COMMUNITY BANCORP /VT

COMMITMENTS, CONTINGENCIES AND OFF-BALANCE-SHEET ARRANGEMENTS

The Company is a party to financial instruments with OBS risk in the normal course of business to meet the financing needs of its customers, to reduce its own exposure to interest rate fluctuations, and in some cases, to generate fee income. 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. Except as described in the next sentence, during 2025 the Company did not engage in any activity that created any additional types of OBS risk. During 2025, the Company entered into a risk participation agreement with a financial institution counterparty pursuant to which the Company has assumed a portion of the counterparty’s credit risk under an interest rate swap with the borrower on a loan in which the Company is a participant, in exchange for a fee commensurate with the risk assumed.

The Company generally requires collateral or other security to support financial instruments with credit risk. The Company's financial instruments whose contract amounts represent credit risk are disclosed in Note 17 to the accompanying audited consolidated financial statements.