June 2020
I am pleased to report that Claremont Savings Bank remains focused on serving our customers despite the challenges associated with the pandemic. We closed our branch lobbies from March 16 to June 7, and they are now open with social distancing measures in place. About two-thirds of our employees are now working from home. We have been an active participant in the Payroll Protection Program (“PPP”) administered through the Small Business Administration, and provided over $17 million in loans to over 200 businesses. The SBA will forgive a portion of those loans.
A major change in 2020 has been the sharp decrease in interest rates. Rates paid on deposits are approaching zero, negatively affecting our deposit customers. Loan rates have also decreased, driving demand for new home purchases and mortgage refinancings. The PPP loans and increased mortgage lending have led to the $39 million in loan growth this year. The income generated from the growth in loan volume was completely offset by the declining net interest margin (the difference between what we earn on our assets less what we pay on deposits and money we borrow), which fell from 3.21% to 3.03%.
We made two new investments in 2020; a $10 million purchase of bank-owned life insurance (“BOLI”), and a $660,000 equity investment in a solar project in Springfield, Vermont.
Because of the economic uncertainties, we are anticipating an increase in problem loans in the second half of 2020 and into 2021. As a result, we boosted our Loan Loss Reserve by an additional $1 million through June. We are hopeful that these reserves will not all be needed but are concerned with increased unemployment and unknown prospects for our business customers. The Federal government has provided the economy with stimulus, but no one knows what will happen when it is exhausted. Some of our mortgage and business customers have their loans in forbearance.
Despite the challenges so far in 2020, our core pre-tax net income, excluding the increase in the Loan Loss Reserve, was up 9.3% from the same period in 2019. Increases in Non-Interest Income and decreases in Non-Interest Expense contributed to the improvement. Non-Interest Income is up because of income earned on the BOLI and income from the sale of mortgages. Non-Interest Expense is less than the year-earlier period due to across-the-board expense control.
There was an accounting change beginning July 1, 2019 whereby the unrealized gain or loss in the value of our stock portfolio passes through the Income Statement. For the six months ending June 30, 2020, the portfolio lost $2.4 million in value. As a result, our net loss for the six-month period was $2.2 million, compared to net income of $1.2 million in the year-earlier period. The value of our portfolio has recovered since June 30 but our reported earnings will be much less stable going forward because of this accounting change.
Total Assets grew to $472 million by 8% from year-end because of the increase in loans and deposits. With this growth and with the $2.4 million decline in value of our stock portfolio, our capital ratio fell to 13%; still a very strong number.
We expect a good second half of 2020 but are concerned about the ongoing low rate environment and potential credit issues due to the pandemic in 2021. I want to thank the staff of the Bank for their hard work and perseverance this year. They have had to adapt to new ways of dealing with our customers and each other. Morale has been good and, like everyone else, we are looking forward to when things get back to normal.
Best regards,
Reginald E. Greene, Jr.
President and CEO
Income Statement
| Six Months June 30, 2020 |
Six Months June 30, 2019 |
|
| Total Interest Income | $8,221,205 | $8353907 |
| Total Interest Expense | 1,677,497 | 1596733 |
| Net Interest Income | $6,543,708 | $6,757,174 |
| Provision for Loan Losses | (1,155,500) | (263,000) |
| Non-Interest Income | 1,915,354 | 891,977 |
| Non-Interest Expense | (6,383,924) | (6,409,659) |
| Pre-Tax Core Income | $199,638 | $976,492 |
| Less Income Taxes | (32,251) | 151,176 |
| Core Income | $231,889 | $825,316 |
| Realized Gain/Loss on Sale of Securities | (18,542) | 445,345 |
| Taxes on Gain/Loss on Sale of Securities | (2,996) | (68,946) |
| Unrealized Gain/Loss on Stocks | (2,419,653) | 0 |
| Net income | $ (2,209,302) | $1,201,715 |
Balance Sheet
| June 30, 2020 | December 31, 2019 | |
| Cash & Due from Banks | $11,189,747 | $18,517,353 |
| Bonds | 35,587,557 | 40,796,920 |
| Stocks | 24,180,281 | 27,036,354 |
| Loans (Net) | 375,601,611 | 336,390,838 |
| Other | 25,521,446 | 14,474,761 |
| Total | $472,080,642 | $437,216,226 |
| Deposits | 373,736,291 | $334,022,314 |
| Borrowings | 30,551,000 | 34,500,000 |
| Other Liabilities | 6,567,738 | 5,543,943 |
| Capital | 61,225,613 | 63,149,969 |
| Total | $472,080,642 | $437,216,226 |
View a PDF version of the June 2020 Statement of Condition.
View our past Statements of Condition: