Company: CMTV
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001654954-25-003447
Chunk: 13

Company: COMMUNITY BANCORP /VT
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1
Chunk 13
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 holding company must guarantee that bank's compliance with the plan. The liability of the parent holding company under any such guarantee is limited to the lessor of 5% of the bank's assets at the time it became undercapitalized or the amount needed to comply with the plan. Furthermore, in the event of the bankruptcy of the parent holding company, such guarantee would take priority over the parent's general unsecured creditors. In addition, FDICIA requires the various regulatory agencies to prescribe certain non-capital standards for safety and soundness related generally to operations and management, asset quality and executive compensation and permits regulatory action against a financial institution that does not meet such standards. 

The Prompt Corrective Action Capital regulations establish various degrees of corrective action to be taken when an FDIC-insured depository institution is considered undercapitalized. In 2015, the FDIC’s Prompt Corrective Action regulations were revised in accordance with the Basel III capital standards.  The enhanced requirements (i) introduced a Common Equity Tier 1 ratio requirement at each capital category (other than critically undercapitalized), and set the required Common Equity Tier 1 ratio at 6.5% for well-capitalized status; (ii) increased the minimum Tier 1 capital ratio requirement for each category (other than critically undercapitalized), and set the minimum Tier 1 capital ratio for well-capitalized status at 8.0% (as compared to 6.0% under the prior rule); and (iii) eliminated the provision that permitted a bank with a composite supervisory rating of 1 to have a 3% leverage ratio and still be considered adequately capitalized.  The Basel III capital standards do not change the total risk-based capital requirement for any prompt corrective action category.

As of December 31, 2024, the Bank was considered "well capitalized" under FDICIA’s Prompt Corrective Action capital requirements. Those capital requirements do not apply to the Company. (See Note 22 to the Company’s audited consolidated financial statements included in Part II, Item 8 of this report for additional information about the Bank’s regulatory capital ratios.)

Safety and Soundness Regulations.  Pursuant to the FDIA, the federal bank regulatory agencies have adopted safety and soundness guidelines establishing general standards relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings, compensation, fees and benefits.  In general, the guidelines require, among other things