What changed in this filing

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Item 1. Financial Statements

2025-05-15 compared with 2024-11-14 · 159 added, 275 removed, 671 unchanged (39% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

September 30,

Cash and due from banks

3 unchanged sentences

Restricted equity securities, at cost

Loans held-for-sale

Allowance for credit losses

5 unchanged sentences

Bank owned life insurance

Other real estate owned

$ 1,187,857,462

9 unchanged sentences

Total deposits

1,001,644,758

Repurchase agreements

15 unchanged sentences

treasury stock, at cost;

210,101 shares at 09/30/24 and 12/31/23

212,101 shares at 03/31/25 and 210,101 shares at 12/31/24

( 2,658,157 )

8 unchanged sentences

and Subsidiary

Consolidated Statements of Income

Three Months Ended September 30,

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

Three Months Ended March 31,

Consolidated Statements of Income

Nine Months Ended September 30,

Interest income

26 unchanged sentences

Earnings per common share

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

Weighted average number of common shares

used in computing earnings per share

Dividends declared per common share

3 unchanged sentences

Consolidated Statements of Comprehensive Income

Three Months Ended September 30,

Three Months Ended March 31,

Other comprehensive income (loss)

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

( 5,155,445 )

( 1,291,573 )

Other comprehensive income (loss), net of tax

( 4,072,800 )

Total comprehensive income (loss)

$ ( 710,291 )

Nine Months Ended September 30,

Other comprehensive income (loss), net of tax:

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

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

( 1,908,870 )

6 unchanged sentences

Consolidated Statements of Changes in Shareholders' Equity

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

shareholders'

7 unchanged sentences

Preferred stock

Comprehensive income

Other comprehensive loss

( 1,508,008 )

March 31, 2024

$ ( 17,439,603 )

$ ( 2,622,777 )

Issuance of common stock

Cash dividends declared

( 1,273,008 )

Preferred stock

Shares purchased through stock buyback program

Comprehensive income

Other comprehensive income

June 30, 2024

$ ( 17,279,553 )

$ ( 2,622,777 )

Issuance of common stock

Cash dividends declared

( 1,278,030 )

March 31, 2025

$ ( 13,401,970 )

Preferred stock

Comprehensive income

Other comprehensive income

September 30, 2024

$ ( 2,658,157 )

$ 102,905,030

*Accumulated other comprehensive loss

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

Community Bancorp.

and Subsidiary

Consolidated Statements of Changes in Shareholders' Equity

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

shareholders'

2 unchanged sentences

$ ( 2,622,777 )

Cumulative change in accounting principle

Balance at January 1, 2023 (as adjusted for change in accounting principle)

Issuance of common stock

4 unchanged sentences

Comprehensive income

Other comprehensive income

March 31, 2023

$ ( 17,994,999 )

$ ( 2,622,777 )

Issuance of common stock

Cash dividends declared

( 1,254,835 )

Preferred stock

Comprehensive income

Other comprehensive loss

1 unchanged sentence

( 1,508,008 )

June 30, 2023

$ (1 9,451,435 )

$ ( 2,622,777 )

Issuance of common stock

Cash dividends declared

( 1,258,852 )

Preferred stock

Comprehensive income

Other comprehensive loss

( 4,072,800 )

September 30, 2023

March 31, 2024

$ ( 17,439,603 )

5 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows from Operating Activities:

2 unchanged sentences

Credit loss expense

Deferred income tax

Deferred income tax (benefit) provision

Gain on sale of loans

(Gain) loss on sale of bank premises and equipment

Loss (gain) on sale of bank premises and equipment

Income from CFS Partners

3 unchanged sentences

( 1,119,000 )

( 5,539,565 )

Decrease in taxes payable

Increase in taxes payable

Increase in interest receivable

( 1,003,374 )

Decrease in mortgage servicing rights

1 unchanged sentence

Decrease in operating lease liabilities

Increase in other assets

Decrease (increase) in other assets

Increase in cash surrender value of BOLI

1 unchanged sentence

Change in net deferred loan fees and costs

Increase in interest payable

(Decrease) increase in interest payable

( 1,915,911 )

Decrease in accrued expenses

(Decrease) increase in other liabilities

( 1,069,838 )

Increase in other liabilities

Net cash provided by operating activities

6 unchanged sentences

( 1,759,800 )

( 3,528,300 )

Decrease in limited partnership contributions payable

( 1,823,301 )

Investments in limited liability entities

Increase in loans, net

1 unchanged sentence

( 21,073,009 )

Capital expenditures net of proceeds from sales of bank premises and equipment

Capital expenditures net of proceeds from sales of bank

premises and equipment

Recoveries of loans charged off

5 unchanged sentences

( 18,117,210 )

( 23,157,006 )

Net decrease in money market and savings accounts

5 unchanged sentences

( 9,089,673 )

Net increase in short-term borrowings

Net (decrease) increase in short-term borrowings

( 41,500,000 )

Proceeds from long-term borrowings

Repayments on 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) provided by financing activities

( 64,095,178 )

Net decrease in cash and cash equivalents

( 82,128,480 )

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

( 4,518,116 )

1 unchanged sentence

Supplemental Schedule of Cash Paid During the Period:

Income taxes, net of refunds

Supplemental Schedule of Noncash Investing and Financing Activities:

1 unchanged sentence

($ 1,908,870 )

Loans transferred to OREO

Additions to operating lease liabilities

Investment in limited partnerships, not yet paid

Common Shares Dividends Paid:

2 unchanged sentences

Dividends reinvested

( 1,058,472 )

Total dividends paid

8 unchanged sentences

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 the full annual period ending December 31, 2024.

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.

14 unchanged sentences

Federal Home Loan Mortgage Corporation

Allowance for Loan Losses

Federal Open Market Committee

Accumulated other comprehensive income

Federal Reserve Board

Federal Open Market Committee

Accounting Standards Codification

Federal Reserve Bank of Boston

Federal Reserve Board

Accounting Standards Update

Generally Accepted Accounting Principles

Federal Reserve Bank of Boston

Community Bancorp.

in the United States

Generally Accepted Accounting Principles

Community National Bank

Government sponsored enterprise

in the United States

Bankers Healthcare Group

Held-to-maturity

Government sponsored enterprise

Borrower-in-Custody

Insured Cash Sweeps of the IntraFi Network

Held-to-maturity

Board of Directors

Internal Revenue Service

Insured Cash Sweeps of the IntraFi Network

Bank owned life insurance

Jobs for New England

Internal Revenue Service

Basis point(s)

Jobs for New England

Bank Term Funding Program

Mortgage-backed security

Certificate of Deposit Accounts Registry

Mortgage servicing rights

Mortgage-backed security

Service of the IntraFi Network

Net interest income

Mortgage servicing rights

Certificates of deposit

Other amortizing security

Net interest income

Current Expected Credit Loss

Off-balance sheet

Other amortizing security

Community Financial Services Group, LLC

Other comprehensive income (loss)

Off-balance sheet

CFS Partners:

Community Financial Services Partners,

Other comprehensive income (loss)

Other real estate owned

Other-than-temporary impairment

CME Group Benchmark Administration Ltd.

Private mortgage insurance

Other-than-temporary impairment

Collateralized Mortgage Obligations

Paycheck Protection Program

Private mortgage insurance

Community Bancorp.

and Subsidiary

USDA Rural Development

Paycheck Protection Program

Commercial Real Estate

Small Business Administration

USDA Rural Development

Discounted cash flow

Securities and Exchange Commission

Small Business Administration

Demand Deposit Account(s)

Secured Overnight Financing Rate

Securities and Exchange Commission

Depository Trust Company

Department of Agriculture

Secured Overnight Financing Rate

Dividend Reinvestment Plan

Veterans Administration

Department of Agriculture

Exchange Act:

Securities Exchange Act of 1934

Veterans Administration

Recent Accounting Developments

In December 2024, the FASB issued ASU No.

2023-09, Improvements to Income Tax Disclosures.

The ASU provides more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information, such as requiring the disclosure of specific categories in the rate reconciliation and the disaggregation of income tax expense and income taxes paid by federal, state, and foreign taxes.

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.

The Company does not believe the ASU will have a material impact on the Company's consolidated financial statements.

Management is reviewing the ASU but does not expect that it will have a material effect on the Company’s consolidated financial statements.

Earnings per Common Share

1 unchanged sentence

The following tables illustrate the calculation of earnings per common share for the periods presented, as adjusted for the cash dividends declared on the preferred stock:

Three Months Ended September 30,

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

Nine Months Ended September 30,

Three Months Ended March 31,

Net income, as reported

1 unchanged sentence

Net income available to common shareholders

Weighted average number of common shares

used in calculating earnings per share

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

Earnings per common share

1 unchanged sentence

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

September 30, 2024

March 31, 2025

GSE debt securities

13 unchanged sentences

$ 159,697,420

The Company had investments in Agency MBS exceeding 10% of shareholders’ equity with a book value of $ 122.7 million and $ 132.0 million, respectively, and a fair value of $ 109.3 million and $ 115.9 million, respectively, as of September 30, 2024 and December 31, 2023.

The Company had investments in Agency MBS exceeding 10 % of shareholders’ equity with a book value of $ 131.6 million and $ 119.5 million, respectively, and a fair value of $ 117.0 million and $ 102.3 million, respectively, as of March 31, 2025 and December 31, 2024.

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:

September 30, 2024

March 31, 2025

December 31, 2024

Investment securities pledged as collateral for BTFP borrowings consisted of U.S.

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

September 30, 2024

GSE debt securities.

The aggregate amortized cost and fair value of these pledged investments were as follows:

December 31, 2024

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

There were no investment securities pledged as collateral for BTFP borrowings as of March 31, 2025, all of which matured and were repaid during the first quarter of 2025.

There were no sales of debt securities during the first three months of 2025 or 2024.

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

September 30, 2024

March 31, 2025

Due in one year or less

15 unchanged sentences

12 months or more

September 30, 2024

March 31, 2025

GSE debt securities

13 unchanged sentences

$ 147,880,823

The Company adopted ASU No.

2016-13 effective January 1, 2023, which requires credit losses on debt securities AFS to be recorded in an allowance for credit losses and eliminates the concept of OTTI for debt securities AFS.

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

As of September 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 September 30, 2024 or December 31, 2023.

As of March 31, 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 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 has determined 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 March 31, 2025, or December 31, 2024.

Accrued interest receivable on AFS debt securities which totaled $ 480,617 and $ 509,429 on March 31, 2025, and December 31, 2024, respectively, was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

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:

September 30, 2024

March 31, 2025

December 31, 2024

11 unchanged sentences

$ 918,779,288

As of September 30, 2024, purchased loans consisted of $ 4,220,549 in commercial loans and $ 4,194,889 in consumer loans, compared to $ 5,705,659 and $ 4,863,263 , respectively, as of December 31, 2023.

Accrued interest receivable on loans totaled $ 3.8 million and $ 3.6 million as of September 30, 2024 and December 31, 2023, respectively, and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

Three Months Ended September 30,

Credit loss expense - loans

Credit loss expense (reversal) - OBS credit exposure

As of March 31, 2025, purchased loans consisted of $ 3.7 million in commercial loans and $ 3.5 million in consumer loans, compared to $ 4.0 million and $ 3.8 million, respectively, as of December 31, 2024.

The Company did not purchase any loans during the three months ended March 31, 2025.

Accrued interest receivable on loans totaled $ 4.9 million and $ 3.8 million as of March 31, 2025, and December 31, 2024, respectively, and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

Credit loss expense

Nine Months Ended September 30,

Three Months Ended March 31,

Credit loss expense - loans

Credit loss expense (reversal) - OBS credit exposure

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 September 30, 2024

September 30,

Commercial & Industrial

$ ( 1,097,922 )

Commercial Real Estate

Residential Real Estate - 1st Lien

Residential Real Estate - Jr Lien

$ ( 1,224,434 )

As of or for the nine months ended September 30, 2024

September 30,

For the three months ended March 31, 2025

Commercial & Industrial

$ ( 1,249,441 )

Commercial Real Estate

1 unchanged sentence

Residential Real Estate - Jr Lien

$ ( 1,454,855 )

As of or for the year ended December 31, 2023

For the year ended December 31, 2024

Commercial & Industrial

$ ( 1,263,015 )

$ ( 386,578 )

Commercial Real Estate

2 unchanged sentences

$ ( 1,481,674 )

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

September 30,

Commercial & Industrial

Commercial Real Estate

Residential Real Estate - 1st Lien

Residential Real Estate - Jr Lien

As of or for the nine months ended September 30, 2023

September 30,

For the three months ended March 31, 2024

Commercial & Industrial

$ ( 137,684 )

$ ( 361,578 )

Commercial Real Estate

9 unchanged sentences

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, including purchased and retail loans that are rated by pool.

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.

20 unchanged sentences

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 delinquency or at the time of other adverse events.

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.

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

As of or for the nine months ended,

September 30, 2024

The risk ratings within the loan portfolio by loan segment and origination year, were as follows:

As of March 31, 2025

Term Loans Amortized Cost Basis by Origination Year

(In thousands)

(Dollars in Thousands)

Commercial & Industrial:

8 unchanged sentences

Residential real estate - Jr lien:

Special mention

Substandard/Doubtful

As of March 31, 2025, there were no Special mention loans or Substandard/Doubtful loans within the Purchased, Municipal, and Consumer loan segments.

As of December 31, 2024

Term Loans Amortized Cost Basis by Origination Year

(Dollars in Thousands)

Commercial & Industrial:

Special mention

Substandard/Doubtful

Commercial real estate:

Special mention

Substandard/Doubtful

Residential real estate - 1st lien:

Special mention

Substandard/Doubtful

Residential real estate - Jr lien:

Substandard/Doubtful

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.

Gross charge-offs, by loan segment and origination year, were as follows:

For the three months ended March 31, 2025

Term Loans Amortized Cost Basis by Origination Year

(Dollars in Thousands)

Current period gross charge-offs

Commercial & Industrial

Total current period gross charge-offs

For the three months ended March 31, 2025, there were no current period gross charge-offs within the Purchased, CRE, Municipal, Residential real estate 1st lien and Residential real estate Jr lien loan segments.

For the year ended December 31, 2024

Term Loans Amortized Cost Basis by Origination Year

(Dollars in Thousands)

Current period gross charge-offs

Commercial & Industrial

Commercial real estate

Total current period gross charge-offs

As of or for the nine months ended September 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 nine months ended September 30, 2024.

For the year ended, December 31, 2024, there were no current period gross charge-offs within the Purchased, Municipal, Residential real estate 1 st 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 September 30, 2024 or December 31, 2023.

September 30, 2024

There were no nonaccrual loans with an ACL as of March 31, 2025, or December 31, 2024.

March 31, 2025

Commercial & industrial

8 unchanged sentences

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

September 30, 2024

March 31, 2025

Commercial & industrial

18 unchanged sentences

repayment expected through underlying collateral, no other expected sources of repayment) as of the balance sheet dates, by collateral type:

September 30, 2024

March 31, 2025

Commercial & industrial

Commercial real estate

Residential real estate - 1st lien

December 31, 2024

Commercial & industrial

Commercial real estate

Residential real estate - 1st lien

(1) Including, but not limited to, inventory, equipment, and accounts receivable, but excluding real estate.

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

Number of loans

September 30, 2024

December 31, 2023

Residential real estate loans in process of foreclosure comprised of one loan in the amount of $ 88,780 as of March 31, 2025, and December 31, 2024.

Allowance for credit losses

Effective January 1, 2023, with the adoption of CECL, the Company established the ACL through a provision for credit losses charged to earnings.

Credit losses are charged against the allowance when management believes that future payments of a loan balance are unlikely.

2 unchanged sentences

Unsecured loans to customers who subsequently file bankruptcy, are charged off within 30 days of receipt of the notification of filing or by the end of the month in which the loans become 120 days past due, whichever occurs first.

For secured loans, both residential and commercial, the potential loss on impaired loans is carried as a loan loss reserve specific allocation;

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.

1 unchanged sentence

The value of the collateral is determined in accordance with the Company’s appraisal policy.

The unsecured portion of an impaired real estate secured loan is charged off by the end of the month in which the loan becomes 180 days past due.

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.

As described below, the allowance consists of general and specific components.

8 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 September 30, 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 December 31, 2024 and 2023, the primary macroeconomic drivers used within the DCF model included forecasts of civilian unemployment and changes in national gross domestic product (GDP).

Management monitors and assesses its macroeconomic drivers at least annually (generally in the fourth quarter, or more frequently as circumstances warrant) to determine whether they continue to be the most predictive indicator of losses within the Company's loan portfolio, and these macroeconomic drivers may change from time to time.

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 September 30, 2024.

The Company used a one-year forecast and reversion period to calculate the ACL on loans as of March 31, 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.

4 unchanged sentences

The contractual term excludes expected extensions, renewals, and modifications.

In calculating the ACL on loans, the contractual life of a loan must be adjusted for prepayments in order to arrive at expected cash flows.

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.

8 unchanged sentences

This evaluation is inherently subjective as it requires estimates that are susceptible to revision as more information becomes available.

During the third quarter of 2024, after review and analysis, management adjusted the qualitative factors for economic trends in all portfolios to reflect improving trends.

The qualitative factors for volume and terms in the commercial and industrial, CRE, and residential portfolios were adjusted to reflect the absence of new or changed risks in those portfolios from new or increasing types of loans, industries, or collateral.

The qualitative factors for concentrations in the commercial and industrial, CRE, and residential portfolios were adjusted to reflect concentrations within policy as well adjust to the appropriate level for the residential portfolios where the concentration policy does not apply.

The qualitative factor for delinquencies and non-performing loans in the consumer and residential portfolios was adjusted to reflect low past due levels and a decrease year to date.

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

During the fourth quarter of 2024, after review and analysis, management adjusted the qualitative factors for credit management oversight in all loan segments, reflecting certain personnel changes at the Company, including the retirement of the current Chief Executive Officer and the former Chief Lending Officer (CLO) taking on the combined role of President & Chief Executive Officer, with the senior team overseeing credit and lending being new in their roles.

Also during the fourth quarter of 2024, the qualitative factors for criticized and classified loans in the commercial and industrial and CRE portfolios were adjusted to reflect recent trends and the qualitative factors for external factors, exceptions, and delinquency and non-performing loans in the consumer portfolio were adjusted to improve a low coverage ratio discovered during backtesting.

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.

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.

13 unchanged sentences

Repayment of construction loans is expected from permanent financing takeout;

the Company generally requires a commitment or eligibility for the take-out financing prior to construction loan origination.

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.

21 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.

For all loan segments, the accrual of interest is discontinued when a loan is specifically determined to be impaired or when the loan is delinquent 90 days and management believes, after considering collection efforts and other factors, that the borrower's financial condition is such that collection of interest is considered by management to be doubtful.

Any unpaid interest previously accrued on those loans is reversed from income.

Interest income is generally not recognized on specific impaired loans unless the likelihood of further loss is considered by management to be remote.

Interest payments received on impaired loans are generally applied as a reduction of the loan principal balance.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and a satisfactory payment performance of six or more months has occurred.

Modifications of Loans

19 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.

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

Term Extension

(months/years)

There were no loan modifications during the first three months of 2025 or 2024.

As of March 31, 2025, the Company was not committed to lend additional amounts to borrowers experiencing financial difficulty whose loans were previously modified.

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.

Commercial & Industrial

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

Off-Balance Sheet Credit Exposures

There were no loans to borrowers experiencing financial difficulty that were modified within the previous twelve months that had subsequently defaulted during the three months ended March 31, 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.

Allowance for Credit Losses on OBS Credit Exposures

Effective January 1, 2023, with the adoption of ASU No.

2016-13 (CECL), the Company estimates expected credit losses on OBS credit exposures over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.

The 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.

1 unchanged sentence

An estimated funding rate is then applied to the qualifying unfunded loan commitments and letters of credit using the Company's own historical experience to estimate the expected funded amount for each loan segment as of the reporting date.

Once the expected funded amount for each loan segment is determined, the loss rate, which is the calculated expected loan loss as a percent of the amortized cost basis for each loan segment, is applied to calculate the ACL on OBS credit exposures as of the reporting date.

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 September 30, 2024 and December 31, 2023, the ACL on OBS credit exposures totaled $ 835,402 and $ 806,172 , respectively.

As of March 31, 2025, and December 31, 2024, the ACL on OBS credit exposures totaled $ 610,155 and $ 703,975 , respectively.

Goodwill and Other Intangible Assets

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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:

Nine Months Ended September 30,

Three Months Ended March 31,

Balance at beginning of year

1 unchanged sentence

MSRs amortized

Change in valuation allowance

Balance at end of period

3 unchanged sentences

MSRs amortized

Change in valuation allowance

Balance at end of period

1 unchanged sentence

The fair values of some of these assets and liabilities are measured on a recurring basis while others are measured on a non-recurring basis, with the determination based upon applicable existing accounting pronouncements.

For example, securities available-for-sale are recorded at fair value on a recurring basis.

Other assets, such as MSRs, loans held-for-sale, impaired loans, and OREO are recorded at fair value on a non-recurring basis using the lower of cost or market methodology to determine impairment of individual assets.

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.

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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, loans held-for-sale, and OREO.

This category generally includes MSRs, individually analyzed loans with a related allowance that are collateral dependent, loans held-for-sale, and OREO.

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

22 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

1 unchanged sentence

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.

September 30,

(market approach)

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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.

September 30,

(market approach)

Individually analyzed loans, net of related allowance

Loans held-for-sale

(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 or not recognized in the balance sheet, if the fair values can be reasonably determined.

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.

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

September 30, 2024

March 31, 2025

(Dollars in Thousands)

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Brokered deposits

Short-term advances

Long-term advances

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Other deposits

Overnight borrowings

Brokered deposits

Short-term advances

11 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 September 11, 2024, the Company’s Board declared a cash dividend of $ 0.24 per common share, payable November 1, 2024, to shareholders of record as of October 15, 2024.

On March 19, 2025, the Company’s Board declared a cash dividend of $ 0.24 per common share, payable May 1, 2025, to shareholders of record as of April 15, 2025.

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