Company: CMTV
Filing Date: 2025-03-28
Form Type: 10-K
Source: 0001654954-25-003447
Chunk: 7

Company: COMMUNITY BANCORP /VT
Filing Date: 2025-03-28
Form: 10-K
Item: Item 1
Chunk 7
---
 capital is redefined to include two components: Common Equity Tier 1 capital and additional Tier 1 capital. Common Equity Tier 1 capital consists solely of common stock (plus related surplus), retained earnings, accumulated other comprehensive income, and limited amounts of minority interests that are in the form of common stock. Additional Tier 1 capital includes other perpetual instruments historically included in Tier 1 capital, such as noncumulative perpetual preferred stock. Tier 2 capital consists of instruments that currently qualify in Tier 2 capital plus instruments that the rule has disqualified from Tier 1 capital treatment. Cumulative perpetual preferred stock, formerly includable in Tier 1 capital, is now included only in Tier 2 capital. Although AOCI is presumptively included in Common Equity Tier 1 capital, the rule provided a one-time opportunity at the end of the first quarter of 2015 for covered banking organizations to opt out of much of this treatment of AOCI.  The Company and Bank made this opt-out election and, as a result, have retained the pre-existing regulatory capital treatment for AOCI. 

In addition, in order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity, but the buffer applies to all three measurements (Common Equity Tier 1, Tier 1 capital and total capital). The capital conservation buffer consists of an additional amount of common equity equal to 2.5% of risk-weighted assets. The Company and the Bank met this capital conservation buffer requirement at December 31, 2024, with a capital conservation buffer of 6.85% for the Company and 6.76% for the Bank as of that date.  Failure to maintain the required buffer would result in limitations on permissible shareholder distributions and discretionary bonus payments.

In general, the Basel III capital rules have had the effect of increasing capital requirements by increasing the risk weights on certain assets, including high volatility commercial real estate, certain loans past due 90 days or more or in nonaccrual status, mortgage servicing rights not includable in Common Equity Tier 1 capital, equity exposures, and claims on securities firms, that are used in the denominator of the three risk-based capital ratios.

 6Table of Contents

The capital ratios of the Company and the Bank exceeded all applicable regulatory requirements at December 31, 2024. (See Note 22 to the Company