COMMUNITY BANCORP VT
For the period ended Dec 31, 2023. Filed Mar 29, 2024.
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FY2023 · Filed Mar 29, 2024
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EX-13 · INVESTMENT SECURITIES
INVESTMENT SECURITIES
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 decreased during 2023 primarily due to amortization within its MBS investment portfolio and use of proceeds to fund loan growth.
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. The Company did not hold any securities HTM during 2023 or 2022.
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 $15.9 million at December 31, 2023, compared to an accumulated unrealized loss net of taxes of $20.7 million at December 31, 2022. 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 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, 2023 and 2022, the Company held $588,150 in FRBB stock and $964,200 and $733,600, 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 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. There were no call features exercised by the issuer in 2023 or 2022.
The Company had investments in Agency MBS exceeding 10% of shareholders equity with a book value of $132.0 million and $135.2 million, respectively, and a fair value of $115.9 million and $115.2 million, respectively, at December 31, 2023 and 2022.
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, · 2023 · 2022 | ||||
|---|---|---|---|---|
| Weighted | Weighted | |||
| Fair | Average | Fair | Average | |
| Value | Yield | Value | Yield | |
| U.S. GSE debt securities | ||||
| Due from one to five years | $7,177,015 | 1.11% | $4,333,400 | 1.15% |
| Due from five to ten years | 2,815,649 | 2.98% | 5,246,398 | 2.01% |
| Due after ten years | 834,910 | 2.69% | 795,493 | 2.69% |
| Total | $10,827,574 | 1.72% | $10,375,291 | 1.68% |
| U.S. Government securities | ||||
| Due in one year or less | $13,261,446 | 1.22% | $0 | 0.00% |
| Due from one to five years | 26,001,803 | 1.02% | 38,231,589 | 1.08% |
| Total | $39,263,249 | 1.09% | $38,231,589 | 0.89% |
| Taxable Municipal securities | ||||
| Due after ten years | $246,965 | 2.17% | $234,858 | 2.17% |
| Tax-exempt Municipal securities | ||||
| Due after ten years | $10,473,785 | 3.73% | $11,323,567 | 3.79% |
| ABS/AOS | ||||
| Due from one to five years | $523,434 | 3.34% | $0 | 0.00% |
| Due from five to ten years | 738,836 | 2.24% | 1,421,632 | 2.71% |
| Due after ten years | 1,085,351 | 3.20% | 1,271,974 | 3.22% |
| Total | $2,347,621 | 2.93% | $2,693,606 | 2.84% |
| CMO | ||||
| Due in one year or less | $3,309,166 | 0.00% | $0 | 0.00% |
| Due from one to five years | 7,088,579 | 3.14% | 11,247,053 | 3.76% |
| Due from five to ten years | 339,851 | 0.94% | 688,872 | 0.99% |
| Total | $10,737,596 | 3.22% | $11,935,925 | 1.11% |
| Other Investments | ||||
| Due in one year or less | $491,271 | 2.90% | $1,966,766 | 3.14% |
| Due from one to five years | 455,159 | 1.03% | 924,908 | 1.96% |
| Total | $946,430 | 2.00% | $2,891,674 | 2.61% |
| Agency MBS (1) | $115,862,799 | 2.08% | $115,231,599 | 1.87% |
| FRBB Stock (2) | $588,150 | 6.02% | $588,150 | 6.00% |
| FHLBB Stock (2) | $964,200 | 8.63% | $733,600 | 4.20% |
| ACBI Stock (2) | $90,000 | 0.73% | $90,000 | 0.42% |
(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 FRBB and FHLBB and for access to correspondent banking services from ACBB.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.