Company: CMTV
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001654954-25-013041
Chunk: 123

Company: COMMUNITY BANCORP /VT
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 2
Chunk 123
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 on deposits must be increased more and/or more quickly than projected due to competitive pressures, the expected benefit of rising rates would be reduced.  In a falling rate environment, NII is expected to trend slightly downward compared with the current rate environment scenario for the first year of the simulation as asset yield erosion is not fully offset by decreasing funding costs.  Thereafter, net interest income is projected to experience sustained downward pressure as funding costs reach their assumed floors and asset yields continue to reprice into the lower rate environment.  

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The following table summarizes the estimated impact on the Company's NII over a twelve-month period, assuming a gradual parallel shift of the yield curve beginning September 30, 2025:

Rate Change Percent Change in NII     Down 100 bps  -0.5%Up 200 bps  -1.6%

The estimated amounts shown in the table above are within the ALCO Policy limits.  However, those amounts do not represent a forecast and should not be relied upon as indicative of future results.  The ALCO model also provides alternate scenarios including a sustained flat, or inverted yield curve. While assumptions used in the ALCO process, including the interest rate simulation analyses, are developed based upon current economic and local market conditions, and expected future conditions, the Company cannot provide any assurances as to the predictive nature of these assumptions, including how customer preferences or competitor influences might change.  

As of September 30, 2025, the Company had $12,887,000 in principal amount of Junior Subordinated Debentures due December 15, 2037, which bear interest at a quarterly floating rate equal to 3-month CME SOFR, as adjusted by a spread adjustment factor of 0.26161, plus 2.85%.  The quarterly floating rate in effect on the debentures was 7.43% for the September 2025 payment, compared to a floating rate of 8.45% for the September 2024 payment.

Credit Risk - As a financial institution, one of the primary risks the Company manages is credit risk, the risk of loss stemming from borrowers’ failure to repay loans or inability to meet other contractual obligations.  The Company’s Board of Directors prescribes policies for managing credit risk, including Loan, Appraisal and Environmental policies.  These policies are supplemented by comprehensive underwriting standards and procedures.  The Company maintains a Credit Administration department whose function includes credit analysis and monitoring of