2022 Annual Report
Community Bancorp. and Subsidiary
Table of Contents
Independent Auditor’s Report………………………………………………………………………...................................... 3
Financial Statements:
Consolidated Balance Sheets…………………………………………………………………….................................... 5
Consolidated Statements of Income……………………………………………………………..................................... 6
Consolidated Statements of Comprehensive Income………………………………………….................................... 7
Consolidated Statements of Changes in Shareholders’ Equity……………………………….................................... 8
Consolidated Statements of Cash Flows………………………………………………………. .................................. 10
Notes to Consolidated Financial Statements………………………………………………….. .................................. 12
Management’s Discussion and Analysis of the Results of Operation…………………………..................................... 53
Common Stock Performance by Quarter…………………………………………………………... ................................. 78
Other Shareholder Information……………………………………………………………………….................................. 79
1
2022 Annual Report
Dear Shareholders and Friends:
Community Bancorp. and Community National Bank posted excellent results in 2022, as we continued to provide
essential banking services to our customers and communities. We grew both deposits and loans and improved
profitability. Our bankers have performed admirably in support of their customers, communities, and each other.
As of year-end 2022, the Company’s capital ratios exceeded all regulatory requirements, and we continue to be
considered a “well-capitalized” institution. This designation is important to us, to our regulators and to you. We
are very pleased with these results.
Thank you to our shareholders and friends whose confidence and support allow us to continue our work. We love
this work and are grateful for the opportunity to serve our communities through this organization. We live here too.
Our customers’ success is our success.
Sincerely,
Kathryn M. Austin
President and Chief Executive Officer
Community Bancorp. and Community National Bank
2
Community Bancorp.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Community Bancorp. and Subsidiary
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Community Bancorp. and Subsidiary (the
Company) as of December 31, 2022 and 2021, and the related consolidated statements of income, comprehensive
(loss) income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes
(collectively referred to as the financial statements). In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of the Company as of December 31,
2022 and 2021, and the consolidated results of their operations and their cash flows for the years then ended, in
conformity with U.S. generally accepted accounting principles.
We have also audited, in accordance with U.S. generally accepted auditing standards, the Company’s internal
control over financial reporting as of December 31, 2022, based on criteria established in the Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) and our report dated March 27, 2023, expressed an unmodified opinion.
Basis for Opinion
The financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement
of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of the criticial audit matter does
not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Maine • New Hampshire • Massachusetts • Connecticut • West Virginia • Arizona • Puerto Rico
berrydunn.com
3
2022 Annual Report
Board of Directors and Shareholders
Community Bancorp. and Subsidiary
Page 2
Allowance for Loan Losses
As disclosed in Note 4 to the Company’s consolidated financial statements, the Company has a gross loan portfolio
of $749 million and related allowance for loan losses of $8.7 million as of December 31, 2022. As disclosed in Note
1, the Company’s allowance for loan losses is a material and complex estimate requiring significant management
judgment in the evaluation of the credit quality and the estimation of inherent losses within the loan portfolio. The
level of the allowance for loan losses is based on management’s periodic evaluation of the loan portfolio, credit
concentrations, trends in historical loss experience, estimated value of any underlying collateral, specific impaired
loans and economic conditions. Changes in these assumptions could have a material effect on the Company’s
financial results. The allowance for loan losses includes a general reserve which is determined based on the results
of a quantitative and a qualitative analysis of all loans not measured for impairment at the reporting date. Impaired
loans are loan(s) to a borrower that in the aggregate are greater than $100,000 and that are in non-accrual status
or are troubled debt restructurings regardless of amount.
In calculating the allowance for loan losses, the Company considers relevant credit quality indicators for each loan
segment, stratifies loans by risk rating, and estimates losses for each loan type based upon their nature and risk
profile. This process requires significant management judgment in the review of the loan portfolio and assignment
of risk ratings based upon the characteristics of loans. In addition, estimation of losses inherent within the portfolio
requires significant management judgment. Auditing these complex judgments and assumptions involves especially
challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these
matters, including the extent of specialized skill or knowledge needed.
The primary procedures we performed to address this critical audit matter included:
• Evaluating the design of controls relating to management’s review of loans, assignment of risk ratings, and
consistency of application of accounting policies.
• Evaluating the reasonableness of assumptions and sources of data used by management in forming the
qualitative loss factors by performing retrospective review of historic loan loss experience and analyzing
historical data used in developing the assumptions, including assessment of whether there were additional
qualitative considerations relevant to the portfolio.
• Evaluating the appropriateness of inputs and factors that the Company used in forming the qualitative loss
factors and assessing whether such inputs and factors were relevant, reliable, and reasonable for the purpose
used.
• Testing the appropriateness of the Company’s loan rating policy and the consistency of its application.
• Evaluating the appropriateness of specific reserves for impaired loans.
• Verifying the mathematical accuracy and computation of the allowance for loan losses by re-performing or
independently calculating significant elements of the allowance based on relevant source documents.
We have served as the Company’s auditor since 2003.
Portland, Maine
March 27, 2023
Vermont Registration No. 92-0000278
4
Community Bancorp.
Community Bancorp. and Subsidiary
Consolidated Balance Sheets
Assets
Cash and due from banks
Federal funds sold and overnight deposits
Total cash and cash equivalents
Securities available-for-sale
Restricted equity securities, at cost
Loans held-for-sale
Loans
Allowance for loan losses
Deferred net loan (costs) fees
Net loans
Bank premises and equipment, net
Accrued interest receivable
Bank owned life insurance
Goodwill
Other assets
Total assets
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Demand, non-interest bearing
Interest-bearing transaction accounts
Money market funds
Savings
Time deposits, $250,000 and over
Other time deposits
Total deposits
Borrowed funds
Repurchase agreements
Junior subordinated debentures
Accrued interest and other liabilities
Total liabilities
Shareholders' Equity
Preferred stock, 1,000,000 shares authorized, 15 shares issued and outstanding
at December 31, 2022 and 2021 ($100,000 liquidation value, per share)
Common stock - $2.50 par value; 15,000,000 shares authorized, 5,647,710
and 5,587,939 shares issued at December 31, 2022 and 2021, respectively
(including 16,850 and 14,337 shares issued February 1, 2023 and 2022,
respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less: treasury stock, at cost; 210,101 shares at December 31, 2022 and 2021
Total shareholders' equity
Total liabilities and shareholders' equity
December 31,
2022
December 31,
2021
$
12,302,771
58,837,557
71,140,328
192,918,109
1,411,750
0
748,548,608
(8,709,225)
493,275
740,332,658
13,042,468
3,214,332
5,153,387
11,574,269
17,244,846
$ 1,056,032,147
$
17,839,374
92,519,552
110,358,926
182,342,459
1,434,450
339,000
689,988,533
(7,710,256)
(37,972)
682,240,305
13,767,328
2,400,560
5,073,228
11,574,269
9,575,274
$ 1,019,105,799
$ 216,093,534
294,050,079
140,117,086
171,072,921
15,632,058
86,006,601
922,972,279
1,300,000
33,077,829
12,887,000
10,618,676
980,855,784
$
209,465,151
265,513,937
129,728,954
168,390,905
17,463,871
88,837,135
879,399,953
1,300,000
32,609,875
12,887,000
8,148,703
934,345,531
1,500,000
1,500,000
14,119,275
36,383,235
46,464,447
(20,667,817)
(2,622,777)
75,176,363
$ 1,056,032,147
13,969,848
35,322,063
37,758,105
(1,166,971)
(2,622,777)
84,760,268
$ 1,019,105,799
Book value per common share outstanding
$
13.55
$
15.48
The accompanying notes are an integral part of these consolidated financial statements.
5
2022 Annual Report
Community Bancorp. and Subsidiary
Consolidated Statements of Income
Interest income
Interest and fees on loans
Interest on taxable debt securities
Interest on tax-exempt debt securities
Dividends
Interest on federal funds sold and overnight deposits
Total interest income
Interest expense
Interest on deposits
Interest on borrowed funds
Interest on repurchase agreements
Interest on junior subordinated debentures
Total interest expense
Net interest income
Provision for loan losses
Net interest income after provision for loan losses
Non-interest income
Service fees
Income from sold loans
Other income from loans
Other income
Total non-interest income
Non-interest expense
Salaries and wages
Employee benefits
Occupancy expenses, net
Other expenses
Total non-interest expense
Income before income taxes
Income tax expense
Net income
Earnings per common share
Weighted average number of common shares
used in computing earnings per share
Dividends declared per common share
Years Ended December 31,
2022
2021
$
$
$
$
32,558,005
3,111,860
203,358
82,989
1,158,444
37,114,656
3,203,696
86,054
166,746
573,603
4,030,099
33,084,557
978,000
32,106,557
3,676,875
605,848
1,377,494
982,831
6,643,048
8,347,000
2,743,210
2,806,830
7,977,299
21,874,339
16,875,266
3,135,326
13,739,940
2.53
5,403,938
0.92
$
$
$
$
33,067,230
1,304,902
273
56,116
362,018
34,790,539
2,568,158
71,375
88,861
393,105
3,121,499
31,669,040
624,165
31,044,875
3,441,607
949,212
982,295
1,361,023
6,734,137
8,027,000
3,124,554
2,808,068
7,697,964
21,657,586
16,121,426
2,983,088
13,138,338
2.45
5,345,988
0.88
The accompanying notes are an integral part of these consolidated financial statements.
6
Community Bancorp.
Community Bancorp. and Subsidiary
Consolidated Statements of Comprehensive (Loss) Income
Net income
Other comprehensive loss, net of tax:
Unrealized holding loss on securities AFS arising during the period
Tax effect
Other comprehensive loss, net of tax
Total comprehensive (loss) income
Years Ended December 31,
2022
2021
$ 13,739,940
$ 13,138,338
(24,684,615)
5,183,769
(19,500,846)
$ (5,760,906)
(2,635,848)
553,529
(2,082,319)
$ 11,056,019
The accompanying notes are an integral part of these consolidated financial statements.
7
2022 Annual Report
Community Bancorp. and Subsidiary
Consolidated Statements of Changes in Shareholders’ Equity
Years Ended December 31, 2022 and 2021
Common stock
Preferred stock
Shares
Amount
Shares
Amount
Balances, December 31, 2020
5,527,380 $ 13,818,450
15 $ 1,500,000
Comprehensive income
Net income
Other comprehensive loss
Total comprehensive income
0
0
0
0
Cash dividends declared - common stock
Cash dividends declared - preferred stock
Issuance of common stock
0
0
60,559
0
0
151,398
0
0
0
0
0
0
0
0
0
0
Balances, December 31, 2021
5,587,939 13,969,848
15
1,500,000
Comprehensive loss
Net income
Other comprehensive loss
Total comprehensive loss
0
0
0
0
Cash dividends declared - common stock
Cash dividends declared - preferred stock
Issuance of common stock
0
0
59,771
0
0
149,427
0
0
0
0
0
0
0
0
0
0
Balances, December 31, 2022
5,647,710 $ 14,119,275
15 $ 1,500,000
The accompanying notes are an integral part of these consolidated financial statements.
8
Community Bancorp. Community Bancorp. and Subsidiary
Consolidated Statements of Changes in Shareholders’ Equity (continued)
Years Ended December 31, 2022 and 2021
Additional
paid-in
capital
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Treasury
stock
Total
shareholders’
equity
$
34,309,646
$ 29,368,046
$
915,348
$
(2,622,777)
$ 77,288,713
0
0
13,138,338
0
0
(2,082,319)
0
0
1,012,417
(4,699,529)
(48,750)
0
0
0
0
0
0
0
0
0
13,138,338
(2,082,319)
11,056,019
(4,699,529)
(48,750)
1,163,815
35,322,063
37,758,105
(1,166,971)
(2,622,777)
84,760,268
0
0
13,739,940
0
0
(19,500,846)
0
0
1,061,172
(4,967,035)
(66,563)
0
0
0
0
0
0
0
0
0
13,739,940
(19,500,846)
(5,760,906)
(4,967,035)
(66,563)
1,210,599
$
36,383,235
$ 46,464,447
$ (20,667,817)
$
(2,622,777)
$ 75,176,363
9
2022 Annual Report
Community Bancorp. and Subsidiary
Consolidated Statements of Cash Flows
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization, bank premises and equipment
Provision for loan losses
Deferred income tax
Gain on sale of loans
Gain on sale of bank premises and equipment
Capital loss on leases
Income from CFS Partners
Amortization of bond premium, net
Proceeds from sales of loans held for sale
Originations of loans held for sale
Increase (decrease) in taxes payable
(Increase) decrease in interest receivable
Decrease in mortgage servicing rights
Decrease in right-of-use assets
Decrease in operating lease liabilities
Decrease in other assets
Increase in cash surrender value of BOLI
Amortization of limited partnerships
Change in net deferred loan fees and costs
Increase (decrease) in interest payable
Increase in accrued expenses
(Decrease) increase in other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities:
Investments - AFS
Maturities, calls, pay downs and sales
Purchases
Proceeds from redemption of restricted equity securities
Purchases of restricted equity securities
Increase (decrease) in limited partnership contributions payable
Investment in limited liability entities
Proceeds from distribution from CFS Partners
(Increase) decrease in loans, net
Capital expenditures net of proceeds from sales of bank
premises and equipment
Recoveries of loans charged off
Net cash used in investing activities
10
Years Ended December 31,
2022
2021
$ 13,739,940
$ 13,138,338
1,141,727
978,000
(118,587)
(237,881)
0
0
(584,971)
609,535
12,865,842
(12,288,961)
499,525
(813,772)
35,127
198,682
(205,165)
15,389
(80,159)
268,714
(531,247)
15,143
267,655
(39,291)
15,735,245
1,104,918
624,165
(76,374)
(540,540)
(7,559)
63,125
(951,605)
531,081
18,103,002
(17,771,062)
(258,585)
587,417
24,426
196,172
(196,825)
67,126
(84,992)
363,048
(1,157,769)
(27,348)
310,996
3,525
14,044,681
18,857,918
(54,727,718)
43,500
(20,800)
2,601,000
(2,601,000)
0
(59,368,049)
18,851,557
(143,655,767)
141,500
(129,400)
(150,000)
0
2,000,000
19,139,595
(615,549)
828,943
(95,001,755)
(895,739)
104,808
(104,593,446)
Community Bancorp.
Community Bancorp. and Subsidiary
Consolidated Statements of Cash Flows (continued)
Cash Flows from Financing Activities:
Net increase in demand and interest-bearing transaction accounts
Net increase in money market and savings accounts
Net decrease in time deposits
Net increase (decrease) in repurchase agreements
Net decrease in short-term borrowings
Repayments on long-term borrowings
Decrease in finance lease obligations
Dividends paid on preferred stock
Dividends paid on common stock
Net cash provided by financing activities
2022
2021
35,164,525
13,070,148
(4,662,347)
467,954
0
0
(213,055)
(66,563)
(3,712,750)
40,047,912
60,311,741
43,828,327
(7,030,955)
(6,117,437)
(150,000)
(1,350,000)
(198,653)
(48,750)
(3,386,502)
85,857,771
Net decrease in cash and cash equivalents
(39,218,598)
(4,690,994)
Cash and cash equivalents:
Beginning
Ending
Supplemental Schedule of Cash Paid During the Period:
Interest
Income taxes, net of refunds
110,358,926
$ 71,140,328
115,049,920
$ 110,358,926
$
$
4,014,956
$
3,148,847
2,485,675
$
2,955,000
Supplemental Schedule of Noncash Investing and Financing Activities:
Change in unrealized loss gain on securities AFS
$
(24,684,615)
$
(2,635,848)
Additions to finance lease obligations
Common Shares Dividends Paid:
Dividends declared
Increase in dividends payable attributable to dividends declared
Dividends reinvested
Total dividends paid
$
$
$
0
$
3,955,252
4,967,035
(43,686)
(1,210,599)
3,712,750
$
$
4,699,529
(149,212)
(1,163,815)
3,386,502
The accompanying notes are an integral part of these consolidated financial statements.
11
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements
Note 1. Significant Accounting Policies
The accounting policies of Community Bancorp. and Subsidiary (the Company) are in conformity, in all material
respects, with U.S. generally accepted accounting principles (U.S. GAAP) and general practices within the banking
industry. The following is a description of the Company’s significant accounting policies.
Basis of presentation and consolidation
In addition to the definitions provided elsewhere in this Annual Report, the definitions, acronyms and abbreviations
identified below are used throughout this Annual Report, including these “Notes to Consolidated Financial
Statements” and the section labeled “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” immediately following. These definitions are intended to aid the reader and provide a reference
page when reviewing this Annual Report.
ABS:
ACBI:
ACH:
ACL:
AFS:
Agency MBS:
ALCO:
ALL:
AML:
AOCI:
ASC:
ASU:
ATMs:
ATS:
Bancorp:
Bank:
BHG:
BIC:
Board:
BOLI:
bp or bps:
BSA:
CBLR:
CARES ACT:
CDARS:
Asset backed security
Atlantic Community Bancshares, Inc.
Automated Clearing House
Allowance for credit losses
Available-for-sale
MBS issued by a US government agency
or GSE
Asset Liability Committee
Allowance for loan losses
Anti-money laundering laws
Accumulated other comprehensive income
Accounting Standards Codification
Accounting Standards Update
Automatic teller machines
Automatic transfer service
Community Bancorp.
Community National Bank
Bankers Healthcare Group
Borrower-in-Custody
Board of Directors
Bank owned life insurance
Basis point(s)
Bank Secrecy Act
Community Bank Leverage Ratio
Coronavirus Aid Relief and Economic
Security Act
Certificate of Deposit Accounts Registry
Service of the InterFi Network
Certificates of deposit
Core deposit intangible
Current Expected Credit Loss
Credit Enhancement Obligation
Consumer Financial Protection Bureau
Community Financial Services Group, LLC
CDs:
CDI:
CECL:
CEO:
CFPB:
CFSG:
CFS Partners: Community Financial Services Partners, LLC
CMO:
Company:
COVID-19:
CRA:
CRE:
DDA or DDAs: Demand Deposit Account(s)
DIF:
DTC:
DRIP:
Exchange Act: Securities Exchange Act of 1934
FASB:
FDIA:
FDIC:
Collateralized Mortgage Obligations
Community Bancorp. and Subsidiary
Coronavirus Disease 2019
Community Reinvestment Act
Commercial Real Estate
Financial Accounting Standards Board
Federal Deposit Insurance Act
Federal Deposit Insurance Corporation
Deposit Insurance Fund
Depository Trust Company
Dividend Reinvestment Plan
FDICIA:
FHA:
FHLBB:
FHLMC:
FLA:
FOMC:
FRB:
FRBB:
GAAP:
Federal Deposit Insurance Company
Improvement Act of 1991
Federal Housing Administration
Federal Home Loan Bank of Boston
Federal Home Loan Mortgage Corporation
First Loss Account
Federal Open Market Committee
Federal Reserve Board
Federal Reserve Bank of Boston
Generally Accepted Accounting Principles
in the United States
Government sponsored enterprise
Home Mortgage Disclosure Act
Held-to-maturity
Insured Cash Sweeps of the InterFi Network
Internal Revenue Service
Jobs for New England
Junior
London Interbank Offered Rate
Limited liability corporation
Mortgage-backed security
Mortgage Partnership Finance
Metropolitan Statistical Areas
Mortgage servicing rights
Net interest income
Other amortizing security
Other comprehensive income (loss)
Office of Foreign Asset Control
Other real estate owned
Other-than-temporary impairment
Private mortgage insurance
Paycheck Protection Program
Qualified Mortgage(s)
USDA Rural Development
Real Estate Settlement Procedures Act
U.S. Small Business Administration
U.S. Securities and Exchange Commission
Secured Overnight Financing Rate
Supplemental Employee Retirement Plan
Sarbanes-Oxley Act of 2002
Troubled-debt restructuring
Truth in Lending Act
U.S. Department of Agriculture
U.S. Veterans Administration
Variable interest entities
Tax Cut and Jobs Act of 2017
GSE:
HMDA:
HTM:
ICS:
IRS:
JNE:
Jr:
LIBOR:
LLC:
MBS:
MPF:
MSAs
MSRs:
NII:
OAS:
OCI:
OFAC:
OREO:
OTTI:
PMI:
PPP:
QM(s):
RD:
RESPA:
SBA:
SEC:
SOFR:
SERP:
SOX:
TDR:
TILA:
USDA:
VA:
VIE:
2017 Tax Act:
2018 Regulatory Economic Growth, Regulatory Relief and
Relief Act:
Consumer Protection Act of 2018
12
Community Bancorp. Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
The consolidated financial statements include the accounts of the Bancorp. and its wholly-owned subsidiary, the
Bank. All significant intercompany accounts and transactions have been eliminated. The Company is considered
a “smaller reporting company” and a “non-accelerated filer” under the disclosure rules of the SEC. Accordingly,
the Company has elected to provide its audited consolidated statements of income, comprehensive (loss) income,
cash flows and changes in shareholders’ equity for a two year, rather than a three year, period, and to provide
smaller reporting company scaled disclosures where management deems it appropriate.
FASB ASC Topic 810, “Consolidation,” in part, addresses limited purpose trusts formed to issue trust preferred
securities. It also establishes the criteria used to identify VIE, and to determine whether or not to consolidate a
VIE. In general, ASC Topic 810 provides that the enterprise with the controlling financial interest, known as the
primary beneficiary, consolidates the VIE. In 2007, the Company formed CMTV Statutory Trust I for the purposes
of issuing trust preferred securities to unaffiliated parties and investing the proceeds from the issuance thereof and
the common securities of the trust in junior subordinated debentures issued by the Company. The Company is
not the primary beneficiary of CMTV Statutory Trust I; accordingly, the trust is not consolidated with the Company
for financial reporting purposes. CMTV Statutory Trust I is considered an affiliate of the Company (see Note 12).
Nature of operations
The Company provides a variety of deposit and lending services to individuals, municipalities, and business
customers through its branches, ATMs and telephone, mobile and internet banking capabilities in northern and
central Vermont, which is primarily a small business and agricultural area. The Company also engages in lending
activity outside the area of its branch network, through loan production offices in Burlington, Vermont and Lebanon,
New Hampshire. The Company’s primary deposit products are checking and savings accounts and certificates of
deposit. Its primary lending products are commercial, real estate, municipal and consumer loans.
Concentration of risk
The Company’s operations are affected by various risk factors, including interest rate risk, credit risk, and risk from
geographic concentration of its deposit taking and lending activities. Management seeks to manage interest rate
risk through various asset/liability management techniques designed to match maturities and repricing of assets
and liabilities. Loan policies and administration are designed to provide assurance that loans will only be granted
to creditworthy borrowers, although credit losses are expected to occur because of subjective factors inherent in
management’s estimate of credit risk and factors beyond the control of the Company. While the Company has a
diversified loan portfolio by loan type, most of its lending activities are conducted within the geographic area where
its banking offices are located. As a result, the Company and its borrowers may be especially vulnerable to the
consequences of changes in the local economy in northern and central Vermont or northern New England more
generally. In addition, a substantial portion of the Company’s loans are secured by real estate, which is susceptible
to a decline in value, especially during times of adverse economic conditions and rising interest rates.
Use of estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP 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. These estimates and assumptions involve inherent uncertainties. Accordingly, actual
results could differ from those estimates and those differences could be material.
Material estimates that are particularly susceptible to significant change include those relating to the determination
of the ALL and the valuation of OREO. In connection with evaluating loans for impairment or assigning the carrying
value of OREO, management generally obtains independent evaluations or appraisals for significant properties.
While the ALL and the carrying value of OREO were determined using management’s best estimate of probable
loan and OREO losses, respectively, as of the balance sheet date, the ultimate collection of a substantial portion
of the Company’s loan portfolio and the recovery of a substantial portion of the fair value of OREO are susceptible
13
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
to uncertainties and changes in a number of factors, especially local real estate market conditions. The amount of
the change that is reasonably possible cannot be estimated.
While management uses available information to recognize losses on loans and OREO, future additions to the
allowance or write-downs of OREO may be necessary based on changes in local economic conditions or other
relevant factors. In addition, regulatory agencies, as an integral part of their examination process, periodically
review the Company’s allowance for losses on loans and the carrying value of OREO. Such agencies may require
the Company to recognize additions to the allowance or write-downs of OREO based on their judgment about
information available to them at the time of their examination.
MSRs associated with loans originated and sold in the secondary market, where servicing is retained, are capitalized
and included in Other assets in the consolidated balance sheets. MSRs are amortized against non-interest income
in proportion to, and over the period of, estimated future net servicing income of the underlying loans. The value of
capitalized servicing rights represents the present estimated value of the future servicing fees arising from the right
to service loans for third parties. The carrying value of the MSRs is periodically reviewed for impairment based on
management’s estimate of fair value as compared to amortized cost, and impairment, if any, is recognized through
a valuation allowance and is recorded as a write down. Critical accounting policies for MSRs relate to the initial
valuation and subsequent impairment tests. The methodology used to determine the valuation of MSRs requires
the development and use of estimates, including anticipated principal amortization and prepayments. Events that
may significantly affect the estimates used are changes in interest rates and the payment performance of the
underlying loans. Management uses a third party consultant to assist in estimating the fair value of the Company’s
MSRs.
Management evaluates securities for OTTI on at least a quarterly basis, and more frequently when economic or
market conditions warrant such evaluation. Consideration is given to various factors, including the length of time
and the extent to which the fair value has been less than cost; the nature of the issuer and its financial condition
and near-term prospects; and the intent and ability of the Company to retain its investment in the issuer for a period
of time sufficient to allow for any anticipated recovery in fair value. The evaluation of these factors is a subjective
process and involves estimates and assumptions about matters that are inherently uncertain. Should actual
factors and conditions differ materially from those used by management, the actual realization of gains or losses
on investment securities could differ materially from the amounts recorded in the financial statements.
Accounting for a business combination that was completed prior to 2009 requires the application of the purchase
method of accounting. Under the purchase method, the Company was required to record the assets and liabilities
acquired through the LyndonBank merger in 2007 at fair market value, with the excess of the purchase price over
the fair value of the net assets recorded as goodwill and evaluated annually for impairment. Management uses
various assumptions in evaluating goodwill for impairment.
Management utilizes numerous techniques to estimate the carrying value of various other assets held by the
Company, including, but not limited to, bank premises and equipment and deferred taxes. The assumptions
considered in making these estimates are based on historical experience and on various other factors that are
believed by management to be reasonable under the circumstances. Management acknowledges that the use of
different estimates or assumptions could produce different estimates of carrying values.
Presentation of cash flows
For purposes of presentation in the consolidated statements of cash flows, cash and cash equivalents includes
cash on hand, amounts due from banks (including cash items in process of clearing), federal funds sold (generally
purchased and sold for one day periods) and overnight deposits.
14
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Investment securities
Debt securities the Company has purchased with the possible intent to sell before maturity are classified as AFS,
and are carried at fair value, with unrealized gains and losses, net of tax and reclassification adjustments, reflected
as a net amount in the shareholders’ equity section of the consolidated balance sheets and in the statements of
changes in shareholders’ equity. Investment securities transactions are accounted for on a trade date basis. The
specific identification method is used to determine realized gains and losses on sales of debt securities AFS.
Premiums and discounts are recognized in interest income using the interest method over the period to maturity
or call date. As of the balance sheet dates, the Company did not hold any securities purchased for the purpose of
selling in the near term and classified as trading or any securities purchased with the positive intent and ability to
hold to maturity and classified as HTM.
For individual debt securities that the Company does not intend to sell and it is not more likely than not that the
Company will be required to sell the security before recovery of its amortized cost basis, the other-than-temporary
decline in the fair value of the debt security related to (1) credit loss is recognized in earnings and (2) other
factors is recognized in other comprehensive income or loss. Credit loss is deemed to exist if the present value of
expected future cash flows using the interest rates at acquisition is less than the amortized cost basis of the debt
security. For individual debt securities where the Company intends to sell the security or more likely than not will be
required to sell the security before recovery of its amortized cost, the OTTI is recognized in earnings equal to the
entire difference between the security’s cost basis and its fair value at the balance sheet date.
Other investments
From time to time, the Company acquires partnership interests in limited partnerships for low income housing
projects. New investments in limited partnerships are amortized using the proportional amortization method. All
investments made before January 1, 2015 are amortized using the effective yield method.
The Company has a one-third ownership interest in CFS Partners, which in turn owns 100% of CFSG, a non-
depository trust company (see Note 9). The Company’s investment in CFS Partners is accounted for under the
equity method of accounting.
Restricted equity securities
The Company holds certain restricted equity securities acquired for non-investment purposes, and required as a
matter of law or as a condition to the receipt of certain financial products and services. These securities are carried
at cost. As a member of the FRBB, the Company is required to invest in FRBB stock in an amount equal to 6% of
the Bank’s capital stock and surplus.
As a member of the FHLBB, the Company is required to invest in $100 par value stock of the FHLBB in an amount
that approximates 1% of unpaid principal balances on qualifying loans, plus an additional amount to satisfy an
activity based requirement. The stock is nonmarketable and redeemable at par value, subject to the FHLBB’s right
to temporarily suspend such redemptions. Members are subject to capital calls in some circumstances to ensure
compliance with the FHLBB’s capital plan.
In order to access correspondent banking services from the ACBB, the Company is required to invest in a minimum
of 20 shares of the common stock of ACBB’s parent company, ACBI.
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 in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to
income.
15
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Loans
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or
pay-off are reported at their outstanding principal balance, adjusted for any charge-offs, the ALL, loan premiums or
discounts for acquired loans and any unearned fees or costs on originated loans.
Loan interest income is accrued daily on the outstanding balances. For all loan segments, the accrual of interest
is discontinued when a loan is specifically determined to be impaired or when the loan is delinquent 90 days and
management believes, after considering collection efforts and other factors, that the borrower’s financial condition
is such that collection of interest is doubtful. Any unpaid interest previously accrued on those loans is reversed
from income. Interest income is generally not recognized on specific impaired loans unless the likelihood of further
loss is considered by management to be remote. Interest payments received on non-accrual loans are generally
applied as a reduction of the loan principal balance. Loans are returned to accrual status when principal and
interest payments are brought current and the customer has demonstrated the intent and ability to make future
payments on a timely basis. Loans are written down or charged off when collection of principal is considered
doubtful.
Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount is
amortized as an adjustment of the related loan’s yield. The Company generally amortizes these amounts over the
contractual life of the loans.
Allowance for loan losses
The ALL is established through a provision for loan losses charged to earnings. Loan losses are charged against
the allowance when management believes that future payments of a loan balance are unlikely. Subsequent
recoveries, if any, are credited to the allowance.
Unsecured loans, primarily consumer loans, are charged off when they become uncollectible and no later than
120 days past due. Unsecured loans to customers who subsequently file bankruptcy are charged off within 30
days of receipt of the notification of filing or by the end of the month in which the loans become 120 days past due,
whichever occurs first. For secured loans, both residential and commercial, the potential loss on impaired loans
is carried as a loan loss reserve specific allocation; the loss portion is charged off when collection of the full loan
appears unlikely. The unsecured portion of a real estate loan is that portion of the loan exceeding the “fair value” of
the collateral less the estimated cost to sell. Value of the collateral is determined in accordance with the Company’s
appraisal policy. The unsecured portion of an impaired real estate secured loan is charged off by the end of the
month in which the loan becomes 180 days past due.
As described below, the allowance reflected in the audited consolidated balance sheet consists of general, specific
and unallocated components. However, the entire allowance is available to absorb losses in the loan portfolio,
regardless of specific, general and unallocated components considered in determining the amount of the allowance.
General component
The general component of the ALL is based on historical loss experience and various qualitative factors and is
stratified by the following loan segments: commercial and industrial, purchased loans, CRE, municipal, residential
real estate 1st lien, residential real estate Jr lien and consumer loans. The Company does not disaggregate its
portfolio segments further into classes.
Loss ratios are calculated by loan segment using appropriate look back periods. Management uses an average
of historical losses based on a time frame appropriate to capture relevant loss data for each loan segment in the
current economic climate. During periods of economic stability, a relatively longer period (e.g., five years) may be
appropriate. During periods of significant expansion or contraction, the Company may appropriately shorten the
16
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
historical time period. Due primarily to the effects of COVID-19, during 2020, the Company shortened its look back
period to one year, however; during 2022, the look back period was changed to five years.
Qualitative factors 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.
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 consumer spending, unfavorable foreign trade conditions and the rising
cost of labor or raw materials are examples of issues that can impact the credit quality in this segment.
Purchased Loans – Loans in this segment are loans purchased through a loan purchasing program with BHG.
BHG originates commercial loans to medical professionals nationwide and sells them individually to a secondary
market, primarily banks, through a bid process. The Bank has established conservative credit parameters and
expects a low risk of default in this segment.
Commercial Real Estate – Loans in this segment are principally made to businesses and are generally secured
by either owner-occupied, or non-owner occupied CRE. A relatively small portion of this segment includes farm
loans secured by farm land and buildings. As with commercial and industrial loans, repayment of owner-occupied
CRE loans is expected from the cash flows of the business and the segment would be impacted by the same risk
factors as commercial and industrial loans. The non-owner occupied CRE portion includes both residential and
commercial construction loans, vacant land and real estate development loans, multi-family dwelling loans and
commercial rental property loans. Repayment of construction loans is expected from permanent financing takeout;
the Company generally requires a commitment or eligibility for the take-out financing prior to construction loan
origination. Real estate development loans are generally repaid from the sale of the subject real property as the
project progresses. Construction and development lending entail additional risks, including the project exceeding
budget, not being constructed according to plans, not receiving permits, or the pre-leasing or occupancy rate not
meeting expectations. Repayment of multi-family loans and commercial rental property loans is expected from the
cash flow generated by rental payments received from the individuals or businesses occupying the real estate.
CRE loans are impacted by factors such as competitive market forces, vacancy rates, cap rates, net operating
incomes, lease renewals and overall economic demand. In addition, loans in the recreational and tourism sector
can be affected by weather conditions, such as unseasonably low winter snowfalls. CRE lending also carries a
higher degree of environmental risk than other real estate lending.
Municipal – Loans in this segment are made to local municipalities, attributable to municipal financing transactions
and backed by the full faith and credit of town governments or dedicated governmental revenue sources, with no
historical losses recognized by the Company.
Residential Real Estate - 1st Lien – Loans in this segment are collateralized by first mortgages on 1 – 4 family
owner-occupied residential real estate and repayment is dependent on the credit quality of the individual borrower.
The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit
quality of this segment.
17
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Residential Real Estate – Jr Lien – Loans in this segment are collateralized by junior lien mortgages on 1 – 4
family residential real estate and repayment is primarily dependent on the credit quality of the individual borrower.
The overall health of the economy, including unemployment rates and housing prices, has an impact on the credit
quality of this segment.
Consumer – Loans in this segment are made to individuals for consumer and household purposes. This segment
includes both loans secured by automobiles and other consumer goods, as well as loans that are unsecured.
This segment also includes overdrafts, which are extensions of credit made to both individuals and businesses
to cover temporary shortages in their deposit accounts and are generally unsecured. The Company maintains
policies restricting the size and term of these extensions of credit. The overall health of the economy, including
unemployment rates, has an impact on the credit quality of this segment.
Specific component
The specific component of the ALL relates to loans that are impaired. Impaired loans are loans to a borrower that
in the aggregate are greater than $100,000 and that are in non-accrual status or are TDRs regardless of amount.
A specific allowance is established for an impaired loan when its estimated fair value or net present value of future
cash flows is less than the carrying value of the loan. For all loan segments, except consumer loans, a loan is
considered impaired when, based on current information and events, in management’s estimation it is probable
that the Company 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 probability of collecting scheduled principal and interest payments
when due. Loans that experience insignificant or temporary payment delays and payment shortfalls generally are
not classified as impaired. Management evaluates 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 and frequency 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, 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.
Impaired loans also include troubled loans that are restructured. A TDR occurs when the Company, for economic
or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that would
otherwise not be granted. TDRs may include the transfer of assets to the Company in partial satisfaction of a
troubled loan, a modification of a loan’s terms, or a combination of the two. Under March 2020 guidance from
the federal banking agencies and concurrence by the FASB, certain short-term loan accommodations made in
good faith prior to January 1, 2022 for borrowers experiencing financial difficulties due to the COVID-19 health
emergency are not considered TDRs.
Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the
Company does not separately identify individual consumer loans for impairment evaluation, unless such loans are
subject to a restructuring agreement.
Unallocated component
An unallocated component of the ALL is maintained to cover uncertainties that could affect management’s estimate
of probable losses. The unallocated component reflects management’s estimate of the margin of imprecision
inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the
portfolio.
Bank premises and equipment
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed
principally by the straight-line method over the estimated useful lives of the assets. The cost of assets sold
18
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
or otherwise disposed of, and the related accumulated depreciation, are eliminated from the accounts and the
resulting gains or losses are reflected in the consolidated statements of income. Maintenance and repairs are
charged to current expense as incurred and the cost of major renewals and betterments is capitalized.
Other real estate owned
Real estate properties acquired through or in lieu of loan foreclosure or properties no longer used for bank
operations are initially recorded at fair value less estimated selling cost at the date of acquisition, foreclosure or
transfer. Fair value is determined, as appropriate, either by obtaining a current appraisal or evaluation prepared
by an independent, qualified appraiser, by obtaining a broker’s market value analysis, and finally, if the Company
has limited exposure and limited risk of loss, by the opinion of management as supported by an inspection of the
property and its most recent tax valuation. During periods of declining market values, the Company will generally
obtain a new appraisal or evaluation. Any write-down based on the asset’s fair value at the date of acquisition or
institution of foreclosure is charged to the ALL. After acquisition through or in lieu of foreclosure, these assets are
carried at the lower of their new cost basis or fair value. Costs of significant property improvements are capitalized,
whereas costs relating to holding the property are expensed as incurred. Appraisals by an independent, qualified
appraiser are performed periodically on properties that management deems significant, or evaluations may be
performed by management or a qualified third party on OREO properties in the portfolio that are deemed less
significant or less vulnerable to market conditions. Subsequent write-downs are recorded as a charge to other
expense. Gains or losses on the sale of such properties are included in income when the properties are sold.
Intangible assets
Intangible assets include the excess of the purchase price over the fair value of net assets acquired (goodwill)
in the Company’s 2007 acquisition of LyndonBank. Goodwill is not amortizable and is reviewed for impairment
annually, or more frequently as events or circumstances warrant.
Income taxes
The Company recognizes income taxes under the asset and liability method. Under this method, deferred tax
assets and liabilities are established for the temporary differences between the accounting bases and the tax
bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when the amounts
related to such temporary differences are realized or settled. Adjustments to the Company’s deferred tax assets
are recognized as deferred income tax expense or benefit based on management’s judgments relating to the
outcome of such asset.
Mortgage servicing
Servicing assets are recognized as separate assets when rights are acquired through purchase or retained upon
the sale of loans. Capitalized servicing rights are reported in Other assets and initially recorded at fair value,
and are amortized against non-interest income in proportion to, and over the period of, the estimated future net
servicing income of the underlying loans. Servicing rights are periodically evaluated for impairment, based upon
the estimated fair value of the rights as compared to amortized cost. Impairment is determined by stratifying the
rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for
similar assets with similar characteristics, when available, or based upon discounted cash flows using market-
based assumptions. Impairment is recognized through a valuation allowance and is recorded as amortization
of Other assets, to the extent that estimated fair value is less than the capitalized amount at the valuation date.
Subsequent improvement, if any, in the estimated fair value of impaired MSRs is reflected in a positive valuation
adjustment and is recognized in other income up to (but not in excess of) the amount of the prior impairment.
Pension costs
Pension costs are charged to salaries and employee benefits expense and accrued over the active service period.
19
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Advertising costs
The Company expenses advertising costs as incurred.
Comprehensive income or loss
U.S. GAAP generally requires recognized revenue, expenses, gains and losses to be included in net income.
Certain changes in assets and liabilities, such as the after-tax effect of unrealized gains and losses on available-
for-sale securities, are not reflected in the consolidated statement of income, but the cumulative effect of such items
from period-to-period is reflected as a separate component of the shareholders’ equity section of the consolidated
balance sheet (accumulated other comprehensive income or loss). Other comprehensive income or loss, along
with net income, comprises the Company’s total comprehensive income or loss.
Preferred stock
In December 2007, the Company issued 25 shares of fixed-to-floating rate non-cumulative perpetual preferred
stock, without par value and having a liquidation preference of $100,000 per share. There were 15 shares of
preferred stock outstanding as of December 31, 2022 and 2021. Under the terms of the preferred stock, the
Company pays non-cumulative cash dividends quarterly, when, as and if declared by the Board. Dividends are
payable at a variable dividend rate equal to the Wall Street Journal Prime Rate in effect on the first business
day of each quarterly dividend period. A variable rate of 3.25% was in effect for the dividend payments due
in the all four quarters of 2021, followed by several increases in 2022 with a rate of 6.25% in effect for the last
quarter of 2022. Partial redemptions of the Company’s preferred stock began in 2018, and are at the discretion of
management and voted on by the Board. Prior to 2020, the Company had redeemed 10 shares of preferred stock
at an aggregate redemption price of $1,000,000 plus accrued dividends. The Company chose to not redeem any
additional preferred shares during 2021 and 2022, but may consider further redemptions in future periods.
Earnings per common share
Earnings per common share amounts are computed based on net income, net of dividends to preferred shareholders,
and on the weighted average number of shares of common stock issued during the period, including DRIP shares
issuable upon reinvestment of dividends (retroactively adjusted for stock splits and stock dividends, if any) and
reduced for shares held in treasury.
The following table illustrates the calculation of earnings per common share for the periods presented, as adjusted
for the cash dividends declared on the preferred stock:
Years Ended December 31,
2022
2021
Net income, as reported
Less: dividends to preferred shareholders
Net income available to common shareholders
Weighted average number of common shares
used in calculating earnings per share
Earnings per common share
Off-balance-sheet financial instruments
$ 13,739,940
66,563
$ 13,673,377
$
13,138,338
48,750
$ 13,089,588
5,403,938
2.53
$
5,345,988
2.45
$
In the ordinary course of business, the Company is a party to off-balance-sheet financial instruments consisting of
commitments to extend credit, commercial and municipal letters of credit, standby letters of credit, and risk-sharing
20
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
commitments on residential mortgage loans sold through the FHLBB’s MPF program. Such financial instruments
are recorded in the consolidated financial statements when they are funded (see Note 17).
Transfers of financial assets
Transfers of financial assets are accounted for as sales when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the
Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right)
to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the
transferred assets through an agreement to repurchase them before their maturity.
Note 2. Recent Accounting Developments
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments. This guidance replaces the incurred loss model for recognizing credit
losses with a Current Expected Credit Loss (CECL) model, which requires recognition of the full amount of expected
credit losses over the life of a loan. Under the CECL model ,expected credit losses for financial assets held at the
reporting date that are accounted for at amortized cost be measured and recognized based on historical experience
and current and reasonably supportable forecasted conditions to reflect the full amount of expected credit losses
over the life of the loans. CECL also applies to certain off-balance sheet items that represent credit risk, such
loan commitments, standby letters of credit and financial guarantees. A modified version of these requirements
also applies to debt securities classified as available for sale, which requires that credit losses on those securities
be recorded through an allowance for credit losses rather than a write-down. The ASU became effective for the
Company on January 1, 2023 will require a change in the Company’s methodology for calculating its ALL and
allowance on unused commitments. That allowance will be referred to as the Allowance for Credit Losses (ACL).
Following issuance of the ASU, the Company formed a committee to assess its implications and implemented a
software solution to prepare for the transition to CECL, including assistance with the ACL calculation and preparing
related management reports to facilitate the calculation. The new software solution has also provided numerous
CECL training opportunities for the appropriate personnel within the Company. Parallel calculations under the ALL
methodology and under the CECL model were run throughout 2022 in preparation for the transition to CECL. The
initial adjustment for the transition to CECL will be made through a cumulative adjustment to retained earnings
and will not be reported in net income. The Company does not expect that the adjustment to retained earnings
from the transition to CECL, or the related impact to the regulatory capital ratios, will have a material impact on the
Company’s consolidated financial statements.
In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled
Debt Restructurings and Vintage Disclosures. The guidance amends Topic 326 (CECL) to eliminate the accounting
guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and
restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than
applying TDR recognition and measurement guidance, under the CECL model creditors will determine whether a
modification results in a new loan or continuation of existing loan. These amendments are intended to enhance
existing disclosure requirements and introduce new requirements related to certain modifications of receivables
made to borrowers experiencing financial difficulty. Additionally, the amendments to Topic 326 require that an
entity disclose current-period gross write-offs by year of origination within the vintage disclosures, which requires
that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of
financing receivable by year of origination. The guidance became effective for the Company on January 1, 2023.
The Company does not expect that adoption of the ASU will have a material impact on the consolidated financial
statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects
of Reference Rate Reform on Financial Reporting, and has issued subsequent amendments thereto, which
provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The
ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract
21
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another
reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide
reference rate transition period. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform
(Topic 848): Deferral of the Sunset Date of Topic 848, which extended the sunset date of December 31, 2022 to
December 31, 2024. The guidance is effective for all entities as of March 12, 2020 through December 31, 2024.
The Company is assessing ASU No. 2020-04 and its impact on the transition away from LIBOR for its Junior
Subordinated Debentures due December 15, 2037, the Company’s only financial instruments that utilize LIBOR as
a reference rate. That transition will become effective for the Debentures as of the first London banking day after
June 30, 2023 (see Note 12).
Note 3. Investment Securities
Debt securities AFS consist of the following:
December 31, 2022
U.S. GSE debt securities
U.S. Government securities
Taxable municipal securities
Tax-exempt municipal securities
Agency MBS
ABS and OAS
CMO
Other investments
Total
December 31, 2021
U.S. GSE debt securities
U.S. Government securities
Taxable municipal securities
Tax-exempt municipal securities
Agency MBS
ABS and OAS
CMO
Other investments
Total
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$ 12,000,000 $
41,368,624
300,000
12,042,410
135,193,097
2,929,740
12,278,033
2,968,000
$ 219,079,904 $
0 $
0
0
40,513
69,447
0
581
0
1,624,709 $ 10,375,291
38,231,589
3,137,035
234,858
65,142
11,323,567
759,356
115,231,599
20,030,945
2,693,606
236,134
11,935,925
342,689
2,891,674
76,326
110,541 $ 26,272,336 $ 192,918,109
$ 12,001,978
32,374,935
300,000
830,279
128,291,487
2,131,610
1,451,349
6,438,000
$ 183,819,638
$
36,024
0
0
1,167
184,002
82,414
0
142,199
$ 445,806
$ 209,504 $ 11,828,498
32,041,041
298,733
831,379
127,132,521
2,214,024
1,420,458
6,575,805
$ 1,922,985 $ 182,342,459
333,894
1,267
67
1,342,968
0
30,891
4,394
There were no sales during 2022 or 2021 from the investment portfolio.
22
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Investments pledged as collateral for larger dollar repurchase agreement accounts and for other purposes as
required or permitted by law consisted of U.S. GSE debt securities, Agency MBS, and ABS and OAS. These
repurchase agreements mature daily. These investments as of the balance sheet dates were as follows:
December 31, 2022
December 31, 2021
Amortized
Cost
Fair
Value
$
55,899,113 $
63,045,599
46,789,284
62,256,702
The carrying amount and estimated fair value of securities by contractual maturity are shown below. Expected
maturities will differ from contractual maturities because issuers may call or prepay obligations with or without call
or prepayment penalties, pursuant to contractual terms. Because the actual maturities of Agency MBS usually
differ from their contractual maturities due to the right of borrowers to prepay the underlying mortgage loans,
usually without penalty, those securities are not presented in the following table by contractual maturity date.
The scheduled maturities of debt securities AFS at December 31, 2022 were as follows:
Amortized
Cost
Fair
Value
December 31, 2022
Due in one year or less
Due from one to five years
Due from five to ten years
Due after ten years
Agency MBS
Total
$
1,976,000 $
1,966,767
54,736,949
7,591,761
13,391,033
115,231,599
$ 219,079,904 $ 192,918,109
58,875,224
8,631,626
14,403,957
135,193,097
23
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Debt securities with unrealized losses as of the balance sheet dates are presented in the tables below.
Less than 12 months
12 months or more
Totals
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized Number of
Securities
Loss
Fair
Value
Unrealized
Loss
December 31, 2022
U.S. GSE debt securities
$
2,723,388 $ 276,611 $
7,651,903 $ 1,348,098
11 $ 10,375,291 $ 1,624,709
U.S. Government securities
4,837,891
169,501
33,393,698
2,967,534
Taxable municipal securities
0
0
Tax-exempt municipal securities
8,608,507
522,128
234,858
592,388
65,142
237,228
54
1
19
38,231,589
3,137,035
234,858
65,142
9,200,895
759,356
Agency MBS
ABS and OAS
CMO
Other investments
2,451,892
20,108
439,782
14,541,901
810,356
97,718,436
19,220,589
120
112,260,337 20,030,945
2,693,606
236,134
0
8,954,323
232,398
1,014,910
0
110,291
56,218
4
9
12
2,693,606
236,134
9,969,233
342,689
2,891,674
76,326
Total
$ 44,811,508 $ 2,267,236 $ 141,045,975 $24,005,100
230 $ 185,857,483 $26,272,336
December 31, 2021
U.S. GSE debt securities
$
5,869,117 $ 130,883 $ 1,921,379
$
78,621
7 $ 7,790,496 $ 209,504
U.S. Government securities
32,041,041
333,894
Taxable municipal securities
Tax-exempt municipal securities
298,733
330,212
1,267
67
0
0
0
0
0
0
46
32,041,041
333,894
1
1
298,733
330,212
1,267
67
Agency MBS
CMO
Other investments
Total
107,061,452 1,128,587
8,809,493
214,381
84
115,870,945
1,342,968
1,420,458
491,606
30,891
4,394
0
0
0
0
3
2
1,420,458
491,606
30,891
4,394
$ 147,512,619 $1,629,983 $ 10,730,872
$ 293,002
144 $ 158,243,491 $ 1,922,985
Management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or
market conditions, or adverse developments relating to the issuer, warrant such evaluation. Consideration is given
to (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 Company to retain its investment in the issuer
for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial
condition, management considers whether the securities are issued by the federal government or its agencies,
whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial
condition.
As the Company has the ability to hold its debt securities until maturity, or for the foreseeable future if classified as
AFS, and it is more likely than not that the Company will not have to sell such securities before recovery of their
cost basis, no declines in such securities were deemed to be other-than-temporary as of the balance sheet dates
presented.
The Bank is a member of the FHLBB. The FHLBB is a cooperatively owned wholesale bank for housing and finance
in the six New England States. Its mission is to support the residential mortgage and community-development
lending activities of its members, which include over 450 financial institutions across New England. The Company
obtains much of its wholesale funding from the FHLBB. As a requirement of membership in the FHLBB, the Bank
must own a minimum required amount of FHLBB stock, calculated periodically based primarily on the Bank’s level
of borrowings from the FHLBB. As a result of the Bank’s level of borrowings during 2022 and 2021, the Bank
was required to purchase additional FHLBB stock in aggregate totaling $20,800 and $129,400, respectively. As
a member of the FHLBB, the Company is also subject to future capital calls by the FHLBB in order to maintain
24
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
compliance with its capital plan. During 2022 and 2021, FHLBB exercised capital call options with redemptions
totaling $43,500 and $141,500, respectively, on the Company’s portfolio of FHLBB stock. As of December 31, 2022
and 2021, the Company’s investment in FHLBB stock was $733,600 and $756,300, respectively.
The Company periodically evaluates its investment in FHLBB stock for impairment based on, among other factors,
the capital adequacy of the FHLBB and its overall financial condition. No impairment losses have been recorded
through December 31, 2022.
The Company’s investment in FRBB Stock was $588,150 at December 31, 2022 and 2021.
In 2018, the Company purchased 20 shares of common stock in ACBI at a purchase price of $90,000, for the
purpose of obtaining access to correspondent banking services from ABCI subsidiary, ACBB. These shares are
subject to contractual resale restrictions and considered by management to be restricted and are recorded in the
balance sheet at cost, amounting to $90,000 at December 31, 2022 and 2021.
Note 4. Loans, Allowance for Loan Losses and Credit Quality
The composition of net loans as of the balance sheet dates was as follows:
Commercial & industrial
Purchased loans
Commercial real estate
Municipal
Residential real estate - 1st lien
Residential real estate - Jr lien
Consumer
Total loans
December 31, 2022
December 31, 2021
$
112,951,873
7,530,458
356,892,986
34,633,055
198,743,375
33,756,872
4,039,989
748,548,608
15.09% $
1.00%
47.68%
4.63%
26.55%
4.51%
0.54%
100.00%
111,125,622
9,807,848
300,958,931
47,955,231
181,316,345
34,359,864
4,464,692
689,988,533
16.10%
1.42%
43.62%
6.95%
26.28%
4.98%
0.65%
100.00%
ALL
Deferred net loan costs (fees)
Net loans
(8,709,225)
493,275
740,332,658
$
(7,710,256)
(37,972)
682,240,305
$
25
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
The following is an age analysis of loans (including non-accrual), as of the balance sheet dates, by portfolio
segment:
December 31, 2022
90 Days
30-89 Days or More
Total
Past Due
Current
Total Loans
90 Days or
Non-Accrual More and
Accruing
Loans
Commercial & industrial
Purchased loans
Commercial real estate
Municipal
Residential real estate
1st lien
Jr lien
Consumer
Totals
$ 2,377,668 $ 879,802 $ 3,257,470 $ 109,694,403 $ 112,951,873 $ 3,442,124 $
0
1,395,444
0
0
353,842
0
0
7,530,458
7,530,458
1,749,286 355,143,700 356,892,986
34,633,055
34,633,055
0
0
3,180,478
0
0
0
324,927
0
1,517,653
321,579
18,745
248,157
2,158,794 196,584,581 198,743,375
0
33,756,872
33,410,286
0
4,039,989
4,021,244
$ 5,631,089 $ 1,899,792 $ 7,530,881 $ 741,017,727 $ 748,548,608 $ 7,890,020 $ 573,084
1,136,330
131,088
0
641,141
25,007
0
346,586
18,745
December 31, 2021
90 Days
30-89 Days or More
Total
Past Due
Current
Total Loans
90 Days or
Non-Accrual More and
Accruing
Loans
Commercial & industrial
Purchased loans
Commercial real estate
Municipal
Residential real estate
1st lien
Jr lien
Consumer
Totals
$ 833,875 $
0
49,450
0
0 $ 833,875 $ 110,291,747 $ 111,125,622 $
9,807,848
9,807,848
0
2,449,964 298,508,967 300,958,931
2,400,514
47,955,231
47,955,231
0
0
0
0
4,517,839
0
98,661 $
0
0
0
0
1,190,300
51,837
9,741
1,799,075 179,517,270 181,316,345
506,827
34,359,864
34,221,551
86,476
0
4,464,692
4,454,951
$ 2,135,203 $ 3,095,765 $ 5,230,968 $ 684,757,565 $ 689,988,533 $ 5,940,629 $ 593,303
1,180,563
143,566
0
608,775
86,476
0
138,313
9,741
For all loan segments, loans over 30 days past due are considered delinquent.
As of the balance sheet dates presented, residential mortgage loans in process of foreclosure consisted of the
following:
December 31, 2022
December 31, 2021
Number of loans
1
5
Balance
$ 19,746
195,082
26
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
The following summarizes changes in the ALL and select loan information, by portfolio segment:
As of or for the year ended December 31, 2022
Commercial Purchased Commercial
Real Estate Real Estate
Residential Residential
& Industrial
Loans
Real Estate
Municipal
1st Lien
Jr Lien
Consumer Unallocated
Total
ALL beginning balance
$
870,392 $
68,655 $ 4,151,760 $
76,728 $ 1,765,892 $
182,014 $
55,698 $
539,117 $ 7,710,256
Charge-offs
Recoveries
Provision (credit)
ALL ending balance
(76,875)
14,112
0
0
(667,474)
667,474
0
0
0
111,763
308,693
(15,565)
910,053
(14,389)
124,181
0
(63,625)
5,089
54,847
30,505
47,108
0
0
(807,974)
828,943
(436,928)
978,000
$ 1,116,322 $
53,090 $ 5,061,813 $
62,339 $ 2,001,836 $
241,950 $
69,686 $
102,189 $ 8,709,225
ALL evaluated for impairment
Individually
Collectively
Total
Loans evaluated for impairment
$
2,322 $
0 $
0 $
0 $
106,280 $
0 $
0 $
0 $
108,602
1,114,000
53,090
5,061,813
62,339
1,895,556
241,950
69,686
102,189
8,600,623
$ 1,116,322 $
53,090 $ 5,061,813 $
62,339 $ 2,001,836 $
241,950 $
69,686 $
102,189 $ 8,709,225
Individually
Collectively
Total
$ 3,442,124 $
0 $ 3,176,835 $
0 $ 3,816,012 $
77,416 $
0
109,509,749
7,530,458 353,716,151
34,633,055 194,927,363
33,679,456
4,039,989
$112,951,873 $ 7,530,458 $356,892,986 $ 34,633,055 $198,743,375 $ 33,756,872 $ 4,039,989
$ 10,512,387
738,036,221
$748,548,608
As of or for the year ended December 31, 2021
Commercial Purchased Commercial
Real Estate Real Estate
Residential Residential
& Industrial
Loans
Real Estate
Municipal
1st Lien
Jr Lien
Consumer Unallocated
Total
ALL beginning balance
$
778,287 $
64,260 $ 3,854,153 $
82,211 $ 1,735,304 $
234,896
$60,461 $
398,913 $ 7,208,485
Charge-offs
Recoveries
Provision (credit)
ALL ending balance
ALL evaluated for impairment
Individually
Collectively
Total
Loans evaluated for impairment
(18,847)
4,761
0
0
(22,000)
27,160
0
0
(98,704)
0
(87,651)
7,636
10,821
106,191
4,395
292,447
(5,483)
121,656
(63,703)
54,430
28,458
0
0
(227,202)
104,808
140,204
624,165
$
870,392 $
68,655 $ 4,151,760 $
76,728 $ 1,765,892 $
182,014
$55,698 $
539,117 $ 7,710,256
$
0 $
0 $
0 $
0 $
79,978 $
0 $
0 $
0 $
79,978
870,392
68,655
4,151,760
76,728
1,685,914
182,014
55,698
539,117
7,630,278
$
870,392 $
68,655 $ 4,151,760 $
76,728 $ 1,765,892 $
182,014
$55,698 $
539,117 $ 7,710,256
Individually
Collectively
Total
$
93,362 $
0 $ 4,553,734 $
0 $ 3,720,503 $
88,563 $
0
111,032,260
9,807,848 296,405,197
47,955,231 177,595,842
34,271,301
4,464,692
$111,125,622 $ 9,807,848 $300,958,931 $ 47,955,231 $181,316,345 $ 34,359,864 $ 4,464,692
$ 8,456,162
681,532,371
$689,988,533
27
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Impaired loans as of the balance sheet dates, by portfolio segment were as follows:
As of December 31, 2022
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment(1)
Related allowance recorded
Commercial & industrial
Residential real estate – 1st lien
Total with related allowance
No related allowance recorded
Commercial & industrial
Commercial real estate
Residential real estate - 1st lien
Residential real estate - Jr lien
Total with no related allowance
$
$
452,963
1,041,730
1,494,693
$
462,745
1,073,350
1,536,095
2,322
106,280
108,602
2,989,161
3,176,962
2,785,669
77,419
9,029,211
3,078,769
3,671,196
3,805,682
126,250
10,681,897
Total impaired loans
$
10,523,904 $
12,217,992 $
108,602
(1) Recorded investment in impaired loans in the table above includes accrued interest receivable and deferred
net loan costs of $11,517.
Related allowance recorded
Commercial & industrial
Commercial real estate
Residential real estate - 1st lien
Residential real estate - Jr lien
Total with related allowance
No related allowance recorded
Commercial & industrial
Commercial real estate
Residential real estate - 1st lien
Residential real estate - Jr lien
Total with no related allowance
As of December 31, 2022
Year Ended
Average
Recorded
Investment
Interest
Income
Recognized
$
281,412 $
49,942
983,944
506
1,315,804
1,180,935
3,680,783
2,808,989
82,261
7,752,968
0
0
64,479
0
64,479
204
115,651
177,892
314
294,061
Total impaired loans
$
9,068,772 $
358,540
28
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
As of December 31, 2021
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment(1)
Related allowance recorded
Residential real estate – 1st lien
Total with related allowance
No related allowance recorded
Commercial & industrial
Commercial real estate
Residential real estate - 1st lien
Residential real estate - Jr lien
Total with no related allowance
$
702,586
702,586
$
716,118
716,118
$
79,978
79,978
93,362
4,554,074
3,050,647
88,570
7,786,653
115,414
5,108,557
4,076,352
132,802
9,433,125
Total impaired loans
$
8,489,239 $
10,149,243 $
79,978
(1) Recorded investment in impaired loans in the table above includes accrued interest receivable and deferred
net loan costs of $33,077.
Related allowance recorded
Residential real estate - 1st lien
Residential real estate - Jr lien
Total with related allowance
No related allowance recorded
Commercial & industrial
Commercial real estate
Residential real estate - 1st lien
Residential real estate - Jr lien
Total with no related allowance
As of December 31, 2021
Year Ended
Average
Recorded
Investment
Interest
Income
Recognized
$
$
858,124
3,452
861,576
60,769
243
61,012
290,181
2,747,193
3,331,971
124,803
6,494,148
204
120,996
205,514
186
326,900
Total impaired loans
$
7,355,724 $
387,912
Credit Quality Grouping
In developing the ALL, management uses credit quality groupings to help evaluate trends in credit quality. The
Company groups credit risk into Groups A, B and C. The manner the Company utilizes to assign risk grouping
is driven by loan purpose. Commercial purpose loans are individually risk graded while the retail portion of the
portfolio is generally grouped by delinquency pool.
29
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Group A loans - Acceptable Risk – are loans that are expected to perform as agreed under their respective terms.
Such loans carry a normal level of risk that does not require management attention beyond that warranted by the
loan or loan relationship characteristics, such as loan size or relationship size. Group A loans include commercial
purpose loans that are individually risk rated and retail loans that are rated by pool. Group A retail loans include
performing consumer and residential real estate loans. Residential real estate loans are loans to individuals
secured by 1-4 family homes, including first mortgages, home equity and home improvement loans. Loan balances
fully secured by deposit accounts or that are fully guaranteed by the federal government are considered acceptable
risk.
Group B loans – Management Involved - are loans that require greater attention than the acceptable risk loans
in Group A. Characteristics of such loans may include, but are not limited to, borrowers that are experiencing
negative operating trends such as reduced sales or margins, borrowers that have exposure to adverse market
conditions such as increased competition or regulatory burden, or borrowers that have had unexpected or adverse
changes in management. These loans have a greater likelihood of migrating to an unacceptable risk level if these
characteristics are left unchecked. Group B is limited to commercial purpose loans that are individually risk rated.
Group C loans – Unacceptable Risk – are loans that have distinct shortcomings that require a greater degree of
management attention. Examples of these shortcomings include a borrower’s inadequate capacity to service
debt, poor operating performance, or insolvency. These loans are more likely to result in repayment through
collateral liquidation. Group C loans range from those that are likely to sustain some loss if the shortcomings are
not corrected, to those for which loss is imminent and non-accrual treatment is warranted. Group C loans include
individually rated commercial purpose loans and retail loans adversely rated in accordance with the Federal
Financial Institutions Examination Council’s Uniform Retail Credit Classification Policy. Group C retail loans include
1-4 family residential real estate loans and home equity loans past due 90 days or more with loan-to-value ratios
greater than 60%, home equity loans 90 days or more past due where the Bank does not hold first mortgage,
irrespective of loan-to-value, loans in bankruptcy where repayment is likely but not yet established, and lastly
consumer loans that are 90 days or more past due.
Commercial purpose loan ratings are assigned by the commercial account officer; for larger and more complex
commercial loans, the credit rating is a collaborative assignment by the lender and the credit analyst. The credit risk
rating is based on the borrower’s expected performance, i.e., the likelihood that the borrower will be able to service
its obligations in accordance with the loan terms. Credit risk ratings are meant to measure risk versus simply record
history. Assessment of expected future payment performance requires consideration of numerous factors. While
past performance is part of the overall evaluation, expected performance is based on an analysis of the borrower’s
financial strength, and historical and projected factors such as size and financing alternatives, capacity and cash
flow, balance sheet and income statement trends, the quality and timeliness of financial reporting, and the quality
of the borrower’s management. Other factors influencing the credit risk rating to a lesser degree include collateral
coverage and control, guarantor strength and commitment, documentation, structure and covenants and industry
conditions. There are uncertainties inherent in this process.
Credit risk ratings are dynamic and require updating whenever relevant information is received. Risk ratings are
assessed on an ongoing basis and at various points, including at delinquency or at the time of other adverse
events. For larger, more complex or adversely rated loans, risk ratings are also assessed at the time of annual
or periodic review. Lenders are required to make immediate disclosure to the Senior Credit Officer of any known
increase in loan risk, even if considered temporary in nature.
30
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
The risk ratings within the loan portfolio, by segment, as of the balance sheet dates were as follows:
As of December 31, 2022
Commercial
Purchased
Commercial
Real Estate
Real Estate
& Industrial
Loans
Real Estate
Municipal
1st Lien
Jr Lien
Consumer
Total
Residential
Residential
Group A
$ 104,697,047 $ 7,530,458 $ 347,732,935 $ 34,633,055 $ 195,269,893 $ 33,538,767 $ 4,039,989 $ 727,442,144
Group B
Group C
Total
6,296,411
1,958,415
0
0
2,754,649
6,405,402
0
0
0
0
3,473,482
218,105
0
0
9,051,060
12,055,404
$ 112,951,873 $ 7,530,458 $ 356,892,986 $ 34,633,055 $ 198,743,375 $ 33,756,872 $ 4,039,989 $ 748,548,608
As of December 31, 2021
Commercial
Purchased
Commercial
Real Estate
Real Estate
& Industrial
Loans
Real Estate
Municipal
1st Lien
Jr Lien
Consumer
Total
Residential
Residential
Group A
$ 107,799,925 $ 9,807,848 $ 285,732,365 $ 47,955,231 $ 177,456,149 $ 34,166,076 $ 4,464,692 $ 667,382,286
Group B
Group C
Total
693,084
2,632,613
0
0
6,550,335
8,676,231
0
0
0
0
3,860,196
193,788
0
0
7,243,419
15,362,828
$ 111,125,622 $ 9,807,848 $ 300,958,931 $ 47,955,231 $ 181,316,345 $ 34,359,864 $ 4,464,692 $ 689,988,533
Modifications of Loans and TDRs
A loan is classified as a TDR if, for economic or legal reasons related to a borrower’s financial difficulties, the
Company grants a concession to the borrower that it would not otherwise consider.
The Company is deemed to have granted such a concession if it has modified a troubled loan in any of the
following ways:
• Reduced accrued interest;
• Reduced the original contractual interest rate to a rate that is below the current market rate for the borrower;
• Converted a variable-rate loan to a fixed-rate loan;
• Extended the term of the loan beyond an insignificant delay;
• Deferred or forgiven principal in an amount greater than three months of payments;
• Performed a refinancing and deferred or forgiven principal on the original loan;
• Capitalized protective advance to pay delinquent real estate taxes; or
• Capitalized delinquent accrued interest.
An insignificant delay or insignificant shortfall in the amount of payments typically would not require the loan to be
accounted for as a TDR. However, pursuant to regulatory guidance, any payment delay longer than three months
is generally not considered insignificant. Management’s assessment of whether a concession has been granted
also takes into account payments expected to be received from third parties, including third-party guarantors,
provided that the third party has the ability to perform on the guarantee.
The Company’s TDRs are principally a result of extending loan repayment terms to relieve cash flow difficulties.
The Company has only, on a limited basis, reduced interest rates for borrowers below the current market rate for
31
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
the borrower. The Company has not forgiven principal or reduced accrued interest within the terms of original
restructurings, nor has it converted variable rate terms to fixed rate terms. However, the Company evaluates each
TDR situation on its own merits and does not foreclose the granting of any particular type of concession.
The Company adopted the TDR guidance issued by the federal banking agencies in March and April 2020
regarding the treatment of certain short-term loan modifications relating to the COVID-19 pandemic. Under this
guidance, qualifying concessions and modifications are not considered TDRs. In total, throughout the pandemic,
the Company granted short term loan concessions and/or modifications within the terms of this guidance to 595
borrowers. Of those loans, 302 remained on the books with an aggregate principal balance of $84.5 million as of
December 31, 2022. None of these loans were in a deferral status as of December 31, 2022; however, these loans
may bear a higher risk of default in future periods.
New TDRs, by portfolio segment, for the periods presented were as follows:
Year ended December 31, 2022
Residential real estate
1st lien
Year ended December 31, 2021
Commercial & industrial
Commercial real estate
Residential real estate
1st lien
Pre-
Post-
Modification Modification
Outstanding
Outstanding
Recorded
Recorded
Investment
Investment
Number of
Contracts
2
$
562,592 $
562,592
Pre-
Post-
Modification Modification
Outstanding Outstanding
Recorded
Investment
Recorded
Investment
Number of
Contracts
1
2
1
4
$
41,751
3,153,402
$
41,751
3,153,402
67,007
$ 3,262,160
67,007
$ 3,262,160
There were no TDRs for which there was a payment default during the twelve month period ended December 31,
2022. The TDRs for which there was a payment default during the twelve month periods presented were as follows:
Year ended December 31, 2021
Commercial & industrial
Commercial real estate
32
Number of
Contracts
Recorded
Investment
1
2
3
$
38,001
3,081,810
$ 3,119,811
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
TDRs are treated as other impaired loans and carry individual specific reserves with respect to the calculation of
the ALL. These loans are categorized as non-performing, may be past due, and are generally adversely risk rated.
The TDRs that have defaulted under their restructured terms are generally in collection status and their reserve is
typically calculated using the fair value of collateral method.
The specific allowances related to TDRs as of the balance sheet dates presented were as follows:
Specific Allocation
2022
2021
$
106,280
$
79,978
As of the balance sheet dates, the Company evaluates whether it is contractually committed to lend additional
funds to debtors with impaired, non-accrual or modified loans. The Company is contractually committed to lend
under one SBA guaranteed line of credit to a borrower whose lending relationship was previously restructured.
Note 5. Loan Servicing
Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid
principal balances of mortgage loans serviced for others were $142,567,853 and $151,198,760 at December 31,
2022 and 2021, respectively. Proceeds on loan sales of $12,865,842 and $18,103,002 were realized for December
31, 2022 and 2021, with net gains of $237,881 and $540,540 for the respective periods. Most loan sales are with
servicing rights retained.
The following table summarizes changes in MSRs for the years ended December 31,
Balance at beginning of year
MSRs capitalized
MSRs amortized
Change in valuation allowance
Balance at end of year
Note 6. Bank Premises and Equipment
2022
2021
$
$
897,720
120,629
(155,756)
0
862,593
$
$
922,146
147,328
(225,404)
53,650
897,720
The major classes of bank premises and equipment and accumulated depreciation and amortization at December
31 were as follows:
Buildings and improvements
Land and land improvements
Furniture and equipment
Leasehold improvements
Finance lease
Operating leases
Other prepaid assets
Less accumulated depreciation and amortization
Net bank premises and equipment
2022
2021
$
10,674,714 $
2,856,017
6,262,893
875,797
4,018,377
1,417,859
5,820
26,111,477
(13,069,009)
13,042,468 $
$
10,503,322
2,663,549
6,067,181
824,605
4,018,377
1,417,859
102,365
25,597,258
(11,829,930)
13,767,328
33
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Note 7. Leases
The Company has operating and finance leases for some of its bank premises, with remaining lease terms of
one year to 18 years. Some of the operating leases have options to renew, which are reflected in the four years.
The Company’s operating lease right-of-use assets and finance lease assets are included in “Bank premises and
equipment, net” in the consolidated balance sheet and operating lease liabilities and finance lease liabilities are
included in Accrued interest and other liabilities in the consolidated balance sheet.
The components of lease expense for the periods presented were as follows:
Years Ended December 31,
Operating lease cost
Finance lease cost:
Amortization of right-of-use assets
Interest on lease liabilities
Variable rent expense
Total finance lease cost
2022
2021
209,697
$
209,667
227,279
86,028
0
313,307
$
$
188,327
71,337
19,798
279,462
$
$
$
Total rental expense not associated with operating lease costs above amounted to $14,142 and $22,498 for the
years ended December 31, 2022 and 2021, respectively.
Supplemental information related to leases as of the balance sheet dates was as follows:
December 31,
2022
2021
Operating Leases
Operating lease right-of-use assets
Operating lease liabilities
Finance Leases
Finance lease right-of-use assets
Finance lease liabilities
$
$
$
$
653,832
$
852,514
658,401
$
863,566
3,625,326
$
3,852,605
3,644,828
$
3,857,883
December 31,
2022
2021
Weighted Average Remaining Lease Term (in Years)
Operating Leases
Finance Leases
Weighted Average Discount Rate
Operating Leases
Finance Leases
2.7
15.7
1.28%
2.29%
3.7
16.7
1.28%
2.29%
34
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Operating lease obligations
The Company is obligated under non-cancelable operating leases for bank premises expiring in various years
through 2026, with options to renew. Minimum future rental payments for these leases with original terms in
excess of one year as of December 31, 2022 for each of the next four years and in aggregate are:
2023
2024
2025
2026
Total
Finance lease obligations
$
$
223,432
199,648
154,659
99,165
676,904
The following is a schedule by years of future minimum lease payments under capital leases, together with the
present value of the net minimum lease payments as of December 31, 2022:
2023
2024
2025
2026
2027
Subsequent to 2027
Total minimum lease payments
Less amount representing interest
Present value of net minimum lease payments
$
300,928
302,819
304,758
311,451
320,076
2,761,314
4,301,346
(656,518)
$
3,644,828
A reconciliation of the undiscounted cash flows in the maturity analysis above and the lease liability recognized in
the consolidated balance sheet as of December 31, 2022, is shown below:
Undiscounted cash flows
Discount effect of cash flows
Lease liabilities
Note 8. Goodwill
Operating
Finance
$
$
676,904 $
(18,503)
658,401 $
4,301,346
(656,518)
3,644,828
As a result of the acquisition of LyndonBank on December 31, 2007, the Company recorded goodwill amounting
to $11,574,269. The goodwill is not amortizable and is not deductible for tax purposes. Management evaluated
goodwill for impairment at December 31, 2022 and 2021 and concluded that no impairment existed as of such
dates.
Note 9. Other Investments
The Company purchases, from time to time, interests in various limited partnerships established to acquire, own
and rent residential housing for low and moderate income residents of northeastern and central Vermont. The tax
credits from these investments were $389,911 and $468,054 for the years ended December 31, 2022 and 2021,
respectively. Expenses related to amortization of the investments in the limited partnerships are recognized as
a component of income tax expense, and were $268,714 and $363,048 for 2022 and 2021, respectively. The
35
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
carrying values of the limited partnership investments were $4,394,959 and $2,062,673 at December 31, 2022 and
2021, respectively, and are included in Other assets.
The Bank has a one-third ownership interest in a non-depository trust company, CFSG, based in Newport, Vermont,
which is held indirectly through CFS Partners, a Vermont LLC that owns 100% of the LLC equity interests of CFSG.
The Bank accounts for its investment in CFS Partners under the equity method of accounting. The Company’s
investment in CFS Partners, included in Other assets, amounted to $3,756,994 and $3,172,023 as of December
31, 2022 and 2021, respectively. The Company recognized income of $584,971 and $951,605 for 2022 and 2021,
respectively, through CFS Partners from the operations of CFSG.
Note 10. Deposits
The following is a maturity distribution of time deposits at December 31, 2022:
2023
2024
2025
2026
2027
Total time deposits
$
65,651,974
15,657,066
4,605,036
10,603,273
5,121,310
$ 101,638,659
Total deposits in excess of the FDIC insurance level amounted to $331,530,619 as of December 31, 2022.
Note 11. Borrowed Funds
Outstanding advances for the Company as of the balance sheet dates presented were as follows:
Long-Term Advances(1)
FHLBB term advance, 0.00%, due September 22, 2023
FHLBB term advance, 0.00%, due November 12, 2025
FHLBB term advance, 0.00%, due November 13, 2028
2022
2021
$
$
200,000 $
300,000
800,000
1,300,000 $
200,000
300,000
800,000
1,300,000
(1) The FHLBB is providing a subsidy, funded by the FHLBB’s earnings, to write down interest rates to 0% on JNE
advances that finance qualifying loans to small businesses. JNE advances must support small business in
New England that create and/or retain jobs, or otherwise contribute to overall economic development activities.
Borrowings from the FHLBB are secured by a blanket lien on qualified collateral consisting primarily of loans with
first mortgages secured by 1-4 family residential properties, as well as certain qualifying CRE loans. Qualified
collateral for these borrowings totaled $160,543,731 and $134,211,623 as of December 31, 2022 and 2021,
respectively, and the Company’s gross potential borrowing capacity under this arrangement was $112,339,573
and $100,230,091, respectively, before reduction for outstanding advances and collateral pledges.
Under a separate agreement with the FHLBB, the Company has the authority to collateralize public unit deposits, up
to its available borrowing capacity, with letters of credit issued by the FHLBB. At December 31, 2022, $52,400,000
in FHLBB letters of credit was utilized as collateral for these deposits compared to $59,875,000 at December 31,
2021. Total fees paid by the Company in connection with issuance of these letters of credit were $58,824 for 2022
and $60,606 for 2021.
36
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
The Company also maintained a $500,000 IDEAL Way Line of Credit with the FHLBB at December 31, 2022 and
2021, with no outstanding advances under this line at either year-end date. Interest on these borrowings is at a
rate determined daily by the FHLBB and payable monthly.
The Company also has a line of credit with the FRBB, which is intended to be used as a contingency funding
source. For this BIC arrangement, the Company pledged eligible commercial and industrial loans, CRE loans
not pledged to FHLBB and home equity loans, resulting in an available line of $56,070,032 and $52,260,374
as of December 31, 2022 and 2021, respectively. Credit advances in the FRBB lending program are overnight
advances with interest chargeable at the primary credit rate (generally referred to as the discount rate), which was
450 basis points as of December 31, 2022. As of December 31, 2022 and 2021, the Company had no outstanding
advances against this line.
The Company has unsecured lines of credit with two correspondent banks at December 31, 2022 and 2021 with
aggregate available borrowing capacity totaling $20,500,000. The Company had no outstanding advances against
either of these lines for the periods presented.
Note 12. Junior Subordinated Debentures
As of December 31, 2022 and 2021, the Company had outstanding $12,887,000 principal amount of Junior
Subordinated Debentures due in 2037 (the Debentures). The Debentures bear a floating rate equal to the 3-month
LIBOR plus 2.85%. During 2022, the floating rate averaged 4.39% per quarter compared to an average rate of
3.01% per quarter for 2021. The Debentures mature on December 15, 2037 and are subordinated and junior in right
of payment to all senior indebtedness of the Company, as defined in the Indenture dated as of October 31, 2007
between the Company and Wilmington Trust Company, as Trustee. The Debentures first became redeemable, in
whole or in part, by the Company on December 15, 2012. Interest paid on the Debentures for 2022 and 2021 was
$573,603 and $393,105, respectively, and is deductible for tax purposes.
In accordance with applicable provisions of the federal Adjustable Interest Rate (LIBOR) Act of 2022 and the
implementing regulations of the FRB, effective on the first London banking day after June 30, 2023 (the last date
upon which LIBOR will be quoted), the Debentures will bear a floating rate equal to 3-month CME Term SOFR, as
adjusted by a spread adjustment factor of 0.26161, plus 2.85%.
The Debentures were issued and sold to CMTV Statutory Trust I (the Trust). The Trust is a special purpose trust
funded by a capital contribution of $387,000 from the Company, in exchange for 100% of the Trust’s common equity.
The Trust was formed for the purpose of issuing corporation-obligated mandatorily redeemable Capital Securities
(Capital Securities) in the principal amount of $12.5 million to third-party investors and using the proceeds from
the sale of such Capital Securities and the Company’s initial capital contribution to purchase the Debentures.
The Debentures are the sole asset of the Trust. Distributions on the Capital Securities issued by the Trust are
payable quarterly at a rate per annum equal to the interest rate being earned by the Trust on the Debentures. The
Capital Securities are subject to mandatory redemption, in whole or in part, upon repayment of the Debentures.
The Company has entered into an agreement which, taken collectively, fully and unconditionally guarantees the
payments on the Capital Securities, subject to the terms of the guarantee.
The Debentures are currently includable in the Company’s Tier 1 capital up to 25% of core capital elements (see
Note 22).
37
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Note 13. Repurchase Agreements
Securities sold under agreements to repurchase mature daily and consisted of the following:
As of or for the year ended December 31,
Current balance
Average balance
Highest month-end balance
Weighted average interest rate
Pledged investment (1)
Amortized cost
Fair value
2022
2021
$
33,077,829 $
31,285,927
34,974,510
0.53%
32,609,875
28,349,896
39,288,875
0.31%
55,899,113
46,789,284
63,045,599
62,256,702
(1) U.S. GSE debt securities, Agency MBS, ABS and OAS, were pledged as collateral for the periods presented.
Note 14. Income Taxes
The Company prepares its income tax return on a consolidated basis. Income taxes are allocated to members of
the consolidated group based on taxable income.
The components of the Provision for income taxes for the years ended December 31 were as follows:
Currently paid or payable
Deferred benefit
Total income tax expense
2022
2021
$
$
3,253,913 $
(118,587)
3,135,326 $
3,059,462
(76,374)
2,983,088
Total income tax expense differed from the amounts computed at the statutory federal income tax rate of 21%
primarily due to the following for the years ended December 31:
Computed expense at statutory rates
Tax exempt interest and BOLI
Disallowed interest
Partnership rehabilitation and tax credits
Low income housing investment amortization expense
Other
Total income tax expense
2022
2021
$
$
3,543,806 $
(243,121)
6,205
(389,911)
212,284
6,063
3,135,326 $
3,385,499
(228,773)
6,290
(468,054)
286,808
1,318
2,983,088
38
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
The deferred income tax benefit consisted of the following items for the years ended December 31:
Depreciation
Mortgage servicing rights
Deferred compensation
Bad debts
Limited partnership amortization
Investment in CFS Partners
Deferred SBA PPP fees
Prepaid expenses
Other
Change in deferred tax benefit
2022
2021
$
$
22,316 $
(7,377)
0
(209,783)
61,442
(90,527)
102,702
34,467
(31,827)
(118,587) $
66,603
(5,129)
2,246
(105,372)
57,387
35,651
(108,668)
(5,384)
(13,708)
(76,374)
Listed below are the significant components of the net deferred tax asset at December 31:
Components of the deferred tax asset:
Bad debts
Deferred compensation
Contingent liability - MPF program
Finance lease
Operating lease
Deferred SBA PPP fees
Unrealized loss on debt securities AFS
Other
Total deferred tax asset
Components of the deferred tax liability:
Depreciation
Limited partnerships
Mortgage servicing rights
Investment in CFS Partners
Operating lease
Prepaid expenses
Total deferred tax liability
Net deferred tax asset
2022
2021
$
$
$
1,828,937 $
6,930
17,838
47,305
959
5,966
5,493,977
22,008
7,423,920 $
$
483,484
156,394
181,144
29,586
0
108,893
959,501
6,464,419 $
1,619,154
6,930
17,838
19,044
0
108,668
310,208
22,716
2,104,558
$
461,168
94,952
188,521
120,113
3,315
74,426
942,495
1,162,063
U.S. GAAP provides for the recognition and measurement of deductible temporary differences (including general
valuation allowances) to the extent that it is more likely than not that the deferred tax asset will be realized.
The net deferred tax asset is included in Other assets in the consolidated balance sheets.
ASC Topic 740, Income Taxes, defines the criteria that an individual tax position must satisfy for some or all of the
benefits of that position to be recognized in a company’s financial statements. Topic 740 prescribes a recognition
39
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken
on a tax return, in order for those tax positions to be recognized in the consolidated financial statements. The
Company has adopted these provisions and there was no material effect on the consolidated financial statements.
The Company is currently open to audit under the statute of limitations by the IRS for the years ended December
31, 2019 through 2021. The 2022 tax return has not yet been filed.
Note 15. 401(k) and Profit-Sharing Plan
The Company has a defined contribution plan covering all employees who meet certain age and service
requirements. The pension expense was $698,000 and $692,804 for 2022 and 2021, respectively. These amounts
represent discretionary matching contributions of a portion of the voluntary employee salary deferrals under the
401(k) plan and discretionary profit-sharing contributions under the plan.
Note 16. Deferred Compensation Plan for Certain Directors
The Company maintains a directors’ deferred compensation plan. Participants are general unsecured creditors of
the Company with respect to these benefits. The benefits accrued under this plan were $33,000 at December 31,
2022 and 2021 and consist of funds for three directors. These funds do not accrue interest, and will be paid out
upon retirement from the Board.
Note 17. Financial Instruments with Off-Balance-Sheet Risk
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to
meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These
financial instruments include commitments to extend credit, standby letters of credit and financial guarantees,
commitments to sell loans and risk-sharing commitments on certain sold loans. Such instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.
The contract or notional amounts of those instruments reflect the maximum extent of involvement the Company
has in particular classes of financial instruments.
The Company’s maximum exposure to credit loss in the event of nonperformance by the other party to the financial
instrument for commitments to extend credit and standby letters of credit and financial guarantees written is
represented by the contractual notional amount of those instruments. The Company applies the same credit
policies and underwriting criteria in making commitments and conditional obligations as it does for on-balance-
sheet instruments.
The Company generally requires collateral or other security to support financial instruments with credit risk. At
December 31, the following off-balance-sheet financial instruments representing credit risk were outstanding:
Unused portions of home equity lines of credit
Residential and commercial construction lines of credit
Commercial real estate commitments
Commercial and industrial commitments
Other commitments to extend credit
Standby letters of credit and commercial letters of credit
Recourse on sale of credit card portfolio
MPF credit enhancement obligation, net (See Note 18)
40
Contract or Notional Amount
2022
2021
$
37,621,050 $
21,388,121
63,719,882
64,482,470
45,724,309
5,343,050
310,805
267,408
36,281,001
6,731,575
47,804,534
56,382,838
43,227,424
2,108,050
305,305
552,158
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future funding requirements. At December 31,
2022 and 2021, the Company had binding loan commitments to sell residential mortgages at fixed rates totaling
$629,550 and $1,906,200, respectively. The recourse provision under the terms of the sale of the Company’s
credit card portfolio in 2007 is based on total lines, not balances outstanding. Based on historical losses, the
Company does not expect any significant losses from this commitment.
The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Company upon extension of credit, or a commitment to extend credit, is based
on management’s credit evaluation of the counter-party. Collateral or other security held varies but may include
real estate, accounts receivable, inventory, property, plant and equipment, and income-producing commercial
properties.
Standby letters of credit and financial guarantees written are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private
borrowing arrangements. The credit risk involved in issuing letters of credit or providing reimbursement guarantees
for the benefit of the Company’s commercial customers is essentially the same as that involved in extending loans
to customers. The fair value of standby letters of credit and reimbursement guarantees on letters of credit has not
been included in the balance sheets as the fair value is immaterial.
In connection with its 2007 trust preferred securities financing, the Company guaranteed the payment obligations
under the $12,500,000 of capital securities of its affiliate, the CMTV Statutory Trust I (the Trust). The source of funds
for payments by the Trust on its capital trust securities is payments made by the Company on its debentures issued
to the Trust. The Company’s obligation under those debentures is fully reflected in the Company’s consolidated
balance sheet, in the gross amount of $12,887,000 as of the dates presented, of which $12,500,000 represents
external financing through the issuance to investors of capital securities by the Trust (see Note 12).
Note 18. Contingent Liability
The Company sells first lien 1-4 family residential mortgage loans under the MPF program with the FHLBB. Under
this program the Company shares in the credit risk of each mortgage loan, while receiving fee income in return.
The Company is responsible for a CEO based on the credit quality of these loans. FHLBB funds a FLA based
on the Company’s outstanding MPF mortgage balances. This creates a laddered approach to sharing in any
losses. In the event of default, homeowner’s equity and private mortgage insurance, if any, are the first sources of
repayment; the FHLBB’s FLA funds are then utilized, followed by the participant’s CEO, with the balance of losses
absorbed by FHLBB. These loans must meet specific underwriting standards of the FHLBB. As of December
31, 2022 and 2021, the Company had $19,961,469 and $22,916,680, respectively, in loans sold through the MPF
program and on which the Company had a CEO. As of December 31, 2022 and 2021, the notional amount of
the maximum CEO related to this program was $352,352 and $637,102, respectively, and the accrued contingent
liability for this CEO was $84,944 for 2022 and 2021. The contingent liability is calculated by management based
on the methodology used in calculating the ALL, adjusted to reflect the risk sharing arrangements with the FHLBB.
Note 19. Legal Proceedings
In the normal course of business, the Company is involved in various claims and legal proceedings. In the opinion
of the Company’s management, any liabilities resulting from such proceedings are not expected to be material to
the Company’s consolidated financial condition or results of operations.
41
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Note 20. Transactions with Related Parties
Aggregate loan transactions of the Company with directors, principal officers, their immediate families and affiliated
companies in which they are principal owners (commonly referred to as related parties) as of December 31 were
as follows:
Balance, beginning of year
Loans - new Directors
New loans to existing Principal Officers/Directors
Repayment*
Balance, end of year
*Includes loans sold to the secondary market
2022
2021
$
16,072,431 $
2,274,378
5,091,531
(7,720,758)
15,717,582 $
$
16,774,535
0
1,902,000
(2,604,104)
16,072,431
Total funds of related parties on deposit with the Company were $17,015,285 and $9,220,641 at December 31,
2022 and 2021, respectively.
The Company utilizes the services of CFSG as an investment advisor for the Company’s 401(k) plan. The Human
Resources committee of the Board of Directors is the Trustee of the plan, and CFSG provides investment advice
for the plan. CFSG also acts as custodian of the retirement funds and makes investments on behalf of the plan
and its participants. The Company pays monthly management fees to CFSG for its services to the 401(k) plan
amounting to $53,231 and $65,550, respectively, for the years ended December 31, 2022 and 2021.
Note 21. Restrictions on Cash and Due From Banks
In the ordinary course of business, the Company may, from time to time, maintain amounts due from correspondent
banks that exceed federally insured limits. However, no losses have occurred in these accounts and the Company
believes it is not exposed to any significant risk with respect to such accounts. The Company was required to
maintain a targeted balance with a correspondent bank of $500,000 and $9.0 million at December 31, 2022 and
2021, respectively.
Note 22. Regulatory Capital Requirements
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements
administered by the 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 Company’s and the Bank’s financial statements. Under capital adequacy guidelines and
the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital
guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance-sheet items, as
calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative
judgments by the regulators about components, risk weightings, and other factors. Additional prompt corrective
action capital requirements are applicable to banks, but not to bank holding companies.
Under current banking rules governing required regulatory capital, the Company and the Bank are required to
maintain minimum amounts and ratios (set forth in the table on the following page) of Common equity tier 1, Tier
1 and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). The Company’s non-cumulative Series A preferred stock ($1.5 million
liquidation preference in 2022 and 2021) is includable without limitation in its Common equity tier 1 and Tier
1 capital. The Company is allowed to include in Common equity tier 1 and Tier 1 capital an amount of trust
42
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
preferred securities equal to no more than 25% of the sum of all core capital elements, which is generally defined
as shareholders’ equity, less certain intangibles, including goodwill, net of any related deferred income tax liability
or asset, with the balance includable in Tier 2 capital. Management believes that, as of December 31, 2022, the
Company and the Bank met all capital adequacy requirements to which they were subject.
Under the 2018 Regulatory Relief Act, these capital requirements have been simplified for qualifying community
banks and bank holding companies. In September 2019, the OCC and the other federal bank regulators approved
a final joint rule that permits a qualifying community banking organization to opt in to a simplified regulatory capital
framework. A qualifying institution that elects to utilize the simplified framework must maintain a CBLR in excess
of 9%, and will thereby be deemed to have satisfied the generally applicable risk-based and other leverage capital
requirements and (if applicable) the FDIC’s prompt corrective action framework. In order to utilize the CBLR
framework, in addition to maintaining a CBLR of over 9%, a community banking organization must have less than
$10 billion in total consolidated assets and must meet certain other criteria such as limitations on the amount of
off-balance sheet exposures and on trading assets and liabilities. The CBLR is calculated by dividing tangible
equity capital by average total consolidated assets. The final rule became effective on January 1, 2020 for capital
calculations as of March 31, 2020 and thereafter.
Beginning in 2016, an additional capital conservation buffer was added to the minimum requirements for capital
adequacy purposes, subject to a three year phase-in period. The capital conservation buffer was fully phased-in
on January 1, 2019 at 2.5% of risk-weighted assets. A banking organization with a conservation buffer of less
than 2.5% is subject to limitations on capital distributions, including dividend payments and certain discretionary
bonus payments to executive officers. As of December 31, 2022 and 2021, the Company and the Bank were fully
compliant, with capital conservation buffers of 7.03% and 7.50%, respectively, for the Company and 6.89% and
7.42%, respectively, for the Bank.
Pursuant to the CARES Act, the federal banking agencies adopted an interim rule temporarily lowering the CBLR
benchmark to in excess of 8%, rather than 9%, with a phased increase of the CBLR back to the 9% level by the
end of 2021. The Company and Bank qualified to utilize the CBLR framework, but did not elect to do so.
As of December 31, 2022, the Bank was considered well capitalized under the regulatory capital framework for
Prompt Corrective Action and the Company exceeded currently applicable consolidated regulatory guidelines for
capital adequacy.
43
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
The following table shows the regulatory capital ratios for the Company and the Bank as of December 31:
Minimum
Minimum
Minimum For Capital
To Be Well
For Capital
Adequacy Purposes
Capitalized Under
Adequacy
Purposes:
with Conservation
Prompt Corrective
Buffer(1):
Action Provisions(2):
Actual
Amount
Ratio
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in Thousands)
$ 82,770
11.74% $ 31,731
4.50% $ 49,359
7.00%
N/A
N/A
$ 96,112
13.64% $ 31,703
4.50% $ 49,315
7.00% $ 45,793
6.50%
$ 97,157
13.78% $ 42,308
6.00% $ 59,936
8.50%
N/A
N/A
$ 96,112
13.64% $ 42,270
6.00% $ 59,883
8.50% $ 56,361
8.00%
$ 105,971
15.03% $ 56,410
8.00% $ 74,038
10.50%
N/A
N/A
$ 104,918
14.89% $ 56,361
8.00% $ 73,973
10.50% $ 70,451
10.00%
$ 97,157
9.24% $ 42,047
$ 96,112
9.15% $ 42,025
4.00%
4.00%
N/A
N/A
N/A
N/A
N/A
N/A $ 52,531
5.00%
$ 72,853
11.90% $ 27,548
4.50% $ 42,853
7.00%
N/A
N/A
$ 86,654
14.17% $ 27,522
4.50% $ 42,812
7.00% $ 39,754
6.50%
$ 87,240
14.25% $ 36,731
6.00% $ 52,036
8.50%
N/A
N/A
$ 86,654
14.17% $ 36,696
6.00% $ 51,986
8.50% $ 48,928
8.00%
$ 94,894
15.50% $ 48,975
8.00% $ 64,279
10.50%
N/A
N/A
$ 94,301
15.42% $ 48,928
8.00% $ 64,218
10.50% $ 61,160
10.00%
$ 87,240
8.79% $ 39,719
$ 86,654
8.73% $ 39,698
4.00%
4.00%
N/A
N/A
N/A
N/A
N/A
N/A $ 49,622
5.00%
December 31, 2022
Common equity tier 1 capital
(to risk-weighted assets)
Company
Bank
Tier 1 capital (to risk-weighted assets)
Company
Bank
Total capital (to risk-weighted assets)
Company
Bank
Tier 1 capital (to average assets)
Company
Bank
December 31, 2021:
Common equity tier 1 capital
(to risk-weighted assets)
Company (3)
Bank
Tier 1 capital (to risk-weighted assets)
Company
Bank
Total capital (to risk-weighted assets)
Company
Bank
Tier 1 capital (to average assets)
Company
Bank
(1) Conservation Buffer is calculated based on risk-weighted assets and does not apply to calculations of average
assets.
(2) Applicable to banks, but not bank holding companies.
(3) Reflects recalculation of the Company’s previously reported common equity tier I capital ratio. The previously
reported calculation for December 31, 2021 and prior annual and interim periods incorrectly included the
Company’s outstanding preferred stock and trust preferred securities in the equity component of the calculation.
The Company’s ability to pay dividends to its shareholders is largely dependent on the Bank’s ability to pay
dividends to the Company. In general, a national bank may not pay dividends that exceed net income for the
current and preceding two years. Regardless of statutory restrictions, as a matter of regulatory policy, banks and
bank holding companies should pay dividends only out of current earnings and only if, after paying such dividends,
they remain adequately capitalized.
44
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Note 23. Fair Value
Certain assets and liabilities are recorded at fair value to provide additional insight into the Company’s quality
of earnings. The fair values of some of these assets and liabilities are measured on a recurring basis while
others are measured on a non-recurring basis, with the determination based upon applicable existing accounting
pronouncements. For example, securities available-for-sale are recorded at fair value on a recurring basis. Other
assets, such as MSRs, loans held-for-sale, impaired loans, and OREO are recorded at fair value on a non-recurring
basis using the lower of cost or market methodology to determine impairment of individual assets. The Company
groups assets and liabilities which are recorded at fair value in three levels, based on the markets in which the
assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The level within
the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement (with
Level 1 considered highest and Level 3 considered lowest). A brief description of each level follows.
Level 1 Quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt
and equity securities and derivative contracts that are traded in an active exchange market, as well as U.S.
Treasury, other U.S. Government debt securities that are highly liquid and are actively traded in over-the-
counter markets.
Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated
by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and
liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded
instruments and derivative contracts whose value is determined using a pricing model with inputs that are
observable in the market or can be derived principally from or corroborated by observable market data.
This category generally includes MSRs, collateral-dependent impaired loans and OREO.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair
value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value
is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well
as instruments for which the determination of fair value requires significant management judgment or
estimation.
The following methods and assumptions were used by the Company in estimating its fair value measurements:
Debt Securities AFS: Fair value measurement is based upon quoted prices for similar assets, if available. If quoted
prices are not available, fair values are measured using matrix pricing models, or other model-based valuation
techniques requiring observable inputs other than quoted prices such as yield curves, prepayment speeds and
default rates. Level 1 securities would include U.S. Government securities that are traded by dealers or brokers in
active over-the-counter markets. Level 2 securities include federal agency securities, municipal securities, CMO
and ABS and OAS.
Impaired loans: Impaired loans are reported based on one of three measures: the present value of expected
future cash flows discounted at the loan’s effective interest rate; the loan’s observable market price; or the fair
value of the collateral if the loan is collateral dependent. If the fair value is less than an impaired loan’s recorded
investment, an impairment loss is recognized as part of the ALL. Accordingly, certain impaired loans may be
subject to measurement at fair value on a non-recurring basis. Management has estimated the fair values of
collateral-dependent loans using Level 2 inputs, such as the fair value of collateral based on independent third-
party appraisals.
Loans held-for-sale: The fair value of loans held-for-sale is based upon an actual purchase and sale agreement
between the Company and an independent market participant. The sale is executed within a reasonable period
following quarter end at the stated fair value.
45
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
MSRs: MSRs represent the value associated with servicing residential mortgage loans. Servicing assets and
servicing liabilities are reported using the amortization method and compared to fair value for impairment. In
evaluating the carrying values of MSRs, the Company obtains third party valuations based on loan level data
including note rate, and the type and term of the underlying loans. The Company classifies MSRs as non-recurring
Level 2.
OREO: Real estate acquired through or in lieu of foreclosure and bank properties no longer used as bank premises
are initially recorded at fair value. The fair value of OREO is based on property appraisals and an analysis of similar
properties currently available. The Company records OREO as non-recurring Level 2.
Assets Recorded at Fair Value on a Recurring Basis
Assets measured at fair value on a recurring basis and reflected in the consolidated balance sheets at December
31, segregated by fair value hierarchy, are summarized below:
Assets: (market approach)
Level 1
U.S. Government securities
Level 2
U.S. GSE debt securities
Taxable Municipal securities
Tax-exempt Municipal securities
Agency MBS
ABS and OAS
CMO
Other investments
Level 2 Total
December 31, December 31,
2022
2021
$
38,231,589 $
32,041,041
$
10,375,291 $
234,858
11,323,567
115,231,599
2,693,606
11,935,925
2,891,674
11,828,498
298,733
831,379
127,132,521
2,214,024
1,420,458
6,575,805
$ 154,686,520 $ 150,301,418
Grand Total
$ 192,918,109 $ 182,342,459
There were no Level 3 assets or liabilities measured on a recurring basis as of the balance sheet dates presented,
nor were there any transfers of assets between Levels during the periods presented.
Assets Recorded at Fair Value on a Non-Recurring Basis
The following table includes assets measured at fair value on a non-recurring basis that have had a fair value
adjustment since their initial recognition. Impaired loans measured at fair value only include impaired loans with
a partial write-down or with a related specific ALL and are presented net of the specific allowances as disclosed in
Note 4.
46
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Assets measured at fair value on a non-recurring basis and reflected in the consolidated balance sheets at
December 31, segregated by fair value hierarchy, are summarized below:
Level 2
Assets: (market approach)
Impaired loans, net of related allowance
Loans held-for-sale
MSRs (1)
December 31,
2022
December 31,
2021
$
$
94,458
0
862,593
177,523
339,000
897,720
(1) Represents MSRs at lower of cost or fair value, including MSRs deemed to be impaired and for which a
valuation allowance was established to carry at fair value at December 31, 2022 and 2021.
There were no Level 1 or Level 3 assets or liabilities measured on a non-recurring basis as of the balance sheet
dates presented, nor were there any transfers of assets between Levels during the periods presented.
FASB ASC Topic 825, “Financial Instruments”, requires disclosures of fair value information about financial
instruments, whether or not recognized in the balance sheet, if the fair values can be reasonably determined. Fair
value is best determined based upon quoted market prices. However, in many instances, there are no quoted
market prices for the Company’s various financial instruments. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other valuation techniques using observable
inputs when available. Those techniques are significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate
settlement of the instrument. Topic 825 excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily
represent the underlying fair value of the Company.
47
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
The carrying amounts and estimated fair values of the Company’s financial instruments as of the balance sheet
dates were as follows:
December 31, 2022
Carrying
Amount
Fair
Value
Level 1
Fair
Value
Level 2
(Dollars in Thousands)
Fair
Value
Level 3
Fair
Value
Total
Financial assets:
Cash and cash equivalents
Debt securities AFS
Restricted equity securities
Loans and loans held-for-sale, net of ALL
Commercial & industrial
Purchased loans
Commercial real estate
Municipal
Residential real estate - 1st lien
Residential real estate - Jr lien
Consumer
MSRs (1)
Accrued interest receivable
Financial liabilities:
Deposits
Other deposits
Brokered deposits
Long-term borrowings
Repurchase agreements
Operating lease obligations
Finance lease obligations
Subordinated debentures
Accrued interest payable
$
71,140 $ 71,140 $
0 $
192,918
1,412
38,232
0
154,686
1,412
0 $ 71,140
192,918
0
1,412
0
111,792
7,476
351,738
34,566
197,281
33,510
3,970
863
3,214
922,723
249
1,300
33,078
658
3,645
12,887
74
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
29
0
65
0
0
1,287
3,214
109,534
7,119
340,254
34,558
180,879
33,218
3,949
0
0
109,534
7,119
340,283
34,558
180,944
33,218
3,949
1,287
3,214
918,882
225
1,025
33,078
658
3,645
12,740
74
0
0
0
0
0
0
0
0
918,882
225
1,025
33,078
658
3,645
12,740
74
(1) Reported fair value represents all MSRs for loans serviced by the Company at December 31, 2022, regardless
of carrying amount.
48
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
December 31, 2021
Carrying
Amount
Fair
Value
Level 1
Fair
Value
Level 2
(Dollars in Thousands)
Fair
Value
Level 3
Fair
Value
Total
Financial assets:
Cash and cash equivalents
Debt securities AFS
Restricted equity securities
Loans and loans held-for-sale, net of ALL
Commercial & industrial
Purchased loans
Commercial real estate
Municipal
Residential real estate - 1st lien
Residential real estate - Jr lien
Consumer
MSRs (1)
Accrued interest receivable
Financial liabilities:
Deposits
Other deposits
Brokered deposits
Long-term borrowings
Repurchase agreements
Operating lease obligations
Finance lease obligations
Subordinated debentures
Accrued interest payable
$ 110,359 $ 110,359 $
0 $
182,342
1,434
32,041
0
150,301
1,434
0 $ 110,359
182,342
0
1,434
0
109,574
9,808
296,528
47,841
180,271
34,151
4,406
898
2,401
879,151
249
1,300
32,610
864
3,858
12,887
59
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
29
0
149
0
0
995
2,401
110,284
9,862
297,339
49,419
180,302
34,189
4,436
0
0
110,284
9,862
297,368
49,419
180,451
34,189
4,436
995
2,401
879,545
246
1,179
32,610
864
3,858
12,868
59
0
0
0
0
0
0
0
0
879,545
246
1,179
32,610
864
3,858
12,868
59
(1) Reported fair value represents all MSRs for loans serviced by the Company at December 31, 2021, regardless
of carrying amount.
The estimated fair values of commitments to extend credit, letters of credit and financial guarantees for the benefit
of customers were immaterial at December 31, 2022 and 2021.
49
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Note 24. Condensed Financial Information (Parent Company Only)
The following condensed financial statements are for Community Bancorp. (Parent Company Only), and should be
read in conjunction with the consolidated financial statements of the Company.
Community Bancorp. (Parent Company Only)
Balance Sheets
December 31, De
cember 31,
2022
2021
Assets
Cash
Investment in subsidiary - Community National Bank
Investment in Capital Trust
Income taxes receivable
Total assets
Liabilities and Shareholders’ Equity
Liabilities
Junior subordinated debentures
Dividends payable
Total liabilities
Shareholders’ Equity
$
1,372,381 $
87,018,360
387,000
223,816
89,001,557 $
$
908,042
97,061,296
387,000
185,439
98,541,777
$ 12,887,000 $ 12,887,000
894,509
13,781,509
938,194
13,825,194
Preferred stock, 1,000,000 shares authorized, 15 shares issued and outstanding
at December 31, 2022 and 2021 ($100,000 liquidation value, per share)
Common stock - $2.50 par value; 15,000,000 shares authorized, 5,647,710
and 5,587,939 shares issued at December 31, 2022 and 2021, respectively
(including 16,850 and 14,337 shares issued February 1, 2023 and 2022,
respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less: treasury stock, at cost; 210,101 shares at December 31, 2022 and 2021
Total shareholders’ equity
1,500,000
1,500,000
14,119,275
36,383,235
46,464,447
(20,667,817)
(2,622,777)
75,176,363
13,969,848
35,322,063
37,758,105
(1,166,971)
(2,622,777)
84,760,268
Total liabilities and shareholders’ equity
$ 89,001,557 $ 98,541,77
The investment in the subsidiary bank is carried under the equity method of accounting. The investment and cash
on deposit with the Bank have been eliminated in consolidation.
50
Community Bancorp.
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Community Bancorp. (Parent Company Only)
Condensed Statements of Income
Years Ended December 31,
2022
2021
Income
Bank subsidiary distributions
Dividends on Capital Trust
Total income
Expense
Interest on junior subordinated debentures
Administrative and other
Total expense
Income before applicable income tax benefit and equity in
undistributed net income of subsidiary
Income tax benefit
Income before equity in undistributed net income of subsidiary
Equity in undistributed net income of subsidiary
Net income
$ 5,124,000 $ 4,291,000
11,805
4,302,805
17,225
5,141,225
573,603
509,409
1,083,012
393,105
501,749
894,854
4,058,213
223,816
3,407,951
185,439
4,282,029
9,457,911
3,593,390
9,544,948
$ 13,739,940 $ 13,138,338
Community Bancorp. (Parent Company Only)
Condensed Statements of Cash Flows
Years Ended December 31,
2022
2021
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Equity in undistributed net income of subsidiary
Increase in income taxes receivable
Net cash provided by operating activities
Cash Flows from Financing Activities
Dividends paid on preferred stock
Dividends paid on common stock
Net cash used in financing activities
Net increase in cash
Cash
Beginning
Ending
Cash Received for Income Taxes
Cash Paid for Interest
Dividends paid:
Dividends declared
Increase in dividends payable attributable to dividends declared
Dividends reinvested
$ 13,739,940 $ 13,138,338
(9,457,911)
(38,377)
4,243,652
(9,544,948)
(467)
3,592,923
(66,563)
(3,712,750)
(3,779,313)
464,339
(48,750)
(3,386,502)
(3,435,252)
157,671
908,042
$ 1,372,381 $
750,371
908,042
$
$
185,439 $
184,973
573,603 $
393,105
$ 4,967,035 $ 4,699,529
(149,212)
(1,163,815)
$ 3,712,750 $ 3,386,502
(43,686)
(1,210,599)
51
2022 Annual Report
Community Bancorp. and Subsidiary
Notes to the Consolidated Financial Statements (continued)
Note 25. Other Income and Other Expenses
The components of other income and other expenses which are in excess of one percent of total revenues in either
of the two years disclosed are as follows:
Income
Income from investment in CFS Partners
Expenses
Outsourcing expense
Service contracts - administration
Marketing
State deposit tax
ATM fees
Note 26. Subsequent Events
Declaration of Cash Dividend
$
$
2022
2021
584,971
$
951,605
$
539,123
579,956
499,000
992,333
616,900
506,563
520,310
470,000
884,492
562,779
On December 22, 2022, the Company declared a cash dividend of $0.23 per share payable February 1, 2023 to
shareholders of record as of January 15, 2023. On March 15, 2023, the Company declared a cash dividend of
$0.23 per share payable May 1, 2023 to shareholders of record as of April 15, 2023. These dividends have been
recorded as of each declaration date, including shares issuable under the DRIP.
For purposes of accrual or disclosure in these financial statements, the Company has evaluated subsequent
events through the date of issuance of these financial statements.
52
Community Bancorp.
Community Bancorp. and Subsidiary
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Years Ended December 31, 2022 and 2021
The following discussion analyzes the consolidated financial condition of the Company and its wholly-owned
subsidiary, Community National Bank, as of December 31, 2022 and 2021, and its consolidated results of operations
for the years then ended. The Company is considered a “smaller reporting company” under the disclosure rules of
the SEC. Accordingly, we have elected to provide our audited statements of income, comprehensive income, cash
flows and changes in shareholders’ equity for a two year, rather than a three year, period and to provide smaller
reporting company scaled disclosures where management deems it appropriate.
The following discussion should be read in conjunction with the Company’s audited consolidated financial statements
and related notes. Please refer to Note 1 in the accompanying audited consolidated financial statements for a
listing of acronyms and defined terms used throughout the following discussion.
FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains
certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,
regarding the consolidated results of operations, financial condition and business of the Company and its
subsidiary. Words used in the discussion below such as “believes,” “expects,” “anticipates,” “intends,” “estimates,”
“projects”, “plans,” “assumes”, “predicts,” “may”, “might”, “will”, “could”, “should” and similar expressions, indicate
that management of the Company is making forward-looking statements.
Forward-looking statements are not guarantees of future performance. They necessarily involve risks, uncertainties
and assumptions. Examples of forward looking statements included in this discussion include, but are not limited to,
statements regarding the potential residual effects of the COVID-19 pandemic on our business, financial condition,
results of operations and prospects; the estimated contingent liability related to assumptions made within the
asset/liability management process; management’s expectations as to the future interest rate environment and the
Company’s related liquidity level; credit risk expectations relating to the Company’s loan portfolio, participation in the
FHLBB MPF program and transition to the CECL model for estimating expected credit losses; and management’s
general outlook for the future performance of the Company or the local or national economy. Although forward-
looking statements are based on management’s expectations and estimates as of the date they are made, many of
the factors that could influence or determine actual results are unpredictable and not within the Company’s control.
Factors that may cause our actual results to differ materially from those contemplated by these forward-looking
statements include, among others, the following possibilities:
•
•
•
•
•
•
•
•
interest rates change in such a way as to negatively affect loan demand, the local economy or the Company’s
net income, asset valuations or margins;
general economic or business conditions, either nationally, regionally or locally, deteriorate, resulting in a
decline in credit quality or a diminished demand for the Company’s products and services;
the impact of inflation on the Company’s customers and on its financial results and performance;
changes in the United States monetary and fiscal policies, including the interest rate policies of the FRB and
its regulation of the money supply;
changes in applicable accounting policies, practices and standards, including, without limitation, implementation
of pending changes to the measurement of credit losses in financial statements under U.S. GAAP pursuant to
the CECL model, which became effective for the Company as of January 1, 2023;
the geographic concentration of the Company’s loan portfolio and deposit base;
the planned phase out of three month LIBOR by June 30, 2023, which could adversely affect the Company’s
interest costs in future periods on its $12,887,000 in principal amount of Junior Subordinated Debentures
due December 12, 2037, which currently bear interest at a variable rate, adjusted quarterly, equal to 3-month
LIBOR, plus 2.85%;
reductions in deposit levels, which necessitate increased borrowings to fund loans and investments;
53
2022 Annual Report
•
•
•
•
•
•
increases in the level of nonperforming assets and charge-offs;
changes in federal or state tax laws or policy;
changes in laws or government rules, including the rules of the federal Consumer Financial Protection Bureau,
or the way in which courts or government agencies interpret or implement those laws or rules, increase our
costs of doing business, causing us to limit or change our product offerings or pricing, or otherwise adversely
affect the Company’s business;
competitive pressures increase among financial service providers in the Company’s northern New England
market area or in the financial services industry generally, including competitive pressures from non-bank
financial service providers, from increasing consolidation and integration of financial service providers, and
from changes in technology and delivery systems;
cybersecurity risks could adversely affect the Company’s business, financial performance or reputation and
could result in financial liability for losses incurred by customers or others due to data breaches or other
compromise of the Company’s information security systems;
higher-than-expected costs are incurred relating to information technology or difficulties arise in implementing
technological enhancements;
•
•
• management’s risk management measures may not be completely effective;
changes in consumer and business spending, borrowing and savings habits;
•
the continuing effects of COVID-19 and emerging variants of the virus on our Company, the communities where
•
we have branches and loan production offices, the State of Vermont and the national and global economies
and overall stability of the financial markets;
the continuing effects of government and regulatory responses to the COVID-19 pandemic;
operational and internal system failures due to changes in normal business practices, including remote working
for Company staff;
increased cybercrime and payment system risk due to increased usage by customers of online, mobile and
other remote banking channels;
the ongoing challenges to find qualified workers to maintain a stable workforce;
losses due to the fraudulent or negligent conduct of third parties, including the Company’s service providers,
customers and employees; and
adverse changes in the credit rating of U.S. government debt.
•
•
•
•
Readers are cautioned not to place undue reliance on such statements as they speak only as of the date they are
made. The Company does not undertake, and disclaims any obligation, to revise or update any forward-looking
statements to reflect the occurrence or anticipated occurrence of events or circumstances after the date of this
Report, except as required by applicable law. The Company claims the protection of the safe harbor for forward-
looking statements provided in the Private Securities Litigation Reform Act of 1995.
NON-GAAP FINANCIAL MEASURES
Under SEC Regulation G, public companies making disclosures containing financial measures that are not in
accordance with GAAP must also disclose, along with each non-GAAP financial measure, certain additional
information, including a reconciliation of the non-GAAP financial measure to the closest comparable GAAP financial
measure, as well as a statement of the company’s reasons for utilizing the non-GAAP financial measure. The SEC
has exempted from the definition of non-GAAP financial measures certain commonly used financial measures that
are not based on GAAP. However, three non-GAAP financial measures commonly used by financial institutions,
namely tax-equivalent net interest income and tax-equivalent net interest margin (as presented in the tables in the
section labeled Interest Income Versus Interest Expense (NII)) and core earnings (as defined and discussed in
the Results of Operations section), have not been specifically exempted by the SEC, and may therefore constitute
non-GAAP financial measures under Regulation G. We are unable to state with certainty whether the SEC would
regard those measures as subject to Regulation G.
Management believes that these non-GAAP financial measures are useful in evaluating the Company’s financial
performance and facilitate comparisons with the performance of other financial institutions. However, that
information should be considered supplemental in nature and not as a substitute for related financial information
prepared in accordance with GAAP.
54
Community Bancorp.
OVERVIEW
The Company’s consolidated assets at year-end 2022 were $1.06 billion compared to $1.02 billion at year-end
2021, an increase of 3.6%. Asset growth in 2022 was driven by increases in loans of $58.6 million, or 8.5% and
$10.6 million, or 5.8%, in AFS securities and $7.7 million, or 80.1% in other assets. These increases were partially
offset by a decrease of $39.2 million, or 35.5%, in cash on deposit at FRBB. The increase of $7.7 million in other
assets is attributable in part to a new partnership interest in a limited partnership investment of $2.6 million, as well
as an increase of $5.2 million in the deferred tax asset associated with the unrealized loss of the AFS securities
portfolio. Loan growth was attributable to increases in the CRE portfolio of $55.9 million, or 18.6%, the commercial
and industrial loan portfolio of $12.3 million, or 11.5% and the residential real estate portfolio of $17.4 million, or
9.6%. These increases were partially offset by a decrease in the municipal loan portfolio of $13.3 million, or 27.8%.
The portfolio of PPP loans also decreased, from $12.2 million at December 31, 2021 to $199,964 at December
31, 2022.
Funding of the asset growth was provided primarily by an increase in customer deposits. Total deposits on
December 31, 2022 were $923.0 million compared to $879.4 million on December 31, 2021, an increase of $43.6
million, or 5.0%, reflecting the combined effect of increases in core deposits (demand deposit accounts, both
interest bearing and non-interest bearing) of $35.2 million, or 7.4%, money market funds of $10.4 million, or 8.0%,
and savings accounts of $2.7 million, or 1.6%. These increases were only partially offset by a decrease in CDs of
$4.7 million, or 4.4%
Total interest income increased $2.3 million, or 6.7%, year over year as a result of increases in the volume of
both the investment and loan portfolios. The increases in the prime rate throughout 2022 also contributed to the
increase. Participation in the PPP had a significant impact on our asset mix and net interest margin during 2021.
The origination of the PPP loans resulted in processing fees from the SBA of approximately $489 thousand for
2022 compared to $4.7 million for 2021. These loan fees are amortized over the projected life of the loan, but are
recognized in full as the PPP loans payoff. At year-end 2022 the balance of deferred PPP fees was $28 thousand,
and is anticipated to amortize over the remaining life of the outstanding loans.
Total interest expense increased $909 thousand, or 29.1%, for the year ended December 31, 2022 compared to
2021, due in part to the increase in interest-bearing deposits and savings and money market accounts, as well
as the 425 basis point increase in short-term rates initiated by the FRB in 2022. Please refer to the interest rate
sensitivity discussion in the Interest Rate Risk and Asset and Liability Management section for more information on
the impact that FRB action and changes in the yield curve could have on net interest income.
The provision for loan losses for the year ended 2022 was $978 thousand compared to $624 thousand for 2021,
resulting in an increase of 56.7% year over year. Due to low levels of loan charge offs in 2021, the provision for
loan losses was decreased accordingly. Although 2022 was another year of low charges offs; the provision was
increased in order to accommodate loan growth. Please refer to the ALL and provisions discussion in the Credit
Risk section for more information on these increases.
Consolidated net income in 2022 increased $602 thousand, or 4.6%, from $13.1 million for 2021 to $13.7 million
for 2022. Non-interest income decreased $91 thousand, or 1.4%, while non-interest expense increased $216
thousand, or 1.0%. Although an increase is noted in the residential loan portfolio, secondary market activity slowed
accounting for the $343 thousand decrease in income from sold loans. Loans originated and subsequently sold
in the secondary market were $12.3 million for 2022 compared to $17.6 million for 2021. Strong commercial loan
growth during 2022 provided a lift in related fees, contributing to the increase in other income from loans of $395
thousand. A decrease of $378 thousand is also noted in other income mostly due to a decrease in income from
CFS Partners. Other noninterest expense increased $279 thousand, or 3.6%, year over year, which was offset in
part by a decrease in wages and benefits of $61,344, or 0.6%. Please refer to the Non-interest Income and Non-
interest Expense sections for more granular information on significant changes.
Equity capital decreased to $75.2 million, with a book value per share of $13.55 as of December 31, 2022,
compared to equity capital of $84.8 million and a book value of $15.48 as of December 31, 2021. This decrease
in equity capital is directly related to the increase of unrealized losses in the investment portfolio, reflecting rising
55
2022 Annual Report
bond rates, which resulted in an increase of $19.5 million, net of tax, in the accumulated other comprehensive loss
in the shareholders’ equity portion of the balance sheet. This position is considered temporary and does not impact
the Company’s regulatory capital ratios.
On December 22, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.23 per common
share, payable on February 1, 2023 to shareholders of record on January 15, 2023.
Our business, financial condition and results of operations generally rely upon the ability of our borrowers to repay
their loans, the value of collateral underlying our secured loans, and the demand for loans and other products and
services we offer, which are highly dependent on the business environment in our local banking markets and in the
country as a whole. Recent economic reports for the state of Vermont show employment in the hardest hit industries
such as leisure and hospitality has risen but is still below pre-pandemic levels. The Vermont unemployment rate,
seasonally adjusted, in December of 2022 was reported at 2.5% compared to the low of 2.1% in July of 2022.
As of December 31, 2022, all of the Company’s capital ratios, and those of our subsidiary Bank, were in excess of
all regulatory requirements. While we believe that we have sufficient capital to withstand an economic downturn
from any headwinds related to inflation or recessionary periods, should one occur, our equity capital and regulatory
capital ratios could be adversely impacted, including as a result of credit losses and other adverse impacts of the
pandemic or government monetary policy.
CRITICAL ACCOUNTING POLICIES
The Company’s consolidated financial statements are prepared according to U.S. GAAP. The preparation of such
financial statements requires management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities in the
consolidated financial statements and related notes. The SEC has defined a company’s critical accounting policies
as those that are most important to the portrayal of the Company’s financial condition and results of operations,
and which require the Company to make its most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. Because of the significance of these estimates and
assumptions, there is a high likelihood that materially different amounts would be reported for the Company under
different conditions or using different assumptions or estimates. Management evaluates on an ongoing basis its
judgment as to which policies are considered to be critical.
ALL - Management believes that the calculation of the ALL is a critical accounting policy that requires the most
significant judgments and estimates used in the preparation of its consolidated financial statements. In estimating
the ALL, management considers historical experience as well as other qualitative factors, including the effect
of current economic indicators and their probable impact on borrowers and collateral, trends in delinquent and
non-performing loans, trends in criticized and classified assets, levels of exceptions, the impact of competition in
the market, 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. Management’s estimates used in calculating the ALL may increase or decrease based on changes in these
factors, which in turn will affect the amount of the Company’s provision for loan losses charged against current
period income. This evaluation is inherently subjective and actual results could differ significantly from these
estimates under different assumptions, judgments or conditions.
As stated in Note 2 of the accompanying notes to the Company’s audited consolidated financial statements, effective
January 1, 2023, the Company is required to recognize credit losses under the guidance of ASU No. 2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The
new guidance, which is referred to as the current expected credit loss (CECL) model, requires that expected credit
losses for financial assets held at the reporting date that are accounted for at amortized cost be measured
and recognized based on historical experience and current and reasonably supportable forecasted conditions
to reflect the full amount of expected credit losses over the life of the loans. The initial adjustment from the
transition to CECL will be recorded as an adjustment to retained earnings. Based on an unaudited parallel
calculation as of December 31, 2022 the required adjustment would have an immaterial impact to retained
earnings and regulatory capital.
56
Community Bancorp.
OREO - Real estate properties acquired through or in lieu of foreclosure or properties no longer used for bank
operations, are initially recorded at fair value less estimated selling cost at the date of acquisition, foreclosure or
transfer. Fair value is determined, as appropriate, either by obtaining a current appraisal or evaluation prepared
by an independent, qualified appraiser, by obtaining a broker’s market value analysis, and finally, if the Company
has limited exposure and limited risk of loss, by the opinion of management as supported by an inspection of the
property and its most recent tax valuation. During periods of declining market values, the Company will generally
obtain a new appraisal or evaluation. The amount, if any, by which the recorded amount of the loan exceeds the
fair value, less estimated cost to sell, is a loss which is charged to the allowance for loan losses at the time of
foreclosure or repossession. The recorded amount of the loan is the loan balance adjusted for any unamortized
premium or discount and unamortized loan fees or costs, less any amount previously charged off, plus recorded
accrued interest. After acquisition through or in lieu of foreclosure, these assets are carried at the lower of their
new cost basis or fair value. Costs of significant property improvements are capitalized, whereas costs relating to
holding the property are expensed as incurred. Appraisals by an independent, qualified appraiser are performed
periodically on properties that management deems significant, or evaluations may be performed by management
or a qualified third party on properties in the portfolio that are deemed less significant or less vulnerable to market
conditions. Subsequent write-downs are recorded as a charge to other expense. Gains or losses on the sale of
such properties are included in income when the properties are sold.
Investment Securities - Management performs quarterly reviews of individual debt securities in the investment
portfolio to determine whether a decline in the fair value of a security is other than temporary. A review of OTTI
requires management to make certain judgments regarding the materiality of the decline and the probability,
extent and timing of a valuation recovery, the Company’s intent to continue to hold the security and, in the case
of debt securities, the likelihood that the Company will not have to sell the security before recovery of its cost
basis. Management assesses fair value declines to determine the extent to which such changes are attributable
to fundamental factors specific to the issuer, such as financial condition and business prospects, or to market-
related or other external factors, such as interest rates, and in the case of debt securities, the extent to which the
impairment relates to credit losses of the issuer, as compared to other factors. Declines in the fair value of debt
securities below their cost that are deemed to be other than temporary, and declines in fair value of debt securities
below their cost that are related to credit losses, are recorded in earnings as realized losses, net of tax effect.
The non-credit loss portion of an other than temporary decline in the fair value of debt securities below their cost
basis (generally, the difference between the fair value and the estimated net present value of expected future cash
flows from the debt security) is recognized in other comprehensive income as an unrealized loss, provided that the
Company does not intend to sell the security and it is more likely than not that the Company will not have to sell
the security before recovery of its reduced basis.
MSRs - MSRs associated with loans originated and sold, where servicing is retained, are required to be capitalized
and initially recorded at fair value on the acquisition date and are subsequently accounted for using the “amortization
method”. Mortgage servicing rights are amortized against non-interest income in proportion to, and over the period
of, estimated future net servicing income of the underlying financial assets. The value of capitalized servicing rights
represents the estimated present value of the future servicing fees arising from the right to service loans for third
parties. The carrying value of the mortgage servicing rights is periodically reviewed for impairment based on a
determination of estimated fair value compared to amortized cost, and impairment, if any, is recognized through
a valuation allowance and is recorded as a reduction of non-interest income. Subsequent improvement (if any)
in the estimated fair value of impaired mortgage servicing rights is reflected in a positive valuation adjustment
and is recognized in non-interest income up to (but not in excess of) the amount of the prior impairment. Critical
accounting policies for mortgage servicing rights relate to the initial valuation and subsequent impairment tests. The
methodology used to determine the valuation of mortgage servicing rights requires the development and use of a
number of estimates, including anticipated principal amortization and prepayments. Factors that may significantly
affect the estimates used are changes in interest rates and the payment performance of the underlying loans. The
Company analyzes and accounts for the value of its servicing rights with the assistance of a third party consultant.
Goodwill - Goodwill from an acquisition accounted for under the purchase accounting method, such as the
Company’s 2007 acquisition of LyndonBank, is subject to ongoing periodic impairment evaluation, which includes
an analysis of the ongoing assets, liabilities and revenues from the acquisition and an estimation of the impact of
business conditions. This evaluation is inherently subjective.
57
2022 Annual Report
Other - Management utilizes numerous techniques to estimate the carrying value of various assets held by the
Company, including, but not limited to, bank premises and equipment and deferred taxes. The assumptions
considered in making these estimates are based on historical experience and on various other factors that are
believed by management to be reasonable under the circumstances. The use of different estimates or assumptions
could produce different estimates of carrying values and those differences could be material in some circumstances.
RESULTS OF OPERATIONS
The Company’s net income increased $602 thousand, or 4.6%, from 2021 to 2022, resulting in earnings per
common share of $2.53 for 2022 versus $2.45 for 2021. Core earnings (NII) increased $1.4 million, or 4.5%, in
2022 compared to 2021. Interest income in 2022 was supported by increases in the volume of the loan portfolio
and rising interest rates, while interest income in 2021 was supported by the fees generated from originating
PPP loans. Of the $7.4 million that the Company received in PPP fee income from the SBA, approximately $489
thousand and $4.7 million was recognized in 2022 and 2021, respectively. In 2021, these fees helped to offset a
decrease in interest income due to the repricing of loans into the prevailing low interest rate environment, as new
loans were booked at lower market rates and PPP loans were booked at a mandated 1% annual interest rate.
Interest paid on deposits, which is the major component of total interest expense, increased $636 thousand, or
24.8% in 2022, reflecting the increase in short-term rates during 2022, after the low rate environment that had
prevailed since March of 2020.
Return on average assets, which is net income divided by average total assets, measures how effectively a
corporation uses its assets to produce earnings. Return on average equity, which is net income divided by average
shareholders’ equity, measures how effectively a corporation uses its equity capital to produce earnings.
The following table shows these ratios, as well as other equity ratios, for each of the last two fiscal years:
December 31,
Return on average assets
Return on average equity
Dividend payout ratio (1)
Average equity to average assets ratio
2022
2021
1.35%
18.01%
36.36%
7.49%
1.38%
16.18%
35.92%
8.51%
(1) Dividends declared per common share divided by earnings per common share.
INTEREST INCOME VERSUS INTEREST EXPENSE (NET INTEREST INCOME)
The largest component of the Company’s operating income is net interest income, which is the difference between
interest earned on loans and investments versus the interest paid on deposits and other sources of funds (i.e.,
other borrowings). The Company’s level of net interest income can fluctuate over time due to changes in the level
and mix of earning assets, and sources of funds (volume) and from changes in the yield earned and the cost of
funds (rate paid). A portion of the Company’s income from municipal loans is not subject to income taxes. Because
the proportion of tax-exempt items in the Company’s portfolio varies from year-to-year, to improve comparability
of information across years, the non-taxable income shown in the tables below has been converted to a tax
equivalent basis. The Company’s corporate tax rate is 21%, therefore, to equalize tax-free and taxable income in
the comparison, we divide the tax-free income by 79%, with the result that every tax-free dollar is equivalent to
$1.27 in taxable income.
Tax-exempt income was derived from $34.6 million and $48.0 million of municipal loans, at December 31, 2022 and
2021, respectively, and from $11.3 million and $831 thousand of tax-exempt municipal securities in our investment
portfolio, respectively, as of such dates.
58
Community Bancorp.
The following table provides the reconciliation between net interest income presented in the consolidated statements
of income and the non-GAAP tax equivalent net interest income presented in the table immediately following for
each of the last two years.
Years Ended December 31,
2022
2021
Net interest income as presented
Effect of tax-exempt income
Net interest income, tax equivalent
$ 33,084,557
286,440
$ 33,370,997
$ 31,669,040
267,066
$ 31,936,106
The following table presents the daily average interest-earning assets and the daily average interest-bearing
liabilities supporting earning assets for each of the last two fiscal years. Interest income (excluding interest on
non-accrual loans) and interest expense are both expressed on a tax equivalent basis, both in dollars and as a
rate/yield.
Years Ended December 31,
2022
2021
Average
Balance
Income/
Expense
Average
Rate/
Yield
Average
Balance
Income/
Expense
Average
Rate/
Yield
Interest-Earning Assets
Loans (1)
$ 713,097,126 $ 32,790,388
4.60% $ 712,453,828 $ 33,334,223
Taxable investment securities
182,184,739
3,111,860
Tax-exempt investment securities
6,954,312
257,415
Sweep and interest-earning accounts
65,817,367
1,158,444
Other investments (2)
1,781,776
82,989
1.71%
3.70%
1.76%
4.66%
99,075,022
1,304,902
16,806
88,544,302
1,844,046
346
362,018
56,116
Total
$ 969,835,320 $ 37,401,096
3.86% $ 901,934,004 $ 35,057,605
Interest-Bearing Liabilities
Interest-bearing transaction accounts $ 263,632,834 $
1,378,421
0.52% $ 237,055,299 $
606,392
Money market funds
Savings deposits
Time deposits
Borrowed funds
Repurchase agreements
Finance lease obligations
Junior subordinated debentures
133,732,022
177,947,216
105,361,424
1,301,129
31,285,927
3,742,662
12,887,000
779,113
107,339
938,823
26
166,746
86,028
573,603
0.58%
125,339,723
0.06%
150,311,147
621,584
165,630
0.89%
108,518,120
1,174,552
0.00%
0.53%
2.30%
4.45%
2,256,479
28,349,896
2,589,477
38
88,861
71,337
12,887,000
393,105
Total
$ 729,890,214 $
4,030,099
0.55% $ 667,307,141 $
3,121,499
Net interest income
Net interest spread (3)
Net interest margin (4)
$ 33,370,997
$ 31,936,106
3.31%
3.44%
4.68%
1.32%
2.06%
0.41%
3.04%
3.89%
0.26%
0.50%
0.11%
1.08%
0.00%
0.31%
2.75%
3.05%
0.47%
3.42%
3.54%
(1) Included in gross loans are non-accrual loans with average balances of $6,668,862 and $4,724,180 for the
years ended December 31, 2022 and 2021, respectively. Loans are stated before deduction of unearned
discount and ALL, less loans held-for-sale and include tax-exempt loans to local municipalities with average
balances of $43,514,790 and $52,298,379 for the years ended December 31, 2022 and 2021, respectively.
59
2022 Annual Report
(2) Included in other investments is the Company’s FHLBB Stock with average balances of $716,626 and
$778,896, respectively, with a dividend rate of approximately 4.2% and 2.05%, respectively, for the years
ended December 31, 2022 and 2021, respectively.
(3) Net interest spread is the difference between the average yield on average interest-earning assets and the
average rate paid on average interest-bearing liabilities.
(4) Net interest margin is net interest income divided by average earning assets.
The average volume of interest-earning assets for the year ended December 31, 2022 increased 7.5% compared
to December 31, 2021. The average yield on interest-earning assets decreased three basis points for 2022 versus
2021.
The average volume of loans increased 0.1% for 2022 versus 2021, while the average yield on loans decreased
eight basis points to 4.60% for 2022, compared to 4.68% for 2021. The decrease in the yield in 2022, despite a
rising rate environment, was due to the $4.2 million decrease in PPP fees year over year. Interest earned on the
loan portfolio as a percentage of total interest income was approximately 87.7% and 95.1%, respectively for 2022
and 2021. This percentage has decreased as the investment securities portfolio has increased as a percentage
of average earning assets.
The average volume of the taxable investment portfolio (classified as AFS) increased 83.9% for 2022 versus
2021. The average yield on the taxable investment portfolio increased 39 basis points for 2022 versus 2021. The
increase in average volume is due primarily to an effort to continue to grow the investment portfolio incrementally
as the balance sheet grows in order to provide additional liquidity and pledge quality assets.
The average volume of the tax-exempt municipal investment portfolio increased $6.9 million and the tax-equivalent
yield increased 164 basis points to 3.70% for 2022 compared to 2.06% for 2021.
The average volume of sweep and interest-earning accounts, which consists primarily of an interest-bearing
account at the FRBB and two correspondent banks, decreased 26.7% during 2022 compared to 2021. This
decrease in volume is attributable to the funding of loan growth and the purchase of investment securities during
2022. The average yield on these funds increased 135 basis points in 2022 versus 2021, reflecting the numerous
increases in the federal funds rate initiated by the FRB during 2022.
The average volume of interest-bearing liabilities for the year ended December 31, 2022 increased 9.4% compared
to the year ended December 31, 2021. The average rate paid on interest-bearing liabilities increased eight basis
points during 2022 compared to 2021. An increase in customer account balances together with an increase in
rates paid on the accounts resulted in an increase in interest expense in various components of interest-bearing
liabilities.
The average volume of interest-bearing transaction accounts increased 11.2% for 2022 versus 2021 reflecting
strong deposit growth during 2022. The average rate paid on these accounts increased 26 basis points for 2022
versus 2021.
The average volume of money market accounts increased 6.7% during 2022 compared to 2021, and the average
rate paid on these deposits increased eight basis points during 2022.
The average volume of savings accounts increased 18.2% for 2022 versus 2021, while the average rate paid on
these accounts decreased five basis points during 2022.
The average volume of time deposits decreased 2.9% for 2022 versus 2021, and the average rate paid decreased
19 basis points during 2022. Interest paid on time deposits as a percentage of total interest expense was 23.6%
and 37.6%, respectively for 2022 and 2021. The decrease in the average volume of time deposits between
comparison periods reflects the maturity of brokered deposits during 2022 that were not replaced, as well as a
decrease in retail time deposits.
60
Community Bancorp.
The average volume of repurchase agreements increased 10.4% during 2022 and the average rate paid increased
22 basis points for 2022 versus 2021.
In summary, the average yield on interest-earning assets decreased three basis points during 2022, while the
average rate paid on interest-bearing liabilities increased eight basis points. Net interest spread decreased 11
basis points for 2022 with a net interest spread of 3.31% for 2022 compared to 3.42% for 2021. Net interest margin
decreased 10 basis points during 2022 to 3.44% from 3.54% for 2021.
The following table summarizes the variances in income between 2022 and 2021, resulting from volume changes
in interest-earning assets and interest-bearing liabilities and fluctuations in rates earned and paid between periods.
Years Ended December 31,
Variance
Due to
Volume (1)
Variance
Due to
Rate (1)
Total
Variance
Average Interest-Earning Assets
Loans
Taxable investment securities
Tax-exempt investment securities
Sweep and interest-earning accounts
Other investments
Total
Average Interest-Bearing Liabilities
Interest-bearing transaction accounts
Money market funds
Savings deposits
Time deposits
Borrowed funds
Repurchase agreements
Finance lease obligations
Junior subordinated debentures
Total
Changes in net interest income
$
$
$
$
(573,941) $
709,910
114,156
1,196,420
29,775
$1,476,320
30,106 $
1,097,048
142,913
(399,994)
(2,902)
$867,171
(543,835)
1,806,958
257,069
796,426
26,873
$2,343,491
702,927 $
115,568
(88,691)
(207,634)
(12)
68,783
(17,022)
180,498
754,417 $
69,102 $
41,961
30,400
(28,095)
0
9,102
31,713
0
154,183 $
772,029
157,529
(58,291)
(235,729)
(12)
77,885
14,691
180,498
908,600
721,903 $
712,988 $ 1,434,891
(1) Items which have shown a year-to-year increase in volume have variances allocated as follows:
Variance due to rate = Change in rate x new volume
Variance due to volume = Change in volume x old rate
Items which have shown a year-to-year decrease in volume have variances allocated as follows:
Variance due to rate = Change in rate x old volume
Variances due to volume = Change in volume x new rate
61
2022 Annual Report
NON-INTEREST INCOME AND NON-INTEREST EXPENSE
Non-interest Income
The components of non-interest income for the annual periods presented are as follows:
Service fees
Income from sold loans
Other income from loans
Other income
Income from CFS Partners
Other miscellaneous income
Total non-interest income
Year Ended
December 31,
Change
2022
2021
Income
Percent
$ 3,676,875 $ 3,441,607 $
605,848
1,377,494
584,971
397,860
949,212
982,295
951,605
409,418
$ 6,643,048 $ 6,734,137 $
235,268
(343,364)
395,199
(366,634)
(11,558)
(91,089)
6.84%
-36.17%
40.23%
-38.53%
-2.82%
-1.35%
Total non-interest income decreased $91,089 for the year ended December 31, 2022 compared to the same period
2021, with significant changes noted in the following:
• Overdraft charges, a component of service fees, increased $173,640, or 21.1%, year over year, and
interchange fees, also a component of service fees, increased $42,381, or 2.2%, between periods.
•
Income from sold loans decreased year over year as a result of a decrease in secondary market activity,
due in part to a lower volume of applications for residential mortgages as well as a strategic decision to
hold some 15 and 30 year mortgages in the portfolio.
• The increased volume of commercial loan activity resulted in an increase in documentation fees collected
at origination accounting for the increase in other income from loans.
• CFS Partners has a small portion of its equity capital invested in the stock market. While the stock
market rebounded somewhat favorably during 2021, less favorable market conditions were experienced in
2022 requiring negative mark to market adjustments to CFGS’s equity portfolio, resulting in a substantial
decrease in income year over year.
62
Community Bancorp.
Non-interest Expense
The components of non-interest expense for the annual periods presented are as follows:
Salaries and wages
Employee benefits
Occupancy expenses, net
Other expenses
Service contracts - administrative
Directors fees
Travel, entertainment and meals expense
Audit fees
Collection & non-accruing loan expense
ATM fees
Electronic banking expense
State deposit tax
Other miscellaneous expenses
Total non-interest expense
Year Ended
December 31,
Change
2022
2021
Expense
Percent
$ 8,347,000 $ 8,027,000 $
2,743,210
2,806,830
3,124,554
2,808,068
579,956
576,928
117,593
429,892
(72,727)
616,900
269,255
992,333
4,467,169
520,310
514,916
81,848
407,457
123,269
562,779
238,108
884,492
4,364,785
$ 21,874,339 $ 21,657,586 $
320,000
(381,344)
(1,238)
59,646
62,012
35,745
22,435
(195,996)
54,121
31,147
107,841
102,384
216,753
3.99%
-12.20%
-0.04%
11.46%
12.04%
43.67%
5.51%
-159.00%
9.62%
13.08%
12.19%
2.35%
1.00%
Total non-interest expense increased $217 thousand, or 1.0%, for the year ended December 31, 2022 compared
to 2021, with significant changes noted in the following:
• Salaries and wages increased due to normal salary increases of 3%, retention bonuses to all employees
under the vice president level, higher production commissions and incentive plan payments, offset by
several unfilled positions during the year.
• The decrease in employee benefits is attributable to a decrease in health insurance claims year over year
under the Company’s self-funded health insurance plan.
• The increase in service contracts – administrative is due to annual increases in pricing, impacted by
growth in the Company’s assets and by inflation.
• The increase in Directors fees is attributable to an additional Director for 2022.
•
In 2022, as COVID restrictions began to ease, more seminars and conferences returned to in-person
attendance accounting for the increase in travel, entertainment and meals expense for 2022 compared
to 2021.
• The increase in audit fees is attributable to increase audit services due to the Company surpassing the
$1.0 billion asset size.
• Collections & non-accruing loan expense decreased year over year due to the recovery of expenses
associated with properties in the Company’s non-accruing loan portfolio.
• ATM fees increased year over year due to the ongoing cost to support the upgraded and enhanced
technology being utilized for deposit automation. Use of deposit automation replaces a manual process
for required monitoring of cash deposits as well as providing fraud detection measures at the ATM.
63
2022 Annual Report
• The increase in electronic banking expense is partly attributable to a new mobile banking platform which
includes security and functionality enhancements and other technical upgrades. The increase also reflects
higher transaction fees, resulting from increased electronic banking transaction volumes.
• State deposit tax increased year over year due to a significant increase in deposits. The calculation is
based on an average of month-end deposit totals over a 12 month period.
APPLICABLE INCOME TAXES
Income before income taxes increased $753 thousand, or 4.7% for 2022 compared to 2021, accounting for the
increase in the provision for income taxes of $152 thousand or 5.1% between periods from $2.98 million in 2021 to
$3.14 million in 2022. Tax credits from affordable housing investments decreased $78 thousand, or 16.7%, from
$468 thousand in 2021 to $390 thousand in 2022.
Amortization expense related to limited partnership investments is included as a component of income tax expense
and amounted to $269 thousand and $363 thousand for 2022 and 2021, respectively. These investments provide
tax benefits, including tax credits, and are designed to provide an effective yield between 7% and 10%.
64
Community Bancorp.
CHANGES IN FINANCIAL CONDITION
The following table provides a visual comparison of the breakdown of the daily average assets and the daily
average liabilities as well as the daily average shareholders’ equity for the comparison periods and should be
reviewed in conjunction with the table on the following page which provides volume changes and percent of
change by category.
2022
2021
Balance
%
Balance
%
Years Ended December 31,
Average Assets
Cash and due from banks
Non-interest bearing
Federal funds sold and overnight deposits
Taxable investment securities
Tax-exempt investment securities
Other securities
Gross loans
ALL
Deferred net loan cost (fees)
Premises and equipment
BOLI
Goodwill
Other assets
Total average assets
Average Liabilities
Demand deposits
Interest-bearing transaction accounts
Money market funds
Savings accounts
Time deposits
Total average deposits
Borrowed funds
Repurchase agreements
Junior subordinated debentures
Other liabilities
Total average liabilities
$
10,931,084
65,817,367
182,184,739
6,954,312
1,394,776
713,273,710
(8,174,643)
347,038
13,348,366
5,110,510
11,574,269
15,839,596
$ 1,018,601,124
$ 208,367,458
263,632,834
133,732,022
177,947,216
105,361,424
889,040,954
1,301,129
31,285,927
12,887,000
7,813,707
942,328,717
Average Shareholders' Equity
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Less: Treasury stock
Accumulated other comprehensive (loss) income
1,500,000
14,024,620
35,731,983
41,473,345
(2,622,777)
(13,834,764)
76,272,407
Total average shareholders' equity
Total average liabilities and shareholders' equity $ 1,018,601,124
1.07% $ 18,973,102
88,544,302
6.46%
99,075,022
17.89%
0.68%
16,806
1,457,046
0.14%
712,806,479
70.02%
(7,657,621)
-0.80%
(1,622,871)
0.03%
12,725,945
1.31%
5,027,731
0.50%
11,574,269
1.14%
1.56%
12,275,102
100% $ 953,195,312
20.46% $201,107,470
237,055,299
25.88%
125,339,723
13.13%
150,311,147
17.47%
108,518,120
10.34%
822,331,759
87.28%
0.13%
3.07%
1.27%
0.77%
92.52%
2,256,479
28,349,896
12,887,000
6,191,484
872,016,618
0.15%
1,500,000
1.38%
13,881,464
3.51%
34,711,117
4.07%
33,672,406
-0.26%
(2,622,777)
-1.36%
36,484
81,178,694
7.49%
100% $ 953,195,312
1.99%
9.29%
10.39%
0.00%
0.15%
74.78%
-0.80%
-0.17%
1.34%
0.53%
1.21%
1.29%
100%
21.10%
24.87%
13.15%
15.76%
11.38%
86.26%
0.24%
2.97%
1.35%
0.65%
91.47%
0.16%
1.46%
3.64%
3.53%
-0.28%
0.01%
8.52%
100%
65
2022 Annual Report
The following table provides a breakdown of volume changes and percent of change by category for the table
on the preceding page. Please refer to the sections labeled “Interest Income and Interest Expense (Net Interest
Income)” and “Liquidity and Capital Resources” for more in-depth discussion of significant changes.
Federal funds sold and overnight deposits
65,817,367
88,544,302
(22,726,935)
Years Ended December 31,
Average Assets
Cash and due from banks
Non-interest bearing
Taxable investment securities
Tax-exempt investment securities
Other securities
Gross loans
ALL
Deferred net loan cost (fees)
Premises and equipment
BOLI
Goodwill
Other assets
Total average assets
Average Liabilities
Demand deposits
Interest-bearing transaction accounts
Money market funds
Savings accounts
Time deposits
Total average deposits
Borrowed funds
Repurchase agreements
Junior subordinated debentures
Other liabilities
Total average liabilities
Average Shareholders' Equity
Preferred stock
Common stock
Additional paid-in capital
Retained earnings
Less: Treasury stock
2022
Average
Balance
2021
Average
Balance
2022 vs 2021
Volume
Change
% of
Change
$
10,931,084
$ 18,973,102
$
(8,042,018)
-42.39%
-25.67%
83.89%
-4.27%
0.07%
6.75%
182,184,739
99,075,022
83,109,717
6,954,312
1,394,776
1,457,046
713,273,710
712,806,479
(62,270)
467,231
16,806
6,937,506
41279.94%
(8,174,643)
(7,657,621)
(517,022)
347,038
(1,622,871)
1,969,909
-121.38%
13,348,366
12,725,945
5,110,510
5,027,731
11,574,269
11,574,269
622,421
82,779
0
15,839,596
12,275,102
3,564,494
$ 1,018,601,124
$ 953,195,312
$ 65,405,812
$ 208,367,458
$ 201,107,470
$ 7,259,988
263,632,834
237,055,299
26,577,535
133,732,022
125,339,723
8,392,299
177,947,216
150,311,147
27,636,069
105,361,424
108,518,120
(3,156,696)
889,040,954
822,331,759
66,709,195
4.89%
1.65%
0.00%
29.04%
6.86%
3.61%
11.21%
6.70%
18.39%
-2.91%
8.11%
1,301,129
2,256,479
(955,350)
-42.34%
31,285,927
28,349,896
2,936,031
12,887,000
12,887,000
0
7,813,707
6,191,484
1,622,223
942,328,717
872,016,618
70,312,099
1,500,000
1,500,000
14,024,620
13,881,464
35,731,983
34,711,117
41,473,345
33,672,406
0
143,156
1,020,866
7,800,939
(2,622,777)
(2,622,777)
0
10.36%
0.00%
26.20%
8.06%
0.00%
1.03%
2.94%
23.17%
0.00%
Accumulated other comprehensive (loss) income
(13,834,764)
36,484
(13,871,248)
-38020.09%
Total average shareholders' equity
76,272,407
81,178,694
(4,906,287)
Total average liabilities and shareholders' equity
$ 1,018,601,124
$ 953,195,312
$ 65,405,812
-6.04%
6.86%
66
Community Bancorp.
CERTAIN TIME DEPOSITS
Increments of maturity of time CDs of $250,000 or more outstanding on December 31, 2022 are summarized as
follows:
3 months or less
Over 3 through 6 months
Over 6 through 12 months
Over 12 months
Total
INVESTMENT SECURITIES
$
3,125,361
4,519,073
3,918,524
4,069,100
$ 15,632,058
The Company maintains an investment portfolio of various securities to diversify its revenue sources, as well as
to provide interest rate risk and credit risk diversification and to provide for its liquidity and funding needs. The
Company’s portfolio of AFS debt securities increased throughout the reporting periods as deposit growth exceeded
loan growth and the Company sought ways to invest the excess cash on hand.
Accounting standards require banks to recognize all appreciation or depreciation of investments classified as either
trading securities or AFS, either through the income statement or on the balance sheet even though a gain or loss
has not been realized. Securities classified as trading securities are marked to market with any gain or loss net of
tax effect, charged to income. The Company’s investment policy does not permit the holding of trading securities.
Debt securities classified as HTM are recorded at book value, subject to adjustment for OTTI. The Company did
not hold any securities HTM during 2022 or 2021.
Debt securities classified as AFS are marked to market with any gain or loss after taxes charged to shareholders’
equity in the consolidated balance sheets. These adjustments in the AFS portfolio resulted in an accumulated
unrealized loss net of taxes of $20.7 million at December 31, 2022, compared to an accumulated unrealized loss
net of taxes of $1.2 million at December 31, 2021. The fluctuations in unrealized gains and losses are due to
market interest rate changes, and are not based on any deterioration in credit quality of the underlying issuers.
The Company’s investment portfolio includes Agency MBS in order to realize a more favorable yield in the portfolio
and diversify the holdings. Although classified as AFS, the Company anticipates holding these securities until
maturity. The unrealized loss positions within the investment portfolio as of the balance sheet dates are considered
by management to be temporary and do not affect the calculation of regulatory capital ratios.
The restricted equity securities comprise the Company’s membership stock in the FRBB, FHLBB and ACBI.
Membership in the FRBB and FHLBB requires the purchase of their stock in specified amounts. On December 31,
2022 and 2021, the Company held $588,150 in FRBB stock and $733,600 and $756,300, respectively, in FHLBB
stock, and $90,000 in ACBI stock. The ACBI stock is required for receipt of correspondent banking services from
ACBB at more favorable pricing. These restricted securities in the FRBB, FHLBB and ACBI are typically held for
an extended period of time and are subject to strict limitations on resales. FRBB stock may only be sold back
to the issuer, while FHLBB stock may only be repurchased by the FHLBB or resold to a member institution and
ACBI stock may only be resold to other depository institutions or their holding companies or subsidiaries, or to the
FDIC. Restricted equity stock is generally sold and redeemed at par. Due to the unique nature of the restricted
equity stock, including the non-investment purpose for owning it, the ownership structure and restrictions and
the absence of a trading market for the stock, these securities are not marked to market, but carried at par. The
FHLBB stock is subject to capital call provisions.
Some of the Company’s debt securities have a call feature, meaning that the issuer may call in the investment
before maturity, at predetermined call dates and prices. In 2022, there were no call features exercised by the
issuer, compared to two call features exercised in 2021.
The Company had investments in Agency MBS exceeding 10% of stockholders equity with a book value of $135.2
million and $128.3 million, respectively, and a fair value of $115.2 million and $127.1 million, respectively, at
December 31, 2022 and 2021.
67
2022 Annual Report
The following is an analysis of the maturities and the daily average yields of the debt securities AFS in the Company’s
investment portfolio for each of the last two fiscal years:
December 31,
U.S. GSE debt securities
Due from one to five years
Due from five to ten years
Due after ten years
Total
U.S. Government securities
Due from one to five years
Due from five to ten years
Total
Taxable municipal securities
Due after ten years
Tax-exempt municipal securities
Due after ten years
ABS/AOS
Due from five to ten years
Due from five to ten years
Total
CMO
Due from one to five years
Due from five to ten years
Total
Other Investments
Due in one year or less
Due from one to five years
Total
Agency MBS (1)
FRBB Stock (2)
FHLBB Stock (2)
ACBI Stock (2)
2022
2021
Fair
Value
Weighted
Average
Yield
Fair
Value
Weighted
Average
Yield
$
4,333,400
5,246,398
795,493
$ 10,375,291
1.15% $ 2,975,634
7,843,475
2.01%
2.69%
1,009,389
1.70% $ 11,828,498
$ 38,231,589
0
$ 38,231,589
1.08% $ 30,080,264
0.00%
1,960,777
1.08% $ 32,041,041
1.31%
1.73%
2.42%
1.68%
0.87%
1.14%
0.89%
$
234,858
2.17% $
298,733
2.17%
$ 11,323,567
3.79% $
831,379
2.35%
$
$
1,421,632
1,271,974
2,693,606
2.71% $ 2,214,024
0
3.22%
2.95% $ 2,214,024
$ 11,247,053
688,872
$ 11,935,925
3.76% $
496,008
924,450
0.99%
3.60% $ 1,420,458
$
$
1,966,766
924,908
2,891,674
3.14% $ 3,508,582
1.96%
3,067,223
2.77% $ 6,575,805
$ 115,231,599
1.87% $ 127,132,521
$
$
$
588,150
6.00% $
588,150
733,600
4.20% $
756,300
90,000
0.42% $
90,000
2.84%
0.00%
2.84%
1.30%
1.01%
1.11%
2.49%
2.75%
2.61%
1.49%
6.00%
2.05%
0.33%
(1) Agency MBS are not due at a single maturity date and have not been allocated to maturity groupings for
purposes of the maturity table.
(2) Required equity purchases for membership in the FRB System and FHLB System and for access to
correspondent banking services from ACBB.
68
Community Bancorp.
RISK MANAGEMENT
Interest Rate Risk and Asset and Liability Management - Management actively monitors and manages the
Company’s interest rate risk exposure and attempts to structure the balance sheet to maximize net interest income
while controlling its exposure to interest rate risk. The Company’s ALCO is made up of the Executive Officers
and certain Vice Presidents of the Bank representing major business lines. The ALCO formulates strategies
to manage interest rate risk by evaluating the impact on earnings and capital of such factors as current interest
rate forecasts and economic indicators, potential changes in such forecasts and indicators, liquidity and various
business strategies. The ALCO meets at least quarterly to review financial statements, liquidity levels, yields
and spreads to better understand, measure, monitor and control the Company’s interest rate risk. In the ALCO
process, the committee members apply policy limits set forth in the Asset Liability, Liquidity and Investment policies
approved and periodically reviewed by the Company’s Board of Directors. The ALCO’s methods for evaluating
interest rate risk include an analysis of the effects of interest rate changes on net interest income and an analysis
of the Company’s interest rate sensitivity “gap”, which provides a static analysis of the maturity and repricing
characteristics of the entire balance sheet. The ALCO Policy also includes a contingency funding plan to help
management prepare for unforeseen liquidity restrictions, including hypothetical severe liquidity crises.
Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates
change, the interest income and expense streams associated with the Company’s financial instruments also
change, thereby impacting NII, the primary component of the Company’s earnings. Fluctuations in interest rates
can also have an impact on liquidity. The ALCO uses an outside consultant to perform rate shock simulations to
the Company’s net interest income, as well as a variety of other analyses. It is the ALCO’s function to provide
the assumptions used in the modeling process. Assumptions used in prior period simulation models are regularly
tested by comparing projected NII with actual NII. The ALCO utilizes the results of the simulation model to quantify
the estimated exposure of NII and liquidity to sustained interest rate changes. The simulation model captures
the impact of changing interest rates on the interest income received and interest expense paid on all interest-
earning assets and interest-bearing liabilities reflected on the Company’s balance sheet. The model also simulates
the balance sheet’s sensitivity to a prolonged flat rate environment. All rate scenarios are simulated assuming a
parallel shift of the yield curve; however further simulations are performed utilizing non-parallel changes in the yield
curve. The results of this sensitivity analysis are compared to the ALCO policy limits which specify a maximum
tolerance level for NII exposure over a 1-year horizon, assuming no balance sheet growth, given a 200 bp shift
upward and a 100 bp shift downward in interest rates.
Under the Company’s interest rate sensitivity modeling, with the continued asset sensitive balance sheet, in a
rising rate environment NII is expected to trend upward as the short-term asset base (cash and adjustable rate
loans) quickly cycle upward while the retail funding base (deposits) lags the market. If rates paid on deposits have
to be increased more and/or more quickly than projected due to competitive pressures, the expected benefit to
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. Management expects that the current rising rate environment will continue to have a positive impact
to the Company’s NII, however some of the benefit will be offset by pressure to increase pricing on the funding side.
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 December 31, 2022:
One Year Horizon
Two Year Horizon
Rate Change
Percent Change in NII
Rate Change
Percent Change in NII
Down 100 basis points
Up 200 basis points
-0.7%
-0.5%
Down 100 basis points
Up 200 basis points
4.4%
9.0%
69
2022 Annual Report
The estimated amounts shown in the table 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. 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 the market rates continue to increase, the impact of a falling rate environment would be more pronounced, and
the possibility of change in NII becomes more plausible than during the last several years of near zero short rates.
As of December 31, 2022, the Company had outstanding $12,887,000 in principal amount of Junior Subordinated
Debentures due December 15, 2037, which bear a quarterly floating rate of interest equal to the 3-month London
Interbank Offered Rate (LIBOR), plus 2.85%. As previously announced by the Financial Conduct Authority in
the United Kingdom, the entity that administers LIBOR, 3-month LIBOR for U.S. dollar denominated deposits will
be phased out as of June 30, 2023. The Indenture governing the terms of the Company’s Debentures contains
detailed fallback provisions in the event 3-month LIBOR is not available, empowering the Trustee to obtain
substitute quotations from other leading banks. However, under the federal Adjustable Interest Rate (LIBOR) Act
enacted in March 2022 (the “LIBOR Act”), fallback provisions like those in the Company’s Indenture that are based
on a “determining person” (such as an indenture trustee) obtaining quotations of interbank lending or deposit rates
are deemed “ineffective” and will be replaced as a matter of law, without need to amend contract documents, with
a benchmark interest rate that will be identified in final regulations to be promulgated by the Federal Reserve. As
required under the LIBOR Act, the Federal Reserve-identified benchmark rates specified in the final regulations
for various tenors of LIBOR are based on the Secured Overnight Financing Rate (SOFR) published by the Federal
Reserve Bank of New York and each includes an appropriate “tenor spread adjustment” to reflect historical spreads
between LIBOR and SOFR. The replacement benchmark rate for ineffective fallback provisions will take effect on
the first London banking day after June 30, 2023, (the “LIBOR Replacement Date”). The Indenture Trustee has
informed the Company that it views the fallback provisions in the Indenture as ineffective under the LIBOR Act, and
that,, absent an amendment to the Indenture and related Debenture documents to adopt a new interest rate or a
change in applicable law, effective on and after the LIBOR Replacement Date, 3-month LIBOR will be replaced by
3-month CME SOFR, as adjusted by a spread adjustment factor of 0.26161 percent, as specified in the LIBOR Act
and FRB regulations. The company does not intend to seek an amendment of the Indenture or other Debenture
documents. Accordingly, as of the LIBOR Replacement Date, the Debentures will bear interest at a quarterly
floating rate equal to 3-month SOFR, as adjusted by a spread adjustment of 0.26161, plus 2.85%.
Aside from the Debentures, the Company does not have any other exposures to the phase out of LIBOR. The
Company has not generally utilized LIBOR as an interest rate benchmark for its variable rate commercial,
residential or other loans and does not utilize derivatives or other financial instruments tied to LIBOR for hedging
or investment purposes. Accordingly, management expects that the Company’s exposure to the phase out of
LIBOR will be limited to the effect on the interest rate paid on its Debentures, but cannot predict with certainty the
magnitude of the impact on the Company’s interest expense at this time.
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 and reporting on the status of the loan portfolio, including delinquent and non-performing loan trends. The
Company also monitors concentration of credit risk in a variety of areas, including portfolio mix, the level of loans
to individual borrowers and their related interest, loans to industry segments, and the geographic distribution of
CRE loans. Loans are reviewed periodically by an independent loan review firm to help ensure accuracy of the
Company’s internal risk ratings and compliance with various internal policies, procedures and regulatory guidance.
Residential mortgages represented 31.1% and 31.3% of the Company’s loan balances at December 31, 2022 and
2021, respectively. The percentage of residential mortgage loans to total loans has been on a gradual decline in
recent years, with a strategic shift to commercial lending. The Company maintains a residential mortgage loan
portfolio of traditional mortgage products and does not engage in higher risk loans such as option adjustable rate
mortgage products, high loan-to-value products, interest only mortgages, subprime loans and products with deeply
70
Community Bancorp.
discounted teaser rates. Residential mortgages with loan-to-values exceeding 80% are generally covered by PMI.
A 90% loan-to-value residential mortgage product without PMI is only available to borrowers with excellent credit
and low debt-to-income ratios and has not been widely originated. Junior lien home equity products make up
14.5% of the residential mortgage portfolio with maximum loan-to-value ratios (including prior liens) of 80%. The
Company also originates some home equity loans greater than 80% under an insured loan program with stringent
underwriting criteria.
Consistent with the strategic focus on commercial lending, the commercial and CRE loan portfolios have seen solid
growth over recent years. Commercial & industrial, Purchased, CRE and Municipal loans collectively comprised
68.4% of the Company’s loan portfolio at December 31, 2022, compared to 68.1% at December 31, 2021.
The Municipal loan portfolio consists of tax-exempt obligations of local municipalities, and is made up of three
types of borrowings; term lending, tax anticipation lending, and non-arbitrage borrowing. The portfolio decreased
$13.3 million, or 27.8%, to $34.6 million as of December 31, 2022 compared to $48.0 million at December 31,
2021. During 2022, term lending decreased $4.9 million, or 17.6%, tax anticipation lending decreased $251
thousand, or 12.1%, and non-arbitrage borrowing decreased $8.1 million, or 45.5%. The non-arbitrage and tax
anticipation loans to municipalities are issued annually on a competitive bid basis; as a result the portfolio can
fluctuate considerably from year to year based on changes in competitive pressures.
Growth in the CRE portfolio in recent years has been principally driven by new loan volume in Chittenden
County and northern Windsor County around the White River Junction, I91-I89 interchange area. Credits in the
Chittenden County market are being managed by two commercial lenders out of the Company’s Burlington loan
production office that know the area well, while Windsor County is being served by a commercial lender from the
St. Johnsbury office with previous lending experience serving the greater White River Junction area. The Company
has a loan production office in Lebanon, New Hampshire to provide a presence in the greater White River Junction
area including Grafton County, New Hampshire. Larger transactions continue to be centrally underwritten and
monitored through the Company’s commercial credit department. The types of CRE transactions driving the
growth have been a mix of construction, land and development, multifamily, and other non-owner occupied CRE
properties including hotels, retail, office, and industrial properties. The largest components of the $356.9 million
CRE portfolio at December 31, 2022 were $102.4 million in owner-occupied CRE and $124.9 million in non-owner
occupied CRE.
The Company’s home equity and commercial line of credit portfolios contain for the most part variable rate loans
with the Wall Street Journal Prime rate as the underlying index and rates repricing monthly. After a series of rate
hikes and decreases over the last 10 years, the Wall Street Journal Prime index ended at 3.25% as of December
31, 2020 and remained constant throughout 2021. In 2022, there were seven rate hikes to end the year at 7.50%.
The home equity portfolio and commercial line of credit portfolio have weathered these fluctuations and continue
to perform well. Commercial and industrial term loans are generally written on a fixed rate basis with limited risk
associated with rising interest rates. CRE loans generally have included an initial fixed rate period typically of 5
years, then enter a variable rate period, usually tied to Wall Street Prime. Approximately $200.2 million of CRE
loans are scheduled to reprice over the next five years. Rates based on the current Prime Rate Index will be subject
to increases as the fed funds rate increases. Management expects that those loans that may experience rate
increases will ultimately refinance or renegotiate pricing, while the increase may adversely impact the repayment
capacity of those CRE loans of lesser credit quality and could ultimately result in higher non-performing loans and
losses.
71
2022 Annual Report
The following tables show the estimated maturity of the Company’s loan portfolio as of December 31, 2022.
Within
1 Year
Fixed Rate Loans
6 - 15
Years
Over
15 Years
2 - 5
Years
Total
Commercial & industrial
Purchased Loans
Commercial real estate
Municipal
Residential real estate - 1st lien
Residential real estate - Jr lien
Consumer
$
696,242 $ 28,735,682 $ 17,405,149 $
0
4,509,870
12,443,656
31,830
6,945
704,328
1,451,179
15,012,858
4,388,381
3,456,678
360,497
2,348,090
6,079,279
20,940,608
5,807,412
27,222,257
2,189,373
135,189
0 $ 46,837,073
7,530,458
0
40,731,622
268,286
22,884,364
244,915
94,608,821
63,898,056
2,556,815
0
3,187,607
0
Total Loans
$ 18,392,871 $ 55,753,365 $ 79,779,267 $ 64,411,257 $ 218,336,760
Within
1 Year
Variable Rate Loans
6 - 15
Years
Over
15 Years
2 - 5
Years
Total
Commercial & industrial
Commercial real estate
Municipal
Residential real estate - 1st lien
Residential real estate - Jr lien
Consumer
$ 21,487,258 $ 29,702,299 $ 9,747,850 $ 5,177,393 $ 66,114,800
82,446,817 221,927,606 316,161,364
11,748,691
11,748,691
83,194,571 104,134,554
18,761,093
31,200,057
18,234,779
11,911,647
852,382
48,624
272,674
5,259,024
0
1,747,641
888,223
408,837
6,527,917
0
431,249
165,408
122,247
0
Total Loans
$ 28,734,079 $ 38,006,024 $ 134,888,772 $ 328,582,973 $530,211,848
Risk in the Company’s commercial and CRE loan portfolios is mitigated in part by government guarantees issued
by federal agencies such as the SBA and RD. At December 31, 2022 and 2021, the Company had approximately
$27.0 million and $42.9 million, respectively, in guaranteed loans with guaranteed balances of approximately $18.3
million and $35.4 million, respectively. Included in the totals are the PPP loans amounting to $200 thousand and
$12.2 million, at December 31, 2022 and 2021, respectively, which carry a 100% SBA guarantee.
The Company works actively with customers early in the delinquency process to help them to avoid default and
foreclosure. Commercial & industrial and CRE loans are generally placed on non-accrual status when there is
deterioration in the financial position of the borrower, payment in full of principal and interest is not expected, and/
or principal or interest has been in default for 90 days or more. However, such a loan need not be placed on non-
accrual status if it is both well secured and in the process of collection. Residential mortgages and home equity
loans are considered for non-accrual status at 90 days past due and are evaluated on a case-by-case basis. The
Company obtains current property appraisals or market value analyses and considers the cost to carry and sell
collateral in order to assess the level of specific allocations required. Consumer loans are generally not placed in
non-accrual but are charged off by the time they reach 120 days past due. When a loan is placed in non-accrual
status, the Company reverses the accrued interest against current period income and discontinues the accrual
of interest until the borrower clearly demonstrates the ability and intention to resume normal payments, typically
demonstrated by regular timely payments for a period of not less than six months. Interest payments received on
non-accrual or impaired loans are generally applied as a reduction of the loan book balance.
72
Community Bancorp.
The Company’s TDRs are principally a result of extending loan repayment terms to relieve cash flow difficulties. The
Company has only infrequently reduced interest rates for borrowers below the current market rates. The Company
has not forgiven principal or reduced accrued interest within the terms of original restructurings. Management
evaluates each TDR situation on its own merits and does not foreclose the granting of any particular type of
concession.
TDRs that were past due 90 days or more or in non-accrual status as of the dates presented, consisted of the
following:
Commercial & industrial
Commercial real estate
Residential real estate - 1st lien
Residential real estate - Jr lien
Total
December 31, 2022
Number of
Loans
Principal
Balance
December 31, 2021
Number of
Loans
Principal
Balance
4 $
4
8
1
39,841
1,279,480
809,917
35,347
17 $ 2,164,585
6
5
12
1
24
$
71,128
3,642,073
977,961
41,901
$ 4,733,063
The remainder of the Company’s TDRs were performing in accordance with their modified terms as of the date
presented and consisted of the following:
December 31, 2022
Number of
Loans
Principal
Balance
December 31, 2021
Number of
Loans
Principal
Balance
Commercial real estate
Residential real estate - 1st lien
Residential real estate - Jr lien
Total
0 $
0
2,679,681
2,194
33 $ 2,681,875
32
1
2 $
31
1
34
41,228
2,473,767
3,537
$ 2,518,532
ALL and provisions - The Company maintains an ALL at a level that management believes is appropriate to
absorb losses inherent in the loan portfolio as of the measurement date (See Note 4 to the accompanying audited
consolidated financial statements). Although the Company, in establishing the ALL, considers the inherent losses
in individual loans and pools of loans, the ALL is a general reserve available to absorb all credit losses in the loan
portfolio. No part of the ALL is segregated to absorb losses from any particular loan or segment of loans.
When establishing the ALL each quarter, the Company applies a combination of historical loss factors and
qualitative factors to loan segments, including residential first and junior lien mortgages, CRE, commercial &
industrial, purchased loans, and consumer loan portfolios. The Company applies numerous qualitative factors to
each segment of the loan portfolio. Those factors include the levels of and trends in delinquencies and non-accrual
loans, criticized and classified assets, volumes and terms of loans, and the impact of any loan policy changes.
Experience, ability and depth of lending personnel, levels of policy and documentation exceptions, national and
local economic trends, the competitive environment, and concentrations of credit are also factors considered.
Specific allocations to the ALL are made for certain impaired loans.
Impaired loans include all troubled debt
restructurings regardless of amount, and all loans to a borrower that in aggregate are greater than $100,000
and that are in non-accrual status. A loan is considered impaired when it is probable that the Company will be
unable to collect all amounts due, including interest and principal, according to the contractual terms of the loan
agreement. The Company reviews all the facts and circumstances surrounding non-accrual loans and on a case-
by-case basis may consider loans below the threshold as impaired when such treatment is material to the financial
statements. See Note 4 to the accompanying audited consolidated financial statements for information on the
73
2022 Annual Report
recorded investment in impaired loans and their related allocations, the allocation of the ALL, as well as the percent
of each loan category to the total loan portfolio. Additionally, the Company does not have any foreign loans in its
loan portfolio.
The following tables summarize the Company’s loan loss experience and other credit risk ratios for the dates presented.
ALL to total loans outstanding
ALL
Loans outstanding
Non-accruing loans to loans outstanding
Non-accruing loans
Loans outstanding
ALL to non-accruing loans
ALL
Non-accruing loans
December 31,
2022
December 31,
2021
1.16%
8,709,225 $
1.12%
7,710,256
748,548,608 $ 689,988,533
1.05%
7,890,020 $
0.86%
5,940,629
748,548,608 $ 689,988,533
110.38%
8,709,225 $
7,890,020 $
129.79%
7,710,256
5,940,629
$
$
$
$
$
$
The increase in non-accruing loans in 2022 is attributable to two commercial relationships with significant balances
being placed on non-accrual status.
74
Community Bancorp.
As of or Years Ended December 31,
2022
2021
Net recoveries (charge-offs) during the period to average loans outstanding:
Commercial & industrial
Net charge-off during the period
Average amount outstanding
Purchased loans
Net charge-offs during the period
Average amount outstanding
Commercial real estate
Net recovery (charge-off) during the period
Average amount outstanding
Municipal
Net charge-off during the period
Average amount outstanding
Residential real estate - 1st lien
Net recoveries (charge-offs) during the period
Average amount outstanding
Residential real estate - Jr lien
Net recoveries during the period
Average amount outstanding
Consumer
Net charge-off during the period
Average amount outstanding
Total loans
Net recoveries (charge-offs) during the period
Average amount outstanding
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
-0.05%
(62,763) $
-0.01%
(14,086)
116,091,523 $ 150,294,275
0.00%
0 $
8,505,512 $
0.00%
0
10,578,453
0.00%
0.00%
5,160
320,521,501 $ 287,099,645
0 $
0.00%
0 $
43,514,790 $
0.00%
0
52,298,379
0.06%
-0.05%
(91,068)
187,505,201 $ 172,144,846
111,763 $
0.02%
5,089 $
33,330,146 $
0.03%
10,821
36,121,958
-0.91%
(33,120) $
3,628,454 $
-0.85%
(33,221)
3,916,272
0.00%
20,969 $
-0.02%
(122,394)
713,097,126 $ 712,453,828
The fourth quarter ALL analysis indicated that the reserve balance of $8.7 million at December 31, 2022 is sufficient
to cover losses that are probable and estimable as of the measurement date, with an unallocated reserve of
$102 thousand. Management believes the reserve balance and unallocated amount continue to be directionally
consistent with the overall risk profile of the Company’s loan portfolio and credit risk appetite. The portion of the
ALL termed “unallocated” is established to absorb inherent losses that exist as of the measurement date although
not specifically identified through management’s process for estimating credit losses. While the ALL is described
as consisting of separate allocated portions, the entire ALL is available to support loan losses, regardless of
category. Unallocated reserves are considered by management to be appropriate as of the measurement date in
light of the Company’s continued growth strategy and shift in the portfolio from residential loans to commercial and
industrial and CRE loans and the risk associated with the relatively new, unseasoned loans in those portfolios. The
adequacy of the ALL is reviewed quarterly by the risk management committee of the Board and then presented to
the full Board for approval.
As of January 1, 2023, the Company transitioned from the incurred loss model for recognizing credit losses to the
current expected credit (CECL) model. (See Note 2 to the accompanying audited consolidated financial statements.)
75
2022 Annual Report
In addition to credit risk in the Company’s loan portfolio and liquidity risk in its loan and deposit-taking operations,
the Company’s business activities also generate market risk. Market risk is the risk of loss in a financial instrument
arising from adverse changes in market prices and rates, foreign currency exchange rates, commodity prices and
equity prices. Declining capital markets can result in fair value adjustments necessary to record decreases in the
value of the investment portfolio for other-than-temporary-impairment. The Company does not have any market
risk sensitive instruments acquired for trading purposes. The Company’s market risk arises primarily from interest
rate risk inherent in its lending and deposit taking activities. During recessionary periods, a declining housing
market can result in an increase in loan loss reserves or ultimately an increase in foreclosures. Interest rate risk
is directly related to the different maturities and repricing characteristics of interest-bearing assets and liabilities,
as well as to loan prepayment risks, early withdrawal of time deposits, and the fact that the speed and magnitude
of responses to interest rate changes vary by product. As discussed above under “Interest Rate Risk and Asset
and Liability Management”, the Company actively monitors and manages its interest rate risk through the ALCO
process.
COMMITMENTS, CONTINGENCIES AND OFF-BALANCE-SHEET ARRANGEMENTS
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet
the financing needs of its customers. These financial instruments include commitments to extend credit, standby
letters of credit and risk-sharing commitments on certain sold loans. Such instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or
notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of
financial instruments. During 2022, the Company did not engage in any activity that created any additional types
of off-balance-sheet risk.
The Company generally requires collateral or other security to support financial instruments with credit risk. The
Company’s financial instruments whose contract amount represents credit risk are disclosed in Note 17 to the
accompanying audited consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Managing liquidity risk is essential to maintaining both depositor confidence and stability in earnings. Liquidity
management refers to the ability of the Company to adequately cover fluctuations in assets and liabilities. Meeting
loan demand (assets) and covering the withdrawal of deposit funds (liabilities) are two key components of the liquidity
management process. The Company’s principal sources of funds are deposits, amortization and prepayment of
loans and securities, maturities of investment securities, sales of loans available-for-sale, and earnings and funds
provided from operations. Maintaining a relatively stable funding base, which is achieved by diversifying funding
sources, competitively pricing deposit products, and extending the contractual maturity of liabilities, reduces the
Company’s exposure to roll over risk on deposits and limits reliance on volatile short-term borrowed funds. Short-
term funding needs arise from declines in deposits or other funding sources and funding requirements for loan
commitments. The Company’s strategy is to fund assets to the maximum extent possible with core deposits that
provide a sizable source of relatively stable and low-cost funds.
The Company recognizes that, at times, when loan demand exceeds deposit growth or the Company has other
liquidity demands, it may be desirable to utilize alternative sources of deposit funding to augment retail deposits and
borrowings. One-way deposits acquired through the CDARS program provide an alternative funding source when
needed. The Company had no one-way CDARS outstanding at December 31, 2022 or 2021. In addition, two-way
(that is, reciprocal) CDARS deposits, as well as reciprocal ICS money market and demand deposits, allow the
Company to provide FDIC deposit insurance to its customers in excess of account coverage limits by exchanging
deposits with other participating FDIC-insured financial institutions. At December 31, 2022 and 2021, the Company
reported $2.8 million and $3.6 million, respectively, in reciprocal CDARS deposits. The balance in ICS reciprocal
money market deposits was $29.5 million and $15.3 million at December 31, 2022 and 2021, respectively, and the
balance in ICS reciprocal demand deposits as of those dates was $85.3 million and $70.8 million, respectively.
The Company had two blocks of DTC Brokered CDs totaling $2.3 million and $1.4 million, which matured in January,
2021 and April, 2021, respectively. These blocks were not replaced, leaving no DTC Brokered CDs outstanding at the
76
Community Bancorp.
balance sheet dates. Although wholesale deposit funding through DTC is an important supplemental source of liquidity
that has proven efficient, flexible and cost-effective when compared with other borrowing methods, the growth in
deposits during 2021 and 2022 has reduced the Company’s need for supplementary funding sources in the near term.
To further manage liquidity, the Company has borrowing capacity through the FHLBB and the FRB secured by the
Company’s qualifying loan portfolio, as well as unsecured lines of credit through correspondent banks. (See Note
11 to the accompanying audited consolidated financial statements.)
The following table illustrates the changes in shareholders’ equity from December 31, 2021 to December 31, 2022:
Balance at December 31, 2021 (book value $15.48 per common share)
Net income
Issuance of common stock through the DRIP
Dividends declared on common stock
Dividends declared on preferred stock
Change in AOCI on AFS securities, net of tax
Balance at December 31, 2022 (book value $13.55 per common share)
$ 84,760,268
13,739,940
1,210,599
(4,967,035)
(66,563)
(19,500,846)
$ 75,176,363
The primary objective of the Company’s capital planning process is to balance appropriately the retention of
capital to support operations and future growth, with the goal of providing shareholders an attractive return on their
investment. To that end, management monitors capital retention and dividend policies on an ongoing basis.
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements
administered by the 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 Company’s and the Bank’s financial statements. Under capital adequacy guidelines, the
Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets,
liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. Capital amounts
and classifications are also subject to qualitative judgments by the regulators about components, risk weightings,
and other factors. Additional Prompt Corrective Action capital requirements are applicable to banks, but not bank
holding companies. (See Note 22 to the accompanying audited consolidated financial statements.)
77
2022 Annual Report
Common Stock Performance by Quarter*
2022
2021
Trade Price
High
Low
Bid Price
High
Low
Cash Dividends
Declared
First
Second
Fourth
$ 24.99 $ 25.00 $ 20.26 $ 19.50 $ 19.99 $ 22.90 $ 22.60 $ 20.64
$ 21.00 $ 19.25 $ 18.25 $ 17.40 $ 14.50 $ 18.50 $ 18.30 $ 19.00
Second
Fourth
Third
Third
First
2022
2021
First
Second
Fourth
$ 22.98 $ 23.15 $ 20.25 $ 19.10 $ 18.18 $ 21.00 $ 21.00 $ 20.20
$ 20.25 $ 19.55 $ 18.00 $ 17.40 $ 14.55 $ 18.50 $ 18.35 $ 19.00
Second
Fourth
Third
Third
First
$
0.23 $
0.23 $
0.23 $
0.23 $
0.22 $
0.22 $
0.22 $
0.22
*The Company’s common stock is not traded on any exchange. However, the Company’s common stock is included
in the OTCQX® marketplace tier maintained by the OTC Markets Group Inc. Trade and bid information for the
stock appears in the OTC’s interdealer quotation system, OTC Link ATS®. The trade price and bid information in
the table above is based on information reported by participating FINRA-registered brokers in the OTC Link ATS®
system and may not represent all trades or high and low bids during the relevant periods. Such price quotations
reflect inter-dealer prices without retail mark-up, mark-down or commission and bid prices do not necessarily
represent actual transactions. The OTC trading symbol for the Company’s common stock is CMTV.
As of February 1, 2023, there were 5,421,386 shares of the Corporation’s common stock ($2.50 par value)
outstanding, owned by 801 shareholders of record.
78
Community Bancorp.
Form 10-K
A copy of the Form 10-K Report filed with the Securities and Exchange Commission may be obtained without
charge upon written request to:
Kathryn M. Austin, President & CEO
Community Bancorp.
4811 US Route 5
Newport, Vermont 05855
Shareholder Services
For shareholder services or information contact:
Melissa Tinker, Assistant Corporate Secretary
Community Bancorp.
4811 US Route 5
Newport, Vermont 05855
(802) 334-7915
Transfer Agent:
Computershare Investor Services
PO Box 43078
Providence, RI 02940-3078
www.computershare.com
Annual Shareholders’ Meeting
The 2023 Annual Shareholders’ Meeting, will be a Virtual Annual Meeting to be held on May 16, 2023, at 2:00 PM.
79
2022 Annual Report
Notes
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80
Community Bancorp. Board of Directors
Community Bancorp. and
Community National Bank
Thomas E. Adams, Owner, NPC Realty Co., Inc.
Kathryn M. Austin, President and Chief Executive Officer,
Community Bancorp. and Community National Bank
Bruce Baker, Founding Member and Principal, Clarke Demas
& Baker PLLC
David Bouffard, Former Co-Owner, Derby Village Store
Aminta K. Conant, Part Owner and Special Projects Manager
Caledonia Spirits, Inc. / Barr Hill
Jacques R. Couture, Owner, Dairy Farm/Maple Products
David P. Laforce, President and Owner, Built by Newport
Rosemary Lalime, Owner and Partner, RE/MAX All Seasons
Realty
Stephen P. Marsh, Board Chair, Community Bancorp. and
Community National Bank
Carol Martin, VP Finance Americas Region, Weidmann
Electrical Technology, Inc.
Emma L. Marvin, Co-Owner, Butternut Mountain Farm
Dorothy R. Mitchell, Board Chair, Vermont Student Assistance
Corporation
Jeffrey L. Moore, President and Owner, Quest Industries, Inc.
Fredric Oeschger, President and Principal, Fred’s Energy, Inc.
and D&C Transportation, Inc.
James G. Wheeler, Jr., Attorney and Principal, Downs Rachlin
Martin, PLLC.
Executive Officers
Community Bancorp. and
Community National Bank
Kathryn M. Austin, President and Chief Executive Officer,
Community Bancorp. and Community National Bank
Louise M. Bonvechio, Corporate Secretary and Treasurer,
Community Bancorp., Executive Vice President, Chief Financial
Officer, Cashier and Corporate Secretary, Community National
Bank
Christopher L. Caldwell, Vice President, Community Bancorp.,
Executive Vice President and Chief Lending Officer, Community
National Bank
Leslie Delhaie, Vice President, Community Bancorp., Executive
Vice President and Chief Operating and Innovation Officer,
Community National Bank
Other Officers
Community National Bank
Laura J. Bennett, Derby Office Manager
Justin Bourgeois, Senior Vice President and Commercial Loan
Officer
Nikole B. Brainard, Assistant Vice President, Finance Manager
Sarah Chadburn, Assistant Vice President, Commercial Loan
Officer
Michelle Cleveland, Price Chopper Office Manager
Mark S. Clough, Vice President and Commercial Loan Officer
Hope K. Colburn, Vice President and Commercial Loan Officer
Robin Coulter, Branch Administration Officer
Jennifer J. Daigle, Senior Vice President and Senior Credit
Officer
Lorilee Drown, Barre and Montpelier Office Manager
Maureen Golden, Vice President and Commercial Loan Officer
Janet C. Gratton, Electronic Banking Officer
Laurie Gray, Assistant Vice President and Information Security
Officer and Security Officer
William Hamilton, Vice President and Commercial Loan Officer
Regan Howard, Vice President and Commercial Loan Officer
Penelope L. Johnson, Assistant Vice President and Residential
Lending Officer
Cindy L. LaGue, Senior Vice President, Retail Banking
Lori Leonard, Memorial Drive Officer Manager
Rosemary Lalime, Vice President and Lead Outside Director
Julie Marquis, Troy Officer Manager
Shelly Morey, Community Circle Director
Theresa B. Morin, Senior Vice President and Senior Loan
Operations Officer
Candace A. Patenaude, Financial Officer
Kelly A. Paul, Senior Vice President ERM, Compliance/BSA
Officer, CRA Officer and Audit Committee Liaison
Amanda Pepin, Assistant Vice President and Credit
Administration Officer
Kimico Perry, Senior Vice President, Human Resources Officer
Brandon Poginy, Vice President and Commercial Loan Officer
Anne Quirion, Deposit Operations Manager
Tracy D. Roberts, Vice President and Marketing Director
Dave Rubel, Vice President and Commercial Loan Officer
Rich Stovall, Information Technology Officer
Lori Wells, Barton Office Manager
Billie Jo Westom, Morrisville Office Manager
4811 US Route 5 • Newport, Vermont 05855
(802) 334-7915
TRADING SYMBOL: CMTV
(tradedonthe OTCQX)
81
2022 Annual Report
communitynationalbank.com
Derby (Main Office):
Physical Location:
4811 US Route 5
Derby, Vermont 05829
Mailing Address:
4811 US Route 5
Newport, Vermont 05855
(802) 334-7915
derby@communitynationalbank.com
Barre:
316 North Main Street
Barre, Vermont 05641
(802) 476-6565
tellers-barre@communitynationalbank.com
Barton:
103 Church Street
Barton, Vermont 05822
(802) 525-3524
tellers-barton@communitynationalbank.com
Derby Line:
69 Main Street
Derby Line, Vermont 05830
(802) 873-3101
tellers-derbyline@communitynationalbank.com
Enosburg Falls:
49 Sampsonville Road
Enosburg Falls, Vermont 05450
(802) 933-8500
tellers-enosburg@communitynationalbank.com
Island Pond:
23 US Route 105
Island Pond, Vermont 05846
(802) 723-4356
tellers-islandpond@communitynationalbank.com
Lyndonville:
467 Broad Street
Lyndonville, Vermont 05851
(802) 626-1200
tellers-lyndonmemorial@communitynationalbank.com
Montpelier:
99 State Street
Montpelier, Vermont 05602
(802) 223-0598
tellers-montpelier@communitynationalbank.com
Morrisville:
116 VT Rte. 15 West
Morrisville, Vermont 05661
(802) 888-4633
tellers-morrisville@communitynationalbank.com
Newport:
100 Main Street
Newport, Vermont 05855
(802) 334-7915
tellers-newport@communitynationalbank.com
St. Johnsbury:
857 Memorial Drive
St. Johnsbury, Vermont 05819
(802) 748-3605
tellers-stjpricechopper@communitynationalbank.com
Troy:
4245 US Route 101
Troy, Vermont 05868
(802) 744-2287
tellers-troy@communitynationalbank.com