10-Q

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, 2020

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)

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, 2020, the number of shares of common stock outstanding was 3,843,158.

Securities registered or to be 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

CBM Bancorp, Inc.

Table of Contents

		Page No.
Part I. Financial Information
Item 1.	Financial Statements
Consolidated Statements of Financial Condition as of March  31, 2020 (unaudited) and December 31, 2019			3
Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (unaudited)			4
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 (unaudited)			5
Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (unaudited)			6
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)			7
Notes to Consolidated Financial Statements			8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		47
Item 4.	Controls and Procedures		47
Part II. Other Information
Item 1.	Legal Proceedings		48
Item 1A.	Risk Factors		48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		48
Item 3.	Defaults Upon Senior Securities		48
Item 4.	Mine Safety Disclosures		48
Item 5.	Other Information		48
Item 6.	Exhibits		48
Signatures			49

2

PART I – FINANCIAL INFORMATION

ITEM 1 – Consolidated Financial Statements

CBM Bancorp, Inc.

Consolidated Statements of Financial Condition

March 31, 2020 (Unaudited) and December 31, 2019

	March 31, 2020			December 31, 2019
	(Unaudited)
Assets
Cash and due from banks	$	1,336,419		$	787,050
Interest-bearing deposits in other banks		12,228,490			5,200,071
Cash and cash equivalents		13,564,909			5,987,121
Time deposits in other banks		7,439,811			7,935,811
Securities available for sale, at fair value		32,679,206			37,090,591
Federal Home Loan Bank stock, at cost		729,700			300,400
Loans held for sale		2,639,875			1,730,430
Loans, net of unearned fees		163,842,313			159,624,611
Allowance for loan losses		(1,550,851	)		(1,379,150	)
Net loans		162,291,462			158,245,461
Accrued interest receivable		697,408			655,146
Bank-owned life insurance		4,742,399			4,723,825
Premises and equipment, net		1,793,973			1,828,666
Foreclosed real estate		845,000			845,000
Deferred income taxes		653,821			724,658
Prepaid expenses and other assets		404,832			334,470
Total assets	$	228,482,396		$	220,401,579
Liabilities and Stockholders’ Equity
Liabilities
Noninterest-bearing deposits	$	21,658,012		$	19,780,866
Interest-bearing deposits		136,283,138			136,660,007
Total deposits		157,941,150			156,440,873
Advances by borrowers for taxes and insurance		925,156			538,516
Federal Home Loan Bank advances		12,500,000			2,500,000
Accounts payable and other liabilities		1,088,377			986,814
Total liabilities		172,454,683			160,466,203
Commitments and contingencies		—			—
Stockholders’ Equity
Preferred stock, $.01 par value; authorized 1,000,000 shares; none issued		—			—
Common stock, $.01 par value; authorized 24,000,000 shares; issued and outstanding 3,861,742 shares at March 31, 2020 and 4,208,505 shares at December 31, 2019		38,617			42,085
Additional paid in capital		36,653,283			41,210,056
Retained earnings		23,417,610			23,243,847
Unearned common stock held by:
Employee Stock Ownership Plan		(2,623,840	)		(2,708,480	)
2019 Equity Incentive Plan		(2,357,994	)		(2,357,994	)
Accumulated other comprehensive income		900,037			505,862
Total stockholders’ equity		56,027,713			59,935,376
Total liabilities and stockholders’ equity	$	228,482,396		$	220,401,579

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, 2020 and 2019

	For the Three Months Ended
	March 31,
	2020		2019
Interest and dividend income
Interest and fees on loans	$	1,965,446	$	1,727,283
Interest and dividends on investments		318,404		453,221
Total interest income		2,283,850		2,180,504
Interest expense
Interest on deposits		369,363		316,037
Interest on borrowings		16,133		—
Total interest expense		385,496		316,037
Net interest income		1,898,354		1,864,467
Provision for loan losses		175,000		90,000
Net interest income after provision for loan losses		1,723,354		1,774,467
Non-interest income
Service fees on deposit accounts		35,881		28,392
Income from bank-owned life insurance		18,574		18,516
Gain on sale of loans held for sale		114,650		15,246
Gain on sale of investment securities		46,551		—
Other non-interest income		29,324		30,120
Total non-interest income		244,980		92,274
Non-interest expense
Salaries, director fees and employee benefits		1,138,703		885,844
Premises and equipment		104,479		119,053
Data processing		141,141		139,893
Professional fees		115,317		122,688
FDIC premiums and regulatory assessments		16,587		30,215
Marketing		16,964		23,184
Other operating expenses		180,449		178,405
Total non-interest expense		1,713,640		1,499,282
Income before income taxes		254,694		367,459
Income tax expense		80,931		95,436
Net income	$	173,763	$	272,023
Earnings per common share
Basic	$	0.05		0.07
Diluted	$	0.05		0.07

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, 2020 and 2019

	For the Three Months Ended March 31,
	2020			2019
Net income	$	173,763		$	272,023
Other comprehensive income
Unrealized gain on investment securities available for sale		590,372			398,996
Reclassification adjustment for realized gain on investments securities available for sale included in net income		(46,551	)		—
Total unrealized gain on investments securities available for sale		543,821			398,996
Income tax expense relating to investment securities available for sale		(149,646	)		(109,793	)
Other comprehensive income		394,175			289,203
Total comprehensive income	$	567,938		$	561,226

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, 2020 and 2019

	Common Stock			Additional Paid-In Capital			Retained Earnings		Unearned ESOP Shares			Unearned RRP Shares			Accumulated Other Comprehensive Income		Total Stockholders’ Equity
Balance, January 1, 2019	$	42,320		$	40,987,146		$	22,336,134	$	(3,047,040	)	$	—		$	28,215	$	60,346,775
Net income		—			—			272,023		—			—			—		272,023
Other comprehensive income		—			—			—		—			—			289,203		289,203
ESOP shares committed to be released		—			24,122			—		84,640			—			—		108,762
Balance, March 31, 2019	$	42,320		$	41,011,268		$	22,608,157	$	(2,962,400	)	$	—		$	317,418	$	61,016,763
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

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, 2020 and 2019

	For the Three Months
	Ended March 31,
	2020			2019
Cash flows from operating activities:
Net income	$	173,763		$	272,023
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion of securities		4,788			6,770
Gain on sale of loans held for sale		(114,650	)		(15,246	)
Originations of loans held for sale		(5,210,152	)		(1,237,156	)
Proceeds from sales of loans held for sale		4,415,357			996,985
Gain on sale of available for sale securities		(46,551	)		—
Amortization of deferred loan origination costs, net of fees		(56,248	)		(23,122	)
Provision for loan losses		175,000			90,000
Increase in accrued interest receivable		(42,262	)		(66,730	)
Increase in cash surrender value of life insurance		(18,574	)		(18,516	)
Depreciation and amortization		36,686			42,211
ESOP compensation expense		112,571			108,762
Stock based compensation expense		168,847			—
Deferred income tax benefit		(78,809	)		(4,091	)
Increase in prepaid expenses and other assets		(70,362	)		(58,830	)
Increase in accounts payable and other liabilities		101,563			97,606
Net cash (used in) provided by operating activities		(449,033	)		190,666
Cash flows from investing activities:
Net maturities (purchases) of time deposits in other banks		496,000			(497,752	)
Purchases of available for sale securities		—			(8,037,204	)
Proceeds from maturities, payments and calls of available for sale securities		3,431,232			2,787,427
Proceeds from sales of available for sale securities		1,565,737			—
Purchases of Federal Home Loan Bank stock		(429,300	)		(33,900	)
Net increase in loans		(4,164,753	)		(2,646,392	)
Purchases of premises and equipment		(1,993	)		(6,555	)
Net cash provided by (used in) investing activities		896,923			(8,434,376	)
Cash flows from financing activities:
Net increase in deposits		1,500,277			642,528
Net increase in advances by borrowers		386,640			369,428
Net increase in FHLB advances		10,000,000			—
Repurchase common stock		(4,757,019	)		—
Net cash provided by financing activities		7,129,898			1,011,956
Net increase (decrease) increase in cash and cash equivalents		7,577,788			(7,231,754	)
Cash and cash equivalents, beginning balance		5,987,121			18,846,760
Cash and cash equivalents, ending balance	$	13,564,909		$	11,615,006
Supplemental disclosure of cash flows information:
Cash paid for interest	$	385,928		$	315,927
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

Basis of Presentation

Pursuant to the terms and conditions of a plan of conversion and reorganization, adopted by its Board of Directors and approved by its members, Banks of the Chesapeake, M.H.C. converted from the mutual holding company corporate structure to the public stock holding company structure as follows: CBM Bancorp, Inc. (“CBM Bancorp” or “Company”) was incorporated on May 22, 2018 to serve as the successor holding company for Chesapeake Bank of Maryland (“Bank”),which was at that time the wholly owned subsidiary of Banks of the Chesapeake, M.H.C. On September 27, 2018, in accordance with the plan of conversion and reorganization, CBM Bancorp became the parent holding company for the Bank and Banks of the Chesapeake, M.H.C. merged with and into CBM Bancorp, with the Company as the surviving corporation. Upon consummation of the merger, Banks of the Chesapeake, M.H.C. ceased to exist.

The conversion and reorganization was accomplished through the sale and issuance of 4,232,000 shares of common stock at a price of $10.00 per share, through which the Company received proceeds of approximately $40.9 million, net of offering expenses of approximately $1.4 million. Approximately 50% of the net proceeds of the offering, or $20.5 million was contributed by the Company to the Bank in return for 100% of the issued and outstanding shares of common stock of the Bank. In connection with the conversion and reorganization, the Bank’s Board of Directors adopted an employee stock ownership plan (the “ESOP”) which subscribed for 8% of the sum of the number of shares, or 338,560 shares of common stock sold in the offering.

The plan of conversion and reorganization provided for the establishment of a liquidation account by CBM Bancorp for the benefit of eligible account holders in an amount equal to the value of the net assets of Banks of the Chesapeake, M.H.C. as of the date of the latest statement of financial condition of Banks of the Chesapeake, M.H.C. prior to the consummation of the conversion and reorganization. The plan of conversion and reorganization also provided for the establishment of a parallel liquidation account in the Bank to support the CBM Bancorp liquidation account in the event CBM Bancorp does not have sufficient assets to fund its obligations under the CBM Bancorp liquidation account.

In the unlikely event that the Bank were to liquidate after the conversion and reorganization, all claims of creditors, including those of depositors, would be paid first. However, except with respect to the liquidation account to be established in CBM Bancorp, depositors’ claims would be solely for the principal amount of their deposit accounts plus accrued interest. Depositors generally would not have an interest in the value of the assets of the Bank or CBM Bancorp above that amount.

Pursuant to the plan of conversion and reorganization, after two years from the date of conversion and reorganization, and upon the written request of the Federal Reserve Board, CBM Bancorp will transfer, or upon the prior written approval of the Federal Reserve Board, CBM Bancorp may transfer, the liquidation account and the depositors’ interests in such account to the Bank, and the liquidation account shall thereupon be subsumed into the liquidation account of the Bank.

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.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“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 accounting principles generally accepted in the United States 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, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, 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, 2019 included in the Company’s Annual Report on Form 10-K dated March 27, 2020.

8

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1. Significant Accounting Policies (Continued)

Nature of Operations

CBM Bancorp, Inc.’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.

The accounting and reporting policies of CBM Bancorp, Inc. and Chesapeake Bank of Maryland conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to general practices in the banking industry. The more significant policies follow:

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 with accounting principles generally accepted in the United States of America 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.

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 (including amortization of premium or accretion of discount).

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

9

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1. Significant Accounting Policies (Continued)

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 Generally Accepted Accounting Standards 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 Federal Home Loan Bank of Atlanta according to a predetermined formula. FHLB stock can be sold back only at par value of $100 per share and only to the FHLB or another member institution. As of March 31, 2020 and December 31, 2019, the Bank owned shares totaling $729,700 and $300,400, respectively.

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 to be derivatives. The period of time 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.

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.

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.

10

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1. Significant Accounting Policies (Continued)

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.

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 (“BOLI”)

The Bank maintains life insurance 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, 2020, and December 31, 2019, $126,201 and $122,118, respectively, was included in other liabilities related to the split-dollar insurance policies.

11

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1. Significant Accounting Policies (Continued)

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 (“ESOP”)

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.

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.

12

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 1. Significant Accounting Policies (Continued)

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 had approximately $416,000 and approximately $0 in deposits in other financial institutions in excess of amounts insured by the FDIC, as of March 31, 2020 and December 31, 2019, respectively. The Bank’s management considers this a normal business risk. 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 TDRs for a limited period of time to account for the effects of COVID-19.

The CARES Act also provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic.

Recent Accounting Pronouncements

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, 2020, and interim periods within fiscal years beginning after December 15, 2021. 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.

13

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 its proposal 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, 2020 and December 31, 2019, are as follows:

	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale
U.S. Government and Federal Agency obligations	$	7,474,916	$	143,416	$	—	$	7,618,332
Residential mortgage-backed securities		23,962,560		1,098,314		—		25,060,874
	$	31,437,476	$	1,241,730	$	—	$	32,679,206
	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale
U.S. Government and Federal Agency obligations	$	9,472,370	$	76,651	$	4,679	$	9,544,342
Residential mortgage-backed securities		25,415,647		638,856		43,964		26,010,539
Municipal securities		1,504,664		31,046		—		1,535,710
	$	36,392,681	$	746,553	$	48,643	$	37,090,591

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. There were no sales of investment securities for the three months ended March 31, 2019.

14

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, 2020 and December 31, 2019, 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, 2020
	Securities Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	3,998,494	$	4,035,061
Due after one year through five years		3,476,422		3,583,271
Due five years to ten years		—		—
Due after ten years		—		—
Mortgage-backed, in monthly installments		23,962,560		25,060,874
	$	31,437,476	$	32,679,206

	December 31, 2019
	Securities Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	1,000,000	$	998,407
Due after one year through five years		9,474,467		9,560,135
Due five years to ten years		502,567		521,510
Due after ten years		—		—
Mortgage-backed, in monthly installments		25,415,647		26,010,539
	$	36,392,681	$	37,090,591

The Bank did not have any securities with gross unrealized losses at March 31, 2020. Securities with gross unrealized losses at December 31, 2019 aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:

	December 31, 2019
	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	$	—	$	—	$	1,995,321	$	4,679	$	1,995,321	$	4,679
Residential mortgage-backed securities		4,862,213		43,964		—		—		4,862,213		43,964
	$	4,862,213	$	43,964	$	1,995,321	$	4,679	$	6,857,534	$	48,643

At March 31, 2020, the Bank held no investments with gross unrealized losses. At December 31, 2019, the Bank held seven investments with gross unrealized losses totaling $48,643. 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.

15

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 2. Securities (Continued)

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, 2020 and December 31, 2019.

Note 3. Loans

The Bank currently manages its credit products and respective exposure to credit losses by the following specific portfolio segments which are levels at which the Bank develops and documents its systematic methodology to determine the allowance for loan losses attributable to each respective portfolio segment. The segments are:

• 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.

16

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 3. Loans (Continued)

• 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, 2020 and December 31, 2019 were as follows:

	March 31,			December 31,
	2020			2019
Real estate loans
One-to four-family	$	77,108,832		$	74,655,376
Home equity loans and lines of credit		7,281,582			7,488,348
Construction and land development		10,176,933			9,260,520
Nonresidential		61,935,252			61,012,514
Total real estate loans		156,502,599			152,416,758
Other loans
Commercial		7,105,201			6,946,372
Consumer		456,814			522,566
Total other loans		7,562,015			7,468,938
Total loans		164,064,614			159,885,696
Net deferred loan origination fees and costs		(222,301	)		(261,085	)
Allowance for loan losses		(1,550,851	)		(1,379,150	)
Total loans, net	$	162,291,462		$	158,245,461

Overdraft deposits are reclassified as consumer loans and are included in the total loans on the balance sheet. Overdrafts were $2,797 and $25,714 at March 31, 2020 and December 31, 2019, respectively.

Nonresidential real estate loans entail greater risks compared to residential real estate loans because they typically involved larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the company, as repayment of the loan generally is dependent, in large part, on the sufficient income for the property to cover operating expenses and debt service. Changes in economic conditions, such as the COVID-19 pandemic, that are not in the control of the borrower or lender could negatively impact the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for nonresidential real estate than residential properties.

The following table provides information regarding our nonresidential real estate loans by type at March 31, 2020.

Type of Loan	Number of Loans		Balance
Office		33	$	16,728,139
Retail		17		13,189,040
Warehouse/Industrial		16		10,974,929
Apartment/Multifamily		16		8,276,994
Hotel		5		7,465,906
Other		11		3,118,332
Restaurant		4		1,256,752
Religious/Church Related		5		925,160
		107	$	61,935,252

17

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 SBA lender, we were automatically authorized to originate PPP loans. An eligible business can apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs,” or (2) $10.0 million dollars. PPP loans will have: (a) an interest rate of 1.0%, (b) two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including an accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business entity are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses.

We intend to limit our investment in PPP loans to up to 20% of the Bank’s capital or approximately $8.6 million in loans. As of April 24, 2020, we had received 79 applications for up to $8.2 million of loans under the PPP and have received approval for 35 applications for $6.1 million of loans.

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, general, and unallocated 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. An unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. 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.

18

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

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

The following tables summarize the activity in the allowance for losses for the three months ended March 31, 2020 and 2019 and for the year ended December 31, 2019 and the distribution of the allowance for loan losses and loans receivable by loan portfolio class and impairment method as of March 31, 2020, March 31, 2019 and December 31, 2019.

19

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

20

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, 2019
	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, 2019	$	244,781	$	68,837		$	185,170	$	626,031	$	28,879	$	6,669		$	27,985		$	1,188,352
Charge-offs		—		—			—		—		—		—			—			—
Recoveries		—		—			—		—		—		—			—			—
Provision		61,263		(7,115	)		33,825		5,068		770		(369	)		(3,442	)		90,000
Ending Balance – March 31, 2019	$	306,044	$	61,722		$	218,995	$	631,099	$	29,649	$	6,300		$	24,543		$	1,278,352
Ending balance: individually evaluated for impairment	$	61,125	$	1,541		$	6,074	$	—	$	—	$	—		$	—		$	68,740
Ending balance: collectively evaluated for impairment	$	244,919	$	60,181		$	212,921	$	631,099	$	29,649	$	6,300		$	24,543		$	1,209,612
Loans:
Ending balance	$	70,401,955	$	7,291,555		$	9,831,129	$	52,909,540	$	5,390,814	$	496,036					$	146,321,029
Ending balance: individually evaluated for impairment	$	661,784	$	127,200		$	86,728	$	484,223	$	—	$	—					$	1,359,935
Ending balance: collectively evaluated for impairment	$	69,740,171	$	7,164,355		$	9,744,401	$	52,425,317	$	5,390,814	$	496,036					$	144,961,094

21

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

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

	As of December 31, 2019
	One –to Four-Family			Home Equity Loans and Lines of Credit			Construction and Land Development			Nonresidential			Commercial		Consumer		Unallocated		Total
Beginning Balance	$	244,781		$	68,837		$	185,170		$	626,031		$	28,879	$	6,669	$	27,985	$	1,188,352
Charge-offs		(90,111	)		—			(11,000	)		—			—		—		—		(101,111	)
Recoveries		—			2,439			—			114,470			—		—		—		116,909
Provision		176,935			(8,673	)		5,371			(57,048	)		26,692		281		31,442		175,000
Ending Balance	$	331,605		$	62,603		$	179,541		$	683,453		$	55,571	$	6,950	$	59,427	$	1,379,150
Ending balance: individually evaluated for impairment	$	—		$	681		$	—		$	—		$	—	$	—	$	—	$	681
Ending balance: collectively evaluated for impairment	$	331,605		$	61,922		$	179,541		$	683,453		$	55,571	$	6,950	$	59,427	$	1,378,469
Loans:
Ending balance	$	74,655,376		$	7,488,348		$	9,260,520		$	61,012,514		$	6,946,372	$	522,566			$	159,885,696
Ending balance: individually evaluated for impairment	$	337,984		$	116,721		$	791,625		$	1,581,818		$	—	$	—			$	2,828,148
Ending balance: collectively evaluated for impairment	$	74,317,392		$	7,371,627		$	8,468,895		$	59,430,696		$	6,946,372	$	522,566			$	157,057,548

22

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.

23

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, 2020 and December 31, 2019:

	March 31, 2020
	One-to Four- Family		Home Equity Loans and Lines of Credit		Construction and Land Development		Nonresidential
Grade:
Pass	$	76,597,036	$	7,281,582	$	10,176,933	$	60,374,499
Special Mention		246,419		—		—		—
Substandard		265,377		—		—		1,560,753
Doubtful		—		—		—		—
	$	77,108,832	$	7,281,582	$	10,176,933	$	61,935,252
	Commercial		Consumer		Totals
Grade:
Pass	$	7,105,201	$	456,814	$	161,992,065
Special Mention		—		—		246,419
Substandard		—		—		1,826,130
Doubtful		—		—		—
	$	7,105,201	$	456,814	$	164,064,614
	December 31, 2019
	One-to Four- Family		Home Equity Loans and Lines of Credit		Construction and Land Development		Nonresidential
Grade:
Pass	$	73,856,550	$	7,412,069	$	8,468,895	$	59,430,696
Special Mention		460,842		—		—		—
Substandard		337,984		76,279		791,625		1,581,818
Doubtful		—		—		—		—
	$	74,655,376	$	7,488,348	$	9,260,520	$	61,012,514
	Commercial		Consumer		Totals
Grade:
Pass	$	6,946,372	$	522,566	$	156,637,148
Special Mention		—		—		460,842
Substandard		—		—		2,787,706
Doubtful		—		—		—
	$	6,946,372	$	522,566	$	159,885,696

24

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

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

The following table sets forth certain information with respect to our loan portfolio delinquencies by loan class and amount as of March 31, 2020 and December 31, 2019:

	March 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	$	221,635	$	—	$	113,102	$	334,737	$	76,774,095	$	77,108,832	$	—	$	265,377
Home equity loans and lines of credit		—		—		—		—		7,281,582		7,281,582		—		—
Construction and land development		—		—		—		—		10,176,933		10,176,933		—		—
Nonresidential		—		—		—		—		61,935,252		61,935,252		—		—
Other loans:
Commercial		—		—		—		—		7,105,201		7,105,201		—		—
Consumer		—		—		—		—		456,814		456,814		—		—
Total loans	$	221,635	$	—	$	113,102	$	334,737	$	163,729,877	$	164,064,614	$	—	$	265,377

	December 31, 2019
	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	$	220,316	$	—	$	337,984	$	558,300	$	74,097,076	$	74,655,376	$	—	$	337,984
Home equity loans and lines of credit		169,329		—		76,279		245,608		7,242,740		7,488,348		—		76,279
Construction and land development		—		—		75,728		75,728		9,184,792		9,260,520		—		75,728
Nonresidential		—		—		—		—		61,012,514		61,012,514		—		—
Other loans:
Commercial		31,510		—		—		31,510		6,914,862		6,946,372		—		—
Consumer		24,759		—		—		24,759		497,807		522,566		—		—
Total loans	$	445,914	$	—	$	489,991	$	935,905	$	158,949,791	$	159,885,696	$	—	$	489,991

At March 31, 2020 and December 31, 2019 there were no loans 90 days past due and still accruing interest. At March 31, 2020, the Bank had three loans on non-accrual status with foregone interest in the amount of $6,511. At December 31, 2019, the Bank had seven loans on non-accrual status with foregone interest in the amount of $17,925.

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.

25

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 impaired loans for the three months ended March 31, 2020 and 2019 and the year ended and December 31, 2019:

							Three Months Ended
	Impaired Loans at March 31, 2020						March 31, 2020
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	265,377	$	267,279	$	—	$	266,868	$	4,896
Nonresidential		1,560,753		1,560,753		—		1,571,286		23,466
With an allowance recorded:
Home equity loans and lines of credit	$	39,103	$	39,103	$	385	$	39,773	$	2,964
Total
One-to four-family	$	265,377	$	267,279	$	—	$	266,868	$	4,896
Home equity loans and lines of credit		39,103		39,103		385		39,773		2,964
Nonresidential		1,560,753		1,560,753		—		1,571,286		23,466
							Three Months Ended
	Impaired Loans at March 31, 2019						March 31, 2019
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	459,430	$	463,756	$	—	$	462,049	$	5,301
Home equity loans and lines of credit		82,885		82,885		—		83,925		1,934
Nonresidential		484,223		871,107		—		484,223		—
With an allowance recorded:
One-to four-family	$	202,354	$	263,605	$	61,125	$	202,601	$	1,337
Home equity loans and lines of credit		44,315		44,315		1,541		45,073		875
Construction and land development		86,728		86,728		6,074		86,728		—
Nonresidential
Total
One-to four-family	$	661,784	$	727,361	$	61,125	$	664,650	$	6,638
Home equity loans and lines of credit		127,200		127,200		1,541		128,998		2,809
Construction and land development		86,728		86,728		6,074		86,728		—
Nonresidential		484,223		871,107		—		484,223		—

26

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

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

	December 31, 2019
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	337,984	$	342,345	$	—	$	342,907	$	11,765
Home equity loans and lines of credit		76,279		76,279		—		82,117		2,727
Construction and land development		791,625		802,625				836,264		54,478
Nonresidential		1,581,818		1,581,818		—		1,609,744		61,141
With an allowance recorded:
Home equity loans and lines of credit	$	40,442	$	40,442	$	681	$	43,136	$	2,964
Total
One-to four-family	$	337,984	$	342,345	$	—	$	342,907	$	11,765
Home equity loans and lines of credit		116,721		116,721		681		125,252		5,691
Construction and land development		791,625		802,625		—		836,264		54,478
Nonresidential		1,581,818		1,581,818		—		1,609,744		61,141

Impaired loans also include certain loans that have been modified in a 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. A summary of TDRs at March 31, 2020 and December 31, 2019 are as follows:

March 31, 2020	Number of Contracts		Performing		Nonperforming		Total
Home equity loans and lines of credit		1	$	39,103	$	—	$	39,103

December 31, 2019	Number of Contracts		Performing		Nonperforming		Total
Home equity loans and lines of credit		1	$	40,442	$	—	$	40,442

The Bank had one TDR at March 31, 2020 totaling $39,103 and one TDR at December 31, 2019 totaling $40,442. The Bank has no commitments to loan additional funds to borrowers whose loans have been modified. There were no nonperforming TDRs reclassified to nonperforming loans during the three months ended March 31, 2020 and 2019. A default is considered to have occurred once the TDR is past due 90 days or more, or it has been placed on nonaccrual. If loans modified in a TDR subsequently default, the Bank evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

The CARES Act provided financial institutions the option, which the Bank has elected to apply, to temporarily suspend certain requirements under U.S. GAAP relating to TDRs for a limited period of time to account for the effects of COVID-19. Financial institutions were encouraged to work prudently with borrowers who are or may be unable to meet their contractual obligations because of the effects of COVID-19. Financial institutions generally do not need to categorize COVID-19 related modifications as TDRs as long as the borrower was not experiencing financial difficulty prior to the effects of COVID-19.

27

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

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

As of April 24, 2020, the Bank had received requests to modify 52 loans due to the effects of COVID-19. The modifications primarily consist of interest only payments with the deferral of principal for up to six months, dependent on the borrower and their financial situation. The breakdown of loan modification requests by type is as follows:

	Number of loans		Balance
Real estate loans
One-to four-family		18	$	3,107,843
Home equity loans and lines of credit		3		94,728
Construction and land development		2		327,843
Nonresidential		21		17,305,269
Total real estate loans		44		20,835,863
Other loans
Commercial		6		1,716,312
Consumer		2		56,149
Total other loans		8		1,772,461
Total loans		52	$	22,608,144

Note 5. Foreclosed Real Estate

At both March 31, 2020 and December 31, 2019, the Bank had $845,000 in foreclosed real estate. The Bank did not dispose of any foreclosed real estate during the three months ended March 31, 2020 and March 31, 2019 and the twelve months ended December 31, 2019.

The following table summarizes changes in foreclosed real estate for the three months ended March 31, 2020 and 2019 and for the year ended December 31, 2018, which are measured on a nonrecurring basis using significant unobservable, Level 3, inputs:

	March 31,				December 31,
	2020		2019		2019
Balance, beginning of period	$	845,000	$	865,000	$	865,000
Write-down of foreclosed real estate		—		—		(20,000	)
Balance, end of period	$	845,000	$	865,000	$	845,000

At March 31, 2020 there were no residential real estate loans in the process of foreclosure. At December 31, 2019 there were no residential real estate loans in the process of foreclosure. At March 31, 2020 and December 31, 2019, there were no residential real estate properties included in foreclosed real estate.

Note 6. Deposits

Deposits are summarized as follows:

	March 31, 2020		December 31, 2019
Noninterest-bearing demand	$	21,658,012	$	19,780,866
Interest-bearing demand		23,459,259		23,779,145
Money market		9,670,363		10,242,323
Savings		24,515,788		24,295,700
Certificates of deposit		78,637,728		78,342,839
Total deposits	$	157,941,150	$	156,440,873

28

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 6. Deposits (Continued)

Deposit accounts in the Bank are federally insured up to $250,000 per depositor. The aggregate amount of time deposits with balances of $250,000 or more totaled $15,135,158 and $14,113,578 at March 31, 2020 and December 31, 2019, respectively.

At March 31, 2020 certificates of deposit and their remaining maturities were as follows:

March 31,
2021	$	29,264,377
2022		19,178,981
2023		14,368,762
2024		8,959,675
2025		6,865,933
	$	78,637,728

Deposit balances of officers and directors totaled $921,560 and $419,857 at March 31, 2020 and December 31, 2019, respectively.

Note 7. Borrowings

The Bank has advances outstanding from the Federal Home Loan Bank of Atlanta (“FHLB”). A schedule of borrowings is as follows:

March 31, 2020							December 31, 2019
Advance Amount		Rate			Maturity Date		Advance Amount		Rate			Maturity Date
$	2,500,000		0.33	%		05/20/2020	$	2,500,000		1.78	%		12/17/2020
	5,000,000		0.55	%		09/14/2020
	5,000,000		0.95	%		03/06/2023
$	12,500,000						$	2,500,000

At March 31, 2020 FHLB advances and their remaining maturities were as follows:

March 31,
2021	$	7,500,000
2022		—
2023		5,000,000
2024		—
2025		—
	$	12,500,000

29

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 7. Borrowings (Continued)

The Bank has an agreement with the Federal Home Loan Bank of Atlanta (“FHLB”) that allows it to obtain advances secured by assets owned by the Bank. Total advances are limited to 25% of the Bank’s total assets. As of March 31, 2020 and December 31, 2019, the Bank had availability of $55,085,000 and $55,100,000, respectively, and remaining credit availability of approximately $42,600,000 and $52,600,000, respectively, with FHLB. As of March 31, 2020 and December 31, 2019, the Bank pledged a portion of its one-to four-family residential mortgages as collateral. The amount of loans that were deemed eligible to pledge as collateral totaled approximately $53,300,000 and $50,320,000 at March 31, 2020 and December 31, 2019, respectively.

The Bank also has a $2,000,000 unsecured federal funds line of credit available with another financial institution, for which no amounts were outstanding as of March 31, 2020 and December 31, 2019.

Note 8. Employee Stock Ownership Plan

In connection with the Bank’s mutual to stock conversion in September 2018, the Bank established the Chesapeake Bank of Maryland Employee Stock Ownership Plan (“ESOP”) for all eligible employees. The ESOP purchased 338,560 shares of Company common stock in the Company’s initial public offering at $10.00 per share with the proceeds of a ten (10) year loan from the Company. The Bank intends to make annual contributions to the ESOP that at a minimum will permit the ESOP to repay the principal and interest due on the ESOP debt. However, the Bank may prepay the principal of the note, partially or in full and without penalty or premium at any time and from time to time without prior notice to the holder. Any dividends declared on Company common stock held by the ESOP and not allocated to the account of a participant can be used to repay the loan. As the ESOP loan is repaid, shares of Company common stock pledged as collateral for the loan are released from the loan suspense account for allocation to Plan participants on the basis of each active participant’s proportional share of compensation.

Participants vest 100% in their ESOP allocations after three years of service. In connection with the implementation of the ESOP, participants were given credit for past service with the Bank for vesting purposes. Participants will become fully vested upon age 65, death or disability, a change in control, or termination of the ESOP. Generally, participants will receive distributions from the ESOP upon separation from service. The plan reallocates any unvested shares of common stock forfeited upon termination of employment among the remaining participants in the plan.

The ESOP compensation expense for the three months ended March 31, 2020 and 2019 was $112,571 and $108,762, respectively. This amount represents the average fair market value of the shares of Company common stock allocated or committed to be released as of that date. The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital. Dividends, if any, on allocated shares are recorded as a reduction of retained earnings and dividends, if any, on unallocated shares are recorded as a reduction of the debt service. At March 31, 2020, there were 270,848 shares not yet released having an aggregate market value of approximately $3,136,420.

30

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 9. Stock Based Compensation

On May 14, 2019, the Board of Directors adopted the 2019 Equity Incentive Plan (“2019 Plan”), which was approved at the Annual Meeting of Stockholders. The 2019 Plan allows for up to 169,280 shares to be issued to employees, executive officers or Directors in the form of restricted stock, and up to 423,200 shares to be issued to employees, executive officers or Directors in the form of stock options. At March 31, 2020, there were 161,320 restricted stock awards granted and 368,300 stock option awards granted under the 2019 Plan.

Restricted Stock

The specific terms of each restricted stock award are determined by the Compensation Committee at the date of the grant. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at the date of the grant. Participants will vest in their share awards at a rate of 20% per year over a five year period, beginning one year after the date of the plan share award. If service to the Company is terminated for any reason other than death, disability or change in control, the unvested share awards will be forfeited.

The 2019 Equity Incentive Plan Trust (“Trust”) has been established to acquire, hold, administer, invest and make distributions from the Trust in accordance with provisions of the Plan and Trust. The Company contributed sufficient funds to the Trust for the Trust to acquire 169,280 shares of common stock which is held in the Trust subject to the restricted stock award vesting requirements. The 2019 Plan provides that grants to each employee and non-employee director shall not exceed 25% and 5% of the shares available under the 2019 Plan, respectively. Shares awarded to non-employee directors in the aggregate shall not exceed 30% of the shares available under the 2019 Plan.

The following table presents a summary of the activity in the Company’s restricted stock for the three months ended March 31, 2020:

	Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2020		—	$	—
Granted		161,320		13.40
Vested		—		—
Forfeited		—		—
Nonvested at March 31, 2020		161,320	$	13.40
Fair value of vested shares	$	—

The 2019 Plan was not adopted until May 14, 2019, therefore there were no shares granted for the three months ended March 31, 2019.

The following table outlines the vesting schedule of the nonvested restricted stock awards as of March 31, 2020:

Year Ending December 31,	Number of Restricted Shares
2020		32,264
2021		32,264
2022		32,264
2023		32,264
2024		32,264
		161,320

31

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 9. Stock Based Compensation (Continued)

The Company recorded compensation expense related to restricted stock awards of $107,494 during the three months ended March 31, 2020. No compensation expense was recorded for the three months ended March 31, 2019. As of March 31, 2020, there was $1,779,393 of total unrecognized compensation expense related to nonvested shares granted under the 2019 Plan. The cost is expected to be recognized over a weighted average period of 4.1 years.

Stock Options

Under the above 2019 Plan, stock options are granted to provide the Company’s directors and key employees with a proprietary interest in the Company as an as incentive to contribute to its success. The Board of Directors of the Company may grant options to eligible employees and non-employee directors based on these factors. The 2019 Plan participants will vest in their options at a rate no more rapid than 20% per year over a five-year period, beginning one year after the grant date of the option. Vested options will have an exercise period of ten years commencing on the date of grant. If service to the Company is terminated for any reason other than death, disability or change in control, the unvested options shall be forfeited. The Company recognizes compensation expense during the vesting period based on the fair value of the option on the date of the grant. The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical data. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of the options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury rate equal to the expected term of the option at the time of the grant.

The fair value of options granted to date was determined using the following assumptions as of the grant date.

Expected Stock Price Volatility		17.08	%
Expected Dividend Yield		0.00	%
Expected Term (In Years)		7.0
Risk-Free Rate		2.30	%
Fair Value of Options Granted	$	3.35

The following table summarizes the Company’s stock option activity and related information for the three months ended March 31, 2020:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2020		—	$	—
Granted		368,300		13.40		9.40
Vested		—				—
Forfeited		—				—
Outstanding at March 31, 2020		368,300	$	13.40		9.40
Fair value of vested shares	$	—

The 2019 Plan was not adopted until May 14, 2019, therefore there were no shares granted for the three months ended March 31, 2019.

The Company recorded compensation expense related to stock options of $61,353 during the three months ended March 31, 2020. No compensation expense was recorded for the three months ended March 31, 2019 relating to stock options. As of March 31, 2020, there was $1,015,607 of total unrecognized compensation expense related to nonvested stock options granted under the plan. The cost is expected to be recognized over a weighted average period of 4.1years. The intrinsic value of a stock option is the amount that the market value of the underlying stock exceeds the exercise price of the option. Based upon a fair market value of $11.58 at March 31, 2020, the intrinsic value of the stock is currently less than the exercise price of the option.

32

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 10. Common Stock

On May 14, 2019, the Board of Directors authorized the repurchase of up to 169,280 shares of the Company’s outstanding common stock for the Trust. The repurchase program was equal to the number of restricted stock shares eligible to be granted in the 2019 Plan and 169,280 shares were repurchased during the year ending December 31, 2019.

On December 2, 2019, the Board of Directors authorized a plan to repurchase up to $6,000,000 of the Company’s outstanding common stock. The repurchases will be made during a one-year period in privately negotiated transactions, or in such other manner as will comply with applicable policy, laws and regulations.

The following table sets forth information in connection with repurchases of the Company’s shares of common stock during the period listed.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Value of Shares Purchased as Part of Publicly Announced Plans		Maximum Value of Shares That May Yet Be Purchased Under the Plan
December 2 – 31, 2019		23,495	$	13.69	$	332,545	$	5,667,455
January 1 – 31, 2020		76,675		14.23		1,423,565		4,576,435
February 1 – 29, 2020		7,500		14.34		1,531,121		4,468,879
March 1 – 31, 2020		262,588		13.55		5,089,565		910,435

On March 25, 2020, the Board of Directors of the Company declared a special cash dividend of $0.50 per share on the Company’s outstanding shares of common stock. The special cash dividend is payable to the Company’s stockholders of record as of April 6, 2020 and was paid on April 17, 2020.

Note 11. Earnings Per Common Share

Basic earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Net income available to common stockholders is net income to the Company. Unallocated common shares held by the ESOP are not included in the weighted average number of common shares outstanding for purposes of calculating earnings per share until they are committed to be released. Basic earnings per share excludes dilution and is computed by dividing net income by weighted average number of common shares outstanding during the period. Dilutive earnings per share reflects the potential dilution that could occur if stock options were exercised and is computed by dividing net income by the dilutive weighted average number of common shares outstanding during the period.

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Net income	$	173,763	$	272,023
Weighted average common shares outstanding - basic		3,804,938		3,927,296
Weighted average common shares outstanding - dilutive		3,804,938		3,927,296
Earnings per common share, basic and diluted	$	0.05	$	0.07

33

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 12. Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s consolidated financial statements. These capital requirements were modified in 2013 with the Basel III capital rules, which establish a new comprehensive capital framework for U.S. banking organizations. The Bank became subject to the new rules on January 1, 2015, with a phase-in period for many of the new provisions which was fully phased in on January 1, 2019. As of March 31, 2020, the Company’s capital levels remained characterized as “well-capitalized” under the new rules. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Common Equity Tier 1 Capital, Tier 1 Capital, and Total Capital to Risk Weighted Assets and of Tier 1 Capital to Average Assets. Management believes, as of March 31, 2020 and December 31, 2019, all applicable capital adequacy requirements have been met.

The most recent notification from the OCC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based capital, Tier 1 capital to risk-weighted assets, and Tier 1 capital to adjusted total assets, ratios. There have been no conditions or events since that notification that management believes have changed the Bank’s category.

The actual and required capital amounts and ratios of the Bank as of March 31, 2020 and December 31, 2019 were as follows (dollars in thousands):

	Actual					Minimum Regulatory Capital Ratios under Basel III					To Be Well Capitalized under Basel III
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(dollars in thousands)
As of March 31, 2020:
Common equity tier 1 capital (to risk-weighted assets)	$	42,070		27.48	%	$	9,950		³6.50	%	$	9,950		³6.50	%
Total risk-based capital (to risk-weighted assets)		43,661		28.52	%		15,308		³10.0	%		15,308		³10.0	%
Tier 1 capital (to risk-weighted assets)		42,070		27.48	%		12,246		³8.0	%		12,246		³8.0	%
Tier 1 capital (to average assets)		42,070		18.92	%		8,893		³4.0	%		11,116		³5.0	%
As of December 31, 2019:
Common equity tier 1 capital (to risk-weighted assets)	$	41,635		27.74	%	$	9,569		³6.375	%	$	9,757		³6.50	%
Total risk-based capital (to risk-weighted assets)		43,054		28.68	%		14,823		³9.875	%		15,010		³10.0	%
Tier 1 capital (to risk-weighted assets)		41,635		27.74	%		11,821		³7.875	%		12,008		³8.0	%
Tier 1 capital (to average assets)		41,635		19.08	%		8,731		³4.000	%		10,913		³5.0	%

34

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 13. Fair Value Measurements

ASC Topic 820 provides a framework for measuring and disclosing fair value under GAAP. ASC Topic 820 requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or a nonrecurring basis (for example, impaired loans).

ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Bank utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale is recorded at fair value on a recurring basis. Additionally, from time to time, the Bank may be required to record at fair value all other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market for the asset or liability, for substantially the full term of the financial instrument.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement and based on the Bank’s own assumptions about market participants’ assumptions.

The following is a description of the valuation methods used for instruments measured at fair value as the general classification of such instruments pursuant to the applicable valuation method.

Fair value measurements on a recurring basis

Securities available for sale – If quoted prices are available in an active market for identical assets, securities are classified within Level 1 of the hierarchy. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and securities dare included within Level 2 of the hierarchy.

35

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 13. Fair Value Measurements (Continued)

As of March 31, 2020 and December 31, 2019 the Bank has categorized its investment securities available for sale as follows:

	Level 1		Level 2		Level 3		Total
March 31, 2020
Securities available for sale:
U.S. Government Agency and Federal Obligations	$	—	$	7,618,332	$	—	$	7,618,332
Residential mortgage-backed securities				25,060,874		—		25,060,874
December 31, 2019
Securities available for sale:
U.S. Government Agency and Federal Obligations	$	—	$	9,544,342	$	—	$	9,544,342
Residential mortgage-backed securities				26,010,539		—		26,010,539
Municipal Securities		—		1,535,710		—		1,535,710

Fair value measurements on a nonrecurring basis

Impaired loans – The Bank measures impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values. As of March 31, 2020 and December 31, 2019 the fair values consisted of loan balances of $1,865,233 and $2,828,148 that have been written down by $385 and $681, respectively, as a result of specific loan loss allowances.

Foreclosed real estate – The Bank’s foreclosed real estate is measured at fair value less estimated cost to sell. As of March 31, 2020 and December 31, 2019, the fair value of foreclosed real estate was estimated to be $845,000. Fair value was determined based on offers and/or appraisals. Cost to sell the real estate was based on standard market factors. The Bank has categorized its foreclosed real estate as Level 3.

	Level 1		Level 2		Level 3		Total
March 31, 2020
Impaired loans	$	—	$	—	$	1,864,848	$	1,864,848
Foreclosed real estate		—		—		845,000		845,000
December 31, 2019
Impaired loans	$	—	$	—	$	2,827,467	$	2,827,467
Foreclosed real estate		—		—		845,000		845,000

36

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 13. Fair Value Measurements (Continued)

The following table presents quantitative information about Level 3 fair value measurements for selected financial instruments measured at fair value on a non-recurring basis at March 31, 2020 and December 31, 2019:

	Fair Value		Value Technique(s)	Unobservable Inputs	Range or Rate Used
March 31, 2020
Impaired loans	$	1,864,848	Appraised value	Discount to reflect current market conditions		0.00	%
			Discounted cash flows	Discount rates		0.98	%
Foreclosed real estate	$	845,000	Appraised value	Discount to reflect current market conditions		10.11	%
December 31, 2019
Impaired loans	$	2,827,467	Appraised value	Discount to reflect current market conditions		0.00	%
			Discounted cash flows	Discount rates		1.68	%
Foreclosed real estate	$	845,000	Appraised value	Discount to reflect current market conditions		10.11	%

The remaining financial assets and liabilities are not reported on the balance sheet at fair value on a recurring basis. The calculation of estimated fair values is based on market conditions at a specific point in time and may not reflect current or future fair values.

The estimated fair values of the Bank’s financial instruments, whether carried at cost or fair value are as follows:

			Fair Value Measurements at March 31, 2020 Using
	Carrying Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(dollars in thousands)
Financial assets:
Cash and cash equivalents	$	13,565	$	13,565	$	—	$	—	$	13,565
Time deposits in other banks		7,440		—		7,474		—		7,474
Securities available for sale		32,679		—		32,679		—		32,679
Federal Home Loan Bank stock		730		—		730		—		730
Loans held for sale		2,640		—		2,722		—		2,722
Loans, net (1)		162,291		—		—		167,410		167,410
Foreclosed real estate		845		—		—		845		845
Accrued interest receivable		654		—		654		—		654
Financial liabilities:
Deposits		157,941		—		151,883		—		151,883
Borrowings		12,500		—		12,829				12,829

(1) Carrying amount is net of unearned income and the allowance for loan losses. In accordance with the prospective adoption of ASU No. 2016-01, the fair value of loans was measured using an exit price notion.

37

CBM Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 13. Fair Value Measurements (Continued)

			Fair Value Measurements at December 31, 2019 Using
	Carrying Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(dollars in thousands)
Financial assets:
Cash and cash equivalents	$	5,987	$	5,987	$	—	$	—	$	5,987
Time deposits in other banks		7,936		—		8,127		—		8,127
Securities available for sale		37,091		—		37,091		—		37,091
Federal Home Loan Bank stock		300		—		300		—		300
Loans held for sale		1,730		—		1,823		—		1,823
Loans, net (1)		158,245		—		—		161,954		161,954
Foreclosed real estate		845		—		—		845		845
Accrued interest receivable		655		—		655		—		655
Financial liabilities:
Deposits		156,441		—		145,617		—		145,617
Borrowings		2,500				2,550				2,550

(2) Carrying amount is net of unearned income and the allowance for loan losses. In accordance with the prospective adoption of ASU No. 2016-01, the fair value of loans was measured using an exit price notion.

38

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statement Regarding Forward-Looking Statements

Overview

Management’s discussion and analysis of financial condition at March 31, 2020 and December 31, 2019 and results of operations for the three months ended March 31, 2020 and 2019 is intended to assist in understanding the financial condition and results of operations of the Bank. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item1, of this quarterly report on Form 10-Q.

This report contains forward looking statements within the meaning of the Securities Exchange Act of 1934, as amended, including statements of goals, intentions, and expectations as to future trends, plans, events or results of Company operations and policies and regarding general economic conditions. In some cases, forward- looking statements can be identified by use of such words as “may,” “will,” “anticipate,” “believes,” “expects,” “plans,” “estimates,” “potential,” “continue,” “should,” and similar words or phrases. These statements are based upon current and anticipated economic conditions, nationally and in the Company’s market, interest rates and interest rate policy, competitive factors and other conditions, which by their nature are not susceptible to accurate forecast and are subject to significant uncertainty. For details on factors that could affect these expectations, see the risk factors and other cautionary language included in the Company’s Prospectus dated August 7, 2018 (filed with the Securities and Exchange Commission on August 15, 2018), and in other periodic and current reports filed by the Company with the Securities and Exchange Commission. Because of these uncertainties and the assumptions on which this discussion and the forward-looking statements are based, actual future operations and results in the future may differ materially from those indicated herein. Readers are cautioned against placing undue reliance on any such forward looking statements.

General

The COVID-19 pandemic has adversely affected our ability to conduct normal business, has adversely affected our customers, and the adverse impacts could be significant.

The COVID-19 pandemic has adversely impacted our business and financial results, and its ultimate impact on our business will depend on highly uncertain and unpredictable future developments, including the magnitude and duration of the pandemic and actions taken by governmental authorities in response to the pandemic, particularly within our geographic footprint. The pandemic has resulted in temporary closures of many businesses, some of which include our borrowers, and the institution of social distancing and sheltering in place requirements in many states and communities, including our market area. As a result, the business disruption may be significant, which could adversely affect our business, and financial position. Furthermore, the pandemic could continue to result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the national economy and our market area worsens, or more clients draw on their lines or credit or seek additional loans to help finance their businesses. Small and mid-sized businesses make up a large portion of our commercial loan portfolio, and are particularly vulnerable to the financial effects of the COVID-19 pandemic due to their increased reliance on continuing cash flow to fund day-to-day operations. Although government programs have sought, and may further seek, to provide relief to these types of businesses, there can be no assurance that these programs will succeed. Our business operations may also be disrupted if significant portions of our workforce, key personnel or third-party service providers are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic. Until the COVID-19 pandemic subsides, it will continue to impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios.

Chesapeake Bank of Maryland

Our business operations are conducted through Chesapeake Bank of Maryland, a federally chartered stock savings association headquartered in Baltimore County, Maryland. Prior to 1998 and the creation of a mutual holding company structure, Chesapeake Bank of Maryland or its predecessors had operated as thrift institutions since 1913. Chesapeake Bank of Maryland conducts business out of its main office located in Baltimore County, Maryland, and out of three branch offices located in Arbutus, Maryland, Bel Air, Maryland, and Pasadena, Maryland.

Chesapeake Bank of Maryland operates as a community-oriented institution by offering a variety of loan and deposit products and serving other financial needs of its local community. Chesapeake Bank of Maryland takes its corporate citizenship seriously and is committed to meeting the credit needs of the community, consistent with safe and sound operations.

Chesapeake Bank of Maryland’s business consists principally of attracting retail deposits from the general public in our market area and using those funds, together with funds generated from operations and borrowings, to originate loans secured by residential and nonresidential real estate. Nonresidential real estate loans, construction and land development loans and commercial loans constitute a significant percentage of the loan portfolio and, in that respect, Chesapeake Bank of Maryland’s lending operations are more diversified and have more risk than many traditional thrift institutions.

Chesapeake Bank of Maryland’s primary market area is the Baltimore Metropolitan Area and its surrounding counties. The economy of Chesapeake Bank of Maryland’s market area is diversified, with a mix of services, manufacturing, wholesale/retail trade and federal and local government. See “Business of Chesapeake Bank of Maryland—Market Area.”

Chesapeake Bank of Maryland is subject to comprehensive regulation and examination by the Office of the Comptroller of the Currency. Chesapeake Bank of Maryland is subject to Maryland banking laws except to the extent they are preempted by Federal law. Chesapeake Bank of Maryland is not regulated by the Maryland Commissioner of Financial Regulation.

39

CBM Bancorp, Inc.

CBM Bancorp, Inc. is a newly formed Maryland corporation. Following the completion of the conversion, reorganization and offering, CBM Bancorp became the holding company for Chesapeake Bank of Maryland.

Our executive offices are located at 2001 East Joppa Road, Baltimore, Maryland 21234, and our telephone number is (410) 665-7600. Our website address is www.chesapeakebank.com. Information on this website is not and should not be considered a part of this prospectus.

Critical Accounting Policies

The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

On March 27, 2020, the CARES Act was signed into law. The CARES Act contains provisions that, among other things, provides financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. We intend to follow the guidance provided under the CARES Act.

Because of the short timeframe between the passing of the CARES Act and the opening of the PPP on April 3, 2020, there is some ambiguity in the laws, rules and guidance regarding operation of the PPP. The SBA subsequently notified lenders that the funds initially earmarked for the PPP were exhausted. Congress has approved additional funding for the PPP, and President Trump signed the new legislation on April 24, 2020.

Since commencement of the PPP, several larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP. If any such litigation is filed against the Company or the Bank and is not resolved in a manner favorable to the Company or the Bank, it may result in significant litigation costs, financial liability or reputational damage.

The Bank also may have credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which loans were originated, funded, or serviced by the Bank. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by the Company, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

The following represents our critical accounting policies:

Allowance for Loan Losses. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment.

The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely.

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on Chesapeake Bank of Maryland’s past loan loss experience, known and inherent risks 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 revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan category that are not considered impaired. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative risk factors.

40

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Office of the Comptroller of the Currency, as an integral part of their examination process, periodically reviews our allowance for loan losses. This agency may require us to recognize adjustments to the allowance based on judgments about information available to them at the time of their examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Deferred Tax Assets. We make estimates and judgments to calculate some of our tax liabilities and determine the recoverability of some of our deferred tax assets, which arise from temporary differences between the tax and financial statement recognition of revenue and expenses. We also estimate a reserve for deferred tax assets if, based on the available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. These estimates and judgments are inherently subjective. Historically, our estimates and judgments to calculate our deferred tax accounts have not required significant revision.

In evaluating our ability to recover deferred tax assets, we consider all available positive and negative evidence, including our past operating results and our forecast of future taxable income. In determining future taxable income, we make assumptions for the amount of taxable income, the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies, these assumptions require us to make judgments about future taxable income and are consistent with the plans and estimates we use to manage our business. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. An increase in the valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings.

Realization of a deferred tax asset requires us to exercise significant judgment and is inherently uncertain because it requires the prediction of future occurrences. Valuation allowances are provided to reduce deferred tax assets to an amount that is more likely than not to be realized. In evaluating the need for a valuation allowance, we must estimate our taxable income in future years and the impact of tax planning strategies. If we were to determine that we would not be able to realize a portion of our net deferred tax asset in the future for which there is no valuation allowance, an adjustment to the net deferred tax asset would be charged to earnings in the period such determination was made. Conversely, if we were to make a determination that it is more likely than not that the deferred tax assets for which we had established a valuation allowance would be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded.

Fair Value Measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

41

Comparison of Financial Condition at March 31, 2020 and December 31, 2019

Total Assets. Total assets increased $8.1 million, or 3.68%, to $228.5 million at March 31, 2020 from $220.4 million at December 31, 2019. The increase in total assets was primarily due to an increase in our balances being held in interest bearing deposits in other banks, an increase in loans offset by a decrease in investment securities due to principal payments, sales and calls, as discussed in more detail below.

Cash and Cash Equivalents. Cash and cash equivalents increased $7.5 million to $13.6 million at March 31, 2020 from $6.0 million at December 31, 2019. The increase cash and cash equivalents was primarily in interest bearing deposits in other banks and was funded with borrowings from the FHLB to provide additional liquidity during COVID-19. Additional liquidity is being maintained as a result of COVID-19 in order to ensure that we have the necessary funding available to fund loans, including PPP loans, as well as meet the demands of our depositors, if necessary.

Time Deposits in Other Banks. Time deposits in other banks decreased by $496,000, or 6.25%, to $7.4 million at March 31, 2020 from $7.9 million at December 31, 2019. This decrease was due to calls of time deposits in other banks.

Investment Securities. Investment securities decreased $4.4 million, or 11.86%, to $32.7 million at March 31, 2020 from $37.1 million at December 31, 2019. The decrease was due to the sale of our municipal securities in the amount of $1.6 million and calls and principal repayments of $3.4 million. At March 31, 2020 all of our investment securities are classified as available for sale.

Net Loans. Net loans increased $4.0 million, or 2.59%, to $162.3 million at March 31, 2020 from $158.3 million at December 31, 2019. One-to four-family residential real estate loans increased $2.4 million, or 3.21%, to $77.1 million at March 31, 2020 from $74.7 million at December 31, 2019. Our construction and land development loans increased $916,000, or 9.89%, to $10.2 million at March 31, 2020 from $9.3 million at December 31, 2019. Our nonresidential loans increased $923,000, or 1.51%, to $61.9 million at March 31, 2020 from $61.0 million at December 31, 2019. Our commercial loans increased $159,000, or 2.29%, to $7.1 million at March 31, 2020 from $7.0 million at December 31, 2019. Our home equity loans and lines of credit decreased by $207,000, or 2.76%, to $7.3 million at March 31, 2020 from $7.5 million as of December 31, 2019. Our consumer loans remained relatively the same at March 31, 2020 compared to December 31, 2019.

Bank-owned Life Insurance. We invest in bank-owned life insurance (“BOLI”) to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses at the time of investment. This investment is accounted for using the cash surrender value method and is recorded at the amount that can be realized under the insurance policies at the balance sheet date. At March 31, 2020 and December 31, 2019, the aggregate cash surrender value of these policies was $4.7 million.

Deposits. Deposits increased $1.5 million, or 0.96%, to $157.9 million at March 31, 2020 from $156.4 million at December 31, 2019. Our non-interest-bearing demand deposits increased $1.9 million, or 9.60%, to $21.7 million at March 31, 2020 from $19.8 million at December 31, 2019. Our interest-bearing demand deposits decreased $320,000, or 1.35%, to $23.4 million at March 31, 2020 from $23.8 million at December 31, 2019. Our money market deposits decreased $572,000, or 5.58%, to $9.7 million at March 31, 2020 from $10.2 million at December 31, 2019. Our savings accounts and certificates of deposit remained relatively the same at March 31, 2020 compared to December 31, 2019.

Total Stockholders’ Equity. Total stockholders’ equity decreased by $3.9 million to $56.0 million at March 31, 2020 from $59.9 million at December 31, 2019. Earnings of $173,000, an increase of $394,000 in other comprehensive income related to interest fluctuations on the Company’s available for sale securities and an increase of $281,000 in additional paid in capital for the recording of stock-based compensation relating to the ESOP and the 2019 Equity Incentive Plan were offset by the repurchase of $4.8 million in common stock, which is part of the stock repurchase plan that was approved by the Board of Directors on December 2, 2019.

42

Average Balance Sheets

The following table set forth average balance sheets, average yields and costs, and certain other information at the dates and for the periods indicated. No tax equivalent yield adjustments have been made, as the effects would immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances of loans. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Loan balances exclude loans held for sale.

	For the Three Months Ended March 31,
	2020								2019
	Average					Average			Average					Average
	Outstanding					Yield/			Outstanding					Yield/
	Balance			Interest		Rate			Balance			Interest		Rate
	(Dollars in thousands)
Interest earning assets:
Loans	$	162,016		$	1,965		4.86	%	$	143,684		$	1,727		4.87	%
Interest-bearing deposits in other banks		6,783			15		0.89	%		15,280			87		2.31	%
Time deposits in other banks		7,925			56		2.83	%		7,146			51		2.89	%
Investment securities		34,412			244		2.84	%		40,516			312		3.12	%
Federal Home Loan Bank stock		424			4		3.78	%		248			3		4.91	%
Total interest-earning assets		211,560			2,284		4.33	%		206,874			2,180		4.27	%
Non-interest-earning assets		10,926								9,138
Total assets	$	222,486							$	216,012
Interest bearing liabilities:
Interest-bearing demand	$	23,289		$	17		0.29	%	$	23,325		$	13		0.23	%
Money market		9,971			5		0.20	%		11,606			6		0.21	%
Savings		24,498			3		0.05	%		25,150			3		0.05	%
Certificates of deposit		79,964			344		1.73	%		75,881			294		1.57	%
Total deposits		137,722			369		1.07	%		135,962			316		0.94	%
Borrowed funds		5,352			16		1.20	%		—			—		—
Total interest-bearing liabilities		143,074			385		1.08	%		135,962			316		0.94	%
Non-interest-bearing liabilities		21,258								19,393
Total liabilities		164,332								155,355
Equity		58,154								60,657
Total liabilities and equity	$	222,486							$	216,012
Net interest income				$	1,899							$	1,864
Interest rate spread(1)							3.25	%							3.33	%
Net interest-earning assets(2)	$	68,486							$	70,912
Net interest margin(3)							3.60	%							3.65	%
Average interest-earning assets to average-interest bearing liabilities		147,87	%							152.16	%

(1) Interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3) Net interest margin represents net interest income divided by average interest-earning assets.

43

Comparison of Operating Results for the Three Months Ended March 31, 2020 and March 31, 2019

General. Net income was $174,000 for the three months ended March 31, 2020 compared to $272,000 for the three months ended March 31, 2019. The decrease was due primarily to an increase in non-interest expense of $214,000, or 14.28%, to $1.7 million for the three months ended March 31, 2020 compared to $1.5 million for the three months ended March 31, 2019 and a decrease in net interest income after provision for loan losses of $52,000, or 2.93%, to $1.7 million for the three months ended March 31, 2020 from $1.8 million for the three months ended March 31, 2019. The decrease was offset by an increase in non-interest income of $153,000 to $245,000 for the three months ended March 31, 2020 from $92,000 for the three months ended March 31, 2019.

Interest Income. Total interest income increased $103,000, or 4.72%, to $2.3 million for the three months ended March 31, 2020 from $2.2 million for the three months ended March 31, 2019. The increase in interest income was due toa combination of the increase in average interest-earning assets and an increase in the average yield on interest-earning assets for the three months March 31, 2020 compared to the three months ended March 31, 2019.

Interest income and fees on loans increased $238,000, or 13.78%, to $2.0 million for the three months ended March 31, 2020 from $1.7 million for three months ended March 31, 2019. Our average balance of loans increased $18.3 million, or 12.73%, to $162.0 million for the three months ended March 31, 2020 from $143.7 million for the three months ended March 31, 2019. Our average yield on loans decreased one basis point to 4.86% for the three months ended March 31, 2020 from 4.87% for the three months ended March 31, 2019.

Interest and dividends on interest-bearing deposits in other banks, time deposits in other banks, and investments decreased $134,000, or 29.58%, to $319,000 for the three months ended March 31, 2020 from $453,000 for the three months ended March 31, 2019. The average balances in interest-bearing deposits in other banks, time deposits in other banks and investments decreased $13.7 million to $49.5 million for the three months ended March 31, 2020 from $63.2 million for the three months ended March 31, 2019 primarily due to the funding of loan growth. . The average rate we earned on interest-bearing deposits in other banks, time deposits in other banks and investments decreased 30 basis points to 2.61% for the three months ended March 31, 2020 from 2.91% for the three months ended March 31, 2019 primarily due to our interest-bearing deposits in other banks repricing due to federal funds rate decreases as well as decreases in average interest rates on investments due to sales and calls of higher yielding investment securities.

Interest Expense. Interest expense increased $69,000, or 21.84%, to $385,000 for the three months ended March 31, 2020 from $316,000 for the three months ended March 31, 2019. Our average balance of interest-bearing liabilities increased $7.1 million, or 5.22%, to $143.1 million for the three months ended March 31, 2020 from $136.0 million for the three months ended March 31, 2019. The increase was due primarily to an increase in borrowed funds and an increase in certificates of deposit balances offset by decreases in money market accounts. Our average rate paid on interest-bearing deposits increased 13 basis points to 1.07% for the three months ended March 31, 2020 from 0.94% for the three months ended March 31, 2019 primarily due to an increase in the average rate paid on certificates of deposit accounts and the average rate paid on borrowings which was 1.20% as of March 31, 2020.

Net Interest Income. Net interest income increased $34,000, or 1.82%, to $1.9 million for the three months ended March 31, 2020 from $1.9 million for the three months ended March 31, 2019. The increase in net interest income was primarily due to an increase in our average loans, which is our highest interest-earning asset, which increased $18.3 million, to $162.0 million at March 31, 2020 from $143.7 million at March 31, 2019. This increase in income attributed to the increase in average loans was offset by the overall decrease in net interest-earning assets and a decrease in our net interest rate spread and net interest margin. Our net interest-earning assets, which represents total interest–earning assets, less total interest–bearing liabilities, decreased by $2.4 million, or 3.39% to $68.5 million at March 31, 2020 from $70.9 million at March 31, 2019, due to an increase in interest-bearing liabilities which was greater than the increase in interest-earning assets, which was attributed primarily to an increase in borrowings. Our borrowings at March 31, 2020 were $5.4 million and we did not have borrowings at March 31, 2019. Our net interest rate spread decreased by 8 basis points to 3.25% for the three months ended March 31, 2020 from 3.33% for the three months ended March 31, 2019. Our net interest margin decreased by 5 basis points to 3.60% for the three months ended March 31, 2020 from 3.65% for the three months ended March 31, 2019. Both the decrease in the net interest rate spread and net interest margin can be primarily attributed to the increase in the average rate paid on certificates of deposit and borrowings.

44

Provisions for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors, including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, the fair value of underlying collateral, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. The allowance for loan losses is assessed on a quarterly basis and provisions are made for loan losses as required in order to maintain the allowance.

Provision for loan losses increased by $85,000 to $175,000 for the three months ended March 31, 2020 from a provision for loan losses for the three months ended March 31, 2019 of $90,000. We recorded $4,000 net charge-offs for the three months ended March 31, 2020 compared to zero in net charge-offs for the three months ended March 31, 2019. Non-performing loans totaled $265,000 at March 31, 2020 compared to $1.2 million at March 31, 2019. The decrease of $1.0 million in non-performing loans was primarily the result of a decrease of $315,000 in non-performing one-to four-family residential loans, a decrease of $83,000 in home equity loans and lines of credit, a decrease of $87,000 in construction and land development loans and a decrease of $484,000 in nonresidential loans. The decrease in non-performing one-to four-family loans, home equity loans and lines of credit and construction and land development loans was attributed to several loans paying in full without loss to the Company, a one-to four family residential property selling at foreclosure with a charge-off recorded on the transaction of $50,000 recorded during the year ended December 31, 2019 and the construction and land development loan settling with a charge-off of $11,000 recorded during the year ended December 31, 2019. The decrease in non-performing nonresidential loans was due to the settlement of a loan relationship where the Company reported a charge-off of $335,000 during the year ended December 31, 2018 and a subsequent recovery of $115,000 during the year ended December 31, 2019 for which the Company has no additional exposure. Our non-performing loans to total loans decreased to 0.16% at March 31, 2020 from 0.84% at March 31, 2019. The increase in provision for loan losses was necessary due to an overall increase in our loan balances as well as an increase in our qualitative factors, such as current economic conditions, the adequacy of underlying collateral and the financial strength of our borrowers affected by the COVID-19 pandemic. We have provided for losses that are probable and reasonably estimable at March 31, 2020.

Non-interest Income. Non-interest income increased by $153,000 to $245,000 for the three months ended March 31, 2020 from $92,000 for the three months ended March 31, 2019. The increase was primarily due to an increase of $10,000 on the gain on sale of loans and an increase of $46,000 on the gain on sale of investment securities.

Non-interest Expense. Non-interest expense increased by $214,000, or 14.28%, to $1.7 million for the three months ended March 31, 2020 from $1.5 million for the three months ended March 31, 2019. Salaries, director fees and employee benefits increased $253,000, or 28.56%, to $1.1 million for the three months ended March 31, 2020 from $886,000 for the three months ended March 31, 2019 due primarily to the recording of $169,000 in stock-based compensation expense relating to the 2019 Equity Incentive Plan which was approved in May 2019, as well as the expansion of our employee base, including sales and relationship management personnel to help support our continued growth strategy. Premises and equipment expenses decreased $15,000, or 12.61%, to $104,000 for the three months ended March 31, 2020 from $119,000 for the three months ended March 31, 2019 due primarily to a decrease in office maintenance costs. FDIC premiums and regulatory expenses decreased $13,000, or 43.33%, to $17,000 for the three months ended March 31, 2020 from $30,000 for the three months ended March 31, 2019 due to the FDIC awarding small banks credits for a portion of their assessment during the first quarter of 2020.

Income Tax Expense. Income tax expense decreased $14,000, or 14.74%, to $81,000 for the three months ended March 31, 2020 from $95,000 for the three months ended March 31, 2019. The effective tax rate was 31.78% and 25.97% for the three months ended March 31, 2020 and 2019, respectively. The decrease in tax expense was the result of a decrease in income before taxes of $112,000, or 69.48%, to $255,000 for the three months ended March 31, 2020 compared to $367,000 for the three months ended March 31, 2019. The increase in the effective tax rate was due to the increase in non-deductible compensation expense relating to the ESOP and the 2019 Equity Incentive Plan.

45

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. Our primary sources of funds are deposits and, principal and interest payments on loans and securities. We also have the ability to borrow funds from the Federal Home Loan Bank of Atlanta, and we have credit availability with a correspondent bank. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

The COVID-19 pandemic could have a negative effect on our liquidity and capital resources due to reductions in principal and interest payments on our loans, funding PPP loans for our customers, an increase in deposit withdrawals and the potential tightening of the capital markets. While we have not yet experienced a decrease in our loan principal and interest payments, we do however expect for there to be a decline in the second quarter ending June 30, 2020 based on our current level of loan modification requests for those customers affected by COVID-19. The loan type, number of loans and balances of these loan modifications are discussed in Note 4 of Notes to Consolidated Financial Statements. As a qualified SBA lender, we were authorized to originate PPP loans as discussed in Note 3 of Notes to Consolidated Financial Statements. We intend to limit our investment up to 20% of the Bank’s capital, or $8.6 million in loans, and have received SBA approval to fund $6.1 million in PPP loans. Deposit balances increased during the three months ended March 31, 2020, however, we are anticipating deposit outflow from consumers and businesses relating to the potential disruption in their income and the adverse business consequences due to COVID-19.    

In order to meet the our potential current short-term and long-term liquidity needs, to include the funding of our investment in PPP loans, as discussed above we have increased our borrowings with the Federal Home Loan Bank to $12.5 million as of March 31, 2020 and subsequent to March 31, 2020, we sold $5.7 million in residential mortgage-backed securities, recognizing a gain of approximately $100,000. We believe that we have enough sources of liquidity to satisfy our short and long-term liquidity needs as of March 31, 2020.

We monitor and adjust our investments in liquid assets based upon our assessments of: (1) expected loan demand; (2) expected deposit flows; (3) yields available on interest-earning deposits and securities; and (4) the objectives of our asset liability management program. Excess liquid assets are invested generally in interest-earning deposits and short and intermediate securities.

Our most liquid assets are cash and cash equivalents, which include interest-bearing deposits in other banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At March 31, 2020, cash and cash equivalents totaled $13.6 million, which included, $1.3 million in cash and due from banks and interest-bearing deposits in other banks of $12.3 million. Time deposits in other banks and securities classified as available-for-sale, which provide additional sources of liquidity, totaled $7.4 million and $32.7 million, respectively at March 31, 2020.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash (used in) provided by operating activities was $(449,000) and $191,000 for the three months ended March 31, 2020 and 2019, respectively. Net cash provided by (used in) investing activities, which consists primarily of disbursements for loan originations and the purchases of securities, offset by principal collections on loans, proceeds from maturing securities and pay-downs on mortgage-backed securities was $896,000 and $(8.4) million for the three months ended March 31, 2020 and 2019, respectively. Net cash provided by financing activities, consisting of activities in deposit accounts and borrowings, as well as the repurchase of common stock was $7.1 million and $1.0 million for the three months ended March 31, 2020 and 2019, respectively.

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of March 31, 2020 totaled $29.3 million, or 18.56% of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

46

We are subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2020, Chesapeake Bank of Maryland exceeded all regulatory capital requirements and was considered “well capitalized” under regulatory guidelines. See “Historical and Pro Forma Regulatory Capital Compliance.”

Off-Balance Sheet Arrangements

As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At March 31, 2020, we had outstanding commitments to originate loans of $25.1 million. We anticipate that we will have sufficient funds available to meet our current lending commitments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information relating to this item.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by the quarterly report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There has been no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

47

Part II – OTHER INFORMATION

Item 1 – Legal Proceedings

The Company was not involved in any pending legal proceedings. The Bank is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. The Company’s management believes that such routine legal proceedings, in the aggregate, are immaterial to the Company’s consolidated financial condition and results of operations.

Item 1A – Risk Factors

Not applicable, as CBM Bancrop, Inc. is a smaller reporting company.

Item 2 – Unregistered Sales of Equity Securities and Use or Proceeds

None.

Item 3 – Defaults Upon Senior Securities

None

Item 4 – Mine Safety Disclosures

Not applicable

Item 5 – Other Information

None

Item 6 – Exhibits

31.1	Rule 13a-14(a)/15d-14(a) Certification of principal executive officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of principal financial officer
32.0	Section 1350 Certifications
101.0	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to the Consolidated Financial Statements.

48

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CBM BANCORP, INC.
Dated: May 15, 2020	By:	/s/ Joseph M. Solomon
		Joseph M. Solomon
		President
		(principal executive officer)
Dated: May 15, 2020	By:	/s/ Jodi L. Beal
		Jodi L. Beal
		Executive Vice President and Chief Financial Officer
		(principal financial and accounting officer)

49

EX-31.1

Exhibit 31.1

Certification

I, Joseph M. Solomon, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CBM Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 15, 2020	/s/ Joseph M. Solomon
	Joseph M. Solomon
	President
	(principal executive officer)

EX-31.2

Exhibit 31.2

Certification

I, Jodi L. Beal, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of CBM Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 15, 2020	/s/ Jodi L. Beal
	Jodi L. Beal
	Executive Vice President and Chief Financial Officer
	(principal financial and accounting officer)

EX-32.0

Exhibit 32.0

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of CBM Bancorp, Inc. (the “Company”) for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission (the “Report”), I hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

By:	/s/ Joseph M. Solomon
	Joseph M. Solomon
	President
	(principal executive officer) May 15, 2020
By:	/s/ Jodi L. Beal
	Jodi L. Beal
	Executive Vice President and Chief Financial Officer
	(principal financial and accounting officer)
	May 15, 2020

XML

Credit Quality of Loans and the Allowance for Loan Losses - Summary of Loan Portfolio Delinquencies (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	$ 334,737	$ 935,905
Current Loans	163,729,877	158,949,791
Total Loans	164,064,614	159,885,696
Recorded Investment > 90 Days and Accruing
Nonaccrual Loans	265,377	489,991
One-to-Four-Family
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	334,737	558,300
Current Loans	76,774,095	74,097,076
Total Loans	77,108,832	74,655,376
Recorded Investment > 90 Days and Accruing
Nonaccrual Loans	265,377	337,984
Home Equity Loans and Lines of Credit
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	245,608
Current Loans	7,281,582	7,242,740
Total Loans	7,281,582	7,488,348
Nonaccrual Loans	0	76,279
Construction and Land Development
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	75,728
Current Loans	10,176,933	9,184,792
Total Loans	10,176,933	9,260,520
Nonaccrual Loans	0	75,728
Nonresidential
Financing Receivable, Recorded Investment [Line Items]
Current Loans	61,935,252	61,012,514
Total Loans	61,935,252	61,012,514
Nonaccrual Loans	0	0
Commercial
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	31,510
Current Loans	7,105,201	6,914,862
Total Loans	7,105,201	6,946,372
Nonaccrual Loans	0	0
Consumer
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	24,759
Current Loans	456,814	497,807
Total Loans	456,814	522,566
Nonaccrual Loans	0	0
Loans 30-59 Days Past Due
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	221,635	445,914
Loans 30-59 Days Past Due | One-to-Four-Family
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	221,635	220,316
Loans 30-59 Days Past Due | Home Equity Loans and Lines of Credit
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	169,329
Loans 30-59 Days Past Due | Commercial
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	31,510
Loans 30-59 Days Past Due | Consumer
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	24,759
Loans 60-89 Days Past Due
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	0
Loans 60-89 Days Past Due | One-to-Four-Family
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	0
Loans 90 or More Days Past Due
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	113,102	489,991
Loans 90 or More Days Past Due | One-to-Four-Family
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	113,102	337,984
Loans 90 or More Days Past Due | Home Equity Loans and Lines of Credit
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	0	76,279
Loans 90 or More Days Past Due | Construction and Land Development
Financing Receivable, Recorded Investment [Line Items]
Total Past Due Loans	$ 0	$ 75,728

XML

Loans - Additional Information (Detail)	Mar. 27, 2020 USD ($)	Apr. 24, 2020 USD ($) Applications	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Mar. 31, 2019 USD ($)
Lease and Investment Commitments [Line Items]
Total loans			$ 164,064,614	$ 159,885,696	$ 146,321,029
Loans and Leases Receivable, Net Amount			162,291,462	158,245,461
Overdraft Consumer Loan
Lease and Investment Commitments [Line Items]
Total loans			$ 2,797	$ 25,714
Paycheck Protection Program Loan
Lease and Investment Commitments [Line Items]
Lending of loan terms and conditions	As a qualified SBA lender, we were automatically authorized to originate PPP loans. An eligible business can apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs,” or (2) $10.0 million dollars. PPP loans will have: (a) an interest rate of 1.0%, (b) two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including an accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business entity are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses.
Paycheck Protection Program Loan | Subsequent Event
Lease and Investment Commitments [Line Items]
Number of loan applications received | Applications		79
Loans and Leases Receivable, Loans in Process		$ 8,200,000
Number of loan applications approved | Applications		35
Loans and Leases Receivable, Net Amount		$ 6,100,000
Paycheck Protection Program Loan | Maximum
Lease and Investment Commitments [Line Items]
Investment for lending of loan | %	20.00%
Amount of investment for lending of loan	$ 8,600,000

XML

Credit Quality of Loans and the Allowance for Loan Losses - Summary Of breakdown of loan modification requests by type (Detail)		3 Months Ended	12 Months Ended
	Apr. 24, 2020 USD ($) Age	Mar. 31, 2020 USD ($) TDR	Dec. 31, 2019 USD ($) TDR
Financing Receivable, Modifications [Line Items]
Number of loans	52	1	1
Balance	$ 22,608,144	$ 39,103	$ 40,442
Real Estate Loan
Financing Receivable, Modifications [Line Items]
Number of loans | Age	44
Balance	$ 20,835,863
Real Estate Loan | One-to four-family
Financing Receivable, Modifications [Line Items]
Number of loans | Age	18
Balance	$ 3,107,843
Real Estate Loan | Home Equity Loans and Lines of Credit
Financing Receivable, Modifications [Line Items]
Number of loans | Age	3
Balance	$ 94,728
Real Estate Loan | Construction and Land Development
Financing Receivable, Modifications [Line Items]
Number of loans | Age	2
Balance	$ 327,843
Real Estate Loan | Nonresidential
Financing Receivable, Modifications [Line Items]
Number of loans | Age	21
Balance	$ 17,305,269
Other Loans
Financing Receivable, Modifications [Line Items]
Number of loans | Age	8
Balance	$ 1,772,461
Other Loans | Commercial
Financing Receivable, Modifications [Line Items]
Number of loans | Age	6
Balance	$ 1,716,312
Other Loans | Consumer
Financing Receivable, Modifications [Line Items]
Number of loans | Age	2
Balance	$ 56,149

XML

Stock Based Compensation - Share Based Payment Award Stock Options Valuation Assumptions (Detail)	3 Months Ended
	Mar. 31, 2020 $ / shares
Expected Stock Price Volatility	17.08%
Expected Dividend Yield	0.00%
Expected Term (In Years)	7 years
Risk-Free Rate	2.30%
Fair Value of Options Granted	$ 3.35

XML

Stock Repurchases - Schedule of Earnings Per Share (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Schedule of Earnings Per Share, Basic and Diluted, by Common Class [Line Items]
Net income	$ 173,763	$ 272,023
Weighted average common shares outstanding - basic	3,804,938	3,927,296
Weighted average common shares outstanding - dilutive	3,804,938	3,927,296
Earnings per common share, basic and diluted	$ 0.05	$ 0.07

XML

Borrowings (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Summary of advances outstanding from the federal home loan bank of atlanta

The Bank has advances outstanding from the Federal Home Loan Bank of Atlanta (“FHLB”). A schedule of borrowings is as follows:

March 31, 2020							December 31, 2019
Advance Amount		Rate			Maturity Date		Advance Amount		Rate			Maturity Date
$	2,500,000		0.33	%		05/20/2020	$	2,500,000		1.78	%		12/17/2020
	5,000,000		0.55	%		09/14/2020
	5,000,000		0.95	%		03/06/2023
$	12,500,000						$	2,500,000

Summary of FHLB advances and their remaining maturities

FHLB advances and their remaining maturities were as follows:

March 31,
2021	$	7,500,000
2022		—
2023		5,000,000
2024		—
2025		—
	$	12,500,000

XML

Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair Value Measurements

Note 13. Fair Value Measurements

ASC Topic 820 provides a framework for measuring and disclosing fair value under GAAP. ASC Topic 820 requires disclosures about the fair value of assets and liabilities recognized in the balance sheet in periods subsequent to initial recognition, whether the measurements are made on a recurring basis (for example, available-for-sale investment securities) or a nonrecurring basis (for example, impaired loans).

ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Bank utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Securities available-for-sale is recorded at fair value on a recurring basis. Additionally, from time to time, the Bank may be required to record at fair value all other assets on a nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market for the asset or liability, for substantially the full term of the financial instrument.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement and based on the Bank’s own assumptions about market participants’ assumptions.

The following is a description of the valuation methods used for instruments measured at fair value as the general classification of such instruments pursuant to the applicable valuation method.

Fair value measurements on a recurring basis

Securities available for sale – If quoted prices are available in an active market for identical assets, securities are classified within Level 1 of the hierarchy. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and securities dare included within Level 2 of the hierarchy.

As of March 31, 2020 and December 31, 2019 the Bank has categorized its investment securities available for sale as follows:

	Level 1		Level 2		Level 3		Total
March 31, 2020
Securities available for sale:
U.S. Government Agency and Federal Obligations	$	—	$	7,618,332	$	—	$	7,618,332
Residential mortgage-backed securities				25,060,874		—		25,060,874
December 31, 2019
Securities available for sale:
U.S. Government Agency and Federal Obligations	$	—	$	9,544,342	$	—	$	9,544,342
Residential mortgage-backed securities				26,010,539		—		26,010,539
Municipal Securities		—		1,535,710		—		1,535,710

Fair value measurements on a nonrecurring basis

Impaired loans – The Bank measures impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values. As of March 31, 2020 and December 31, 2019 the fair values consisted of loan balances of $1,865,233 and $2,828,148 that have been written down by $385 and $681, respectively, as a result of specific loan loss allowances.

Foreclosed real estate – The Bank’s foreclosed real estate is measured at fair value less estimated cost to sell. As of March 31, 2020 and December 31, 2019, the fair value of foreclosed real estate was estimated to be $845,000. Fair value was determined based on offers and/or appraisals. Cost to sell the real estate was based on standard market factors. The Bank has categorized its foreclosed real estate as Level 3.

	Level 1		Level 2		Level 3		Total
March 31, 2020
Impaired loans	$	—	$	—	$	1,864,848	$	1,864,848
Foreclosed real estate		—		—		845,000		845,000
December 31, 2019
Impaired loans	$	—	$	—	$	2,827,467	$	2,827,467
Foreclosed real estate		—		—		845,000		845,000

The following table presents quantitative information about Level 3 fair value measurements for selected financial instruments measured at fair value on a non-recurring basis at March 31, 2020 and December 31, 2019:

	Fair Value		Value Technique(s)	Unobservable Inputs	Range or Rate Used
March 31, 2020
Impaired loans	$	1,864,848	Appraised value	Discount to reflect current market conditions		0.00	%
			Discounted cash flows	Discount rates		0.98	%
Foreclosed real estate	$	845,000	Appraised value	Discount to reflect current market conditions		10.11	%
December 31, 2019
Impaired loans	$	2,827,467	Appraised value	Discount to reflect current market conditions		0.00	%
			Discounted cash flows	Discount rates		1.68	%
Foreclosed real estate	$	845,000	Appraised value	Discount to reflect current market conditions		10.11	%

The remaining financial assets and liabilities are not reported on the balance sheet at fair value on a recurring basis. The calculation of estimated fair values is based on market conditions at a specific point in time and may not reflect current or future fair values.

The estimated fair values of the Bank’s financial instruments, whether carried at cost or fair value are as follows:

			Fair Value Measurements at March 31, 2020 Using
	Carrying Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(dollars in thousands)
Financial assets:
Cash and cash equivalents	$	13,565	$	13,565	$	—	$	—	$	13,565
Time deposits in other banks		7,440		—		7,474		—		7,474
Securities available for sale		32,679		—		32,679		—		32,679
Federal Home Loan Bank stock		730		—		730		—		730
Loans held for sale		2,640		—		2,722		—		2,722
Loans, net (1)		162,291		—		—		167,410		167,410
Foreclosed real estate		845		—		—		845		845
Accrued interest receivable		654		—		654		—		654
Financial liabilities:
Deposits		157,941		—		151,883		—		151,883
Borrowings		12,500		—		12,829				12,829

(1) Carrying amount is net of unearned income and the allowance for loan losses. In accordance with the prospective adoption of ASU No. 2016-01, the fair value of loans was measured using an exit price notion.

			Fair Value Measurements at December 31, 2019 Using
	Carrying Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(dollars in thousands)
Financial assets:
Cash and cash equivalents	$	5,987	$	5,987	$	—	$	—	$	5,987
Time deposits in other banks		7,936		—		8,127		—		8,127
Securities available for sale		37,091		—		37,091		—		37,091
Federal Home Loan Bank stock		300		—		300		—		300
Loans held for sale		1,730		—		1,823		—		1,823
Loans, net (1)		158,245		—		—		161,954		161,954
Foreclosed real estate		845		—		—		845		845
Accrued interest receivable		655		—		655		—		655
Financial liabilities:
Deposits		156,441		—		145,617		—		145,617
Borrowings		2,500				2,550				2,550

(2) Carrying amount is net of unearned income and the allowance for loan losses. In accordance with the prospective adoption of ASU No. 2016-01, the fair value of loans was measured using an exit price notion.

XML

Loans (Tables)

3 Months Ended

Mar. 31, 2020

Summary of Principal Loan Portfolio Segment

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, 2020 and December 31, 2019 were as follows:

	March 31,			December 31,
	2020			2019
Real estate loans
One-to four-family	$	77,108,832		$	74,655,376
Home equity loans and lines of credit		7,281,582			7,488,348
Construction and land development		10,176,933			9,260,520
Nonresidential		61,935,252			61,012,514
Total real estate loans		156,502,599			152,416,758
Other loans
Commercial		7,105,201			6,946,372
Consumer		456,814			522,566
Total other loans		7,562,015			7,468,938
Total loans		164,064,614			159,885,696
Net deferred loan origination fees and costs		(222,301	)		(261,085	)
Allowance for loan losses		(1,550,851	)		(1,379,150	)
Total loans, net	$	162,291,462		$	158,245,461

Summary Of Type Wise Nonresidential Real Estate Loans

The following table provides information regarding our nonresidential real estate loans by type at March 31, 2020.

Type of Loan	Number of Loans		Balance
Office		33	$	16,728,139
Retail		17		13,189,040
Warehouse/Industrial		16		10,974,929
Apartment/Multifamily		16		8,276,994
Hotel		5		7,465,906
Other		11		3,118,332
Restaurant		4		1,256,752
Religious/Church Related		5		925,160
		107	$	61,935,252

XML

Foreclosed Real Estate

3 Months Ended

Mar. 31, 2020

Foreclosed Real Estate

Note 5. Foreclosed Real Estate

At both March 31, 2020 and December 31, 2019, the Bank had $845,000 in foreclosed real estate. The Bank did not dispose of any foreclosed real estate during the three months ended March 31, 2020 and March 31, 2019 and the twelve months ended December 31, 2019.

The following table summarizes changes in foreclosed real estate for the three months ended March 31, 2020 and 2019 and for the year ended December 31, 2018, which are measured on a nonrecurring basis using significant unobservable, Level 3, inputs:

	March 31,				December 31,
	2020		2019		2019
Balance, beginning of period	$	845,000	$	865,000	$	865,000
Write-down of foreclosed real estate		—		—		(20,000	)
Balance, end of period	$	845,000	$	865,000	$	845,000

At March 31, 2020 there were no residential real estate loans in the process of foreclosure. At December 31, 2019 there were no residential real estate loans in the process of foreclosure. At March 31, 2020 and December 31, 2019, there were no residential real estate properties included in foreclosed real estate.

XML

Stock Based Compensation

3 Months Ended

Mar. 31, 2020

Stock Based Compensation

Note 9. Stock Based Compensation

On May 14, 2019, the Board of Directors adopted the 2019 Equity Incentive Plan (“2019 Plan”), which was approved at the Annual Meeting of Stockholders. The 2019 Plan allows for up to 169,280 shares to be issued to employees, executive officers or Directors in the form of restricted stock, and up to 423,200 shares to be issued to employees, executive officers or Directors in the form of stock options. At March 31, 2020, there were 161,320 restricted stock awards granted and 368,300 stock option awards granted under the 2019 Plan.

Restricted Stock

The specific terms of each restricted stock award are determined by the Compensation Committee at the date of the grant. Compensation expense is recognized over the vesting period of the awards based on the fair value of the stock at the date of the grant. Participants will vest in their share awards at a rate of 20% per year over a five year period, beginning one year after the date of the plan share award. If service to the Company is terminated for any reason other than death, disability or change in control, the unvested share awards will be forfeited.

The 2019 Equity Incentive Plan Trust (“Trust”) has been established to acquire, hold, administer, invest and make distributions from the Trust in accordance with provisions of the Plan and Trust. The Company contributed sufficient funds to the Trust for the Trust to acquire 169,280 shares of common stock which is held in the Trust subject to the restricted stock award vesting requirements. The 2019 Plan provides that grants to each employee and non-employee director shall not exceed 25% and 5% of the shares available under the 2019 Plan, respectively. Shares awarded to non-employee directors in the aggregate shall not exceed 30% of the shares available under the 2019 Plan.

The following table presents a summary of the activity in the Company’s restricted stock for the three months ended March 31, 2020:

	Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2020		—	$	—
Granted		161,320		13.40
Vested		—		—
Forfeited		—		—
Nonvested at March 31, 2020		161,320	$	13.40
Fair value of vested shares	$	—

The 2019 Plan was not adopted until May 14, 2019, therefore there were no shares granted for the three months ended March 31, 2019.

The following table outlines the vesting schedule of the nonvested restricted stock awards as of March 31, 2020:

Year Ending December 31,	Number of Restricted Shares
2020		32,264
2021		32,264
2022		32,264
2023		32,264
2024		32,264
		161,320

The Company recorded compensation expense related to restricted stock awards of $107,494 during the three months ended March 31, 2020. No compensation expense was recorded for the three months ended March 31, 2019. As of March 31, 2020, there was $1,779,393 of total unrecognized compensation expense related to nonvested shares granted under the 2019 Plan. The cost is expected to be recognized over a weighted average period of 4.1 years.

Stock Options

Under the above 2019 Plan, stock options are granted to provide the Company’s directors and key employees with a proprietary interest in the Company as an as incentive to contribute to its success. The Board of Directors of the Company may grant options to eligible employees and non-employee directors based on these factors. The 2019 Plan participants will vest in their options at a rate no more rapid than 20% per year over a five-year period, beginning one year after the grant date of the option. Vested options will have an exercise period of ten years commencing on the date of grant. If service to the Company is terminated for any reason other than death, disability or change in control, the unvested options shall be forfeited. The Company recognizes compensation expense during the vesting period based on the fair value of the option on the date of the grant. The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical data. The Company uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of the options granted represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury rate equal to the expected term of the option at the time of the grant.

The fair value of options granted to date was determined using the following assumptions as of the grant date.

Expected Stock Price Volatility		17.08	%
Expected Dividend Yield		0.00	%
Expected Term (In Years)		7.0
Risk-Free Rate		2.30	%
Fair Value of Options Granted	$	3.35

The following table summarizes the Company’s stock option activity and related information for the three months ended March 31, 2020:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2020		—	$	—
Granted		368,300		13.40		9.40
Vested		—				—
Forfeited		—				—
Outstanding at March 31, 2020		368,300	$	13.40		9.40
Fair value of vested shares	$	—

The 2019 Plan was not adopted until May 14, 2019, therefore there were no shares granted for the three months ended March 31, 2019.

The Company recorded compensation expense related to stock options of $61,353 during the three months ended March 31, 2020. No compensation expense was recorded for the three months ended March 31, 2019 relating to stock options. As of March 31, 2020, there was $1,015,607 of total unrecognized compensation expense related to nonvested stock options granted under the plan. The cost is expected to be recognized over a weighted average period of 4.1years. The intrinsic value of a stock option is the amount that the market value of the underlying stock exceeds the exercise price of the option. Based upon a fair market value of $11.58 at March 31, 2020, the intrinsic value of the stock is currently less than the exercise price of the option.

XML

Consolidated Statements of Changes in Stockholders' Equity - USD ($)	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Unearned ESOP Shares	Accumulated Other Comprehensive Income	Unearned RRP Shares
Beginning balance at Dec. 31, 2018	$ 60,346,775	$ 42,320	$ 40,987,146	$ 22,336,134	$ (3,047,040)	$ 28,215
Net income	272,023			272,023
Other comprehensive income	289,203					289,203
ESOP shares committed to be released	108,762		24,122		84,640
Ending balance at Mar. 31, 2019	61,016,763	42,320	41,011,268	22,608,157	(2,962,400)	317,418
Beginning balance at Dec. 31, 2019	59,935,376	42,085	41,210,056	23,243,847	(2,708,480)	505,862	$ (2,357,994)
Net income	173,763			173,763
Other comprehensive income	394,175					394,175
ESOP shares committed to be released	112,571		27,931		84,640
Repurchase of common stock for 2019 Equity Incentive Plan	(4,757,019)
Stock based compensation	168,847		168,847
Repurchase of common stock		(3,468)	(4,753,551)
Ending balance at Mar. 31, 2020	$ 56,027,713	$ 38,617	$ 36,653,283	$ 23,417,610	$ (2,623,840)	$ 900,037	$ (2,357,994)

XML

Consolidated Statements of Financial Condition - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Assets
Cash and due from banks	$ 1,336,419	$ 787,050
Interest-bearing deposits in other banks	12,228,490	5,200,071
Cash and cash equivalents	13,564,909	5,987,121
Time deposits in other banks	7,439,811	7,935,811
Securities available for sale, at fair value	32,679,206	37,090,591
Federal Home Loan Bank stock, at cost	729,700	300,400
Loans held for sale	2,639,875	1,730,430
Loans, net of unearned fees	163,842,313	159,624,611
Allowance for loan losses	(1,550,851)	(1,379,150)
Net loans	162,291,462	158,245,461
Accrued interest receivable	697,408	655,146
Bank-owned life insurance	4,742,399	4,723,825
Premises and equipment, net	1,793,973	1,828,666
Foreclosed real estate	845,000	845,000
Deferred income taxes	653,821	724,658
Prepaid expenses and other assets	404,832	334,470
Total assets	228,482,396	220,401,579
Liabilities
Noninterest-bearing deposits	21,658,012	19,780,866
Interest-bearing deposits	136,283,138	136,660,007
Total deposits	157,941,150	156,440,873
Advances by borrowers for taxes and insurance	925,156	538,516
Federal Home Loan Bank advances	12,500,000	2,500,000
Accounts payable and other liabilities	1,088,377	986,814
Total liabilities	172,454,683	160,466,203
Commitments and contingencies
Stockholders' Equity
Preferred stock, $.01 par value; authorized 1,000,000 shares, none issued
Common stock, $.01 par value; authorized 24,000,000 shares; issued and outstanding 3,861,742 shares at March 31, 2020 and 4,208,505 shares at December 31, 2019	38,617	42,085
Additional paid in capital	36,653,283	41,210,056
Retained earnings	23,417,610	23,243,847
Employee Stock Ownership Plan	(2,623,840)	(2,708,480)
2019 Equity Incentive Plan	(2,357,994)	(2,357,994)
Accumulated other comprehensive income	900,037	505,862
Total stockholders' equity	56,027,713	59,935,376
Total liabilities and stockholders' equity	$ 228,482,396	$ 220,401,579

XML

Significant Accounting Policies - Schedule of Range of Estimated Useful Lives for Premises and Equipment (Detail)	3 Months Ended
	Mar. 31, 2020
Buildings and land improvements [Member] | Minimum
Property, Plant and Equipment [Line Items]
Property Plant And Equipment	5 years
Buildings and land improvements [Member] | Maximum
Property, Plant and Equipment [Line Items]
Property Plant And Equipment	50 years
Leasehold Improvements | Minimum
Property, Plant and Equipment [Line Items]
Property Plant And Equipment	10 years
Leasehold Improvements | Maximum
Property, Plant and Equipment [Line Items]
Property Plant And Equipment	15 years
Furniture, fixtures and equipment [Member] | Minimum
Property, Plant and Equipment [Line Items]
Property Plant And Equipment	3 years
Furniture, fixtures and equipment [Member] | Maximum
Property, Plant and Equipment [Line Items]
Property Plant And Equipment	10 years
Automobiles | Maximum
Property, Plant and Equipment [Line Items]
Property Plant And Equipment	5 years

XML

Earnings Per Common Share (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Earnings Per Share

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Net income	$	173,763	$	272,023
Weighted average common shares outstanding - basic		3,804,938		3,927,296
Weighted average common shares outstanding - dilutive		3,804,938		3,927,296
Earnings per common share, basic and diluted	$	0.05	$	0.07

XML

Securities - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Marketable Securities [Line Items]
Gross unrealized gain (loss)		$ 48,643
Securities pledged	$ 0	$ 0
Proceeds from Sale of Available-for-sale Securities	1,565,737
Available-for-sale Securities, Realized Gain	46,551
Municipal Securities
Marketable Securities [Line Items]
Proceeds from Sale of Available-for-sale Securities	1,565,737
Available-for-sale Securities, Realized Gain	$ 46,551

XML

Employee Stock Ownership Plan - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Common stock per share	$ 0.01		$ 0.01
ESOP compensation expense	$ 112,571	$ 108,762
ESOP
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]
Stock issued during period purchased shares, ESOP	338,560
Common stock per share	$ 10.00
Employee stock ownership plan, loan period description	The Company's initial public offering at $10.00 per share with the proceeds of a ten (10) year loan from the Company.
Employee stock ownership plan, vesting period	3 years
Employee stock ownership plan, vesting percentage	100.00%
ESOP compensation expense	$ 112,571	$ 108,762
Employee Stock Ownership Plan (ESOP), Number of Suspense Shares	270,848
Employee stock ownership plan (ESOP), number of suspense value	$ 3,136,420

XML

Foreclosed Real Estate - Additional Information (Detail)	3 Months Ended	12 Months Ended
	Mar. 31, 2020 USD ($) Loans	Dec. 31, 2019 USD ($) Loans	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Real Estate [Line Items]
Foreclosed real estate amount | $	$ 845,000	$ 845,000	$ 865,000	$ 865,000
Residential Real Estate
Real Estate [Line Items]
Number of loans in the process of foreclosure	0	0
Number of properties included in foreclosed real estate	0	0

XML

Deposits - Schedule of Certificates of Deposit and Remaining Maturities (Detail)	Mar. 31, 2020 USD ($)
Schedule of Maturities of Time Deposits [Line Items]
2020	$ 29,264,377
2021	19,178,981
2022	14,368,762
2023	8,959,675
2024	6,865,933
Certificate of deposit	$ 78,637,728

XML

Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net income	$ 173,763	$ 272,023
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and accretion of securities	4,788	6,770
Gain on sale of loans held for sale	(114,650)	(15,246)
Originations of loans held for sale	(5,210,152)	(1,237,156)
Proceeds from sales of loans held for sale	4,415,357	996,985
Gain on sale of available for sale securities	(46,551)
Amortization of deferred loan origination costs, net of fees	(56,248)	(23,122)
Provision for loan losses	175,000	90,000
Increase in accrued interest receivable	(42,262)	(66,730)
Increase in cash surrender value of life insurance	(18,574)	(18,516)
Depreciation and amortization	36,686	42,211
ESOP compensation expense	112,571	108,762
Stock based compensation expense	168,847
Deferred income tax benefit	(78,809)	(4,091)
Increase in prepaid expenses and other assets	(70,362)	(58,830)
Increase in accounts payable and other liabilities	101,563	97,606
Net cash (used in) provided by operating activities	(449,033)	190,666
Cash flows from investing activities:
Net maturities (purchases) of time deposits in other banks	496,000	(497,752)
Purchases of available for sale securities		(8,037,204)
Proceeds from maturities, payments and calls of available for sale securities	3,431,232	2,787,427
Proceeds from Sale of Available-for-sale Securities	1,565,737
Purchases of Federal Home Loan Bank stock	(429,300)	(33,900)
Net increase in loans	(4,164,753)	(2,646,392)
Purchases of premises and equipment	(1,993)	(6,555)
Net cash provided by (used in) investing activities	896,923	(8,434,376)
Cash flows from financing activities:
Net increase in deposits	1,500,277	642,528
Net increase in advances by borrowers	386,640	369,428
Net increase in FHLB advances	10,000,000
Repurchase common stock	(4,757,019)
Net cash provided by financing activities	7,129,898	1,011,956
Net increase (decrease) increase in cash and cash equivalents	7,577,788	(7,231,754)
Cash and cash equivalents, beginning balance	5,987,121	18,846,760
Cash and cash equivalents, ending balance	13,564,909	11,615,006
Supplemental disclosure of cash flows information:
Cash paid for interest	385,928	315,927
Cash paid for income taxes	$ 0	$ 0

XML

Consolidated Statements of Financial Condition (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, authorized	1,000,000	1,000,000
Preferred stock, issued	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	24,000,000	24,000,000
Common stock, issued	3,861,742	4,208,505
Common stock, outstanding	3,861,742	4,208,505

XML

Deposits

3 Months Ended

Mar. 31, 2020

Deposits

Note 6. Deposits

Deposits are summarized as follows:

	March 31, 2020		December 31, 2019
Noninterest-bearing demand	$	21,658,012	$	19,780,866
Interest-bearing demand		23,459,259		23,779,145
Money market		9,670,363		10,242,323
Savings		24,515,788		24,295,700
Certificates of deposit		78,637,728		78,342,839
Total deposits	$	157,941,150	$	156,440,873

Deposit accounts in the Bank are federally insured up to $250,000 per depositor. The aggregate amount of time deposits with balances of $250,000 or more totaled $15,135,158 and $14,113,578 at March 31, 2020 and December 31, 2019, respectively.

At March 31, 2020 certificates of deposit and their remaining maturities were as follows:

March 31,
2021	$	29,264,377
2022		19,178,981
2023		14,368,762
2024		8,959,675
2025		6,865,933
	$	78,637,728

Deposit balances of officers and directors totaled $921,560 and $419,857 at March 31, 2020 and December 31, 2019, respectively.

XML

Common Stock

3 Months Ended

Mar. 31, 2020

Common Stock

Note 10. Common Stock

On May 14, 2019, the Board of Directors authorized the repurchase of up to 169,280 shares of the Company’s outstanding common stock for the Trust. The repurchase program was equal to the number of restricted stock shares eligible to be granted in the 2019 Plan and 169,280 shares were repurchased during the year ending December 31, 2019.

On December 2, 2019, the Board of Directors authorized a plan to repurchase up to $6,000,000 of the Company’s outstanding common stock. The repurchases will be made during a one-year period in privately negotiated transactions, or in such other manner as will comply with applicable policy, laws and regulations.

The following table sets forth information in connection with repurchases of the Company’s shares of common stock during the period listed.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Value of Shares Purchased as Part of Publicly Announced Plans		Maximum Value of Shares That May Yet Be Purchased Under the Plan
December 2 – 31, 2019		23,495	$	13.69	$	332,545	$	5,667,455
January 1 – 31, 2020		76,675		14.23		1,423,565		4,576,435
February 1 – 29, 2020		7,500		14.34		1,531,121		4,468,879
March 1 – 31, 2020		262,588		13.55		5,089,565		910,435

On March 25, 2020, the Board of Directors of the Company declared a special cash dividend of $0.50 per share on the Company’s outstanding shares of common stock. The special cash dividend is payable to the Company’s stockholders of record as of April 6, 2020 and was paid on April 17, 2020.

XML

Securities - Securities with Gross Unrealized Losses (Detail)	Dec. 31, 2019 USD ($)
Marketable Securities [Line Items]
Fair Value, Less than 12 Months	$ 4,862,213
Gross Unrealized Losses, Less than 12 Months	43,964
Fair Value, 12 Months or Greater	1,995,321
Gross Unrealized Losses, 12 Months or Greater	4,679
Securities Available for Sale, Fair Value	6,857,534
Securities Available for Sale, Gross Unrealized Losses	48,643
U.S. Government and Federal Agency obligations
Marketable Securities [Line Items]
Fair Value, 12 Months or Greater	1,995,321
Gross Unrealized Losses, 12 Months or Greater	4,679
Securities Available for Sale, Fair Value	1,995,321
Securities Available for Sale, Gross Unrealized Losses	4,679
Residential Mortgage-Backed Securities
Marketable Securities [Line Items]
Fair Value, Less than 12 Months	4,862,213
Gross Unrealized Losses, Less than 12 Months	43,964
Securities Available for Sale, Fair Value	4,862,213
Securities Available for Sale, Gross Unrealized Losses	$ 43,964

XML

Significant Accounting Policies - Additional Information (Detail) - USD ($)		3 Months Ended
	Sep. 27, 2018	Mar. 31, 2020	Mar. 27, 2020	Dec. 31, 2019
Summary Of Significant Accounting Policies [Line Items]
Repurchase par value of common stock, per share		$ 100
Federal Home Loan Bank stock, at cost		$ 729,700		$ 300,400
Loans, number of days in delinquency for interest accrual to discontinue		90 days
Deposits in other financial institutions in excess of amounts insured by the Federal Deposit Insurance Corporation ("FDIC")		$ 416,000		0
Balances in brokerage firms, insured		$ 500,000
COVID 19
Summary Of Significant Accounting Policies [Line Items]
Contributions in aid of emergency economic relief			$ 2,000,000,000,000
Fixed Rate Residential Mortgage [Member] | Minimum
Summary Of Significant Accounting Policies [Line Items]
Loan, time period between issuance of loan commitment and closing and sale of the loan		30 days
Fixed Rate Residential Mortgage [Member] | Maximum
Summary Of Significant Accounting Policies [Line Items]
Loan, time period between issuance of loan commitment and closing and sale of the loan		90 days
CBM Bancorp, Inc. [Member]
Summary Of Significant Accounting Policies [Line Items]
Sale and issuance of common stock	4,232,000
Sale and issuance of common stock, per share	$ 10.00
Proceeds from sale and issuance of common stock	$ 40,900,000
Offering expenses	1,400,000
Proceeds from offerings	$ 20,500,000
Proceeds from offerings, Percent	50.00%
Percent of issued and outstanding common stock	100.00%
Number of shares sold under ESOP	338,560
Number of shares sold under ESOP, as percentage	8.00%
Other Liabilities
Summary Of Significant Accounting Policies [Line Items]
Bank owned life insurance ("BOLI")		$ 126,201		$ 122,118

XML

Common Stock (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Share Repurchase Program

The following table sets forth information in connection with repurchases of the Company’s shares of common stock during the period listed.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Value of Shares Purchased as Part of Publicly Announced Plans		Maximum Value of Shares That May Yet Be Purchased Under the Plan
December 2 – 31, 2019		23,495	$	13.69	$	332,545	$	5,667,455
January 1 – 31, 2020		76,675		14.23		1,423,565		4,576,435
February 1 – 29, 2020		7,500		14.34		1,531,121		4,468,879
March 1 – 31, 2020		262,588		13.55		5,089,565		910,435

XML

Foreclosed Real Estate - Schedule of Changes in Foreclosed Real Estate (Detail)	12 Months Ended
	Dec. 31, 2019 USD ($)
Real Estate [Line Items]
Balance, beginning of period	$ 865,000
Write-down of foreclosed real estate	(20,000)
Balance, end of period	$ 845,000

XML

Borrowings - Schedule of Outstanding the Federal Home Loan Bank Of AtlantaBorrowings (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Advance amount	$ 12,500,000	$ 2,500,000
FHLB Advance One [Member]
Advance amount	$ 2,500,000	$ 2,500,000
Rate	0.33%	1.78%
Maturity Date	May 20, 2020	Dec. 17, 2020
FHLB Advance Two [Member]
Advance amount	$ 5,000,000
Rate	0.55%
Maturity Date	Sep. 14, 2020
FHLB Advance Three Member [Member]
Advance amount	$ 5,000,000
Rate	0.95%
Maturity Date	Mar. 06, 2023

XML

Stock Based Compensation - Additional Information (Detail) - USD ($)		3 Months Ended
	May 14, 2019	Mar. 31, 2020	Mar. 31, 2019
Share Based Payment Award Options Granted		368,300	0
Share Based Payment Award Options Granted Weighted Average Grant Date Fair Value		$ 3.35
2019 Equity Incentive Plan Trust
Number Of Shares Available to Acquired Subject To Vesting Of Restricted Shares	169,280
Share Based Payments Awards Maximum Grants Percentage Description		The 2019 Plan provides that grants to each employee and non-employee director shall not exceed 25% and 5% of the shares available under the 2019 Plan, respectively. Shares awarded to non-employee directors in the aggregate shall not exceed 30% of the shares available under the 2019 Plan.
Restricted Stock
Share based Payment Award Vesting Rights Percentage	20.00%
Restricted Stock | 2019 Equity Incentive Plan Trust
Share Based Payment Award Number Of Shares Authorized	169,280
Share Based Payment Award Equity Instruments Other Than Options Granted		161,320
Employee Stock Option
Share Based Compensation Expense		$ 61,353
Unrecognized compensation expense related to nonvested shares granted		$ 1,015,607
Compensation Cost Not Yet Recognized Period For Recognition		4 years 1 month 6 days
Share Based Payment Award Options Granted Weighted Average Grant Date Fair Value		$ 11.58
Employee Stock Option | 2019 Equity Incentive Plan Trust
Share Based Payment Award Number Of Shares Authorized	423,200
Share Based Payment Award Options Granted		368,300
Share based Payment Award Vesting Rights Percentage	20.00%
Restricted Stock Units (RSUs)
Share Based Payment Award Equity Instruments Other Than Options Granted		161,320	0
Share Based Compensation Expense		$ 107,494
Unrecognized compensation expense related to nonvested shares granted		$ 1,779,393
Compensation Cost Not Yet Recognized Period For Recognition		4 years 1 month 6 days

XML

Fair Value Measurements - Schedule of Estimated Fair Values of the Bank's Financial Instruments (Detail) - USD ($)		Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Financial assets:
Cash and cash equivalents		$ 13,564,909	$ 5,987,121	$ 11,615,006	$ 18,846,760
Securities available for sale		32,679,206	37,090,591
Federal Home Loan Bank stock		729,700	300,400
Loans held for sale		2,639,875	1,730,430
Loans, net		162,291,462	158,245,461
Foreclosed real estate		845,000	845,000	$ 865,000	$ 865,000
Accrued interest receivable		697,408	655,146
Financial liabilities:
Deposits		157,941,150	156,440,873
Level 1
Financial assets:
Cash and cash equivalents		13,565,000	5,987,000
Level 2
Financial assets:
Time deposits in other banks		7,474,000	8,127,000
Securities available for sale		32,679,000	37,091,000
Federal Home Loan Bank stock		730,000	300,000
Loans held for sale		2,722,000	1,823,000
Accrued interest receivable		654,000	655,000
Financial liabilities:
Deposits		151,883,000	145,617,000
Borrowings		12,829,000	2,550,000
Level 3
Financial assets:
Loans, net	[1]	167,410,000	161,954,000
Foreclosed real estate		845,000	845,000
Carrying Value
Financial assets:
Cash and cash equivalents		13,565,000	5,987,000
Time deposits in other banks		7,440,000	7,936,000
Securities available for sale		32,679,000	37,091,000
Federal Home Loan Bank stock		730,000	300,000
Loans held for sale		2,640,000	1,730,000
Loans, net	[1]	162,291,000	158,245,000
Foreclosed real estate		845,000	845,000
Accrued interest receivable		654,000	655,000
Financial liabilities:
Deposits		157,941,000	156,441,000
Borrowings		12,500,000	2,500,000
Fair Value
Financial assets:
Cash and cash equivalents		13,565,000	5,987,000
Time deposits in other banks		7,474,000	8,127,000
Securities available for sale		32,679,000	37,091,000
Federal Home Loan Bank stock		730,000	300,000
Loans held for sale		2,722,000	1,823,000
Loans, net	[1]	167,410,000	161,954,000
Foreclosed real estate		845,000	845,000
Accrued interest receivable		654,000	655,000
Financial liabilities:
Deposits		151,883,000	145,617,000
Borrowings		$ 12,829,000	$ 2,550,000

[1] Carrying amount is net of unearned income and the allowance for loan losses. In accordance with the prospective adoption of ASU No. 2016-01, the fair value of loans was measured using an exit price notion.

XML

Credit Quality of Loans and the Allowance for Loan Losses - Summary Of Troubled Debt Restructuring (Detail)		3 Months Ended	12 Months Ended
	Apr. 24, 2020 USD ($) Age	Mar. 31, 2020 USD ($) TDR	Dec. 31, 2019 USD ($) TDR
Financing Receivable, Modifications [Line Items]
Number of Contracts	52	1	1
Total	$ 22,608,144	$ 39,103	$ 40,442
Home Equity Loans and Lines of Credit
Financing Receivable, Modifications [Line Items]
Number of Contracts | TDR		1	1
Performing		$ 39,103	$ 40,442
Total		$ 39,103	$ 40,442

XML

Credit Quality of Loans and the Allowance for Loan Losses - Summary of Loan Portfolio Quality Indicators by Loan Class Recorded Investment (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 164,064,614	$ 159,885,696	$ 146,321,029
Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	161,992,065	156,637,148
Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	246,419	460,842
Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,826,130	2,787,706
One-to-Four-Family
Financing Receivable, Recorded Investment [Line Items]
Total loans	77,108,832	74,655,376	70,401,955
One-to-Four-Family | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	76,597,036	73,856,550
One-to-Four-Family | Special Mention
Financing Receivable, Recorded Investment [Line Items]
Total loans	246,419	460,842
One-to-Four-Family | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	265,377	337,984
Home Equity Loans and Lines of Credit
Financing Receivable, Recorded Investment [Line Items]
Total loans	7,281,582	7,488,348	7,291,555
Home Equity Loans and Lines of Credit | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	7,281,582	7,412,069
Home Equity Loans and Lines of Credit | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	76,279
Construction and Land Development
Financing Receivable, Recorded Investment [Line Items]
Total loans	10,176,933	9,260,520	9,831,129
Construction and Land Development | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	10,176,933	8,468,895
Construction and Land Development | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	0	791,625
Nonresidential
Financing Receivable, Recorded Investment [Line Items]
Total loans	61,935,252	61,012,514	52,909,540
Nonresidential | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	60,374,499	59,430,696
Nonresidential | Substandard
Financing Receivable, Recorded Investment [Line Items]
Total loans	1,560,753	1,581,818
Commercial
Financing Receivable, Recorded Investment [Line Items]
Total loans	7,105,201	6,946,372	5,390,814
Commercial | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	7,105,201	6,946,372
Consumer
Financing Receivable, Recorded Investment [Line Items]
Total loans	456,814	522,566	$ 496,036
Consumer | Pass
Financing Receivable, Recorded Investment [Line Items]
Total loans	$ 456,814	$ 522,566

XML

Loans - Summary of Principal Loan Portfolio Segment (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Lease and Investment Commitments [Line Items]
Total loans	$ 164,064,614	$ 159,885,696	$ 146,321,029
Net deferred loan origination fees	(222,301)	(261,085)
Allowance for loan losses	(1,550,851)	(1,379,150)	$ (1,278,352)	$ (1,188,352)
Net loans	162,291,462	158,245,461
Real Estate Loan
Lease and Investment Commitments [Line Items]
Total loans	156,502,599	152,416,758
Real Estate Loan | One-to Four-Family
Lease and Investment Commitments [Line Items]
Total loans	77,108,832	74,655,376
Real Estate Loan | Home Equity Loans and Lines of Credit
Lease and Investment Commitments [Line Items]
Total loans	7,281,582	7,488,348
Real Estate Loan | Construction and Land Development
Lease and Investment Commitments [Line Items]
Total loans	10,176,933	9,260,520
Real Estate Loan | Nonresidential
Lease and Investment Commitments [Line Items]
Total loans	61,935,252	61,012,514
Other Loans
Lease and Investment Commitments [Line Items]
Total loans	7,562,015	7,468,938
Other Loans | Commercial
Lease and Investment Commitments [Line Items]
Total loans	7,105,201	6,946,372
Other Loans | Consumer
Lease and Investment Commitments [Line Items]
Total loans	$ 456,814	$ 522,566

XML

Stock Based Compensation - Schedule Of Share Based Compensation Stock Options Activity (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Outstanding, Shares at Beginning
Granted, Shares	368,300	0
Vested, Shares
Forfeited, Shares
Outstanding, Shares at Ending	368,300
Fair value of vested shares
Outstanding, Weighted Average Exercise Price at Beginning
Granted, Weighted Average Exercise Price	13.40
Outstanding, Weighted Average Exercise Price at Ending	$ 13.40
Oustanding, Weighted Average Remaining Contractual Term	9 years 4 months 24 days
Granted, Weighted Average Remaining Contractual Term	9 years 4 months 24 days

XML

Regulatory Capital Requirements - Schedule of Actual and Required Capital Amounts and Ratios of the Bank (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Common equity tier 1 capital (to risk-weighted assets), actual amount	$ 42,070	$ 41,635
Total risk-based capital (to risk-weighted assets), actual amount	43,661	43,054
Tier 1 capital (to risk-weighted assets), actual amount	42,070	41,635
Tier 1 capital (to average assets), actual amount	$ 42,070	$ 41,635
Common equity tier 1 capital (to risk-weighted assets), actual ratio	27.48%	27.74%
Total risk-based capital (to risk-weighted assets), actual ratio	28.52%	28.68%
Tier 1 capital (to risk-weighted assets), actual ratio	27.48%	27.74%
Tier 1 capital (to average assets), actual ratio	18.92%	19.08%
Common equity tier 1 capital (to risk-weighted assets), minimum regulatory capital ratios under Basel III amount	$ 9,950	$ 9,569
Total risk-based capital (to risk-weighted assets), minimum regulatory capital ratios under Basel III amount	15,308	14,823
Tier 1 capital (to risk-weighted assets), minimum regulatory capital ratios under Basel III amount	12,246	11,821
Tier 1 capital (to average assets), minimum regulatory capital ratios under Basel III amount	$ 8,893	$ 8,731
Common equity tier 1 capital (to risk-weighted assets), minimum regulatory capital ratios under Basel III ratio	6.50%	6.375%
Total risk-based capital (to risk-weighted assets), minimum regulatory capital ratios under Basel III ratio	10.00%	9.875%
Tier 1 capital (to risk-weighted assets), minimum regulatory capital ratios under Basel III ratio	8.00%	7.875%
Tier 1 capital (to average assets), minimum regulatory capital ratios under Basel III ratio	4.00%	4.00%
Common equity tier 1 capital (to risk-weighted assets), to be well capitalized under Basel III	$ 9,950	$ 9,757
Total risk-based capital (to risk-weighted assets), to be well capitalized under Basel III	15,308	15,010
Tier 1 capital (to risk-weighted assets), to be well capitalized under Basel III	12,246	12,008
Tier 1 capital (to average assets), to be well capitalized under Basel III	$ 11,116	$ 10,913
Common equity tier 1 capital (to risk-weighted assets), to be well capitalized under Basel III ratio	6.50%	6.50%
Total risk-based capital (to risk-weighted assets), to be well capitalized under Basel III ratio	10.00%	10.00%
Tier 1 capital (to risk-weighted assets), to be well capitalized under Basel III ratio	8.00%	8.00%
Tier 1 capital (to average assets), to be well capitalized under Basel III ratio	5.00%	5.00%

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Basis of Presentation

Basis of Presentation

Pursuant to the terms and conditions of a plan of conversion and reorganization, adopted by its Board of Directors and approved by its members, Banks of the Chesapeake, M.H.C. converted from the mutual holding company corporate structure to the public stock holding company structure as follows: CBM Bancorp, Inc. (“CBM Bancorp” or “Company”) was incorporated on May 22, 2018 to serve as the successor holding company for Chesapeake Bank of Maryland (“Bank”),which was at that time the wholly owned subsidiary of Banks of the Chesapeake, M.H.C. On September 27, 2018, in accordance with the plan of conversion and reorganization, CBM Bancorp became the parent holding company for the Bank and Banks of the Chesapeake, M.H.C. merged with and into CBM Bancorp, with the Company as the surviving corporation. Upon consummation of the merger, Banks of the Chesapeake, M.H.C. ceased to exist.

The conversion and reorganization was accomplished through the sale and issuance of 4,232,000 shares of common stock at a price of $10.00 per share, through which the Company received proceeds of approximately $40.9 million, net of offering expenses of approximately $1.4 million. Approximately 50% of the net proceeds of the offering, or $20.5 million was contributed by the Company to the Bank in return for 100% of the issued and outstanding shares of common stock of the Bank. In connection with the conversion and reorganization, the Bank’s Board of Directors adopted an employee stock ownership plan (the “ESOP”) which subscribed for 8% of the sum of the number of shares, or 338,560 shares of common stock sold in the offering.

The plan of conversion and reorganization provided for the establishment of a liquidation account by CBM Bancorp for the benefit of eligible account holders in an amount equal to the value of the net assets of Banks of the Chesapeake, M.H.C. as of the date of the latest statement of financial condition of Banks of the Chesapeake, M.H.C. prior to the consummation of the conversion and reorganization. The plan of conversion and reorganization also provided for the establishment of a parallel liquidation account in the Bank to support the CBM Bancorp liquidation account in the event CBM Bancorp does not have sufficient assets to fund its obligations under the CBM Bancorp liquidation account.

In the unlikely event that the Bank were to liquidate after the conversion and reorganization, all claims of creditors, including those of depositors, would be paid first. However, except with respect to the liquidation account to be established in CBM Bancorp, depositors’ claims would be solely for the principal amount of their deposit accounts plus accrued interest. Depositors generally would not have an interest in the value of the assets of the Bank or CBM Bancorp above that amount.

Pursuant to the plan of conversion and reorganization, after two years from the date of conversion and reorganization, and upon the written request of the Federal Reserve Board, CBM Bancorp will transfer, or upon the prior written approval of the Federal Reserve Board, CBM Bancorp may transfer, the liquidation account and the depositors’ interests in such account to the Bank, and the liquidation account shall thereupon be subsumed into the liquidation account of the Bank.

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.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“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 accounting principles generally accepted in the United States 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, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, 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, 2019 included in the Company’s Annual Report on Form 10-K dated March 27, 2020.

Nature of Operations

Nature of Operations

CBM Bancorp, Inc.’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.

The accounting and reporting policies of CBM Bancorp, Inc. and Chesapeake Bank of Maryland conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to general practices in the banking industry. The more significant policies follow:

Principles of Consolidation

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

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

Cash and Cash Equivalents

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

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

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 (including amortization of premium or accretion of discount).

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 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 Generally Accepted Accounting Standards 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 Federal Home Loan Bank of Atlanta according to a predetermined formula. FHLB stock can be sold back only at par value of $100 per share and only to the FHLB or another member institution. As of March 31, 2020 and December 31, 2019, the Bank owned shares totaling $729,700 and $300,400, respectively.

Loans Held for Sale

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 to be derivatives. The period of time 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.

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.

Loans

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

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.

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 ("BOLI")

Bank-Owned Life Insurance (“BOLI”)

The Bank maintains life insurance 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, 2020, and December 31, 2019, $126,201 and $122,118, respectively, was included in other liabilities related to the split-dollar insurance policies.

Premises and Equipment

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

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 ("ESOP")

Employee Stock Ownership Plan (“ESOP”)

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

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.

Income Taxes

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

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.

Off-Balance Sheet Financial Instruments

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

Concentrations of Credit Risk

The Bank had approximately $416,000 and approximately $0 in deposits in other financial institutions in excess of amounts insured by the FDIC, as of March 31, 2020 and December 31, 2019, respectively. The Bank’s management considers this a normal business risk. The Bank also maintains accounts with brokerage firms containing securities. These balances are insured up to $500,000 by the Securities Investor Protection Corporation.

EmergingGrowthCompany

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

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 TDRs for a limited period of time to account for the effects of COVID-19.

The CARES Act also provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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, 2020, and interim periods within fiscal years beginning after December 15, 2021. 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.

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 its proposal 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.

XML

Credit Quality of Loans and the Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2020

Summary of Allowance for Loan Losses and Loans Receivable by Loan Portfolio Class and Impairment Method

The following tables summarize the activity in the allowance for losses for the three months ended March 31, 2020 and 2019 and for the year ended December 31, 2019 and the distribution of the allowance for loan losses and loans receivable by loan portfolio class and impairment method as of March 31, 2020, March 31, 2019 and December 31, 2019.

	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

	As of March 31, 2019
	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, 2019	$	244,781	$	68,837		$	185,170	$	626,031	$	28,879	$	6,669		$	27,985		$	1,188,352
Charge-offs		—		—			—		—		—		—			—			—
Recoveries		—		—			—		—		—		—			—			—
Provision		61,263		(7,115	)		33,825		5,068		770		(369	)		(3,442	)		90,000
Ending Balance – March 31, 2019	$	306,044	$	61,722		$	218,995	$	631,099	$	29,649	$	6,300		$	24,543		$	1,278,352
Ending balance: individually evaluated for impairment	$	61,125	$	1,541		$	6,074	$	—	$	—	$	—		$	—		$	68,740
Ending balance: collectively evaluated for impairment	$	244,919	$	60,181		$	212,921	$	631,099	$	29,649	$	6,300		$	24,543		$	1,209,612
Loans:
Ending balance	$	70,401,955	$	7,291,555		$	9,831,129	$	52,909,540	$	5,390,814	$	496,036					$	146,321,029
Ending balance: individually evaluated for impairment	$	661,784	$	127,200		$	86,728	$	484,223	$	—	$	—					$	1,359,935
Ending balance: collectively evaluated for impairment	$	69,740,171	$	7,164,355		$	9,744,401	$	52,425,317	$	5,390,814	$	496,036					$	144,961,094

	As of December 31, 2019
	One –to Four-Family			Home Equity Loans and Lines of Credit			Construction and Land Development			Nonresidential			Commercial		Consumer		Unallocated		Total
Beginning Balance	$	244,781		$	68,837		$	185,170		$	626,031		$	28,879	$	6,669	$	27,985	$	1,188,352
Charge-offs		(90,111	)		—			(11,000	)		—			—		—		—		(101,111	)
Recoveries		—			2,439			—			114,470			—		—		—		116,909
Provision		176,935			(8,673	)		5,371			(57,048	)		26,692		281		31,442		175,000
Ending Balance	$	331,605		$	62,603		$	179,541		$	683,453		$	55,571	$	6,950	$	59,427	$	1,379,150
Ending balance: individually evaluated for impairment	$	—		$	681		$	—		$	—		$	—	$	—	$	—	$	681
Ending balance: collectively evaluated for impairment	$	331,605		$	61,922		$	179,541		$	683,453		$	55,571	$	6,950	$	59,427	$	1,378,469
Loans:
Ending balance	$	74,655,376		$	7,488,348		$	9,260,520		$	61,012,514		$	6,946,372	$	522,566			$	159,885,696
Ending balance: individually evaluated for impairment	$	337,984		$	116,721		$	791,625		$	1,581,818		$	—	$	—			$	2,828,148
Ending balance: collectively evaluated for impairment	$	74,317,392		$	7,371,627		$	8,468,895		$	59,430,696		$	6,946,372	$	522,566			$	157,057,548

Summary of Loan Portfolio Quality Indicators by Loan Class Recorded Investment

The following table is a summary of the loan portfolio quality indicators by loan class recorded investment as of March 31, 2020 and December 31, 2019:

	March 31, 2020
	One-to Four- Family		Home Equity Loans and Lines of Credit		Construction and Land Development		Nonresidential
Grade:
Pass	$	76,597,036	$	7,281,582	$	10,176,933	$	60,374,499
Special Mention		246,419		—		—		—
Substandard		265,377		—		—		1,560,753
Doubtful		—		—		—		—
	$	77,108,832	$	7,281,582	$	10,176,933	$	61,935,252
	Commercial		Consumer		Totals
Grade:
Pass	$	7,105,201	$	456,814	$	161,992,065
Special Mention		—		—		246,419
Substandard		—		—		1,826,130
Doubtful		—		—		—
	$	7,105,201	$	456,814	$	164,064,614
	December 31, 2019
	One-to Four- Family		Home Equity Loans and Lines of Credit		Construction and Land Development		Nonresidential
Grade:
Pass	$	73,856,550	$	7,412,069	$	8,468,895	$	59,430,696
Special Mention		460,842		—		—		—
Substandard		337,984		76,279		791,625		1,581,818
Doubtful		—		—		—		—
	$	74,655,376	$	7,488,348	$	9,260,520	$	61,012,514
	Commercial		Consumer		Totals
Grade:
Pass	$	6,946,372	$	522,566	$	156,637,148
Special Mention		—		—		460,842
Substandard		—		—		2,787,706
Doubtful		—		—		—
	$	6,946,372	$	522,566	$	159,885,696

Summary of Loan Portfolio Delinquencies

The following table sets forth certain information with respect to our loan portfolio delinquencies by loan class and amount as of March 31, 2020 and December 31, 2019:

	March 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	$	221,635	$	—	$	113,102	$	334,737	$	76,774,095	$	77,108,832	$	—	$	265,377
Home equity loans and lines of credit		—		—		—		—		7,281,582		7,281,582		—		—
Construction and land development		—		—		—		—		10,176,933		10,176,933		—		—
Nonresidential		—		—		—		—		61,935,252		61,935,252		—		—
Other loans:
Commercial		—		—		—		—		7,105,201		7,105,201		—		—
Consumer		—		—		—		—		456,814		456,814		—		—
Total loans	$	221,635	$	—	$	113,102	$	334,737	$	163,729,877	$	164,064,614	$	—	$	265,377

	December 31, 2019
	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	$	220,316	$	—	$	337,984	$	558,300	$	74,097,076	$	74,655,376	$	—	$	337,984
Home equity loans and lines of credit		169,329		—		76,279		245,608		7,242,740		7,488,348		—		76,279
Construction and land development		—		—		75,728		75,728		9,184,792		9,260,520		—		75,728
Nonresidential		—		—		—		—		61,012,514		61,012,514		—		—
Other loans:
Commercial		31,510		—		—		31,510		6,914,862		6,946,372		—		—
Consumer		24,759		—		—		24,759		497,807		522,566		—		—
Total loans	$	445,914	$	—	$	489,991	$	935,905	$	158,949,791	$	159,885,696	$	—	$	489,991

Summary of Impaired Loans

The following table is a summary of impaired loans for the three months ended March 31, 2020 and 2019 and the year ended and December 31, 2019:

							Three Months Ended
	Impaired Loans at March 31, 2020						March 31, 2020
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	265,377	$	267,279	$	—	$	266,868	$	4,896
Nonresidential		1,560,753		1,560,753		—		1,571,286		23,466
With an allowance recorded:
Home equity loans and lines of credit	$	39,103	$	39,103	$	385	$	39,773	$	2,964
Total
One-to four-family	$	265,377	$	267,279	$	—	$	266,868	$	4,896
Home equity loans and lines of credit		39,103		39,103		385		39,773		2,964
Nonresidential		1,560,753		1,560,753		—		1,571,286		23,466
							Three Months Ended
	Impaired Loans at March 31, 2019						March 31, 2019
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	459,430	$	463,756	$	—	$	462,049	$	5,301
Home equity loans and lines of credit		82,885		82,885		—		83,925		1,934
Nonresidential		484,223		871,107		—		484,223		—
With an allowance recorded:
One-to four-family	$	202,354	$	263,605	$	61,125	$	202,601	$	1,337
Home equity loans and lines of credit		44,315		44,315		1,541		45,073		875
Construction and land development		86,728		86,728		6,074		86,728		—
Nonresidential
Total
One-to four-family	$	661,784	$	727,361	$	61,125	$	664,650	$	6,638
Home equity loans and lines of credit		127,200		127,200		1,541		128,998		2,809
Construction and land development		86,728		86,728		6,074		86,728		—
Nonresidential		484,223		871,107		—		484,223		—

	December 31, 2019
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	337,984	$	342,345	$	—	$	342,907	$	11,765
Home equity loans and lines of credit		76,279		76,279		—		82,117		2,727
Construction and land development		791,625		802,625				836,264		54,478
Nonresidential		1,581,818		1,581,818		—		1,609,744		61,141
With an allowance recorded:
Home equity loans and lines of credit	$	40,442	$	40,442	$	681	$	43,136	$	2,964
Total
One-to four-family	$	337,984	$	342,345	$	—	$	342,907	$	11,765
Home equity loans and lines of credit		116,721		116,721		681		125,252		5,691
Construction and land development		791,625		802,625		—		836,264		54,478
Nonresidential		1,581,818		1,581,818		—		1,609,744		61,141

Summary of Troubled Debt Restructuring

A summary of TDRs at March 31, 2020 and December 31, 2019 are as follows:

March 31, 2020	Number of Contracts		Performing		Nonperforming		Total
Home equity loans and lines of credit		1	$	39,103	$	—	$	39,103

December 31, 2019	Number of Contracts		Performing		Nonperforming		Total
Home equity loans and lines of credit		1	$	40,442	$	—	$	40,442

Extended Maturity [Member]

Summary of Troubled Debt Restructuring

The breakdown of loan modification requests by type is as follows:

	Number of loans		Balance
Real estate loans
One-to four-family		18	$	3,107,843
Home equity loans and lines of credit		3		94,728
Construction and land development		2		327,843
Nonresidential		21		17,305,269
Total real estate loans		44		20,835,863
Other loans
Commercial		6		1,716,312
Consumer		2		56,149
Total other loans		8		1,772,461
Total loans		52	$	22,608,144

XML

Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Summary of the Activity in the Company's Restricted Stock

The following table presents a summary of the activity in the Company’s restricted stock for the three months ended March 31, 2020:

	Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2020		—	$	—
Granted		161,320		13.40
Vested		—		—
Forfeited		—		—
Nonvested at March 31, 2020		161,320	$	13.40
Fair value of vested shares	$	—

Vesting Schedule of the Nonvested Restricted Stock Awards

The following table outlines the vesting schedule of the nonvested restricted stock awards as of March 31, 2020:

Year Ending December 31,	Number of Restricted Shares
2020		32,264
2021		32,264
2022		32,264
2023		32,264
2024		32,264
		161,320

Share Based Payment Award Stock Options Valuation Assumptions

The fair value of options granted to date was determined using the following assumptions as of the grant date.

Expected Stock Price Volatility		17.08	%
Expected Dividend Yield		0.00	%
Expected Term (In Years)		7.0
Risk-Free Rate		2.30	%
Fair Value of Options Granted	$	3.35

Schedule Of Share Based Compensation Stock Options Activity

The following table summarizes the Company’s stock option activity and related information for the three months ended March 31, 2020:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2020		—	$	—
Granted		368,300		13.40		9.40
Vested		—				—
Forfeited		—				—
Outstanding at March 31, 2020		368,300	$	13.40		9.40
Fair value of vested shares	$	—

XML

Securities - Amortized Cost and Estimated Fair Value of Securities Classified as Available for Sale and Held to Maturity (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Marketable Securities [Line Items]
Securities Available for Sale, Amortized Cost	$ 31,437,476	$ 36,392,681
Securities Available for Sale, Gross Unrealized Gains	1,241,730	746,553
Securities Available for Sale, Gross Unrealized Losses	0	48,643
Securities Available for Sale, Fair Value	32,679,206	37,090,591
U.S. Government Agency and Federal Obligations
Marketable Securities [Line Items]
Securities Available for Sale, Amortized Cost	7,474,916	9,472,370
Securities Available for Sale, Gross Unrealized Gains	143,416	76,651
Securities Available for Sale, Gross Unrealized Losses		4,679
Securities Available for Sale, Fair Value	7,618,332	9,544,342
Residential Mortgage-Backed Securities
Marketable Securities [Line Items]
Securities Available for Sale, Amortized Cost	23,962,560	25,415,647
Securities Available for Sale, Gross Unrealized Gains	1,098,314	638,856
Securities Available for Sale, Gross Unrealized Losses		43,964
Securities Available for Sale, Fair Value	$ 25,060,874	26,010,539
Municipal Securities
Marketable Securities [Line Items]
Securities Available for Sale, Amortized Cost		1,504,664
Securities Available for Sale, Gross Unrealized Gains		31,046
Securities Available for Sale, Fair Value		$ 1,535,710

XML

Regulatory Capital Requirements (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Actual and Required Capital Amounts and Ratios of the Bank

The actual and required capital amounts and ratios of the Bank as of March 31, 2020 and December 31, 2019 were as follows (dollars in thousands):

	Actual					Minimum Regulatory Capital Ratios under Basel III					To Be Well Capitalized under Basel III
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(dollars in thousands)
As of March 31, 2020:
Common equity tier 1 capital (to risk-weighted assets)	$	42,070		27.48	%	$	9,950		³6.50	%	$	9,950		³6.50	%
Total risk-based capital (to risk-weighted assets)		43,661		28.52	%		15,308		³10.0	%		15,308		³10.0	%
Tier 1 capital (to risk-weighted assets)		42,070		27.48	%		12,246		³8.0	%		12,246		³8.0	%
Tier 1 capital (to average assets)		42,070		18.92	%		8,893		³4.0	%		11,116		³5.0	%
As of December 31, 2019:
Common equity tier 1 capital (to risk-weighted assets)	$	41,635		27.74	%	$	9,569		³6.375	%	$	9,757		³6.50	%
Total risk-based capital (to risk-weighted assets)		43,054		28.68	%		14,823		³9.875	%		15,010		³10.0	%
Tier 1 capital (to risk-weighted assets)		41,635		27.74	%		11,821		³7.875	%		12,008		³8.0	%
Tier 1 capital (to average assets)		41,635		19.08	%		8,731		³4.000	%		10,913		³5.0	%

XML

Consolidated Statements of Comprehensive Income - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net income	$ 173,763	$ 272,023
Other comprehensive income
Unrealized gain on investment securities available for sale	590,372	398,996
Reclassification adjustment for realized gain on investments securities available for sale included in net income	(46,551)
Total unrealized gain on investments securities available for sale	543,821	398,996
Income tax expense relating to investment securities available for sale	(149,646)	(109,793)
Other comprehensive income	394,175	289,203
Total comprehensive income	$ 567,938	$ 561,226

XML

Cover Page - shares	3 Months Ended
	Mar. 31, 2020	May 12, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Entity Registrant Name	CBM BANCORP, INC.
Entity Central Index Key	0001742089
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Address, State or Province	MD
Title of 12(b) Security	Common stock
Trading Symbol	CBMB
Security Exchange Name	NASDAQ
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Shell Company	false
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		3,843,158
Document Quarterly Report	true

XML

Regulatory Capital Requirements

3 Months Ended

Mar. 31, 2020

Regulatory Capital Requirements

Note 12. Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s consolidated financial statements. These capital requirements were modified in 2013 with the Basel III capital rules, which establish a new comprehensive capital framework for U.S. banking organizations. The Bank became subject to the new rules on January 1, 2015, with a phase-in period for many of the new provisions which was fully phased in on January 1, 2019. As of March 31, 2020, the Company’s capital levels remained characterized as “well-capitalized” under the new rules. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital adequacy guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Common Equity Tier 1 Capital, Tier 1 Capital, and Total Capital to Risk Weighted Assets and of Tier 1 Capital to Average Assets. Management believes, as of March 31, 2020 and December 31, 2019, all applicable capital adequacy requirements have been met.

The most recent notification from the OCC categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based capital, Tier 1 capital to risk-weighted assets, and Tier 1 capital to adjusted total assets, ratios. There have been no conditions or events since that notification that management believes have changed the Bank’s category.

The actual and required capital amounts and ratios of the Bank as of March 31, 2020 and December 31, 2019 were as follows (dollars in thousands):

	Actual					Minimum Regulatory Capital Ratios under Basel III					To Be Well Capitalized under Basel III
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(dollars in thousands)
As of March 31, 2020:
Common equity tier 1 capital (to risk-weighted assets)	$	42,070		27.48	%	$	9,950		³6.50	%	$	9,950		³6.50	%
Total risk-based capital (to risk-weighted assets)		43,661		28.52	%		15,308		³10.0	%		15,308		³10.0	%
Tier 1 capital (to risk-weighted assets)		42,070		27.48	%		12,246		³8.0	%		12,246		³8.0	%
Tier 1 capital (to average assets)		42,070		18.92	%		8,893		³4.0	%		11,116		³5.0	%
As of December 31, 2019:
Common equity tier 1 capital (to risk-weighted assets)	$	41,635		27.74	%	$	9,569		³6.375	%	$	9,757		³6.50	%
Total risk-based capital (to risk-weighted assets)		43,054		28.68	%		14,823		³9.875	%		15,010		³10.0	%
Tier 1 capital (to risk-weighted assets)		41,635		27.74	%		11,821		³7.875	%		12,008		³8.0	%
Tier 1 capital (to average assets)		41,635		19.08	%		8,731		³4.000	%		10,913		³5.0	%

XML

Securities

3 Months Ended

Mar. 31, 2020

Securities

Note 2. Securities

The amortized cost and estimated fair value of securities classified as available for sale at March 31, 2020 and December 31, 2019, are as follows:

	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale
U.S. Government and Federal Agency obligations	$	7,474,916	$	143,416	$	—	$	7,618,332
Residential mortgage-backed securities		23,962,560		1,098,314		—		25,060,874
	$	31,437,476	$	1,241,730	$	—	$	32,679,206
	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale
U.S. Government and Federal Agency obligations	$	9,472,370	$	76,651	$	4,679	$	9,544,342
Residential mortgage-backed securities		25,415,647		638,856		43,964		26,010,539
Municipal securities		1,504,664		31,046		—		1,535,710
	$	36,392,681	$	746,553	$	48,643	$	37,090,591

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. There were no sales of investment securities for the three months ended March 31, 2019.

The amortized cost and estimated fair value of securities as of March 31, 2020 and December 31, 2019, 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, 2020
	Securities Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	3,998,494	$	4,035,061
Due after one year through five years		3,476,422		3,583,271
Due five years to ten years		—		—
Due after ten years		—		—
Mortgage-backed, in monthly installments		23,962,560		25,060,874
	$	31,437,476	$	32,679,206

	December 31, 2019
	Securities Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	1,000,000	$	998,407
Due after one year through five years		9,474,467		9,560,135
Due five years to ten years		502,567		521,510
Due after ten years		—		—
Mortgage-backed, in monthly installments		25,415,647		26,010,539
	$	36,392,681	$	37,090,591

The Bank did not have any securities with gross unrealized losses at March 31, 2020. Securities with gross unrealized losses at December 31, 2019 aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:

	December 31, 2019
	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	$	—	$	—	$	1,995,321	$	4,679	$	1,995,321	$	4,679
Residential mortgage-backed securities		4,862,213		43,964		—		—		4,862,213		43,964
	$	4,862,213	$	43,964	$	1,995,321	$	4,679	$	6,857,534	$	48,643

At March 31, 2020, the Bank held no investments with gross unrealized losses. At December 31, 2019, the Bank held seven investments with gross unrealized losses totaling $48,643. 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, 2020 and December 31, 2019.

XML

Credit Quality of Loans and the Allowance for Loan Losses

3 Months Ended

Mar. 31, 2020

Credit Quality of Loans and the Allowance for Loan Losses

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, general, and unallocated 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. An unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. 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, 2020 and 2019 and for the year ended December 31, 2019 and the distribution of the allowance for loan losses and loans receivable by loan portfolio class and impairment method as of March 31, 2020, March 31, 2019 and December 31, 2019.

	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

	As of March 31, 2019
	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, 2019	$	244,781	$	68,837		$	185,170	$	626,031	$	28,879	$	6,669		$	27,985		$	1,188,352
Charge-offs		—		—			—		—		—		—			—			—
Recoveries		—		—			—		—		—		—			—			—
Provision		61,263		(7,115	)		33,825		5,068		770		(369	)		(3,442	)		90,000
Ending Balance – March 31, 2019	$	306,044	$	61,722		$	218,995	$	631,099	$	29,649	$	6,300		$	24,543		$	1,278,352
Ending balance: individually evaluated for impairment	$	61,125	$	1,541		$	6,074	$	—	$	—	$	—		$	—		$	68,740
Ending balance: collectively evaluated for impairment	$	244,919	$	60,181		$	212,921	$	631,099	$	29,649	$	6,300		$	24,543		$	1,209,612
Loans:
Ending balance	$	70,401,955	$	7,291,555		$	9,831,129	$	52,909,540	$	5,390,814	$	496,036					$	146,321,029
Ending balance: individually evaluated for impairment	$	661,784	$	127,200		$	86,728	$	484,223	$	—	$	—					$	1,359,935
Ending balance: collectively evaluated for impairment	$	69,740,171	$	7,164,355		$	9,744,401	$	52,425,317	$	5,390,814	$	496,036					$	144,961,094

	As of December 31, 2019
	One –to Four-Family			Home Equity Loans and Lines of Credit			Construction and Land Development			Nonresidential			Commercial		Consumer		Unallocated		Total
Beginning Balance	$	244,781		$	68,837		$	185,170		$	626,031		$	28,879	$	6,669	$	27,985	$	1,188,352
Charge-offs		(90,111	)		—			(11,000	)		—			—		—		—		(101,111	)
Recoveries		—			2,439			—			114,470			—		—		—		116,909
Provision		176,935			(8,673	)		5,371			(57,048	)		26,692		281		31,442		175,000
Ending Balance	$	331,605		$	62,603		$	179,541		$	683,453		$	55,571	$	6,950	$	59,427	$	1,379,150
Ending balance: individually evaluated for impairment	$	—		$	681		$	—		$	—		$	—	$	—	$	—	$	681
Ending balance: collectively evaluated for impairment	$	331,605		$	61,922		$	179,541		$	683,453		$	55,571	$	6,950	$	59,427	$	1,378,469
Loans:
Ending balance	$	74,655,376		$	7,488,348		$	9,260,520		$	61,012,514		$	6,946,372	$	522,566			$	159,885,696
Ending balance: individually evaluated for impairment	$	337,984		$	116,721		$	791,625		$	1,581,818		$	—	$	—			$	2,828,148
Ending balance: collectively evaluated for impairment	$	74,317,392		$	7,371,627		$	8,468,895		$	59,430,696		$	6,946,372	$	522,566			$	157,057,548

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.

The following table is a summary of the loan portfolio quality indicators by loan class recorded investment as of March 31, 2020 and December 31, 2019:

	March 31, 2020
	One-to Four- Family		Home Equity Loans and Lines of Credit		Construction and Land Development		Nonresidential
Grade:
Pass	$	76,597,036	$	7,281,582	$	10,176,933	$	60,374,499
Special Mention		246,419		—		—		—
Substandard		265,377		—		—		1,560,753
Doubtful		—		—		—		—
	$	77,108,832	$	7,281,582	$	10,176,933	$	61,935,252
	Commercial		Consumer		Totals
Grade:
Pass	$	7,105,201	$	456,814	$	161,992,065
Special Mention		—		—		246,419
Substandard		—		—		1,826,130
Doubtful		—		—		—
	$	7,105,201	$	456,814	$	164,064,614
	December 31, 2019
	One-to Four- Family		Home Equity Loans and Lines of Credit		Construction and Land Development		Nonresidential
Grade:
Pass	$	73,856,550	$	7,412,069	$	8,468,895	$	59,430,696
Special Mention		460,842		—		—		—
Substandard		337,984		76,279		791,625		1,581,818
Doubtful		—		—		—		—
	$	74,655,376	$	7,488,348	$	9,260,520	$	61,012,514
	Commercial		Consumer		Totals
Grade:
Pass	$	6,946,372	$	522,566	$	156,637,148
Special Mention		—		—		460,842
Substandard		—		—		2,787,706
Doubtful		—		—		—
	$	6,946,372	$	522,566	$	159,885,696

The following table sets forth certain information with respect to our loan portfolio delinquencies by loan class and amount as of March 31, 2020 and December 31, 2019:

	March 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	$	221,635	$	—	$	113,102	$	334,737	$	76,774,095	$	77,108,832	$	—	$	265,377
Home equity loans and lines of credit		—		—		—		—		7,281,582		7,281,582		—		—
Construction and land development		—		—		—		—		10,176,933		10,176,933		—		—
Nonresidential		—		—		—		—		61,935,252		61,935,252		—		—
Other loans:
Commercial		—		—		—		—		7,105,201		7,105,201		—		—
Consumer		—		—		—		—		456,814		456,814		—		—
Total loans	$	221,635	$	—	$	113,102	$	334,737	$	163,729,877	$	164,064,614	$	—	$	265,377

	December 31, 2019
	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	$	220,316	$	—	$	337,984	$	558,300	$	74,097,076	$	74,655,376	$	—	$	337,984
Home equity loans and lines of credit		169,329		—		76,279		245,608		7,242,740		7,488,348		—		76,279
Construction and land development		—		—		75,728		75,728		9,184,792		9,260,520		—		75,728
Nonresidential		—		—		—		—		61,012,514		61,012,514		—		—
Other loans:
Commercial		31,510		—		—		31,510		6,914,862		6,946,372		—		—
Consumer		24,759		—		—		24,759		497,807		522,566		—		—
Total loans	$	445,914	$	—	$	489,991	$	935,905	$	158,949,791	$	159,885,696	$	—	$	489,991

At March 31, 2020 and December 31, 2019 there were no loans 90 days past due and still accruing interest. At March 31, 2020, the Bank had three loans on non-accrual status with foregone interest in the amount of $6,511. At December 31, 2019, the Bank had seven loans on non-accrual status with foregone interest in the amount of $17,925.

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, 2020 and 2019 and the year ended and December 31, 2019:

							Three Months Ended
	Impaired Loans at March 31, 2020						March 31, 2020
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	265,377	$	267,279	$	—	$	266,868	$	4,896
Nonresidential		1,560,753		1,560,753		—		1,571,286		23,466
With an allowance recorded:
Home equity loans and lines of credit	$	39,103	$	39,103	$	385	$	39,773	$	2,964
Total
One-to four-family	$	265,377	$	267,279	$	—	$	266,868	$	4,896
Home equity loans and lines of credit		39,103		39,103		385		39,773		2,964
Nonresidential		1,560,753		1,560,753		—		1,571,286		23,466
							Three Months Ended
	Impaired Loans at March 31, 2019						March 31, 2019
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	459,430	$	463,756	$	—	$	462,049	$	5,301
Home equity loans and lines of credit		82,885		82,885		—		83,925		1,934
Nonresidential		484,223		871,107		—		484,223		—
With an allowance recorded:
One-to four-family	$	202,354	$	263,605	$	61,125	$	202,601	$	1,337
Home equity loans and lines of credit		44,315		44,315		1,541		45,073		875
Construction and land development		86,728		86,728		6,074		86,728		—
Nonresidential
Total
One-to four-family	$	661,784	$	727,361	$	61,125	$	664,650	$	6,638
Home equity loans and lines of credit		127,200		127,200		1,541		128,998		2,809
Construction and land development		86,728		86,728		6,074		86,728		—
Nonresidential		484,223		871,107		—		484,223		—

	December 31, 2019
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
	Investment		Balance		Allowance		Investment		Recognized
With no related allowance recorded:
One-to four-family	$	337,984	$	342,345	$	—	$	342,907	$	11,765
Home equity loans and lines of credit		76,279		76,279		—		82,117		2,727
Construction and land development		791,625		802,625				836,264		54,478
Nonresidential		1,581,818		1,581,818		—		1,609,744		61,141
With an allowance recorded:
Home equity loans and lines of credit	$	40,442	$	40,442	$	681	$	43,136	$	2,964
Total
One-to four-family	$	337,984	$	342,345	$	—	$	342,907	$	11,765
Home equity loans and lines of credit		116,721		116,721		681		125,252		5,691
Construction and land development		791,625		802,625		—		836,264		54,478
Nonresidential		1,581,818		1,581,818		—		1,609,744		61,141

Impaired loans also include certain loans that have been modified in a 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. A summary of TDRs at March 31, 2020 and December 31, 2019 are as follows:

March 31, 2020	Number of Contracts		Performing		Nonperforming		Total
Home equity loans and lines of credit		1	$	39,103	$	—	$	39,103

December 31, 2019	Number of Contracts		Performing		Nonperforming		Total
Home equity loans and lines of credit		1	$	40,442	$	—	$	40,442

The Bank had one TDR at March 31, 2020 totaling $39,103 and one TDR at December 31, 2019 totaling $40,442. The Bank has no commitments to loan additional funds to borrowers whose loans have been modified. There were no nonperforming TDRs reclassified to nonperforming loans during the three months ended March 31, 2020 and 2019. A default is considered to have occurred once the TDR is past due 90 days or more, or it has been placed on nonaccrual. If loans modified in a TDR subsequently default, the Bank evaluates the loan for possible further impairment. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

The CARES Act provided financial institutions the option, which the Bank has elected to apply,  to temporarily suspend certain requirements under U.S. GAAP relating to TDRs for a limited period of time to account for the effects of COVID-19. Financial institutions were encouraged to work prudently with borrowers who are or may be unable to meet their contractual obligations because of the effects of COVID-19. Financial institutions generally do not need to categorize COVID-19 related modifications as TDRs as long as the borrower was not experiencing financial difficulty prior to the effects of COVID-19.

As of April 24, 2020, the Bank had received requests to modify 52 loans due to the effects of COVID-19. The modifications primarily consist of interest only payments with the deferral of principal for up to six months, dependent on the borrower and their financial situation. The breakdown of loan modification requests by type is as follows:

	Number of loans		Balance
Real estate loans
One-to four-family		18	$	3,107,843
Home equity loans and lines of credit		3		94,728
Construction and land development		2		327,843
Nonresidential		21		17,305,269
Total real estate loans		44		20,835,863
Other loans
Commercial		6		1,716,312
Consumer		2		56,149
Total other loans		8		1,772,461
Total loans		52	$	22,608,144

XML

Employee Stock Ownership Plan

3 Months Ended

Mar. 31, 2020

Employee Stock Ownership Plan

Note 8. Employee Stock Ownership Plan

In connection with the Bank’s mutual to stock conversion in September 2018, the Bank established the Chesapeake Bank of Maryland Employee Stock Ownership Plan (“ESOP”) for all eligible employees. The ESOP purchased 338,560 shares of Company common stock in the Company’s initial public offering at $10.00 per share with the proceeds of a ten (10) year loan from the Company. The Bank intends to make annual contributions to the ESOP that at a minimum will permit the ESOP to repay the principal and interest due on the ESOP debt. However, the Bank may prepay the principal of the note, partially or in full and without penalty or premium at any time and from time to time without prior notice to the holder. Any dividends declared on Company common stock held by the ESOP and not allocated to the account of a participant can be used to repay the loan. As the ESOP loan is repaid, shares of Company common stock pledged as collateral for the loan are released from the loan suspense account for allocation to Plan participants on the basis of each active participant’s proportional share of compensation.

Participants vest 100% in their ESOP allocations after three years of service. In connection with the implementation of the ESOP, participants were given credit for past service with the Bank for vesting purposes. Participants will become fully vested upon age 65, death or disability, a change in control, or termination of the ESOP. Generally, participants will receive distributions from the ESOP upon separation from service. The plan reallocates any unvested shares of common stock forfeited upon termination of employment among the remaining participants in the plan.

The ESOP compensation expense for the three months ended March 31, 2020 and 2019 was $112,571 and $108,762, respectively. This amount represents the average fair market value of the shares of Company common stock allocated or committed to be released as of that date. The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital. Dividends, if any, on allocated shares are recorded as a reduction of retained earnings and dividends, if any, on unallocated shares are recorded as a reduction of the debt service. At March 31, 2020, there were 270,848 shares not yet released having an aggregate market value of approximately $3,136,420.

XML

Fair Value Measurements - Schedule of Foreclosed Real Estate (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed real estate	$ 845,000	$ 845,000	$ 865,000	$ 865,000
Fair Value Measurements on Non-Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	1,864,848	2,827,467
Foreclosed real estate	845,000	845,000
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed real estate	845,000	845,000
Level 3 | Fair Value Measurements on Non-Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	1,864,848	2,827,467
Foreclosed real estate	$ 845,000	$ 845,000

XML

Deposits - Additional Information (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Deposit accounts, federally insured	$ 250,000
Time deposits with balances of $250,000 or more	15,135,158	$ 14,113,578
Deposit balances	157,941,150	156,440,873
Officers and Directors
Deposit balances	$ 921,560	$ 419,857

XML

Borrowings - Additional information (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Federal Home Loan Bank, advances limit as percentage of total assets	25.00%
Total Credit Federal Home Loan Bank, available amount	$ 55,085,000	$ 55,100,000
Federal Home Loan Bank, available amount	42,600,000	52,600,000
Federal home loan bank advances eligible amount to pledge as collateral	53,300,000	50,320,000
Line of credit facility, maximum borrowing capacity	2,000,000	2,000,000
Line of credit outstanding	$ 0	$ 0

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Fair value of loan balance	$ 1,865,233	$ 2,828,148	$ 1,359,935
Written down value of loan balance	385	681	68,740
Foreclosed real estate	$ 845,000	$ 845,000	$ 865,000	$ 865,000

XML

Stock Based Compensation - Vesting Schedule of the Nonvested Restricted Stock Awards (Detail) - Restricted Stock Units (RSUs)	3 Months Ended
	Mar. 31, 2020 shares
Nonvested restricted stock awards	161,320
2020
Nonvested restricted stock awards	32,264
2021
Nonvested restricted stock awards	32,264
2022
Nonvested restricted stock awards	32,264
2023
Nonvested restricted stock awards	32,264
2024
Nonvested restricted stock awards	32,264

XML

Common Stock - Schedule of Share Repurchase program (Detail) - $ / shares	1 Months Ended
	Mar. 31, 2020	Feb. 29, 2020	Jan. 31, 2020	Dec. 31, 2019
Total Number of Shares Purchased	262,588	7,500	76,675	23,495
Average Price Paid per Share	$ 13.55	$ 14.34	$ 14.23	$ 13.69
2019 Equity Incentive Plan Trust
Total Number of Shares Purchased	5,089,565	1,531,121	1,423,565	332,545
Maximum Number of Shares That May Yet Be Purchased Under the Plan	910,435	4,468,879	4,576,435	5,667,455

XML

Credit Quality of Loans and the Allowance for Loan Losses - Additional Information (Detail)		3 Months Ended	12 Months Ended
	Apr. 24, 2020 USD ($) Age	Mar. 31, 2020 USD ($) Loans TDR	Dec. 31, 2019 USD ($) Loans TDR
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans past due and still accruing interest period		90 days	90 days
Number of loans on non accrual of interest status | Loans		3	7
Financing receivable recorded investment non accrual status, forgone interest | $		$ 6,511	$ 17,925
Recorded investment 90 days and accruing interest | Loans		0	0
Number of TDR	52	1	1
Financing receivable modifications recorded investment | $	$ 22,608,144	$ 39,103	$ 40,442

XML

Loans - Summary Of Type Wise Nonresidential Real Estate Loans (Detail)	3 Months Ended
	Mar. 31, 2020 USD ($) Age	Dec. 31, 2019 USD ($)
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Balance	$ 162,291,462	$ 158,245,461
Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	107
Balance	$ 61,935,252
Office | Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	33
Balance	$ 16,728,139
Retail | Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	17
Balance	$ 13,189,040
Warehouse/Industrial | Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	16
Balance	$ 10,974,929
Apartment/Multifamily | Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	16
Balance	$ 8,276,994
Hotel | Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	5
Balance	$ 7,465,906
Other | Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	11
Balance	$ 3,118,332
Restaurant | Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	4
Balance	$ 1,256,752
Religious/Church Related | Nonresidential Real Estate Loans
Disclosure Of Type Wise Nonresidential Real Estate Loans [Line Items]
Number Of Loans | Age	5
Balance	$ 925,160

XML

Securities (Tables)

3 Months Ended

Mar. 31, 2020

Amortized Cost and Estimated Fair Value of Securities Classified as Available for Sale and Held to Maturity

The amortized cost and estimated fair value of securities classified as available for sale at March 31, 2020 and December 31, 2019, are as follows:

	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale
U.S. Government and Federal Agency obligations	$	7,474,916	$	143,416	$	—	$	7,618,332
Residential mortgage-backed securities		23,962,560		1,098,314		—		25,060,874
	$	31,437,476	$	1,241,730	$	—	$	32,679,206
	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities Available for Sale
U.S. Government and Federal Agency obligations	$	9,472,370	$	76,651	$	4,679	$	9,544,342
Residential mortgage-backed securities		25,415,647		638,856		43,964		26,010,539
Municipal securities		1,504,664		31,046		—		1,535,710
	$	36,392,681	$	746,553	$	48,643	$	37,090,591

Amortized Cost and Estimated Fair Value of Securities by Contractual Maturity

The amortized cost and estimated fair value of securities as of March 31, 2020 and December 31, 2019, 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, 2020
	Securities Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	3,998,494	$	4,035,061
Due after one year through five years		3,476,422		3,583,271
Due five years to ten years		—		—
Due after ten years		—		—
Mortgage-backed, in monthly installments		23,962,560		25,060,874
	$	31,437,476	$	32,679,206

	December 31, 2019
	Securities Available for Sale
	Amortized		Fair
	Cost		Value
Due in one year or less	$	1,000,000	$	998,407
Due after one year through five years		9,474,467		9,560,135
Due five years to ten years		502,567		521,510
Due after ten years		—		—
Mortgage-backed, in monthly installments		25,415,647		26,010,539
	$	36,392,681	$	37,090,591

Securities with Gross Unrealized Losses

The Bank did not have any securities with gross unrealized losses at March 31, 2020. Securities with gross unrealized losses at December 31, 2019 aggregated by investment category and length of time that individual securities have been in a continuous loss position are as follows:

	December 31, 2019
	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	$	—	$	—	$	1,995,321	$	4,679	$	1,995,321	$	4,679
Residential mortgage-backed securities		4,862,213		43,964		—		—		4,862,213		43,964
	$	4,862,213	$	43,964	$	1,995,321	$	4,679	$	6,857,534	$	48,643

XML

Deposits (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Deposits

Deposits are summarized as follows:

	March 31, 2020		December 31, 2019
Noninterest-bearing demand	$	21,658,012	$	19,780,866
Interest-bearing demand		23,459,259		23,779,145
Money market		9,670,363		10,242,323
Savings		24,515,788		24,295,700
Certificates of deposit		78,637,728		78,342,839
Total deposits	$	157,941,150	$	156,440,873

Schedule of Certificates of Deposit and Remaining Maturities

At March 31, 2020 certificates of deposit and their remaining maturities were as follows:

March 31,
2021	$	29,264,377
2022		19,178,981
2023		14,368,762
2024		8,959,675
2025		6,865,933
	$	78,637,728

XML

Stock Based Compensation - Summary of the Activity in the Company's Restricted Stock (Detail) - Restricted Stock Units (RSUs) - $ / shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Granted, Shares	161,320	0
Nonvested ending balance, Shares	161,320
Granted, Weighted Average Grant Date Fair Value	$ 13.40
Nonvested ending balance, Weighted Average Grant Date Fair Value	$ 13.40

XML

Common Stock - Additional information (Detail) - $ / shares	Mar. 25, 2020	Dec. 02, 2019	May 14, 2019
Number of Shares Authorized to Repurchase		6,000,000
Special cash dividend declared per share	$ 0.50
2019 Equity Incentive Plan Trust
Number of Shares Authorized to Repurchase			169,280
2019 Equity Incentive Plan Trust | Restricted Stock
Number of Shares Authorized to Repurchase			169,280

XML

Fair Value Measurements - Schedule of Investment Securities Available for Sale (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 32,679,206	$ 37,090,591
U.S. Government Agency and Federal Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	7,618,332	9,544,342
Residential Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	25,060,874	26,010,539
Fair Value Measurements on Recurring Basis | U.S. Government Agency and Federal Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	7,618,332	9,544,342
Fair Value Measurements on Recurring Basis | Residential Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	25,060,874	26,010,539
Fair Value Measurements on Recurring Basis | Municipal Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		1,535,710
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	32,679,000	37,091,000
Level 2 | Fair Value Measurements on Recurring Basis | U.S. Government Agency and Federal Obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	7,618,332	9,544,342
Level 2 | Fair Value Measurements on Recurring Basis | Residential Mortgage-Backed Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale	$ 25,060,874	26,010,539
Level 2 | Fair Value Measurements on Recurring Basis | Municipal Securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Securities available for sale		$ 1,535,710

XML

Credit Quality of Loans and the Allowance for Loan Losses - Summary Of Impaired Loans (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Home Equity Loans and Lines of Credit
Financing Receivable, Impaired [Line Items]
Recorded Investment		$ 82,885	$ 76,279
Unpaid Principal Balance		82,885	76,279
Average Recorded Investment		83,925	82,117
Interest Income Recognized		1,934	2,727
Recorded Investment	$ 39,103	44,315	40,442
Unpaid Principal Balance	39,103	44,315	40,442
Related Allowance	385	1,541	681
Average Recorded Investment	39,773	45,073	43,136
Interest Income Recognized	2,964	875	2,964
Recorded Investment	39,103	127,200	116,721
Unpaid Principal Balance	39,103	127,200	116,721
Related Allowance	385	1,541	681
Average Recorded Investment	39,773	128,998	125,252
Interest Income Recognized	2,964	2,809	5,691
Nonresidential
Financing Receivable, Impaired [Line Items]
Recorded Investment	1,560,753	484,223	1,581,818
Unpaid Principal Balance	1,560,753	871,107	1,581,818
Average Recorded Investment	1,571,286	484,223	1,609,744
Interest Income Recognized	23,466	0	61,141
Recorded Investment	1,560,753	484,223	1,581,818
Unpaid Principal Balance	1,560,753	871,107	1,581,818
Average Recorded Investment	1,571,286	484,223	1,609,744
Interest Income Recognized	23,466	0	61,141
One-to-Four-Family
Financing Receivable, Impaired [Line Items]
Recorded Investment	265,377	459,430	337,984
Unpaid Principal Balance	267,279	463,756	342,345
Average Recorded Investment	266,868	462,049	342,907
Interest Income Recognized	4,896	5,301	11,765
Recorded Investment	202,354
Unpaid Principal Balance	263,605
Related Allowance		61,125
Average Recorded Investment		202,601
Interest Income Recognized		1,337
Recorded Investment	265,377	661,784	337,984
Unpaid Principal Balance	267,279	727,361	342,345
Related Allowance		61,125
Average Recorded Investment	266,868	664,650	342,907
Interest Income Recognized	$ 4,896	6,638	11,765
Construction and Land Development
Financing Receivable, Impaired [Line Items]
Recorded Investment			791,625
Unpaid Principal Balance			802,625
Average Recorded Investment			836,264
Interest Income Recognized			54,478
Recorded Investment		86,728
Unpaid Principal Balance		86,728
Related Allowance		6,074
Average Recorded Investment		86,728
Interest Income Recognized		0
Recorded Investment		86,728	791,625
Unpaid Principal Balance		86,728	802,625
Related Allowance		6,074
Average Recorded Investment		86,728	836,264
Interest Income Recognized		$ 0	$ 54,478

XML

Credit Quality of Loans and the Allowance for Loan Losses - Summary of Allowance for Loan Losses and Loans Receivable by Loan Portfolio Class and Impairment Method (Detail) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	$ 1,379,150	$ 1,188,352	$ 1,188,352
Charge-offs	(3,896)	0	(101,111)
Recoveries	597	0	116,909
(Reversal) provision	175,000	90,000
Ending Balance	1,550,851	1,278,352	1,379,150
Ending balance: individually evaluated for impairment	385	68,740	681
Ending balance: collectively evaluated for impairment	1,550,466	1,209,612	1,378,469
Ending balance	164,064,614	146,321,029	159,885,696
Ending balance: individually evaluated for impairment	1,865,233	1,359,935	2,828,148
Ending balance: collectively evaluated for impairment	162,199,381	144,961,094	157,057,548
One-to-Four-Family
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	331,605	244,781	244,781
Charge-offs	(263)	0	(90,111)
(Reversal) provision	48,887	61,263	176,935
Ending Balance	380,229	306,044	331,605
Ending balance: individually evaluated for impairment		61,125
Ending balance: collectively evaluated for impairment	380,229	244,919	331,605
Ending balance	77,108,832	70,401,955	74,655,376
Ending balance: individually evaluated for impairment	265,377	661,784	337,984
Ending balance: collectively evaluated for impairment	76,843,455	69,740,171	74,317,392
Home Equity Loans and Lines of Credit
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	62,603	68,837	68,837
Recoveries	597	0	2,439
(Reversal) provision	1,643	(7,115)	(8,673)
Ending Balance	64,843	61,722	62,603
Ending balance: individually evaluated for impairment	385	1,541	681
Ending balance: collectively evaluated for impairment	64,458	60,181	61,922
Ending balance	7,281,582	7,291,555	7,488,348
Ending balance: individually evaluated for impairment	39,103	127,200	116,721
Ending balance: collectively evaluated for impairment	7,242,479	7,164,355	7,371,627
Construction and Land Development
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	179,541	185,170	185,170
Charge-offs		0	(11,000)
(Reversal) provision	27,241	33,825	5,371
Ending Balance	206,782	218,995	179,541
Ending balance: individually evaluated for impairment		6,074
Ending balance: collectively evaluated for impairment	206,782	212,921	179,541
Ending balance	10,176,933	9,831,129	9,260,520
Ending balance: individually evaluated for impairment	0	86,728	791,625
Ending balance: collectively evaluated for impairment	10,176,933	9,744,401	8,468,895
Nonresidential
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	683,453	626,031	626,031
Recoveries		0	114,470
(Reversal) provision	125,565	5,068	(57,048)
Ending Balance	809,018	631,099	683,453
Ending balance: collectively evaluated for impairment	809,018	631,099	683,453
Ending balance	61,935,252	52,909,540	61,012,514
Ending balance: individually evaluated for impairment	1,560,753	484,223	1,581,818
Ending balance: collectively evaluated for impairment	60,374,499	52,425,317	59,430,696
Commercial
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	55,571	28,879	28,879
(Reversal) provision	11,928	770	26,692
Ending Balance	67,499	29,649	55,571
Ending balance: collectively evaluated for impairment	67,499	29,649	55,571
Ending balance	7,105,201	5,390,814	6,946,372
Ending balance: collectively evaluated for impairment	7,105,201	5,390,814	6,946,372
Consumer
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	6,950	6,669	6,669
Charge-offs	(3,633)
(Reversal) provision	2,210	(369)	281
Ending Balance	5,527	6,300	6,950
Ending balance: individually evaluated for impairment	0
Ending balance: collectively evaluated for impairment	5,527	6,300	6,950
Ending balance	456,814	496,036	522,566
Ending balance: individually evaluated for impairment	0
Ending balance: collectively evaluated for impairment	456,814	496,036	522,566
Unallocated
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning Balance	59,427	27,985	27,985
(Reversal) provision	(42,474)	(3,442)	31,442
Ending Balance	16,953	24,543	59,427
Ending balance: collectively evaluated for impairment	$ 16,953	$ 24,543	$ 59,427

XML

Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Range of Estimated Useful Lives for Premises and Equipment

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

XML

Foreclosed Real Estate (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Changes in Foreclosed Real Estate

The following table summarizes changes in foreclosed real estate for the three months ended March 31, 2020 and 2019 and for the year ended December 31, 2018, which are measured on a nonrecurring basis using significant unobservable, Level 3, inputs:

	March 31,				December 31,
	2020		2019		2019
Balance, beginning of period	$	845,000	$	865,000	$	865,000
Write-down of foreclosed real estate		—		—		(20,000	)
Balance, end of period	$	845,000	$	865,000	$	845,000

XML

Securities - Amortized Cost and Estimated Fair Value of Securities by Contractual Maturity (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Due in one year or less, Amortized Cost	$ 3,998,494	$ 1,000,000
Due after one year through five years, Amortized Cost	3,476,422	9,474,467
Due five years to ten years, Amortized Cost		502,567
Securities Available for Sale, Amortized Cost	31,437,476	36,392,681
Due in one year or less, Fair Value	4,035,061	998,407
Due after one year through five years, Fair Value	3,583,271	9,560,135
Due five years to ten years, Fair Value		521,510
Securities Available for Sale, Fair Value	32,679,206	37,090,591
Mortgage Backed Securities
Debt Securities, Available-for-sale [Line Items]
Securities Available for Sale, Amortized Cost	23,962,560	25,415,647
Securities Available for Sale, Fair Value	$ 25,060,874	$ 26,010,539

XML

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Investment Securities Available for Sale

Fair value measurements on a recurring basis

Securities available for sale – If quoted prices are available in an active market for identical assets, securities are classified within Level 1 of the hierarchy. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and securities dare included within Level 2 of the hierarchy.

As of March 31, 2020 and December 31, 2019 the Bank has categorized its investment securities available for sale as follows:

	Level 1		Level 2		Level 3		Total
March 31, 2020
Securities available for sale:
U.S. Government Agency and Federal Obligations	$	—	$	7,618,332	$	—	$	7,618,332
Residential mortgage-backed securities				25,060,874		—		25,060,874
December 31, 2019
Securities available for sale:
U.S. Government Agency and Federal Obligations	$	—	$	9,544,342	$	—	$	9,544,342
Residential mortgage-backed securities				26,010,539		—		26,010,539
Municipal Securities		—		1,535,710		—		1,535,710

Schedule of Foreclosed Real Estate

The Bank has categorized its foreclosed real estate as Level 3.

	Level 1		Level 2		Level 3		Total
March 31, 2020
Impaired loans	$	—	$	—	$	1,864,848	$	1,864,848
Foreclosed real estate		—		—		845,000		845,000
December 31, 2019
Impaired loans	$	—	$	—	$	2,827,467	$	2,827,467
Foreclosed real estate		—		—		845,000		845,000

Schedule of Financial Instruments Measured at Fair Value on Non-Recurring Basis

The following table presents quantitative information about Level 3 fair value measurements for selected financial instruments measured at fair value on a non-recurring basis at March 31, 2020 and December 31, 2019:

	Fair Value		Value Technique(s)	Unobservable Inputs	Range or Rate Used
March 31, 2020
Impaired loans	$	1,864,848	Appraised value	Discount to reflect current market conditions		0.00	%
			Discounted cash flows	Discount rates		0.98	%
Foreclosed real estate	$	845,000	Appraised value	Discount to reflect current market conditions		10.11	%
December 31, 2019
Impaired loans	$	2,827,467	Appraised value	Discount to reflect current market conditions		0.00	%
			Discounted cash flows	Discount rates		1.68	%
Foreclosed real estate	$	845,000	Appraised value	Discount to reflect current market conditions		10.11	%

Schedule of Estimated Fair Values of the Bank's Financial Instruments

The estimated fair values of the Bank’s financial instruments, whether carried at cost or fair value are as follows:

			Fair Value Measurements at March 31, 2020 Using
	Carrying Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(dollars in thousands)
Financial assets:
Cash and cash equivalents	$	13,565	$	13,565	$	—	$	—	$	13,565
Time deposits in other banks		7,440		—		7,474		—		7,474
Securities available for sale		32,679		—		32,679		—		32,679
Federal Home Loan Bank stock		730		—		730		—		730
Loans held for sale		2,640		—		2,722		—		2,722
Loans, net (1)		162,291		—		—		167,410		167,410
Foreclosed real estate		845		—		—		845		845
Accrued interest receivable		654		—		654		—		654
Financial liabilities:
Deposits		157,941		—		151,883		—		151,883
Borrowings		12,500		—		12,829				12,829

(1) Carrying amount is net of unearned income and the allowance for loan losses. In accordance with the prospective adoption of ASU No. 2016-01, the fair value of loans was measured using an exit price notion.

			Fair Value Measurements at December 31, 2019 Using
	Carrying Value		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(dollars in thousands)
Financial assets:
Cash and cash equivalents	$	5,987	$	5,987	$	—	$	—	$	5,987
Time deposits in other banks		7,936		—		8,127		—		8,127
Securities available for sale		37,091		—		37,091		—		37,091
Federal Home Loan Bank stock		300		—		300		—		300
Loans held for sale		1,730		—		1,823		—		1,823
Loans, net (1)		158,245		—		—		161,954		161,954
Foreclosed real estate		845		—		—		845		845
Accrued interest receivable		655		—		655		—		655
Financial liabilities:
Deposits		156,441		—		145,617		—		145,617
Borrowings		2,500				2,550				2,550

(2) Carrying amount is net of unearned income and the allowance for loan losses. In accordance with the prospective adoption of ASU No. 2016-01, the fair value of loans was measured using an exit price notion.

XML

Loans

3 Months Ended

Mar. 31, 2020

Loans

Note 3. Loans

The Bank currently manages its credit products and respective exposure to credit losses by the following specific portfolio segments which are levels at which the Bank develops and documents its systematic methodology to determine the allowance for loan losses attributable to each respective portfolio segment. The segments are:

• 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.

• 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, 2020 and December 31, 2019 were as follows:

	March 31,			December 31,
	2020			2019
Real estate loans
One-to four-family	$	77,108,832		$	74,655,376
Home equity loans and lines of credit		7,281,582			7,488,348
Construction and land development		10,176,933			9,260,520
Nonresidential		61,935,252			61,012,514
Total real estate loans		156,502,599			152,416,758
Other loans
Commercial		7,105,201			6,946,372
Consumer		456,814			522,566
Total other loans		7,562,015			7,468,938
Total loans		164,064,614			159,885,696
Net deferred loan origination fees and costs		(222,301	)		(261,085	)
Allowance for loan losses		(1,550,851	)		(1,379,150	)
Total loans, net	$	162,291,462		$	158,245,461

Overdraft deposits are reclassified as consumer loans and are included in the total loans on the balance sheet. Overdrafts were $2,797 and $25,714 at March 31, 2020 and December 31, 2019, respectively.

Nonresidential real estate loans entail greater risks compared to residential real estate loans because they typically involved larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the company, as repayment of the loan generally is dependent, in large part, on the sufficient income for the property to cover operating expenses and debt service. Changes in economic conditions, such as the COVID-19 pandemic, that are not in the control of the borrower or lender could negatively impact the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for nonresidential real estate than residential properties.

The following table provides information regarding our nonresidential real estate loans by type at March 31, 2020.

Type of Loan	Number of Loans		Balance
Office		33	$	16,728,139
Retail		17		13,189,040
Warehouse/Industrial		16		10,974,929
Apartment/Multifamily		16		8,276,994
Hotel		5		7,465,906
Other		11		3,118,332
Restaurant		4		1,256,752
Religious/Church Related		5		925,160
		107	$	61,935,252

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 SBA lender, we were automatically authorized to originate PPP loans. An eligible business can apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs,” or (2) $10.0 million dollars. PPP loans will have: (a) an interest rate of 1.0%, (b) two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including an accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business entity are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses.

We intend to limit our investment in PPP loans to up to 20% of the Bank’s capital or approximately $8.6 million in loans. As of April 24, 2020, we had received 79 applications for up to $8.2 million of loans under the PPP and have received approval for 35 applications for $6.1 million of loans.

XML

Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Significant Accounting Policies

Note 1. Significant Accounting Policies

Basis of Presentation

Pursuant to the terms and conditions of a plan of conversion and reorganization, adopted by its Board of Directors and approved by its members, Banks of the Chesapeake, M.H.C. converted from the mutual holding company corporate structure to the public stock holding company structure as follows: CBM Bancorp, Inc. (“CBM Bancorp” or “Company”) was incorporated on May 22, 2018 to serve as the successor holding company for Chesapeake Bank of Maryland (“Bank”),which was at that time the wholly owned subsidiary of Banks of the Chesapeake, M.H.C. On September 27, 2018, in accordance with the plan of conversion and reorganization, CBM Bancorp became the parent holding company for the Bank and Banks of the Chesapeake, M.H.C. merged with and into CBM Bancorp, with the Company as the surviving corporation. Upon consummation of the merger, Banks of the Chesapeake, M.H.C. ceased to exist.

The conversion and reorganization was accomplished through the sale and issuance of 4,232,000 shares of common stock at a price of $10.00 per share, through which the Company received proceeds of approximately $40.9 million, net of offering expenses of approximately $1.4 million. Approximately 50% of the net proceeds of the offering, or $20.5 million was contributed by the Company to the Bank in return for 100% of the issued and outstanding shares of common stock of the Bank. In connection with the conversion and reorganization, the Bank’s Board of Directors adopted an employee stock ownership plan (the “ESOP”) which subscribed for 8% of the sum of the number of shares, or 338,560 shares of common stock sold in the offering.

The plan of conversion and reorganization provided for the establishment of a liquidation account by CBM Bancorp for the benefit of eligible account holders in an amount equal to the value of the net assets of Banks of the Chesapeake, M.H.C. as of the date of the latest statement of financial condition of Banks of the Chesapeake, M.H.C. prior to the consummation of the conversion and reorganization. The plan of conversion and reorganization also provided for the establishment of a parallel liquidation account in the Bank to support the CBM Bancorp liquidation account in the event CBM Bancorp does not have sufficient assets to fund its obligations under the CBM Bancorp liquidation account.

In the unlikely event that the Bank were to liquidate after the conversion and reorganization, all claims of creditors, including those of depositors, would be paid first. However, except with respect to the liquidation account to be established in CBM Bancorp, depositors’ claims would be solely for the principal amount of their deposit accounts plus accrued interest. Depositors generally would not have an interest in the value of the assets of the Bank or CBM Bancorp above that amount.

Pursuant to the plan of conversion and reorganization, after two years from the date of conversion and reorganization, and upon the written request of the Federal Reserve Board, CBM Bancorp will transfer, or upon the prior written approval of the Federal Reserve Board, CBM Bancorp may transfer, the liquidation account and the depositors’ interests in such account to the Bank, and the liquidation account shall thereupon be subsumed into the liquidation account of the Bank.

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.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“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 accounting principles generally accepted in the United States 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, 2020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, 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, 2019 included in the Company’s Annual Report on Form 10-K dated March 27, 2020.

Nature of Operations

CBM Bancorp, Inc.’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.

The accounting and reporting policies of CBM Bancorp, Inc. and Chesapeake Bank of Maryland conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) and to general practices in the banking industry. The more significant policies follow:

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 with accounting principles generally accepted in the United States of America 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.

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 (including amortization of premium or accretion of discount).

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 Generally Accepted Accounting Standards 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 Federal Home Loan Bank of Atlanta according to a predetermined formula. FHLB stock can be sold back only at par value of $100 per share and only to the FHLB or another member institution. As of March 31, 2020 and December 31, 2019, the Bank owned shares totaling $729,700 and $300,400, respectively.

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 to be derivatives. The period of time 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.

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.

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.

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 (“BOLI”)

The Bank maintains life insurance 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, 2020, and December 31, 2019, $126,201 and $122,118, 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 (“ESOP”)

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.

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.

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 had approximately $416,000 and approximately $0 in deposits in other financial institutions in excess of amounts insured by the FDIC, as of March 31, 2020 and December 31, 2019, respectively. The Bank’s management considers this a normal business risk. 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 TDRs for a limited period of time to account for the effects of COVID-19.

The CARES Act also provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic.

Recent Accounting Pronouncements

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, 2020, and interim periods within fiscal years beginning after December 15, 2021. 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.

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 its proposal 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.

XML

Borrowings

3 Months Ended

Mar. 31, 2020

Borrowings

Note 7. Borrowings

The Bank has advances outstanding from the Federal Home Loan Bank of Atlanta (“FHLB”). A schedule of borrowings is as follows:

March 31, 2020							December 31, 2019
Advance Amount		Rate			Maturity Date		Advance Amount		Rate			Maturity Date
$	2,500,000		0.33	%		05/20/2020	$	2,500,000		1.78	%		12/17/2020
	5,000,000		0.55	%		09/14/2020
	5,000,000		0.95	%		03/06/2023
$	12,500,000						$	2,500,000

At March 31, 2020 FHLB advances and their remaining maturities were as follows:

March 31,
2021	$	7,500,000
2022		—
2023		5,000,000
2024		—
2025		—
	$	12,500,000

The Bank has an agreement with the Federal Home Loan Bank of Atlanta (“FHLB”) that allows it to obtain advances secured by assets owned by the Bank. Total advances are limited to 25% of the Bank’s total assets. As of March 31, 2020 and December 31, 2019, the Bank had availability of $55,085,000 and $55,100,000, respectively, and remaining credit availability of approximately $42,600,000 and $52,600,000, respectively, with FHLB. As of March 31, 2020 and December 31, 2019, the Bank pledged a portion of its one-to four-family residential mortgages as collateral. The amount of loans that were deemed eligible to pledge as collateral totaled approximately $53,300,000 and $50,320,000 at March 31, 2020 and December 31, 2019, respectively.

The Bank also has a $2,000,000 unsecured federal funds line of credit available with another financial institution, for which no amounts were outstanding as of March 31, 2020 and December 31, 2019.

XML

Consolidated Statements of Operations - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Interest and dividend income
Interest and fees on loans	$ 1,965,446	$ 1,727,283
Interest and dividends on investments	318,404	453,221
Total interest income	2,283,850	2,180,504
Interest expense
Interest on deposits	369,363	316,037
Interest on borrowings	16,133
Total interest expense	385,496	316,037
Net interest income	1,898,354	1,864,467
Provision for loan losses	175,000	90,000
Net interest income after provision for loan losses	1,723,354	1,774,467
Non-interest income
Service fees on deposit accounts	35,881	28,392
Income from bank-owned life insurance	18,574	18,516
Gain on sale of loans held for sale	114,650	15,246
Gain on sale of investment securities	46,551
Other non-interest income	29,324	30,120
Total non-interest income	244,980	92,274
Non-interest expense
Salaries, director fees and employee benefits	1,138,703	885,844
Premises and equipment	104,479	119,053
Data processing	141,141	139,893
Professional fees	115,317	122,688
FDIC premiums and regulatory assessments	16,587	30,215
Marketing	16,964	23,184
Other operating expenses	180,449	178,405
Total non-interest expense	1,713,640	1,499,282
Income before income taxes	254,694	367,459
Income tax expense	80,931	95,436
Net income	$ 173,763	$ 272,023
Earnings per common share
Basic	$ 0.05	$ 0.07
Diluted	$ 0.05	$ 0.07

XML

Earnings Per Common Share

3 Months Ended

Mar. 31, 2020

Earnings Per Common Share

Note 11. Earnings Per Common Share

Basic earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Net income available to common stockholders is net income to the Company. Unallocated common shares held by the ESOP are not included in the weighted average number of common shares outstanding for purposes of calculating earnings per share until they are committed to be released. Basic earnings per share excludes dilution and is computed by dividing net income by weighted average number of common shares outstanding during the period. Dilutive earnings per share reflects the potential dilution that could occur if stock options were exercised and is computed by dividing net income by the dilutive weighted average number of common shares outstanding during the period.

	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
Net income	$	173,763	$	272,023
Weighted average common shares outstanding - basic		3,804,938		3,927,296
Weighted average common shares outstanding - dilutive		3,804,938		3,927,296
Earnings per common share, basic and diluted	$	0.05	$	0.07

XML

Fair Value Measurements - Schedule of Financial Instruments Measured at Fair Value on Non-Recurring Basis (Detail)	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Foreclosed real estate	$ 845,000	$ 845,000	$ 865,000	$ 865,000
Fair Value Measurements on Non-Recurring Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans	1,864,848	2,827,467
Foreclosed real estate	$ 845,000	$ 845,000
Fair Value Measurements on Non-Recurring Basis | Measurement Input, Discount Rate | Appraised Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rates	10.11	10.11
Fair Value Measurements on Non-Recurring Basis | Measurement Input, Discount Rate | Discounted Cash Flows
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rates	0.98	1.68
Fair Value Measurements on Non-Recurring Basis | Minimum | Measurement Input, Discount Rate | Appraised Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Discount rates	0.00	0.00

XML

Deposits - Schedule of Deposits (Detail) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Deposits [Line Items]
Noninterest-bearing demand	$ 21,658,012	$ 19,780,866
Interest-bearing demand	23,459,259	23,779,145
Money market	9,670,363	10,242,323
Savings	24,515,788	24,295,700
Certificates of deposit	78,637,728	78,342,839
Total deposits	$ 157,941,150	$ 156,440,873

XML

Borrowings - Schedule of FHLB advances and their remaining maturities (Detail)	Mar. 31, 2020 USD ($)
2021	$ 7,500,000
2022	5,000,000
Total	$ 12,500,000