SEC Form 10-Q filed by CBM Bancorp, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

Or

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                    .

001-38680

(Commission File No.)

 

 

CBM BANCORP, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Maryland		83-1095537
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
2001 East Joppa Road, Baltimore, Maryland		21234
(Address of Principal Executive Offices)		(Zip Code)

410-665-7600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act.

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock		CBMB		The Nasdaq Capital Market LLC

 

 

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 such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ☒    NO  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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).    YES  ☒    NO  ☐

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		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				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  ☐    NO  ☒

As of May 12, 2021, the number of shares of common stock outstanding was 3,525,814.

 

 

 

 

CBM Bancorp, Inc.

Table of Contents

 

Part I. Financial Information				Page No.
Item 1.		Financial Statements
Consolidated Statements of Financial Condition as of March  31, 2021 (unaudited) and December 31, 2020					3
Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (unaudited)					4
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020 (unaudited)					5
Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (unaudited)					6
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)					7
Notes to Consolidated Financial Statements					8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			33
Item 3.		Quantitative and Qualitative Disclosures About Market Risk			42
Item 4.		Controls and Procedures			42
Part II. Other Information
Item 1.		Legal Proceedings			43
Item1A.		Risk Factors			43
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3.		Defaults Upon Senior Securities			43
Item 4.		Mine Safety Disclosures			43
Item 5.		Other Information			43
Item 6.		Exhibits			43
Signatures					44

 

2

PART I – FINANCIAL INFORMATION

ITEM 1

– Consolidated Financial Statements

CBM Bancorp, Inc.

Consolidated Statements of Financial Condition

March 31, 2021 (Unaudited) and December 31, 2020

 

		March 31,				December 31,
		2021				2020
		(Unaudited)
Assets
Cash and due from banks		$	1,291,097			$	799,120
Interest-bearing deposits in other banks			49,609,913				46,808,842
Cash and cash equivalents			50,901,010				47,607,962
Time deposits in other banks			7,439,853				6,447,853
Securities available for sale, at fair value			18,913,837				16,543,524
Federal Home Loan Bank stock, at cost			329,900				410,900
Loans held for sale			5,667,293				6,073,782
Loans, net of unearned fees			148,948,159				150,305,998
Allowance for loan losses			(1,727,216	)			(1,727,216	)
Net loans			147,220,943				148,578,782
Accrued interest receivable			619,887				605,333
Bank-owned life insurance			4,849,359				4,831,457
Premises and equipment, net			1,722,285				1,753,608
Foreclosed real estate			775,000				775,000
Deferred income taxes			934,739				856,005
Prepaid expenses and other assets			444,768				319,397
Total assets		$	239,818,874			$	234,803,603
Liabilities and Stockholders’ Equity
Liabilities
Noninterest-bearing deposits		$	35,946,401			$	32,650,939
Interest-bearing deposits			147,042,304				142,129,183
Total deposits			182,988,705				174,780,122
Advances by borrowers for taxes and insurance			778,425				431,089
Federal Home Loan Bank advances			5,000,000				5,000,000
Accounts payable and other liabilities			1,157,278				1,029,677
Total liabilities			189,924,408				181,240,888
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.01 par value; authorized 1,000,000 shares; none issued			—				—
Common stock, $0.01 par value; authorized 24,000,000 shares; issued and outstanding 3,527,033 shares at March 31, 2021 and 3,690,633 shares at December 31, 2020			35,270				36,906
Additional paid in capital			32,638,358				34,735,278
Retained earnings			20,851,351				22,397,154
Unearned common stock held by:
Employee Stock Ownership Plan			(2,285,280	)			(2,369,920	)
2019 Equity Incentive Plan			(1,908,570	)			(1,908,570	)
Accumulated other comprehensive income			563,337				671,867
Total stockholders’ equity			49,894,466				53,562,715
Total liabilities and stockholders’ equity		$	239,818,874			$	234,803,603

The notes to consolidated financial statements are an integral part of these consolidated statements.

 

3

CBM Bancorp, Inc.

Consolidated Statements of Operations (Unaudited)

Three Months Ended March 31, 2021 and 2020

 

		For the Three Months Ended
		March 31,
		2021				2020
Interest and dividend income
Interest and fees on loans		$	1,785,688			$	1,965,446
Interest and dividends on investments			173,093				318,404
Total interest and dividend income			1,958,781				2,283,850
Interest expense
Interest on deposits			313,390				369,363
Interest on borrowings			11,813				16,133
Total interest expense			325,203				385,496
Net interest income			1,633,578				1,898,354
Provision for loan losses			—				175,000
Net interest income after provision for loan losses			1,633,578				1,723,354
Non-interest income
Service fees on deposit accounts			28,510				35,881
Income from bank-owned life insurance			17,902				18,574
Gain on sale of loans held for sale			302,170				114,650
Gain on sale of investment securities			—				46,551
Other non-interest income			30,965				29,324
Total non-interest income			379,547				244,980
Non-interest expense
Salaries, director fees and employee benefits			1,217,894				1,138,703
Premises and equipment			117,417				104,479
Data processing			148,137				141,141
Professional fees			94,481				115,317
FDIC premiums and regulatory assessments			29,490				16,587
Marketing			24,516				16,964
Other operating expenses			190,900				180,449
Total non-interest expense			1,822,835				1,713,640
Income before income taxes			190,290				254,694
Income tax expense			68,573				80,931
Net income		$	121,717			$	173,763
Earnings per common share
Basic		$	0.04			$	0.05
Diluted		$	0.04			$	0.05

The notes to consolidated financial statements are an integral part of these consolidated statements.

 

4

CBM Bancorp, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended March 31, 2021 and 2020

 

		For the Three Months Ended
		March 31,
		2021				2020
Net income		$	121,717			$	173,763
Other comprehensive income
Unrealized (loss) gain on investment securities available for sale			(149,733	)			590,372
Reclassification adjustment for realized gain on investment securities available for sale included in net income			—				(46,551	)
Total unrealized (loss) gain on investment securities available for sale			(149,733	)			543,821
Income tax benefit (expense) relating to investment securities available for sale			41,203				(149,646	)
Other comprehensive (loss) income			(108,530	)			394,175
Total comprehensive income		$	13,187			$	567,938

The notes to consolidated financial statements are an integral part of these consolidated statements.

 

5

CBM Bancorp, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Three Months Ended March 31, 2021 and 2020

 

		Common Stock				Additional Paid-In Capital				Retained Earnings				Unearned ESOP Shares				Unearned RRP Shares				Accumulated Other Comprehensive Income				Total Stockholders’ Equity
Balance, January 1, 2020		$	42,085			$	41,210,056			$	23,243,847			$	(2,708,480	)		$	(2,357,994	)		$	505,862			$	59,935,376
Net income			—				—				173,763				—				—				—				173,763
Other comprehensive income			—				—				—				—				—				394,175				394,175
ESOP shares committed to be released			—				27,931				—				84,640				—				—				112,571
Stock based compensation			—				168,847				—				—				—				—				168,847
Repurchase of common stock			(3,468	)			(4,753,551	)			—				—				—				—				(4,757,019	)
Balance, March 31, 2020		$	38,617			$	36,653,283			$	23,417,610			$	(2,623,840	)		$	(2,357,994	)		$	900,037			$	56,027,713
Balance, January 1, 2021		$	36,906			$	34,735,278			$	22,397,154			$	(2,369,920	)		$	(1,908,570	)		$	671,867			$	53,562,715
Net income			—				—				121,717				—				—				—				121,717
Other comprehensive loss			—				—				—				—				—				(108,530	)			(108,530	)
Cash dividends $0.50 per share			—				—				(1,667,520	)			—				—				—				(1,667,520	)
ESOP shares committed to be released			—				33,473				—				84,640				—				—				118,113
Stock based compensation			—				180,217				—				—				—				—				180,217
Repurchase of common stock			(1,636	)			(2,310,610	)			—				—				—				—				(2,312,246	)
Balance March 31, 2021		$	35,270			$	32,638,358			$	20,851,351			$	(2,285,280	)		$	(1,908,570	)		$	563,337			$	49,894,466

The notes to consolidated financial statements are an integral part of these consolidated statements.

 

6

CBM Bancorp, Inc.

Consolidated Statements of Cash Flows (Unaudited)

Three Months Ended March 31, 2021 and 2020

 

		For the Three Months
		Ended March 31,
		2021				2020
Cash flows from operating activities:
Net income		$	121,717			$	173,763
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion of securities			12,580				4,788
Gain on sale of loans held for sale			(302,170	)			(114,650	)
Originations of loans held for sale			(10,328,739	)			(5,210,152	)
Proceeds from sales of loans held for sale			11,037,398				4,415,357
Gain on sale of available for sale securities			—				(46,551	)
Amortization of deferred loan origination costs, net of fees			(147,995	)			(56,248	)
Provision for loan losses			—				175,000
Increase in accrued interest receivable			(14,554	)			(42,262	)
Increase in cash surrender value of life insurance			(17,902	)			(18,574	)
Depreciation and amortization			36,923				36,686
ESOP compensation expense			118,113				112,571
Stock based compensation expense			180,217				168,847
Deferred income tax benefit			(37,531	)			(78,809	)
Increase in prepaid expenses and other assets			(125,371	)			(70,362	)
Increase in accounts payable and other liabilities			127,601				101,563
Net cash provided by (used in) operating activities			660,287				(449,033	)
Cash flows from investing activities:
Net (purchases) maturities of time deposits in other banks			(992,000	)			496,000
Purchases of available for sale securities			(3,996,418	)			—
Proceeds from maturities, payments and calls of available for sale securities			1,463,792				3,431,232
Proceeds from sales of available for sale securities			—				1,565,737
Redemption (purchases) of Federal Home Loan Bank stock			81,000				(429,300	)
Net decrease (increase) in loans			1,505,834				(4,164,753	)
Purchases of premises and equipment			(5,600	)			(1,993	)
Net cash (used in) provided by investing activities			(1,943,392	)			896,923
Cash flows from financing activities:
Net increase in deposits			8,208,583				1,500,277
Net increase in advances by borrowers			347,336				386,640
Net increase in FHLB advances			—				10,000,000
Repurchase common stock			(2,312,246	)			(4,757,019	)
Cash dividends on common stock			(1,667,520	)			—
Net cash provided by financing activities			4,576,153				7,129,898
Net increase in cash and cash equivalents			3,293,048				7,577,788
Cash and cash equivalents, beginning balance			47,607,962				5,987,121
Cash and cash equivalents, ending balance		$	50,901,010			$	13,564,909
Supplemental disclosure of cash flows information:
Cash paid for interest		$	324,598			$	385,928
Cash paid for income taxes			—				—

The notes to consolidated financial statements are an integral part of these consolidated statements.

 

7

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 1. Significant Accounting Policies

Nature of Operations

CBM Bancorp, Inc. (“CBM Bancorp” or “Company”) is the holding company for Chesapeake Bank of Maryland (“Bank”) and was formed in connection with the conversion of the Bank from the mutual to the stock form of organization. On September 27, 2018, the mutual to stock conversion of the Bank was completed and the Company became the parent holding company for the Bank. Shares of the Company began trading on the Nasdaq Capital Market on September 28, 2018. The Company is subject to regulation by the Board of Governors of the Federal Reserve System (“Federal Reserve Bank”).

CBM Bancorp’s primary business is the ownership and operation of the Bank, a community-oriented federal stock savings bank regulated by the Office of the Comptroller of the Currency. The Bank’s primary business activity is the acceptance of deposits from the general public and using the proceeds for loan originations and investments. The Bank is subject to competition from other financial institutions. The Bank is subject to the regulations of certain federal agencies and undergoes periodic examinations by the regulatory authorities.

In accordance with federal and state regulations, at the time of the conversion from mutual to stock form, the Bank substantially restricted retained earnings by establishing a liquidation account. The liquidation account will be maintained for the benefit of eligible account holders who continue to maintain their accounts at the Bank after the conversion. The liquidation account will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation account. In the event of a complete liquidation of the Bank, each account holder will be entitled to receive a distribution in an amount proportionate to the adjusted qualifying account balances then held.

The Company may not pay a dividend on, or repurchase any of, its capital stock, if the effect thereof would cause retained earnings to be reduced below the liquidation account amount or regulatory capital requirements. In addition, the Company is subject to certain other regulations restricting the payment of dividends on, and the repurchase of, its capital stock.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Operating results for the three months ended March 31, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021, or any other period. For further information, refer to the Bank’s annual audited consolidated financial statements and related notes for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K dated March 26, 2021.

Principles of Consolidation

The consolidated financial statements include the accounts of CBM Bancorp, Inc. and the Bank, its wholly owned subsidiary. Material intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans and the valuation of deferred tax assets. In connection with the determination of the allowances for loan losses and foreclosed real estate, management obtains independent appraisals for significant properties.

 

 

8

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 1. Significant Accounting Policies (Continued)

 

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and balances due from banks and interest-bearing deposits in other banks.

Time Deposits in Other Banks

The Bank uses financial instruments to supplement the investment securities portfolio. Interest income is recognized as earned. Purchase premiums and discounts are recognized as part of interest income using the interest method over the terms of the investments. Realized gains and losses on the sale of time deposits in other banks are included in earnings based on the trade date and are determined using the specific identification method. Time deposits in other banks are not marked to market.

Investment Securities

Management determines the appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Securities that the Bank has the positive intent and ability to hold to maturity are classified as held to maturity and are reported at amortized cost.

Securities classified as available for sale are carried at fair value and are those securities that the Bank intends to hold for an indefinite period of time but not necessarily to maturity. Unrealized gains and losses are reported as increases or decreases in other comprehensive income. Realized gains and losses, determined on the basis of the cost of the specific securities sold, are included in earnings on a trade date basis. Premiums and discounts are recognized in interest income using a method which approximates the interest method over the terms of the securities. Declines in the fair value of available for sale securities below their cost that are deemed to be other than temporary, if any, are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Bank to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Federal Home Loan Bank Stock

Federal Home Loan Bank of Atlanta (“FHLB”) stock is an equity interest in the FHLB, which does not have a readily determinable fair value for purposes of U.S. GAAP related to Accounting for Certain Investments in Debt and Equity Securities, because its ownership is restricted and it lacks a market. FHLB stock represents the required investment in the common stock of the FHLB according to a predetermined formula. FHLB stock can be sold back at par value of $100 per share and only to the FHLB or another member institution.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value.    Fair value is derived from secondary market quotations for similar instruments. Gains and losses on loan sales are recorded in non-interest income, and loan origination fees, net of certain direct origination costs are deferred at origination of the loan and are recognized in non-interest income upon sale of the loan. The Bank’s current practice is to sell residential mortgage loans on a servicing released basis, and, therefore, it has no intangible asset recorded for the value of such servicing. Interest on loans held for sale is credited to income based on the principal amounts outstanding.

The Bank enters into commitments to originate residential mortgage loans whereby the interest rate on the loan is determined prior to funding (i.e., rate lock commitment). Such rate lock commitments on mortgage loans to be sold in the secondary market are considered derivatives. The time period between the issuance of a loan commitment and closing and sale of the loan generally ranges from 30 to 90 days. The Bank protects itself from changes in interest rates through the use of best efforts forward delivery commitments, whereby the investor commits to purchase a loan at a price representing a premium on the day the borrower commits to an interest rate with the intent that they buyer/investor has assumed the interest rate risk on the loan. As a result, the Bank is not generally exposed to losses on loans sold utilizing best efforts, nor will it realize gains related to rate lock commitments due to changes in interest rates. The fair value of the rate lock commitments was considered immaterial at March 31, 2021 and December 31, 2020 and an adjustment was not recorded. Loans held for sale that are not ultimately sold, but instead are placed into the Bank’s portfolio, are reclassified as loans held for investment and recorded at fair value.

 

9

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 1. Significant Accounting Policies (Continued)

 

Loans

Loans are generally carried at the amount of unpaid principal, less the allowance for loan losses and adjusted for deferred loan origination fees and costs, which are recognized over the term of the loan as an adjustment to yield using a method that approximates the interest method. Interest on loans is accrued based on the principal amounts outstanding. It is the Bank’s policy to discontinue the accrual of interest when the principal or interest is delinquent for 90 days or more, or if collection of principal and interest in full is in doubt.

A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. The carrying value of impaired loans is based on the present value of the loan’s expected future cash flows or, alternatively, the observable market price of the loan or the fair value of the collateral.

Impaired loans also include certain loans that have been modified in a troubled debt restructuring (“TDR”) to make concessions to help a borrower remain current on the loan and/or to avoid foreclosure. These concessions typically result from the Bank’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Generally, nonaccrual loans that are modified and are considered TDRs are classified as nonperforming at the time of the restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses charged to earnings. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. The Bank maintains the allowance at a level believed, to the best of management’s knowledge, to cover all known and inherent losses in the portfolio that are both probable and reasonable to estimate at each reporting date. The evaluation process by portfolio segment includes, among other things, an analysis of delinquency trends, non-performing loan trends, the level of charge-offs and recoveries, prior loss experience, total loans outstanding, the volume of loan originations, the type, size and geographic concentration of the loans, the value of collateral securing the loan, the borrower’s ability to repay and repayment performance, the number of loans requiring heightened management oversight, local economic conditions and industry experience.

The establishment of the allowance for loan losses is significantly affected by management’s judgment and uncertainties, and there is likelihood that different amounts would be reported under different conditions or assumptions. The Office of the Comptroller of the Currency as an integral part of its examination process periodically reviews the allowance for loan losses and may require the Bank to make additional provisions for estimated loan losses based upon judgments different from those of management.

The Bank’s policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss, are those considered uncollectible and of such little value that their recognition as assets is not justified. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve close attention, are required to be designated as special mention.

 

10

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 1. Significant Accounting Policies (Continued)

 

While the Bank utilizes available information to recognize losses on loans, future additions to the allowances for loan losses may be necessary based on changes in economic conditions, particularly in its’ market area primarily in the state of Maryland. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examination. Actual loan losses may be significantly more than the allowance for loan and lease losses the Bank has established, which could have a material negative effect on our consolidated financial statements.

Bank-Owned Life Insurance

The Bank maintains bank-owned life insurance (“BOLI”) policies on certain present and former directors. These policies are split-dollar or director insurance policies. Under the split-dollar insurance policies, the Bank pays the premiums and upon the death of the insured, the Bank will receive an amount equal to the premiums paid on the policy from the policy date to the date of death. Any remaining proceeds will be paid to the beneficiary. If the policy is surrendered before the date of death, the Bank will receive the lesser of the cash surrender value or the sum of the premiums paid on the policy from the policy date to the date of surrender. Under the director insurance policies, the Bank receives the cash surrender value if the policy is surrendered or receives all benefits payable upon the death of the insured. As of March 31, 2021, and December 31, 2020, $122,615 and $121,388, respectively, was included in other liabilities related to the split-dollar insurance policies.

Premises and Equipment

Land is carried at cost. Property and equipment is carried at cost less accumulated depreciation. Depreciation is computed on the straight-line method over estimated useful lives of assets. Amortization of leasehold improvements is recognized on a straight-line basis over the term of the lease or the life of the improvement, whichever is shorter. The cost of maintenance and repairs is charged to expense as incurred whereas improvements are capitalized. The range of estimated useful lives for premises and equipment are as follows:

 

Buildings and land improvements			5 - 50 years
Leasehold improvements			10 - 15 years
Furniture, fixtures and equipment			3 - 10 years
Automobile			5 years

Foreclosed Real Estate

Real estate acquired through foreclosure or other means is recorded at the fair value of the related real estate collateral at the transfer date less estimated selling costs. Losses incurred at the time of the acquisition of the property are charged to the allowance for loan losses. Subsequent reductions in the estimated fair value of the property are included in noninterest expense. Costs to maintain foreclosed real estate are expensed as incurred.

Employee Stock Ownership Plan

Compensation expense is recognized based on the current market price of shares committed to be released to employees. All shares released and committed to be released are deemed outstanding for purposes of earnings per share calculations. Dividends declared and paid on allocated shares held by the ESOP are charged to retained earnings. The value of unearned shares to be allocated to ESOP participants for future services not yet performed is reflected as a reduction of stockholders’ equity. Dividends declared on unallocated shares held by the ESOP are recorded as a reduction of the ESOP’s loan payment to the Company.

Stock-Based Compensation

Compensation cost is recognized for stock options and restricted stock awards (“RSA”) issued to employees and directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for RSAs. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

 

11

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 1. Significant Accounting Policies (Continued)

 

Income Taxes

The provision for income taxes includes taxes payable for the current year and deferred income taxes. Deferred income taxes are provided for the temporary differences between financial and taxable income. Deferred income taxes and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management it is more likely than not that some portion of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted through earnings for the effects of changes in tax laws and rates on the date of enactment.

Earnings per Common Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Weighted average shares include allocated ESOP shares and ESOP shares committed to be released but exclude unallocated ESOP shares. Diluted earnings per share includes additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Bank has entered into off-balance sheet financial instruments consisting of commitments to extend credit. These commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized on the balance sheet. Such financial instruments are recorded when they are funded. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments is represented by the contractual amount of these instruments. The Bank uses the same credit policies for these instruments as it does for the on-balance sheet instruments.

Concentrations of Credit Risk

The Bank did not have any deposits in other financial institutions in excess of amounts insured by the FDIC, as of March 31, 2021 and December 31, 2020. The Bank also maintains accounts with brokerage firms containing securities. These balances are insured up to $500,000 by the Securities Investor Protection Corporation.

Emerging Growth Company

The Company, as an emerging growth company (“EGC”), has elected 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.

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law. The CARES Act creates a forbearance program for federally backed mortgage loans, protects borrowers from negative credit reporting due to loan accommodations related to the National Emergency, and provides financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19.

Recent Accounting Pronouncements

Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This ASU provides certain targeted improvements to align lessor accounting with the lessee accounting model. This update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, including interim reporting periods within that reporting period, for public business entities. As the Company will take advantage of the extended transition period for complying with new or revised accounting standards assuming we remain a smaller reporting company, we will adopt the amendments in this update beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. A modified retrospective approach must be applied for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The adoption of this ASU is not expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

 

12

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 1. Significant Accounting Policies (Continued)

 

ASU 2016-13, Financial Instruments – Credit Losses. The ASU sets forth a “current expected credit loss” (CECL) model which requires the Bank to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. Entities will apply the standard’s provisions as a cumulative-effect (i.e., modified retrospective approach). The Company has begun to gather loan information and consider acceptable methodologies to comply with this ASU. The Company’s initial evaluation indicates that the provisions of this ASU are expected to impact its consolidated financial statements, in particular the level of reserve for loan losses and is continuing to evaluate and assess the impact of the adoption of this ASU on its consolidated financial statements. On October 16, 2019, the FASB approved to delay the effective date for smaller reporting companies, as defined by the SEC, and other non-SEC reporting entities. As the Company will take advantage of the extended transition period for complying with new or revised accounting standards assuming we remain a smaller reporting company, we will adopt the amendments in this update beginning after December 15, 2022, including interim periods within those fiscal years.

Note 2. Securities

The amortized cost and estimated fair value of securities classified as available for sale at March 31, 2021 and December 31, 2020, are as follows:

 

		March 31, 2021
						Gross Unrealized Gains				Gross Unrealized Losses
		Amortized Cost												Fair Value
Securities Available for Sale
U.S. Government and Federal Agency obligations		$	5,492,878			$	41,250			$	(25,495	)		$	5,508,633
Residential mortgage-backed securities			12,643,755				766,914				(5,465	)			13,405,204
		$	18,136,633			$	808,164			$	(30,960	)		$	18,913,837

 

		December 31, 2020
						Gross Unrealized Gains				Gross Unrealized Losses
		Amortized Cost												Fair Value
Securities Available for Sale
U.S. Government and Federal Agency obligations		$	2,499,671			$	54,342			$	—			$	2,554,013
Residential mortgage-backed securities			13,116,916				872,595				—				13,989,511
		$	15,616,587			$	926,937			$	—			$	16,543,524

There were no sales of investment securities for the three months ended March 31, 2021. Proceeds from the sale of available for sale municipal securities totaled $1,565,737, realizing gross gains of $46,551 for the three months ended March 31, 2020.

 

13

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 2. Securities (Continued)

 

The amortized cost and estimated fair value of securities as of March 31, 2021, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

		March 31, 2021
		Securities Available for Sale
		Amortized				Fair
		Cost				Value
Due in one year or less		$	1,999,901			$	2,033,406
Due after one year through five years			3,492,977				3,475,227
Mortgage-backed, in monthly installments			12,643,755				13,405,204
		$	18,136,633			$	18,913,837

Securities with gross unrealized losses at March 31, 2021, aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:

 

		March 31, 2021
		Less than 12 Months								12 Months or Greater								Total
		Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses				Fair Value				Gross Unrealized Losses
Securities Available for Sale
U.S. Government and Federal Agency obligations		$	2,967,649			$	(25,495	)		$	—			$	—			$	2,967,649			$	(25,495	)
Residential mortgage-backed securities			1,042,983				(5,465	)			—				—				1,042,983				(5,465	)
		$	4,010,632			$	(30,960	)		$	—			$	—			$	4,010,632			$	(30,960	)

At March 31, 2021, the Bank held six investments with gross unrealized losses totaling $30,960. At December 31, 2020, the Bank held no investments with gross unrealized losses. The unrealized losses that existed were a result of market changes in interest rates since the original purchase. Management systematically evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis. This analysis requires management to consider various factors, which include (1) duration and magnitude of the decline in value, (2) the financial condition of the issuer or issuers and (3) structure of the security.

An impairment loss is recognized in earnings if any of the following are true: (1) the Bank intends to sell the debt security; (2) it is more likely than not that the Bank will be required to sell the security before recovery of its amortized cost basis; or (3) the Bank does not expect to recover the entire amortized cost basis of the security. In situations where the Bank intends to sell or when it is more likely than not that the Bank will be required to sell the security, the entire impairment loss must be recognized in earnings. In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in equity as a component of other comprehensive income, net of deferred tax.

There were no securities pledged as of March 31, 2021 and December 31, 2020.

 

14

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 3. Loans

The Bank currently manages its credit products and respective exposure to credit losses by the following specific loan portfolio segments:

 

•

One-to four-family real estate loans – This residential real estate category contains permanent mortgage loans and construction permanent mortgage loans to consumers secured by residential real estate. Residential real estate loans are evaluated for the adequacy of repayment sources at the time of approval, based upon measures including credit scores, debt-to-income ratios, and collateral values. Loans may either be conforming or non-conforming.

 

•

Home equity loans and lines of credit – This residential real estate category includes mortgage loans and lines of credit secured by one-to four-family residential real estate. These loans are typically secured with second mortgages on the homes.

 

•

Construction and land development – Commercial acquisition, development and construction loans are intended to finance the construction of commercial and residential properties and include loans for the acquisition and development of land. Construction loans represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. The loan commitment on these loans often includes an interest reserve that allows the lender to periodically advance loan funds to pay interest charges on the outstanding balance of the loan.

 

•

Nonresidential real estate loans – Nonresidential real estate loans consist of commercial permanent mortgage loans and commercial construction permanent mortgage loans secured by owner occupied and non-owner occupied properties. Owner occupied commercial property loans involve a variety of property types to conduct the borrower’s operations. The primary source of repayment for this type of loan is the cash flow from the business and is based upon the borrower’s financial health and ability of the borrower and the business to repay. Non-owner occupied commercial property loans involve investment properties for warehouse, retail, and office space with a history of occupancy and cash flow. This real estate category contains commercial mortgage loans to the developers and owners of commercial real estate where the borrower intends to operate or sell the property at a profit and use the income stream or proceeds from the sale to repay the loan.

 

•

Commercial loans – Commercial loans are made to provide funds for equipment and general corporate needs. Repayment of the loan primarily uses the funds obtained from the operation of the borrower’s business. Commercial loans also include lines of credit that are utilized to finance a borrower’s short-term credit needs and/or finance a percentage of eligible receivables and inventory, as well as PPP loans

 

•

Consumer loans – This category of loans includes primarily installment loans, personal lines of credit. Consumer loans include installment loans used by customers to purchase automobiles, boats and recreational vehicles.

The Bank makes loans to customers primarily in the Baltimore Metropolitan Area and its surrounding counties. The principal loan portfolio segment balances at March 31, 2021 and December 31, 2020 were as follows:

 

		March 31,				December 31,
		2021				2020
Real estate loans
One-to four-family		$	59,653,409			$	62,117,559
Home equity loans and lines of credit			4,746,179				6,894,632
Construction and land development			11,280,061				10,804,315
Nonresidential			59,815,640				60,209,896
Total real estate loans			135,495,289				140,026,402
Other loans
Commercial			13,284,697				10,197,884
Consumer			294,075				336,507
Total other loans			13,578,772				10,534,391
Total loans			149,074,061				150,560,793
Net deferred loan origination fees and costs			(125,902	)			(254,795	)
Allowance for loan losses			(1,727,216	)			(1,727,216	)
Total loans, net		$	147,220,943			$	148,578,782

Overdraft deposits are reclassified as consumer loans and are included in the total loans on the balance sheet. Overdrafts were $677 and $1,739 at March 31, 2021 and December 31, 2020, respectively.

 

15

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 3. Loans (Continued)

 

Paycheck Protection Program

The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). As a qualified lender, we were automatically authorized to originate PPP loans. In early April 2020, the Company began accepting and processing applications for PPP loans. During the year ended December 31, 2020 we processed 101 PPP loans in the amount of $8,563,898. During the three months ended March 31, 2021, we processed an additional 75 PPP loans in the amount of $4,784,978. As of March 31, 2021, borrowers applied for and received forgiveness on these PPP loans in the amount of $5,926,973.

We recorded fee income during the three months ended March 31, 2021 in the amount of $81,723. As of March 31, 2021, our outstanding PPP loan balances are $7,421,903, with deferred fees relating to those loans in the amount of $267,425. As of December 31, 2020, our outstanding PPP loan balances were $4,479,894.

Note 4. Credit Quality of Loans and the Allowance for Loan Losses

 

The allowance for loan losses is maintained at a level to provide for losses that are probable and can be reasonably estimated. Management’s periodic evaluation of the adequacy of the allowance is based on the Bank’s past loan loss experience, known and inherent losses in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows expected to be received on impaired loans.

The allowance consists of specific and general components. The specific component relates to loans that are classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for qualitative factors. Determinations as to the classification of assets and the amount of loss allowances are subject to review by our principal federal regulator, the Office of the Comptroller of the Currency, which can require that we establish additional loss allowances. The Bank regularly reviews its asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

A loan is considered past due or delinquent when a contractual payment is not paid on the day it is due. A loan in considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for all loans secured by real estate by the fair value of the collateral if the loan is collateral dependent. If the loan repayment is not deemed collateral dependent, impairment is measured on the net present value of the expected discounted future cash flows.

Loans are automatically placed on non-accrual status when payment of principal or interest is more than 90 days delinquent. Loans are also placed on non-accrual status if collection of principal or interest in full is in doubt or if the loan has been restructured. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received. The loan may be returned to accrual status if unpaid principal and interest are repaid so that the loan is less than 90 days delinquent. The Bank’s charge-off policy states after all collection efforts have been exhausted, the loan is deemed to be a loss and the amount has been determined, the loss amount will be charged to the allowance for loan losses.

The following tables summarize the activity in the allowance for losses for the three months ended March 31, 2021 and 2020 the distribution of the allowance for loan losses and loans receivable by loan portfolio class and impairment method as of March 31, 2021 and 2020.

 

16

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 4. Credit Quality of Loans and the Allowance for Loan Losses (Continued)

 

 

		As of March 31, 2021
		One –to Four-Family				Home Equity Loans and Lines of Credit				Construction and Land Development				Nonresidential				Commercial				Consumer				Total
Allowance for loans losses:
Beginning Balance – January 1, 2021		$	339,817			$	64,350			$	206,362			$	1,043,596			$	68,380			$	4,711			$	1,727,216
Charge-offs			—				—				—				—				—				—				—
Recoveries			—				—				—				—				—				—				—
Provision			(21,866	)			(19,877	)			11,343				22,103				8,803				(506	)			—
Ending Balance – March 31, 2021		$	317,951			$	44,473			$	217,705			$	1,065,699			$	77,183			$	4,205			$	1,727,216
Ending balance: individually evaluated for impairment		$	7,336			$	844			$	—			$	—			$	—			$	—			$	8,180
Ending balance: collectively evaluated for impairment		$	310,615			$	43,629			$	217,705			$	1,065,699			$	77,183			$	4,205			$	1,719,036
Loans:
Ending balance		$	59,653,409			$	4,746,179			$	11,280,061			$	59,815,640			$	13,284,697			$	294,075			$	149,074,061
Ending balance: individually evaluated for impairment		$	322,566			$	54,894			$	—			$	—			$	—			$	—			$	377,460
Ending balance: collectively evaluated for impairment		$	59,330,843			$	4,691,285			$	11,280,061			$	59,815,640			$	13,284,697			$	294,075			$	148,696,601

 

17

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 4. Credit Quality of Loans and the Allowance for Loan Losses (Continued)

 

		As of March 31, 2020
		One –to Four-Family				Home Equity Loans and Lines of Credit				Construction and Land Development				Nonresidential				Commercial				Consumer				Unallocated				Total
Allowance for loans losses:
Beginning Balance – January 1, 2020		$	331,605			$	62,603			$	179,541			$	683,453			$	55,571			$	6,950			$	59,427			$	1,379,150
Charge-offs			(263	)			—				—				—				—				(3,633	)			—				(3,896	)
Recoveries			—				597				—				—				—				—				—				597
Provision			48,887				1,643				27,241				125,565				11,928				2,210				(42,474	)			175,000
Ending Balance – March 31, 2020		$	380,229			$	64,843			$	206,782			$	809,018			$	67,499			$	5,527			$	16,953			$	1,550,851
Ending balance: individually evaluated for impairment		$	—			$	385			$	—			$	—			$	—			$	—			$	—			$	385
Ending balance: collectively evaluated for impairment		$	380,229			$	64,458			$	206,782			$	809,018			$	67,499			$	5,527			$	16,953			$	1,550,466
Loans:
Ending balance		$	77,108,832			$	7,281,582			$	10,176,933			$	61,935,252			$	7,105,201			$	456,814							$	164,064,614
Ending balance: individually evaluated for impairment		$	265,377			$	39,103			$	—			$	1,560,753			$	—			$	—							$	1,865,233
Ending balance: collectively evaluated for impairment		$	76,843,455			$	7,242,479			$	10,176,933			$	60,374,499			$	7,105,201			$	456,814							$	162,199,381

 

18

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 4. Credit Quality of Loans and the Allowance for Loan Losses (Continued)

 

As part of the ongoing monitoring of the credit quality of the Bank’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grade of classified loans, net chargeoffs, nonperforming loans, credit scores, and the general economic conditions in the Bank’s market area.

The Bank utilizes an internal rating system to monitor the credit quality of the overall loan portfolio. A description of the general characteristics is as follows:

 

•

Pass – A pass loan is considered of sufficient quality to preclude a special mention or an adverse rating. Pass assets are generally well protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral. The pass classification also includes watch credits which have all of the characteristics of a pass loan but warrant more than the normal level of supervision.

 

•

Special mention – A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification.

 

•

Substandard – A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness, or weaknesses, that jeopardize the collection or liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. This will be the measurement for determining if a loan is impaired.

 

•

Doubtful – A doubtful loan has all of the weaknesses inherent in a substandard credit with the added factor that the weaknesses make the collection or liquidation in full, on the basis of current information, conditions and values, highly questionable and improbable. Loans in this category must be placed on non-accrual status and all payments applied to principal recapture. Doubtful classification should be used only when a distinct possibility of loss exists. When identified, adequate loss should be recorded for the specific assets. It is not necessary to classify an entire credit doubtful when collection of a specific portion appears highly probable.

 

•

Loss – A loan classified as loss is considered uncollectable and of such little value that continuance as a loan in unjustified. A loss classification does not mean that the credit has absolutely no value; partial recoveries may be received in the future. Amounts classified as loss must be charged-off in the period in which they are deemed uncollectible.

When assets are classified as impaired, the Bank allocates a portion of the related general loss allowances to such assets as the Bank deems prudent. Determinations as to the classification of assets and the amount of loss allowances are subject to review by our principal federal regulator, the Office of the Comptroller of the Currency, which can require that we establish additional loss allowances. The Bank regularly reviews its asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

 

19

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 4. Credit Quality of Loans and the Allowance for Loan Losses (Continued)

 

The following table is a summary of the loan portfolio quality indicators by loan class recorded investment as of March 31, 2021 and December 31, 2020:

 

		March 31, 2021
		Pass				Special Mention				Substandard				Doubtful				Total Loans
Real estate loans:
One-to four-family		$	59,191,191			$	139,652			$	322,566			$	—			$	59,653,409
Home equity loans and lines of credit			4,725,558				—				20,621				—				4,746,179
Construction and land development			11,280,061				—				—				—				11,280,061
Nonresidential			58,526,225				1,289,415				—				—				59,815,640
Other loans:
Commercial			13,284,697				—				—				—				13,284,697
Consumer			294,075				—				—				—				294,075
Total loans		$	147,301,807			$	1,429,067			$	343,187			$	—			$	149,074,061

 

		December 31, 2020
		Pass				Special Mention				Substandard				Doubtful				Total Loans
Real estate loans:
One-to four-family		$	61,657,131			$	272,583			$	187,845			$	—			$	62,117,559
Home equity loans and lines of credit			6,874,011				20,621				—				—				6,894,632
Construction and land development			10,804,315				—				—				—				10,804,315
Nonresidential			58,831,855				1,378,041				—				—				60,209,896
Other loans:
Commercial			10,197,884				—				—				—				10,197,884
Consumer			336,507				—				—				—				336,507
Total loans		$	148,701,703			$	1,671,245			$	187,845			$	—			$	150,560,793

The following table sets forth certain information with respect to our loan portfolio delinquencies by loan class and amount as of March 31, 2021 and December 31, 2020:

 

		March 31, 2021
		Loans 30-59 Days Past Due				Loans 60-89 Days Past Due				Loans 90 or More Days Past Due				Total Past Due Loans				Current Loans				Total Loans				Recorded Investment > 90 Days and Accruing				Nonaccrual Loans
Real estate loans:
One-to four-family		$	—			$	—			$	232,477			$	232,477			$	59,420,932			$	59,653,409			$	—			$	322,566
Home equity loans and lines of credit			—				—				20,621				20,621				4,725,558				4,746,179				—				20,621
Construction and land development			—				—				—				—				11,280,061				11,280,061				—				—
Nonresidential			—				—				—				—				59,815,640				59,815,640				—				—
Other loans:
Commercial			—				—				—				—				13,284,697				13,284,697				—				—
Consumer			—				—				—				—				294,075				294,075				—				—
Total loans		$	—			$	—			$	253,098			$	253,098			$	148,820,963			$	149,074,061			$	—			$	343,187

 

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CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

 

Note 4. Credit Quality of Loans and the Allowance for Loan Losses (Continued)

 

 

		December 31, 2020
		Loans 30-59 Days Past Due				Loans 60-89 Days Past Due				Loans 90 or More Days Past Due				Total Past Due Loans				Current Loans				Total Loans				Recorded Investment > 90 Days and Accruing				Nonaccrual Loans
Real estate loans:
One-to four-family		$	9,199			$	—			$	187,845			$	197,044			$	61,920,515			$	62,117,559			$	—			$	187,845
Home equity loans and lines of credit			—				—				—				—				6,894,632				6,894,632				—				—
Construction and land development			—				—				—				—				10,804,315				10,804,315				—				—
Nonresidential			—				—				—				—				60,209,896				60,209,896				—				—
Other loans:
Commercial			—				—				—				—				10,197,884				10,197,884				—				—
Consumer			—				—				—				—				336,507				336,507				—				—
Total loans		$	9,199			$	—			$	187,845			$	197,044			$	150,363,749			$	150,560,793			$	—			$	187,845

At March 31, 2021 and December 31, 2020 there were no loans 90 days past due and still accruing interest. At March 31, 2021, the Bank had five loans on non-accrual status with foregone interest in the amount of $8,280. At December 31, 2020, the Bank had three loans on non-accrual status with foregone interest in the amount of $8,895.

The Bank accounts for impaired loans under generally accepted accounting principles. An impaired loan generally is one for which it is probable, based on current information, that the lender will not collect all the amounts due under the contractual terms of the loan. Loans are individually evaluated for impairment. When the Bank classifies a problem asset as impaired, it provides a specific reserve for that portion of the asset that is deemed uncollectible based on the present value of expected future cash flows discounted at the loan’s original effective interest rate, or based on the loan’s observable market price or fair value of the collateral if the loan is collateral dependent.

The following table is a summary of impaired loans for the three months ended March 31, 2021 and 2020 and the year ended and December 31, 2020:

 

														Three Months Ended
		Impaired Loans at March 31, 2021												March 31, 2021
						Unpaid								Average				Interest
		Recorded				Principal				Related				Recorded				Income
		Investment				Balance				Allowance				Investment				Recognized
With no related allowance recorded:
One-to four-family		$	232,477			$	236,257			$	—			$	232,477			$	—
Home equity loans and lines of credit			20,621				20,621				—				20,621				—
With an allowance recorded:
One-to four-family		$	90,089			$	90,089			$	7,336			$	90,451			$	1,019
Home equity loans and lines of credit			34,273				34,273				844				34,921				486
Total
One-to four-family		$	322,566			$	326,346			$	7,336			$	322,928			$	1,019
Home equity loans and lines of credit			54,894				54,894				844				55,541				486

 

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