |
|
| (44,192,162 | ) |
|
| -14.53 | % |
Money market funds |
|
| (39,129,643 | ) |
|
| -23.08 | % |
Savings deposits |
|
| 419,043 |
|
|
| 0.29 | % |
Time deposits |
|
| 10,136,759 |
|
|
| 5.41 | % |
Overnight borrowings |
|
| 19,700,000 |
|
|
| 100.00 | % |
Long-term advances |
|
| (36,500,000 | ) |
|
| -50.28 | % |
The increase in the loan portfolio during the first six months of 2025 was primarily attributable to increases in CRE loans, and residential real estate 1st lien loans.
The decrease in the securities AFS portfolio at June 30, 2025 is attributable to the combined effect during the first six months of the year of purchases totaling $17.1 million and a decrease of $4.2 million in unrealized losses reflected in OCI, which was more than offset by maturities of $11.3 million and principal payments on MBS, ABS and CMO investments totaling $9.9 million. In management’s view, the size of the AFS securities portfolio is appropriate and proportional to the overall asset base, as this portfolio serves a significant role in the Company’s liquidity position.
| 41 |
| Table of Contents |
The decrease in interest-bearing transactions accounts at June 30, 2025 from year end 2024 is attributable to a cyclical decrease of $15.8 million, or 36.8% in government agency accounts for our municipal customers, a decrease of $17.4 million or 15.9%, in ICS accounts, and a decrease of $11.0 million, or 10.2% in retail deposit accounts. The decrease in money market accounts was driven by a decrease of $36.9 million, or 83.1%, in ICS accounts, and a decrease in retail money market accounts of $862 thousand, or 0.7%, as well as a decrease in municipal money market deposits of $1.4 million, or 33.8%. The increase in time deposits is attributable to an increase in brokered time deposits. In addition to the brokered time deposits, the Company used overnight deposits to cover maturities in borrowed funds during the first six months of 2025 and used those funds to cover fluctuations in aggregate deposits during the same period, enabling the Company to rely less on other sources of funding.
Uninsured Deposits
Estimated deposits in excess of the FDIC insurance level amounted to $228.3 million as of June 30, 2025 and $258.0 million as of December 31, 2024. The estimated balance of $41.1 million of uninsured time deposits as of June 30, 2025 was made up of time CDs of $37.4 million and retirement accounts of $3.7 million. Increments of maturity of these time deposits are summarized as follows:
3 months or less |
| $ | 21,693,586 |
|
Over 3 through 6 months |
|
| 14,988,138 |
|
Over 6 through 12 months |
|
| 4,423,326 |
|
Total |
| $ | 41,105,050 |
|
Interest Rate Risk and Asset and Liability Management - Management actively monitors and manages the Company’s interest rate risk exposure and attempts to structure the balance sheet to maximize net interest income while controlling its exposure to interest rate risk. The Company's ALCO is made up of the Executive Officers and certain Vice Presidents of the Bank representing major business lines. The ALCO formulates strategies to manage interest rate risk by evaluating the impact on earnings and capital of such factors as current interest rate forecasts and economic indicators, potential changes in such forecasts and indicators, liquidity and various business strategies. The ALCO meets at least quarterly to review financial statements, liquidity levels, yields and spreads to better understand, measure, monitor and control the Company’s interest rate risk. In the ALCO process, the committee members apply policy limits set forth in the Asset Liability, Liquidity and Investment policies approved and periodically reviewed by the Company’s Board of Directors (together the ”ALCO Policy”). The ALCO's methods for evaluating interest rate risk include an analysis of the effects of interest rate changes on net interest income and an analysis of the Company's interest rate sensitivity "gap", which provides a static analysis of the maturity and repricing characteristics of the entire balance sheet. The ALCO Policy also includes a contingency funding plan to help management prepare for unforeseen liquidity restrictions, including hypothetical severe liquidity crises.
Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change, the interest income and expense streams associated with the Company’s financial instruments also change, thereby impacting NII, the primary component of the Company’s earnings. Fluctuations in interest rates can also have an impact on liquidity. The ALCO uses an outside consultant to perform rate shock simulations to the Company's net interest income, as well as a variety of other analyses. It is 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 sustain 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, including an inverted 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 bp shift upward and a 100 bp shift downward in interest rates.
Under the Company’s interest rate sensitivity modeling, in a rising rate environment NII initially trends upward as the short-term asset base (cash and adjustable-rate loans) quickly cycles upward while the retail funding base (deposits) lags the market. If rates paid on deposits must be increased more and/or more quickly than projected due to competitive pressures, the expected benefit of 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.
| 42 |
| Table of Contents |
The following table summarizes the estimated impact on the Company's NII over a twelve-month period, assuming a gradual parallel shift of the yield curve beginning June 30, 2025:
Rate Change |
| Percent Change in NII |
| |
|
|
|
| |
Down 100 bps |
|
| 0.2 | % |
Up 200 bps |
|
| -3.5 | % |
The estimated amounts shown in the table above are 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 June 30, 2025, the Company had $12,887,000 in principal amount of Junior Subordinated Debentures due December 15, 2037, which 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%. The quarterly floating rate in effect on the debentures was 7.41% for the June 2025 payment, compared to a floating rate of 8.44% for the June 2024 payment.
Credit Risk - As a financial institution, one of the primary risks the Company manages is credit risk, the risk of loss stemming from borrowers’ failure to repay loans or inability to meet other contractual obligations. The Company’s Board of Directors prescribes policies for managing credit risk, including Loan, Appraisal and Environmental policies. These policies are supplemented by comprehensive underwriting standards and procedures. The Company maintains a Credit Administration department whose function includes credit analysis and monitoring of and reporting on the status of the loan portfolio, including delinquent and non-performing loan trends. The Company also monitors concentration of credit risk in a variety of areas, including portfolio mix, the level of loans to individual borrowers and their related interests, loans to industry segments, and the geographic distribution of commercial real estate loans. Loans are reviewed periodically by an independent loan review firm to help ensure accuracy of the Company's internal risk ratings and compliance with various internal policies, procedures and regulatory guidance.
Residential mortgage loans represented 28.2% of the Company’s loan balances as of June 30, 2025, compared to 27.4% as of December 31, 2024. The Company maintains a residential mortgage loan portfolio of traditional mortgage products and does not offer higher risk loan products, such as option adjustable-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-value ratios exceeding 80% are generally covered by 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. As of June 30, 2025, junior lien home equity products made up 14.4% of the residential mortgage portfolio with maximum loan-to-value ratios (including prior liens) of 80%. The Company also originates some home equity loans with loan-to-value ratios greater than 80% under an insured loan program with stringent underwriting criteria.
| 43 |
| Table of Contents |
The following tables show the estimated maturities within the Company’s loan portfolio as of June 30, 2025.
|
| Fixed Rate Loans |
| |||||||||||||||||
|
| Within |
|
| 2 - 5 |
|
| 6 - 15 |
|
| Over |
|
|
| ||||||
|
| 1 Year |
|
| Years |
|
| Years |
|
| 15 Years |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & industrial |
| $ | 4,868,092 |
|
| $ | 27,007,486 |
|
| $ | 26,695,700 |
|
| $ | 0 |
|
| $ | 58,571,278 |
|
Purchased (1) |
|
| 6,348 |
|
|
| 3,148,348 |
|
|
| 8,412,056 |
|
|
| 0 |
|
|
| 11,566,752 |
|
Commercial real estate |
|
| 15,756,215 |
|
|
| 8,460,478 |
|
|
| 17,867,147 |
|
|
| 1,159,603 |
|
|
| 43,243,443 |
|
Municipal |
|
| 20,242,880 |
|
|
| 4,288,033 |
|
|
| 5,403,270 |
|
|
| 0 |
|
|
| 29,934,183 |
|
Residential real estate - 1st lien |
|
| 296,364 |
|
|
| 2,637,506 |
|
|
| 22,597,527 |
|
|
| 58,884,238 |
|
|
| 84,415,635 |
|
Residential real estate - Jr lien |
|
| 64,364 |
|
|
| 414,764 |
|
|
| 4,168,050 |
|
|
| 62,428 |
|
|
| 4,709,606 |
|
Consumer |
|
| 492,588 |
|
|
| 2,028,902 |
|
|
| 25,694 |
|
|
| 0 |
|
|
| 2,547,184 |
|
Total Loans |
| $ | 41,726,851 |
|
| $ | 47,985,517 |
|
| $ | 85,169,444 |
|
| $ | 60,106,269 |
|
| $ | 234,988,081 |
|
|
| Variable Rate Loans |
| |||||||||||||||||
|
| Within |
|
| 2 - 5 |
|
| 6 - 15 |
|
| Over |
|
|
| ||||||
|
| 1 Year |
|
| Years |
|
| Years |
|
| 15 Years |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & industrial |
| $ | 25,524,272 |
|
| $ | 28,989,084 |
|
| $ | 8,804,139 |
|
| $ | 6,269,111 |
|
| $ | 69,586,606 |
|
Commercial real estate |
|
| 2,515,318 |
|
|
| 5,414,308 |
|
|
| 115,312,946 |
|
|
| 324,507,200 |
|
|
| 447,749,772 |
|
Municipal |
|
| 0 |
|
|
| 0 |
|
|
| 9,347,535 |
|
|
| 3,129,595 |
|
|
| 12,477,130 |
|
Residential real estate - 1st lien |
|
| 419,955 |
|
|
| 3,183,102 |
|
|
| 16,745,979 |
|
|
| 122,750,935 |
|
|
| 143,099,971 |
|
Residential real estate - Jr lien |
|
| 846,101 |
|
|
| 515,635 |
|
|
| 12,780,917 |
|
|
| 19,304,874 |
|
|
| 33,447,527 |
|
Consumer |
|
| 56,961 |
|
|
| 171,276 |
|
|
| 185,671 |
|
|
| 0 |
|
|
| 413,908 |
|
Total Loans |
| $ | 29,362,607 |
|
| $ | 38,273,405 |
|
| $ | 163,177,187 |
|
| $ | 475,961,715 |
|
| $ | 706,774,914 |
|
(1) | Consists of commercial loans totaling $6 thousand within 1 year; $2.9 million in 2 – 5 years and $526 thousand in 6 – 15 years and consumer loans of $0, $186 thousand and $7.9 million in those maturity categories, respectively. |
The Company experienced solid growth in the CRE loan portfolios, which is consistent with its strategic focus on commercial lending. Commercial & industrial, purchased, CRE and municipal loans collectively comprised 71.5% of the Company’s loan portfolio as of June 30, 2025, compared to 72.3% as of December 31, 2024. The largest components of the CRE portfolio were $131.5 million in owner-occupied CRE and $165.1 million in non-owner occupied CRE as of June 30, 2025, compared to $125.5 million and 154.6 million, respectively, as of December 31, 2024.
Risk in the Company’s commercial & industrial and CRE loan portfolios is mitigated in part by government guarantees issued by federal agencies such as the SBA and RD. As of June 30, 2025, the Company had $28.1 million in guaranteed loans with guaranteed balances of $19.1 million, compared to $25.5 million in guaranteed loans with guaranteed balances of $17.2 million as of December 31, 2024. PPP loans with outstanding balances of $24 thousand as of June 30, 2025, and $43 thousand as of December 31, 2024, are included in these totals, all of which carry a 100% guarantee through the SBA, subject to borrower eligibility requirements.
The Company works actively with customers early in the delinquency process to help them to avoid default and foreclosure. Commercial & industrial and CRE loans are generally placed on non-accrual status when there is deterioration in the financial position of the borrower, payment in full of principal and interest is not expected, and/or principal or interest has been in default for 90 days or more. However, such a loan need not be placed on non-accrual status if it is both well secured and in the process of collection. Residential mortgages and home equity loans are considered for non-accrual status at 90 days past due and are evaluated on a case-by-case basis. The Company obtains current property appraisals or market value analyses and considers the cost to carry and sell collateral 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 loans are generally applied as a reduction of the loan book balance.
| 44 |
| Table of Contents |
Credit loss expense
The credit loss expense was made up of the following components for the periods indicated:
Three Months Ended |
| June 30, |
|
| Change |
| ||||||||||
|
| 2025 |
|
| 2024 |
|
| $ |
|
| % |
| ||||
Credit loss expense - loans |
| $ | 394,622 |
|
| $ | 351,921 |
|
| $ | 42,701 |
|
|
| 12.13 | % |
Credit loss expense (reversal) - OBS credit exposure |
|
| 12,424 |
|
|
| (20,339 | ) |
|
| 32,763 |
|
|
| -161.08 | % |
Credit loss expense |
| $ | 407,046 |
|
| $ | 331,582 |
|
| $ | 75,464 |
|
|
| 22.76 | % |
Six Months Ended |
| June 30, |
|
| Change |
| ||||||||||
|
| 2025 |
|
| 2024 |
|
| $ |
|
| % |
| ||||
Credit loss expense - loans |
| $ | 813,496 |
|
| $ | 669,721 |
|
| $ | 143,775 |
|
|
| 21.47 | % |
Credit loss reversal - OBS credit exposure |
|
| (81,396 | ) |
|
| (24,560 | ) |
|
| (56,836 | ) |
|
| 231.42 | % |
Credit loss expense |
| $ | 732,100 |
|
| $ | 645,161 |
|
| $ | 86,939 |
|
|
| 13.48 | % |
The increase in the credit loss expense on loans in both periods of 2025 compared to the same periods of 2024, was due in part to changes in the economic forecast, prepayments speeds, loan curtailments and adjustments to certain qualitative factors used in the model, as well as an increase in the volume of the loan portfolio. The increase in the OBS credit exposure for the three months ended June 30, 2025 is attributable to an increase in unfunded loan commitments under contract and the decrease in the six months ended June 30, 2025 is attributable to a decrease in unfunded loan commitments under contract.
ACL and provisions –The Company’s ACL policy provides guidance in maintaining an adequate methodology for establishing, estimating, and maintaining allowances for credit losses under ASC 326. The policy creates a measurement model to establish a proper ACL based on current expected credit losses rather than losses incurred.
The Company maintains an ACL at a level that management believes is appropriate to absorb losses inherent in the loan portfolio as of the measurement date (See Note 5 of the accompanying unaudited interim consolidated financial statements). Although the Company, in establishing the ACL, considers the expected inherent losses in individual loans and pools of loans, the ACL is a general reserve available to absorb all credit losses in the loan portfolio. No part of the ACL is segregated to absorb losses from any loan or segment of loans.
When establishing the ACL each quarter, the Company applies a combination of significant key assumptions and methodologies, as discussed in the ACL section under Critical Accounting Policies in this MD&A and presented in Note 5 of the accompanying unaudited interim consolidated financial statements.
The following table summarizes the Company’s credit risk ratios for the balance sheet dates presented:
|
| June 30, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
ACL to total loans outstanding |
|
| 1.12 | % |
|
| 1.06 | % |
ACL |
| $ | 10,549,531 |
|
| $ | 9,810,212 |
|
Loans outstanding |
| $ | 941,762,995 |
|
| $ | 927,940,805 |
|
|
|
|
|
|
|
|
|
|
Non-accruing loans to loans outstanding |
|
| 0.92 | % |
|
| 0.90 | % |
Non-accruing loans |
| $ | 8,674,342 |
|
| $ | 8,338,166 |
|
Loans outstanding |
| $ | 941,762,995 |
|
| $ | 927,940,805 |
|
|
|
|
|
|
|
|
|
|
ACL to non-accruing loans |
|
| 121.62 | % |
|
| 117.65 | % |
ACL |
| $ | 10,549,531 |
|
| $ | 9,810,212 |
|
Non-accruing loans |
| $ | 8,674,342 |
|
| $ | 8,338,166 |
|
| 45 |
| Table of Contents |
The following table shows the breakdown of the ACL by loan segment and the percentage of loans in each category to total loans in the respective portfolios at the date indicated:
|
| June 30, 2025 |
|
| December 31, 2024 |
| ||||||||||
|
| Amount |
|
| Percent |
|
| Amount |
|
| Percent |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial & industrial |
| $ | 697,125 |
|
|
| 13.61 | % |
| $ | 727,488 |
|
|
| 13.37 | % |
Purchased |
|
| 32,580 |
|
|
| 1.23 | % |
|
| 22,415 |
|
|
| 0.84 | % |
Commercial real estate |
|
| 6,760,034 |
|
|
| 52.14 | % |
|
| 6,487,700 |
|
|
| 50.88 | % |
Municipal |
|
| 106,028 |
|
|
| 4.50 | % |
|
| 167,719 |
|
|
| 7.23 | % |
Residential real estate - 1st lien |
|
| 2,602,099 |
|
|
| 24.16 | % |
|
| 2,087,034 |
|
|
| 23.50 | % |
Residential real estate - Jr lien |
|
| 326,582 |
|
|
| 4.05 | % |
|
| 291,239 |
|
|
| 3.85 | % |
Consumer |
|
| 25,083 |
|
|
| 0.31 | % |
|
| 26,617 |
|
|
| 0.33 | % |
Total |
| $ | 10,549,531 |
|
|
| 100.00 | % |
| $ | 9,810,212 |
|
|
| 100.00 | % |
The second quarter ACL analysis indicated that the reserve balance of $10.5 million as of June 30, 2025, was sufficient to cover expected credit losses that are probable and estimable as of the measurement date. Included in the ACL calculation for the second quarter of 2025 are adjustments to certain qualitative factors made by management, including a decrease in the risk status of the qualitative factors for loan review in the commercial and CRE segments to reflect the strong loan review system that is in place, as discussed in Note 5 of the accompanying unaudited interim consolidated financial statements.
Management believes that the quantitative calculation adequately captures the risk in these areas, and that the reserve balance continues to be directionally consistent with the overall risk profile of the Company’s loan portfolio and credit risk appetite. While the ACL is described as consisting of separate allocated portions, the entire ACL is available to support loan losses, regardless of category. Management’s assessment of the adequacy of the ACL is presented to the full Board for approval quarterly.
| 46 |
| Table of Contents |
Net charge-offs during the periods presented to average loans outstanding were as follows:
For the Six Months Ended June 30, |
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
Commercial & industrial |
|
| -0.02 | % |
|
| -0.08 | % |
Net charge-offs during the period |
| $ | (23,104 | ) |
| $ | (107,450 | ) |
Average amount outstanding |
| $ | 124,770,912 |
|
| $ | 126,491,436 |
|
|
|
|
|
|
|
|
|
|
Purchased |
|
| 0.00 | % |
|
| 0.00 | % |
Net charge-offs during the period |
| $ | 0 |
|
| $ | 0 |
|
Average amount outstanding |
| $ | 9,558,456 |
|
| $ | 9,994,314 |
|
|
|
|
|
|
|
|
|
|
Commercial real estate |
|
| 0.00 | % |
|
| -0.01 | % |
Net charge-offs during the period |
| $ | 0 |
|
| $ | (45,393 | ) |
Average amount outstanding |
| $ | 479,691,041 |
|
| $ | 427,244,969 |
|
|
|
|
|
|
|
|
|
|
Municipal |
|
| 0.00 | % |
|
| 0.00 | % |
Net charge-offs during the period |
| $ | 0 |
|
| $ | 0 |
|
Average amount outstanding |
| $ | 68,549,058 |
|
| $ | 57,613,672 |
|
|
|
|
|
|
|
|
|
|
Residential real estate - 1st lien |
|
| 0.00 | % |
|
| 0.00 | % |
Net recoveries during the period |
| $ | 219 |
|
| $ | 0 |
|
Average amount outstanding |
| $ | 223,510,841 |
|
| $ | 209,128,975 |
|
|
|
|
|
|
|
|
|
|
Residential real estate - Jr lien |
|
| 0.00 | % |
|
| 0.01 | % |
Net recoveries during the period |
| $ | 0 |
|
| $ | 2,415 |
|
Average amount outstanding |
| $ | 36,512,026 |
|
| $ | 31,625,031 |
|
|
|
|
|
|
|
|
|
|
Consumer |
|
| -2.13 | % |
|
| -0.81 | % |
Net charge-offs during the period |
| $ | (51,292 | ) |
| $ | (26,303 | ) |
Average amount outstanding |
| $ | 2,404,792 |
|
| $ | 3,236,126 |
|
|
|
|
|
|
|
|
|
|
Total loans |
|
| -0.01 | % |
|
| -0.02 | % |
Net charge-offs during the period |
| $ | (74,177 | ) |
| $ | (176,731 | ) |
Average amount outstanding |
| $ | 944,997,126 |
|
| $ | 865,334,523 |
|
In addition to credit risk in the Company’s loan and 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 to asset valuations or the 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, 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 and credit-related losses. 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 OBS 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 more than 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 six months of 2025, the Company did not engage in any activity that created any additional types of OBS risk.
| 47 |
| Table of Contents |
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 lower-cost funds.
The Company recognizes that, at times, when loan demand exceeds deposit growth or the Company has other liquidity demands, or when the Company experiences deposit outflows; it may be desirable to utilize alternative sources of deposit funding to augment retail deposits and borrowings. One-way deposits acquired through the CDARS and/or ICS programs provide an alternative funding source when needed. As of June 30, 2025, and December 31, 2024, the Company had $0 and $236 thousand in one-way CDARS deposits, and no one-way ICS deposits outstanding at either period end. In addition, two-way (reciprocal) CDARS deposits, as 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 FDIC deposit insurance to its customers in excess of account coverage limits through the exchange of deposits with other participating FDIC-insured financial institutions. As of June 30, 2025 and December 31, 2024, the Company reported $2.4 million and $2.5 million, respectively, in reciprocal CDARS deposits. The balance in ICS reciprocal money market deposits was $7.5 million as of June 30, 2025, compared to $44.4 million as of December 31, 2024, and the balance in ICS reciprocal demand deposits as of those dates was $92.1 million and $109.5 million, respectively.
Additionally, the Company had brokered deposits from another source totaling approximately $19.5 million as of June 30, 2025 and $13.8 million as of December 31, 2024. This relationship has provided convenient and timely access to short-term funding that is easily accessible without any detrimental effect on the pricing of the core deposit base.
As of June 30, 2025 and December 31, 2024, borrowing capacity of $108.7 million for both periods was available through the FHLBB, secured by the Company's qualifying loan portfolio (generally, residential mortgage and commercial loans), reduced by outstanding advances of $55.8 million and $31.1 million, respectively.
The following table reflects the Company’s outstanding advances with FHLBB as of the dates indicated:
|
| June 30, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
FHLBB Long-Term Advances |
|
|
|
|
|
| ||
FHLBB term advance, 0.00%, due November 12, 2025 (1) |
| $ | 300,000 |
|
| $ | 300,000 |
|
FHLBB term advance, 0.00%, due November 13, 2028 (1) |
|
| 800,000 |
|
|
| 800,000 |
|
FHLBB option advance, 4.54%, due May 15, 2026 |
|
| 10,000,000 |
|
|
| 10,000,000 |
|
FHLBB option advance, 4.74%, due May 26, 2026 |
|
| 5,000,000 |
|
|
| 5,000,000 |
|
FHLBB option advance, 3.89%, due February 01, 2027 |
|
| 0 |
|
|
| 5,000,000 |
|
FHLBB option advance, 4.27%, due June 07, 2027 |
|
| 10,000,000 |
|
|
| 10,000,000 |
|
FHLBB option advance, 3.66%, due March 26, 2027 |
|
| 5,000,000 |
|
|
| 0 |
|
FHLBB option advance, 3.51%, due March 27, 2028 |
|
| 5,000,000 |
|
|
| 0 |
|
Total Long-Term Advances |
|
| 36,100,000 |
|
|
| 31,100,000 |
|
|
|
|
|
|
|
|
|
|
Overnight Borrowings |
|
|
|
|
|
|
|
|
Correspondent Banks, 4.52% |
|
| 19,700,000 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
Total Advances and Overnight Borrowings |
| $ | 55,800,000 |
|
| $ | 31,100,000 |
|
(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. |
| 48 |
| Table of Contents |
The Company utilized borrowing capacity during 2023 and the first quarter of 2024 under the BTFP, a temporary loan facility established by the FRB in March 2023 to provide additional liquidity to financial institutions in the wake of several high-profile bank failures. The Company’s BTFP borrowings are collateralized by U.S. Agency and U.S. Government Securities, valued at par. The BTFP ceased extending new loans on March 11, 2024. The BTFP loans matured and were repaid during the first quarter of 2025.
The Company’s advances under the BTFP as of the balance sheet dates were as follows:
|
| June 30, |
|
| December 31, |
| ||
|
| 2025 |
|
| 2024 |
| ||
|
|
|
|
|
|
| ||
FRB BTFP term advance, 4.83%, due January 17, 2025 |
| $ | 0 |
|
| $ | 41,500,000 |
|
The Company also has an unsecured Federal Funds credit line with the FHLBB with an available balance of $500,000 with no outstanding advances during either of the respective comparison periods. Interest is chargeable at a rate determined daily, approximately 25 bps higher than the rate paid on federal funds sold.
The Company has a BIC arrangement with the FRBB secured by eligible commercial & industrial loans, CRE loans and home equity loans, resulting in an available credit line of $66.1 million and $60.8 million, respectively, as of June 30, 2025, and December 31, 2024. 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 450 bps. The Company had no outstanding advances through this facility as of June 30, 2025, or December 31, 2024.
As of June 30, 2025, and December 31, 2024, the Company had an unsecured line of credit of $12.5 million with a correspondent bank. The Company had no outstanding advances against this credit line as of the balance sheet dates.
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 meet the Company’s liquidity and capital needs.
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, while at the same time satisfying all regulatory capital requirements. To that end, management strives to deploy capital efficiently and monitors capital retention and dividend policies on an ongoing basis.
During the third quarter of 2024, the Company adopted a stock repurchase program authorizing the repurchase of up to 275,000 shares of the Company’s common stock, representing approximately 5% of the outstanding common shares. Purchases under the program may be on such terms, including price, as market conditions warrant, and may be made through open market purchases or in privately negotiated transactions, as Management deems appropriate. The repurchase authorization expires in July, 2029 unless extended, or earlier terminated, by the Board. Notwithstanding the program’s five-year term, the Board reviews and re-evaluates the program annually in light of the Company’s then current capital needs, the number and cost of shares repurchased, the number of shares remaining for repurchase under the authorization, and other relevant factors. In addition, management will confer with the FRBB regarding the program, as appropriate in the circumstances. As of June 30, 2025, 29,813 shares had been repurchased since the inception of the program, for an aggregate purchase price of $548,218.
The following table illustrates the changes in shareholders' equity from December 31, 2024, to June 30, 2025:
Balance as of December 31, 2024 (book value $17.24 per common share) |
| $ | 98,048,205 |
|
Net income |
|
| 7,585,231 |
|
Issuance of common stock through the DRIP |
|
| 715,681 |
|
Dividends declared on common stock |
|
| (2,690,221 | ) |
Dividends declared on preferred stock |
|
| (56,250 | ) |
Repurchase of shares through the stock buyback program |
|
| (548,218 | ) |
Change in AOCI on AFS securities, net of tax |
|
| 3,288,979 |
|
Balance as of June 30, 2025 (book value $18.69 per common share) |
| $ | 106,343,407 |
|
As described in more detail in Note 22 to the audited consolidated financial statements contained in the Company’s 2024 Annual Report on Form 10-K and under the caption “LIQUIDITY AND CAPITAL RESOURCES” in the MD&A section of that 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.
| 49 |
| Table of Contents |
As of June 30, 2025, the Bank was considered well capitalized under the standard regulatory capital framework for Prompt Corrective Action and the Company exceeded currently applicable consolidated regulatory guidelines for capital adequacy.
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 balance sheet dates:
|
|
|
|
|
|
|
|
|
| Minimum |
|
| Minimum |
| ||||||||||||||||||
|
|
|
|
|
| Minimum |
|
| For Capital |
|
| To Be Well |
| |||||||||||||||||||
|
|
|
|
|
| For Capital |
|
| Adequacy Purposes |
|
| Capitalized Under |
| |||||||||||||||||||
|
|
|
|
|
| Adequacy |
|
| with Conservation |
|
| Prompt Corrective |
| |||||||||||||||||||
|
| Actual |
|
| Purposes |
|
| Buffer (1) |
|
| Action Provisions (2) |
| ||||||||||||||||||||
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
|
| Amount |
|
| Ratio |
| ||||||||
|
| (Dollars in Thousands) |
| |||||||||||||||||||||||||||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Common equity tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Company |
| $ | 105,757 |
|
|
| 12.07 | % |
| $ | 39,443 |
|
|
| 4.50 | % |
| $ | 61,356 |
|
|
| 7.00 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 119,095 |
|
|
| 13.60 | % |
| $ | 39,419 |
|
|
| 4.50 | % |
| $ | 61,318 |
|
|
| 7.00 | % |
| $ | 56,938 |
|
|
| 6.50 | % |
Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 120,144 |
|
|
| 13.71 | % |
| $ | 52,591 |
|
|
| 6.00 | % |
| $ | 74,504 |
|
|
| 8.50 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 119,095 |
|
|
| 13.60 | % |
| $ | 52,558 |
|
|
| 6.00 | % |
| $ | 74,457 |
|
|
| 8.50 | % |
| $ | 70,078 |
|
|
| 8.00 | % |
Total capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 131,103 |
|
|
| 14.96 | % |
| $ | 70,121 |
|
|
| 8.00 | % |
| $ | 92,034 |
|
|
| 10.50 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 130,048 |
|
|
| 14.85 | % |
| $ | 70,078 |
|
|
| 8.00 | % |
| $ | 91,977 |
|
|
| 10.50 | % |
| $ | 87,597 |
|
|
| 10.00 | % |
Tier 1 capital (to average assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 120,144 |
|
|
| 10.15 | % |
| $ | 47,356 |
|
|
| 4.00 | % |
|
| N/A |
|
|
| N/A |
|
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 119,095 |
|
|
| 10.06 | % |
| $ | 47,337 |
|
|
| 4.00 | % |
|
| N/A |
|
|
| N/A |
|
| $ | 59,172 |
|
|
| 5.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 100,751 |
|
|
| 11.90 | % |
| $ | 38,086 |
|
|
| 4.50 | % |
| $ | 59,244 |
|
|
| 7.00 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 114,323 |
|
|
| 13.52 | % |
| $ | 38,053 |
|
|
| 4.50 | % |
| $ | 59,194 |
|
|
| 7.00 | % |
| $ | 54,966 |
|
|
| 6.50 | % |
Tier 1 capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 115,138 |
|
|
| 13.60 | % |
| $ | 50,781 |
|
|
| 6.00 | % |
| $ | 71,940 |
|
|
| 8.50 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 114,323 |
|
|
| 13.52 | % |
| $ | 50,738 |
|
|
| 6.00 | % |
| $ | 71,879 |
|
|
| 8.50 | % |
| $ | 67,650 |
|
|
| 8.00 | % |
Total capital (to risk-weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 125,652 |
|
|
| 14.85 | % |
| $ | 67,708 |
|
|
| 8.00 | % |
| $ | 88,867 |
|
|
| 10.50 | % |
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 124,837 |
|
|
| 14.76 | % |
| $ | 67,650 |
|
|
| 8.00 | % |
| $ | 88,791 |
|
|
| 10.50 | % |
| $ | 84,563 |
|
|
| 10.00 | % |
Tier 1 capital (to average assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company |
| $ | 115,138 |
|
|
| 9.46 | % |
| $ | 48,690 |
|
|
| 4.00 | % |
|
| N/A |
|
|
| N/A |
|
|
| N/A |
|
|
| N/A |
|
Bank |
| $ | 114,323 |
|
|
| 9.40 | % |
| $ | 48,665 |
|
|
| 4.00 | % |
|
| N/A |
|
|
| N/A |
|
| $ | 60,831 |
|
|
| 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. 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.
| 50 |
| Table of Contents |
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Omitted, in accordance with the regulatory relief available to smaller reporting companies in SEC Release Nos. 33-10513 and 34-83550.
ITEM 4. Controls and Procedures
Disclosure Controls and Procedures
Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). As of June 30, 2025, 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 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 June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
| 51 |
| Table of Contents |
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
In the normal course of business, the Company is involved in litigation that is considered incidental to its business. Management does not expect that any such litigation will be material to the Company's consolidated financial condition or results of operations.
ITEM 1A. Risk Factors
In management’s view, the Risk Factors identified in our Annual Report on Form 10-K for the year ended December 31, 2024, represent the most significant risks to the Company's future results of operations and financial condition as of the date of this quarterly report.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information as to purchases of the Company’s common stock during the quarter ended June 30, 2025, by the Company and by any affiliated purchaser (as defined in SEC Rule 10b-18):
For the period: |
| Total Number of Shares Purchased (1) |
|
| Average Price Paid Per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plan (1) |
|
| Maximum Number of Shares That May Yet Be Purchased Under the Plan at the End of the Period |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
April 1 - April 30 |
|
| 0 |
|
| $ | 0.00 |
|
|
| 0 |
|
|
| 273,000 |
|
May 1 - May 31 |
|
| 4,581 |
|
|
| 17.37 |
|
|
| 4,581 |
|
|
| 268,419 |
|
June 1 - June 30 |
|
| 23,231 |
|
|
| 18.65 |
|
|
| 23,231 |
|
|
| 245,188 |
|
Total |
|
| 27,812 |
|
| $ | 18.44 |
|
|
| 27,812 |
|
|
| 245,188 |
|
(1) All purchases during the quarter were made pursuant to the repurchase program adopted by the Company’s Board of Directors in July 2024 authorizing the repurchase from time to time of up to 275,000 shares of the Company’s common stock in open market purchases and privately negotiated transactions, in management’s discretion and as market conditions may warrant. The repurchase authorization will expire in July, 2029 unless extended or earlier terminated by the Board of Directors.
| 52 |
| Table of Contents |
ITEM 6. Exhibits
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 six-months ended June 30, 2025 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 six-month interim periods ended June 30, 2025 and 2024, (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 Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act.
| 53 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
COMMUNITY BANCORP.
DATED: August 14, 2025 | /s/ Christopher L. Caldwell |
|
| Christopher L. Caldwell, President |
|
| & Chief Executive Officer |
|
| (Principal Executive Officer) |
|
|
|
|
DATED: August 14, 2025 | /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 June 30, 2025
COMMUNITY BANCORP.
EXHIBITS
EXHIBIT INDEX
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Exhibit 101 |
| The following materials from the Company’s Quarterly Report on Form 10-Q for the six-months ended June 30, 2025 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 six- month interim periods ended June 30, 2025 and 2024, (iii) the unaudited consolidated statements of comprehensive income, (iv) the unaudited consolidated statements of cash flows and (v) related notes. |
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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 Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act.
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EXHIBIT 31.1
CERTIFICATION
I, Christopher L. Caldwell, President and Chief Executive Officer (Principal Executive Officer), certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Community Bancorp.; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
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| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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| Community Bancorp. |
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| August 14, 2025 | /s/ Christopher L. Caldwell |
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| Christopher L. Caldwell |
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| President and Chief Executive Officer |
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| (Principal Executive Officer) |
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EXHIBIT 31.2
CERTIFICATION
I, Louise M. Bonvechio, Corporate Secretary and Treasurer (Principal Financial Officer), certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Community Bancorp.; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| (c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| (d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
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| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
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| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
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| Community Bancorp. |
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| August 14, 2025 | /s/ Louise M. Bonvechio |
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| Louise M. Bonvechio |
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| Corporate Secretary and Treasurer |
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| (Principal Financial Officer) |
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Community Bancorp. (the "Company") on Form 10-Q for the period ended June 30, 2025, filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.
A signed original of this written statement required by Section 906 has been provided to Community Bancorp. and will be retained by Community Bancorp. and furnished to the Securities and Exchange Commission or its staff upon request.
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| Community Bancorp. |
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| August 14, 2025 | /s/ Christopher L. Caldwell |
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| Christopher L. Caldwell |
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| President & Chief Executive Officer |
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| (Principal Executive Officer) |
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U. S. C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Community Bancorp. (the "Company") on Form 10-Q for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.
A signed original of this written statement required by Section 906 has been provided to Community Bancorp. and will be retained by Community Bancorp. and furnished to the Securities and Exchange Commission or its staff upon request.
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| Community Bancorp. |
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| August 14, 2025 | /s/ Louise M. Bonvechio |
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| Louise M. Bonvechio |
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| Corporate Secretary and Treasurer |
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| (Principal Financial Officer) |
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