COMMUNITY BANCORP /VT
For the period ended Dec 31, 2025. Filed Mar 27, 2026.
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FY2025 · Filed Mar 27, 2026
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EX-13 · INTEREST INCOME VERSUS INTEREST EXPENSE (NII)
INTEREST INCOME VERSUS INTEREST EXPENSE (NII)
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 $62.1 million and $67.1 million of municipal loans, at December 31, 2025 and 2024, respectively, and from $10.3 million and $10.2 million of tax-exempt municipal securities in our investment portfolio, respectively, as of such dates.
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, | 2025 | 2024 |
|---|---|---|
| Net interest income as presented | $40,873,909 | $34,631,367 |
| Effect of tax-exempt income | 829,519 | 732,089 |
| Net interest income, tax equivalent | $41,703,428 | $35,363,456 |
The following tables present the daily average assets and the daily average liabilities, including the yields on interest-earning assets and interest-bearing liabilities for the respective comparison periods. Interest income (excluding interest on non-accrual loans) is expressed on a tax equivalent basis, both in dollars and as a yield/rate for the comparison periods presented. Net interest income, net interest spread, and net interest margin are also expressed on a tax equivalent basis.
| Year Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2025 · 2024 | ||||||
| Average | Average | |||||
| Average | Income/ | Yield/ | Average | Income/ | Yield/ | |
| Balance | Expense | Rate | Balance | Expense | Rate | |
| Average Assets | ||||||
| Loans, net (1) | $943,776,400 | $56,208,779 | 5.96% | $876,475,122 | $50,270,634 | 5.74% |
| Taxable investment securities | 147,115,177 | 3,586,797 | 2.44% | 164,625,831 | 3,633,292 | 2.21% |
| Tax-exempt investment securities | 10,037,694 | 407,147 | 4.06% | 10,337,723 | 407,146 | 3.94% |
| Federal funds sold and overnight deposits | 30,399,073 | 1,269,541 | 4.18% | 23,871,864 | 1,193,788 | 5.00% |
| Other investments (2) | 3,439,235 | 237,114 | 6.89% | 2,945,682 | 228,169 | 7.75% |
| Total interest-earning assets | 1,134,767,579 | $61,709,378 | 5.44% | $1,078,256,222 | $55,733,029 | 5.17% |
| Cash and due from banks | 10,792,100 | 10,920,508 | ||||
| Premises and equipment | 12,187,840 | 12,408,878 | ||||
| BOLI | 5,355,620 | 5,272,050 | ||||
| Goodwill | 11,574,269 | 11,574,269 | ||||
| Other assets | 27,554,229 | 22,214,876 | ||||
| Total assets | $1,202,231,637 | $1,140,646,803 | ||||
| Average Liabilities and Shareholders' Equity | ||||||
| Interest-bearing transaction accounts | $285,694,284 | $5,150,837 | 1.80% | $288,183,136 | $5,503,150 | 1.91% |
| Money market funds | 154,795,263 | 3,608,121 | 2.33% | 121,153,125 | 2,724,283 | 2.25% |
| Savings deposits | 142,909,964 | 122,332 | 0.09% | 146,590,062 | 127,740 | 0.09% |
| Time deposits | 204,253,364 | 7,158,173 | 3.50% | 156,024,163 | 5,760,371 | 3.69% |
| Repurchase agreements | 41,393,391 | 1,069,965 | 2.58% | 32,532,862 | 797,002 | 2.45% |
| Borrowed funds | 43,806,535 | 1,866,153 | 4.26% | 89,990,738 | 4,282,481 | 4.76% |
| Finance lease obligations | 3,071,730 | 70,677 | 2.30% | 3,302,569 | 75,956 | 2.30% |
| Junior subordinated debentures | 12,887,000 | 959,692 | 7.45% | 12,887,000 | 1,098,590 | 8.52% |
| Total interest-bearing liabilities | 888,811,531 | $20,005,950 | 2.25% | 850,663,655 | $20,369,573 | 2.39% |
| Non-interest bearing deposits | 197,677,589 | 190,549,111 | ||||
| Other liabilities | 9,973,506 | 6,594,619 | ||||
| Total liabilities | 1,096,462,626 | 1,047,807,385 | ||||
| Shareholders' equity | 105,769,011 | 92,839,418 | ||||
| Total liabilities and shareholders' equity | $1,202,231,637 | $1,140,646,803 | ||||
| Net interest income | $41,703,428 | $35,363,456 | ||||
| Net interest spread (3) | 3.19% | 2.78% | ||||
| Net interest margin (4) | 3.68% | 3.28% | ||||
| (1) | Included in net loans are non-accrual loans with average balances of $8,283,011 and $6,075,373 for the years ended December 31, 2025 and 2024, respectively. Loans are stated net of unearned discount and ACL, and include loans held-for-sale and tax-exempt loans to local municipalities with average balances of $66,623,605 and $61,052,330 for the years ended December 31, 2025 and 2024, respectively. |
| (2) | Included in other investments is the Company’s FHLBB Stock with average balances of $2,374,085 and $1,840,201, respectively, with a dividend rate of approximately 7.25% and 8.52%, respectively, for the years ended December 31, 2025 and 2024, 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, 2025 increased 5.2% compared to December 31, 2024. The average yield on interest-earning assets increased 27 basis points for 2025 versus 2024.
The average volume of loans increased 7.7% for 2025 versus 2024, and the average yield on loans increased 22 basis points to 5.96% for 2025, compared to 5.74% for 2024. The increase in the average yield in 2025 was attributable to the increase in the average loan volume year over year. Interest earned on the loan portfolio as a percentage of total interest income was approximately 91.1% and 90.2%, respectively for 2025 and 2024.
The average volume of the taxable investment portfolio (classified as AFS) decreased 10.6% for 2025 versus 2024, while the average yield increased 23 basis points for 2025 versus 2024.
The average volume of the tax-exempt municipal investment portfolio (classified as AFS) decreased $300 thousand, while the tax-equivalent average yield increased 12 basis points to 4.06% for 2025 compared to 3.94% for 2024.
The average volume of sweep and interest-earning accounts, which consists primarily of interest-bearing accounts at the FRBB and two correspondent banks, increased 27.3% during 2025 compared to 2024. This increase in average volume is attributable to the increase in deposit accounts during 2025. The average yield on these funds decreased 82 basis points in 2025 versus 2024, reflecting decreases in the federal funds rate initiated by the FRB.
The average volume of interest-bearing liabilities for the year ended December 31, 2025 increased 4.5% compared to the year ended December 31, 2024. The average rate paid on interest-bearing liabilities decreased 14 basis points during 2025 compared to 2024. A substantial increase in average CD balances resulted in an increase in interest expense in these components of interest-bearing liabilities, despite a decrease of 19 basis points in the average rate paid on these accounts.
The average volume of interest-bearing transaction accounts decreased 1.0% for 2025 versus 2024 reflecting a slight decrease in these accounts during 2025. The average rate paid on these accounts decreased 11 basis points for 2025 versus 2024. Interest paid on interest-bearing transaction accounts as a percentage of total interest expense was 25.8% and 27.0%, respectively for 2025 and 2024.
The average volume of money market accounts increased 27.8% during 2025 compared to 2024, and the average rate paid on these deposits increased 8 basis points during 2025.
The average volume of savings accounts decreased 2.5% for 2025 versus 2024, while the average rate paid on these accounts remained level during 2025.
The average volume of time deposits increased 30.9% for 2025 versus 2024, while the average rate paid decreased 19 basis points during 2025. The decrease in the average rate paid on time deposits between comparison periods reflects the easing of competitive pressures in a declining rate environment. Interest paid on time deposits as a percentage of total interest expense was 35.8% and 28.3%, respectively for 2025 and 2024.
The average volume of borrowed funds decreased primarily to the increase in deposits and brokered CDs.
The average volume of repurchase agreements increased 27.2% during 2025 and the average rate paid increased 13 basis points for 2025 versus 2024.
In summary, the average yield on interest-earning assets increased 27 basis points during 2025, and the average rate paid on interest-bearing liabilities decreased 14 basis points. Net interest spread increased 41 basis points for 2025 with a net interest spread of 3.19% for 2025 compared to 2.78% for 2024. Net interest margin increased 40 basis points during 2025 to 3.68% from 3.28% for 2024.
The following tables summarize the variances in interest income and interest expense on a fully tax-equivalent basis for the annual periods presented, resulting from volume changes in daily average assets and daily average liabilities and fluctuations in average rates earned and paid.
| Year Ended December 31, 2025 · Year Ended December 31, 2024 | ||||||
|---|---|---|---|---|---|---|
| Compared to · Compared to | ||||||
| Year Ended December 31, 2024 · Year Ended December 31, 2023 | ||||||
| Variance · Variance · Variance · Variance | ||||||
| Due to | Due to | Total | Due to | Due to | Total | |
| Rate (1) | Volume (1) | Variance | Rate (1) | Volume (1) | Variance | |
| Average Interest-Earning Assets | ||||||
| Loans, net | $2,075,052 | $3,863,093 | $5,938,145 | $3,405,152 | $4,675,690 | $8,080,842 |
| Taxable investment securities | 380,765 | (427,260) | (46,495) | 105,228 | (279,586) | (174,358) |
| Tax-exempt investment securities | 12,182 | (12,181) | 1 | (15,545) | (34,610) | (50,155) |
| Federal funds sold and overnight deposits | (250,607) | 326,360 | 75,753 | 74,538 | 349,401 | 423,939 |
| Other investments | (29,305) | 38,250 | 8,945 | 11,698 | 77,789 | 89,487 |
| Total | $2,188,087 | $3,788,262 | $5,976,349 | $3,581,071 | $4,788,684 | $8,369,755 |
| Average Interest-Bearing Liabilities | ||||||
| Interest-bearing transaction accounts | $(307,514) | $(44,799) | $(352,313) | $859,502 | $162,761 | $1,022,263 |
| Money market funds | 126,890 | 756,948 | 883,838 | 595,750 | (259,649) | 336,101 |
| Savings deposits | (2,096) | (3,312) | (5,408) | 13,254 | (16,199) | (2,945) |
| Time deposits | (381,856) | 1,779,658 | 1,397,802 | 2,416,979 | 1,001,219 | 3,418,198 |
| Repurchase agreements | 55,880 | 217,083 | 272,963 | 120,632 | (70,721) | 49,911 |
| Borrowed funds | (448,881) | (1,967,447) | (2,416,328) | (81,679) | 2,895,183 | 2,813,504 |
| Finance lease obligations | 30 | (5,309) | (5,279) | 24 | (5,140) | (5,116) |
| Junior subordinated debentures | (138,898) | 0 | (138,898) | 44,717 | 0 | 44,717 |
| Total | $(1,096,445) | $732,822 | $(363,623) | $3,969,179 | $3,707,454 | $7,676,633 |
| Changes in net interest income | $3,284,532 | $3,055,440 | $6,339,972 | $(388,108) | $1,081,230 | $693,122 |
(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
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