Company: CMTV
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001654954-25-009542
Chunk: 34

Company: COMMUNITY BANCORP /VT
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 34
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 reasonable and supportable forecast in a directionally consistent and objective manner.  For the purchased loans segment, a long-term average loss rate is calculated and applied on a quarterly basis for the remaining life of the pool.  Due to the lack of any historical loss data, a manual entry methodology was chosen for the municipal loans given the immaterial nature of the pool when considering prior loss history as well as the inability to reasonably forecast a PD or LGD for the pool.

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Qualitative factors are also applied to include the levels of and trends in delinquencies and non-performing loans, levels of and trends in loan risk groups, trends in volumes and terms of loans, effects of any changes in loan related policies, experience, ability and the depth of management, documentation and credit data exception levels, national and local economic trends, external factors such as competition and regulation and lastly, concentrations of credit risk in a variety of areas, including portfolio product mix, the level of loans to individual borrowers and their related interests, loans to industry segments, and the geographic distribution of CRE loans. This evaluation is inherently subjective as it requires estimates that are susceptible to revision as more information becomes available. Management’s review of the ACL during the first quarter of 2025 resulted in increases in the risk status of qualitative factors to reflect increasing trends in volume and exceptions in the residential loan portfolio as well as factors related to delinquencies and non-performing loans to reflect the uncertainty as to how and when inflation or a recession will, or could, affect our customers’ ability to pay. During the second quarter of 2025, management’s review of the ACL resulted in a decrease to the qualitative factor for loan review in the commercial and CRE loan segments. This is a reflection of the strong loan review process that is in place. The qualitative factors are determined based on the various risk characteristics of each loan segment.  The Company has policies, procedures and internal controls that management believes are commensurate with the risk profile of each of these segments.  Major risk characteristics relevant to each portfolio segment are as follows: Commercial & Industrial – Loans in this segment include commercial and industrial loans and to a lesser extent loans to finance agricultural production. Commercial loans are made to businesses and are generally secured by assets of the business, including trade assets and equipment. While not the primary collateral, in many cases these loans may also be secured by the real estate of the business. Repayment is expected from the cash flows of the business. A weakened economy, soft