What changed in this filing

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Item 1. Financial Statements

2024-08-14 compared with 2024-05-15 · 195 added, 65 removed, 715 unchanged (27% of the section changed)

17 unchanged sentences

Bank owned life insurance

Other real estate owned

$ 1,100,437,227

37 unchanged sentences

and Subsidiary

Three Months Ended March 31,

Three Months Ended June 30,

Consolidated Statements of Income

32 unchanged sentences

and Subsidiary

Six Months Ended June 30,

Consolidated Statements of Income

Interest income

Interest and fees on loans

Interest on taxable debt securities

Interest on tax-exempt debt securities

Interest on federal funds sold and overnight deposits

Total interest income

Interest expense

Interest on deposits

Interest on borrowed funds

Interest on repurchase agreements

Interest on junior subordinated debentures

Total interest expense

Net interest income

Credit loss expense

Net interest income after credit loss expense

Non-interest income

Income from sold loans

Other income from loans

Total non-interest income

Non-interest expense

Salaries and wages

Employee benefits

Occupancy expenses, net

Other expenses

Total non-interest expense

Income before income taxes

Income tax expense

Earnings per common share

Weighted average number of common shares used in computing earnings per share

Dividends declared per common share

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

Community Bancorp.

and Subsidiary

Consolidated Statements of Comprehensive Income

Three Months Ended March 31,

Three Months Ended June 30,

Other comprehensive income (loss)

Unrealized holding income (loss) on securities AFS arising during the period

( 1,843,589 )

Other comprehensive income (loss), net of tax

( 1,456,436 )

Total comprehensive income

Six Months Ended June 30,

Other comprehensive (loss) income, net of tax:

8 unchanged sentences

Consolidated Statements of Changes in Shareholders’ Equity

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

shareholders’

Balance January 1, 2024

January 1, 2024

$ ( 15,931,595 )

$ ( 2,622,777 )

Issuance of common stock

7 unchanged sentences

( 1,508,008 )

Balance March 31, 2024

March 31, 2024

$ ( 17,439,603 )

Three Months Ended March 31 2023

$ ( 2,622,777 )

Issuance of common stock

Cash dividends declared

( 1,273,008 )

Preferred stock

Comprehensive income

Other comprehensive income

June 30, 2024

$ ( 17,279,553 )

$ ( 2,622,777 )

*Accumulated other comprehensive loss

Community Bancorp.

and Subsidiary

Consolidated Statements of Changes in Shareholders’ Equity

Six Months Ended June 30, 2023

shareholders’

Balance January 1, 2023

Cumulative change in accounting principle (Note 2)

Balance at January 1, 2023 (as adjusted for

Change in accounting principle)

January 1, 2023

$ ( 20,667,817 )

$ ( 2,622,777 )

Cumulative change in accounting principle

Balance at January 1, 2023 (as adjusted

for change in accounting principle)

Issuance of common stock

5 unchanged sentences

Other comprehensive income

Balance March 31, 2023

March 31, 2023

$ ( 17,994,999 )

$ ( 2,622,777 )

Issuance of common stock

Cash dividends declared

( 1,254,835 )

( 1,254,836 )

Preferred stock

Comprehensive income

Other comprehensive loss

( 1,456,436 )

June 30, 2023

$ ( 19,451,435 )

$ ( 2,622,777 )

*Accumulated other comprehensive loss

3 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities:

4 unchanged sentences

Gain on sale of loans

Gain on sale of bank premises and equipment

(Gain) loss on sale of bank premises and equipment

Income from CFS Partners

4 unchanged sentences

( 3,759,305 )

Increase in taxes payable

Decrease in taxes payable

(Increase) decrease in interest receivable

1 unchanged sentence

Decrease in right-of-use assets

Decrease in operating lease liabilities

Increase (decrease) in operating lease liabilities

Increase in other assets

2 unchanged sentences

Change in net deferred loan fees and costs

Increase (decrease) in interest payable

Increase in interest payable

Decrease in accrued expenses

( 1,069,838 )

( 1,040,367 )

Increase in other liabilities

6 unchanged sentences

( 5,107,800 )

( 1,547,300 )

Investments in limited liability entities

22 unchanged sentences

Dividends paid on common stock

Net cash provided by (used in) financing activities

( 1,824,681 )

( 1,835,286 )

Net cash used in financing activities

( 3,216,430 )

( 31,836,771 )

Net decrease in cash and cash equivalents

3 unchanged sentences

Supplemental Schedule of Cash Paid During the Period:

Income taxes, net of refunds

Supplemental Schedule of Noncash Investing and Financing Activities:

1 unchanged sentence

$ ( 1,706,273 )

Loans transferred to OREO

Additions to operating lease liabilities

Common Shares Dividends Paid:

51 unchanged sentences

Bank Term Funding Program

London Interbank Offered Rate

Certificate of Deposit Accounts Registry

Mortgage-backed security

Service of the IntraFi Network

Certificate of Deposit Accounts Registry

Mortgage servicing rights

Certificates of deposit

Service of the IntraFi Network

Net interest income

Core deposit intangible

Certificates of deposit

Other amortizing security

35 unchanged sentences

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 March 31,

Three Months Ended June 30,

Net income, as reported

3 unchanged sentences

Earnings per common share

Six Months Ended June 30,

Net income, as reported

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

Investment Securities

Debt securities AFS as of the balance sheet dates consisted of the following:

March 31, 2024

June 30, 2024

GSE debt securities

13 unchanged sentences

$ 190,706,019

The Company had investments in Agency MBS exceeding 10% of shareholders’ equity with a book value of $ 129.2 million and $ 132.0 million, respectively, and a fair value of $ 111.2 million and $ 115.9 million, respectively, as of March 31, 2024 and December 31, 2023.

There was no ACL on AFS debt securities as of March 31, 2024 or December 31, 2023.

The Company had investments in Agency MBS exceeding 10% of shareholders’ equity with a book value of $ 126.0 million and $ 132.0 million, respectively, and a fair value of $ 107.9 million and $ 115.9 million, respectively, as of June 30, 2024 and December 31, 2023.

Investment securities pledged as collateral for repurchase agreements consisted of certain U.S.

2 unchanged sentences

The aggregate amortized cost and fair value of these pledged investments as of the balance sheet dates were as follows:

March 31, 2024

June 30, 2024

December 31, 2023

2 unchanged sentences

GSE debt securities with an aggregate amortized cost and fair value of these pledged investments as of the balance sheet dates as follows:

March 31, 2024

June 30, 2024

December 31, 2023

There were no sales of debt securities during the first three months of 2024 or 2023.

There were no sales of debt securities during the first six months of 2024 or 2023.

The scheduled maturities of debt securities as of the balance sheet dates were as follows:

March 31, 2024

June 30, 2024

Due in one year or less

15 unchanged sentences

12 months or more

March 31, 2024

June 30, 2024

GSE debt securities

16 unchanged sentences

Under the ASU, if the Company intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, then the credit loss is recorded through an allowance rather than as a write-down of the security.

As of March 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 prior to recovery and determined that no individual debt securities in an unrealized loss position represented credit losses that would require an allowance for credit losses.

The Company concluded that the unrealized losses were primarily attributed to increases in market interest rates since these securities were purchased under other market conditions.

As of June 30, 2024 and December 31, 2023, the Company did not have the intent to sell, nor was it more likely than not that we would be required to sell, any of the debt securities AFS in an unrealized loss position as of such dates prior to recovery and determined that no individual debt securities in an unrealized loss position represented credit losses that would require an allowance for credit losses.

The Company concluded that the unrealized losses 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, 2024 or December 31, 2023.

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:

March 31, 2024

June 30, 2024

December 31, 2023

3 unchanged sentences

Commercial real estate

441,804,609 51.24 % 414,880,621 49.07 %

34,101,293 3.96 % 54,466,988 6.44 %

Residential real estate - 1st lien

212,028,611 24.59 % 208,824,888 24.70 %

Residential real estate - Jr lien

1 unchanged sentence

3,295,121 0.38 % 3,313,917 0.39 %

862,172,136 100.00 % 845,429,854 100.00 %

( 10,335,715 ) ( 9,842,725 )

Deferred net loan costs

1 unchanged sentence

$ 852,440,144 $ 836,160,298

As of March 31, 2024, purchased loans consisted of $ 5,452,239 in commercial loans and $ 4,755,125 in consumer loans, compared to $ 4,863,263 and $ 5,705,659 , respectively, as of December 31, 2023.

As of June 30, 2024, purchased loans consisted of $4,868,823 in commercial loans and $ 4,339,981 in consumer loans, compared to $ 5,705,659 and $4,863,263, respectively, as of December 31, 2023.

Credit Loss Expense

Credit loss expense was made up of the following components for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30,

Credit loss expense - loans

Credit loss (reversal) expense - OBS credit exposure

Credit loss reversal - OBS credit exposure

Credit loss expense

Six Months Ended June 30,

Credit loss expense - loans

Credit loss reversal - OBS credit exposure

Credit loss expense

The following tables present the activity in the ACL on loans for the periods presented.

As of or for the three months ended March 31, 2024

As of or for the three months ended June 30, 2024

ACL beginning balance

$ 1,078,956 $ 35,623 $ 5,730,532 $ 142,321 $ 2,574,341 $ 442,394 $ 23,601 $ 10,027,768

( 13,834 ) 0 ( 45,393 ) 0 0 0 ( 20,691 ) ( 79,918 )

31,755 0 0 0 0 1,207 2,982 35,944

Credit loss (reversal) expense

( 9,798 ) ( 3,562 ) 300,900 ( 57,068 ) 120,314 ( 17,978 ) 19,113 351,921

ACL ending balance

$ 1,087,079 $ 32,061 $ 5,986,039 $ 85,253 $ 2,694,655 $ 425,623 $ 25,005 $ 10,335,715

As of or for the six months ended June 30, 2024

ACL beginning balance

Credit loss expense(reversal)

5 unchanged sentences

ACL ending balance

As of or for the three months ended March 31, 2023

As of or for the three months ended June 30, 2023

ACL beginning balance

Credit loss expense (reversal)

ACL ending balance

As of or for the six months ended June 30, 2023

ACL beginning balance

Impact of adopting CECL

2 unchanged sentences

The following is an age analysis of past due loans (including non-accrual) as of the balance sheet dates, by portfolio segment:

March 31, 2024

June 30, 2024

Commercial & industrial

17 unchanged sentences

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 March 31, 2024 or December 31, 2023.

March 31, 2024

There were no nonaccrual loans with an ACL as of June 30, 2024 or December 31, 2023.

June 30, 2024

Commercial & industrial

7 unchanged sentences

Residential real estate - Jr lien

There were no residential real estate loans in process of foreclosure as of March 31, 2024 or December 31, 2023.

Residential real estate loans in process of foreclosure as of the balance sheet dates comprised of the following:

Number of loans

June 30, 2024

December 31, 2023

Allowance for credit losses

19 unchanged sentences

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 March 31, 2024, the primary macroeconomic drivers used within the DCF model included forecasts of civilian unemployment and changes in national gross domestic product (GDP).

As of June 30, 2024, 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.

3 unchanged sentences

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 March 31, 2024.

The Company used a one-year forecast and reversion period to calculate the ACL on loans as of June 30, 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.

17 unchanged sentences

Also, the qualitative factors for collateral in the residential portfolios were adjusted to reflect stabilization of real estate values in that sector.

There were no adjustments to the qualitative factors made in the second quarter of 2024.

The qualitative factors are determined by management based on the various risk characteristics of each loan segment.

38 unchanged sentences

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.

The following table presents the amortized cost basis of collateral-dependent loans as of March 31, 2024, by collateral type:

March 31, 2024

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:

June 30, 2024

Commercial & industrial

45 unchanged sentences

The risk ratings within the loan portfolio and current period gross charge-offs, by loan segment and origination year, were as follows:

As of or for the three months ended,

March 31, 2024

As of or for the six months ended,

June 30, 2024

Term Loans Amortized Cost Basis by Origination Year

3 unchanged sentences

Substandard/Doubtful

Current period gross charge-offs

Commercial real estate:

7 unchanged sentences

Current period gross charge-offs

Commercial & Industrial

Commercial real estate

Total current period gross charge-offs

As of or for the three months ended March 31, 2024, there were (i) no current period gross charge-offs within the Purchased, CRE, Municipal, Residential real estate 1st lien and Residential real estate Jr lien loan segments, (ii) no Special mention loans within the Purchased, Municipal, Residential real estate Jr lien and Consumer loan segments, and (iii) no Substandard/Doubtful loans within the Purchased, Municipal and Consumer loan segments.

As of or for the six months ended June 30, 2024, there were (i) no current period gross charge-offs within the Purchased, Municipal, Residential real estate 1st lien and Residential real estate Jr lien loan segments, (ii) no Special mention loans within the Purchased, Municipal, Residential real estate Jr lien and Consumer loan segments, and (iii) no Substandard/Doubtful loans within the Purchased, Municipal and Consumer loan segments.

The Company did not purchase any loans during the six months ended June 30, 2024.

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:

15 unchanged sentences

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.

There were no loan modifications during the first three months of 2024.

As of the balance sheet dates, the Company evaluates whether it is contractually committed to lend additional funds to debtors with impaired, non-accrual or modified loans.

The Company is contractually committed to lend on one SBA guaranteed line of credit to a borrower whose lending relationship was previously modified.

The following table presents the amortized cost basis of loans as of June 30, 2024, that were both experiencing financial difficulty and modified during the six months ended June 30, 2024, 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.

Commercial & Industrial

As of the balance sheet dates, the Company had committed to lend additional amounts totaling $ 250,000 to the borrower whose loans are included in the table above.

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, 2024.

Term Extension

(months/years)

Commercial & Industrial

There were no loan modifications that were past due as of June 30, 2024, or that had a payment default since modification.

Off-Balance Sheet Credit Exposures

9 unchanged sentences

The ACL on OBS credit exposures is presented within accrued interest and other liabilities on the consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, the ACL on OBS credit exposures totaled $ 781,612 and $ 806,172 , respectively.

Goodwill and Other Intangible Assets

3 unchanged sentences

Management evaluates its goodwill intangible for impairment at least annually, or more frequently as circumstances warrant.

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,

Balance at beginning of year

MSRs capitalized

MSRs amortized

Balance at end of period

Year Ended December 31,

Balance at beginning of year

MSRs capitalized

MSRs amortized

Balance at end of period

Certain assets and liabilities are recorded at fair value to provide additional insight into the Company’s quality of earnings and comprehensive income.

38 unchanged sentences

The Company classifies MSRs as non-recurring Level 2.

Real estate acquired through or in lieu of foreclosure and bank properties no longer used as bank premises are initially recorded at fair value.

The fair value of OREO is based on property appraisals and an analysis of similar properties currently available.

The Company records OREO as non-recurring Level 2.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

31 unchanged sentences

The estimated fair values of the Company’s financial instruments as of the balance sheet dates were as follows:

March 31, 2024

June 30, 2024

(Dollars in Thousands)

11 unchanged sentences

Other deposits

Brokered deposits

Overnight borrowings

30 unchanged sentences

Reported fair value represents all MSRs for loans serviced by the Company, regardless of carrying amount.

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:

Three Months Ended

Balance at beginning of year

MSRs capitalized

MSRs amortized

Balance at end of period

Legal Proceedings

3 unchanged sentences

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 March 20, 2024, the Company’s Board declared a cash dividend of $ 0.23 per common share, payable May 1, 2024, to shareholders of record as of April 15, 2024.

On June 12, 2024, the Company’s Board declared a cash dividend of $ 0.23 per common share, payable August 1, 2024, to shareholders of record as of July 15, 2024.

This dividend has been recorded in the Company’s consolidated financial statements as of the declaration date, including shares issuable under the DRIP.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements