COMMUNITY BANCORP /VT

OVERVIEW

The Company’s consolidated assets at year-end 2025 were $1.29 billion compared to $1.25 billion at year-end 2024, an increase of 3.1%. Asset growth in 2025 was driven by increases in net loans of $36.4 million, or 3.9%, and an increase of $17.1 million, or 15.4%, in cash on deposit at the FRBB, but was partially offset by a decrease of $15.2 million, or 9.5%, in securities AFS portfolio. Loan growth was attributable to increases in the CRE portfolio of $27.5 million, or 5.8%, the residential real estate first lien portfolio of $18.5 million, or 8.5%, and the residential real estate Jr lien portfolio of $10.8 million, or 30.2%. These increases were partially offset by a decrease of $16.6 million, or 13.4%, in the commercial & industrial loan portfolio.

Funding for loan growth was provided in part by an increase of $69.0 million, or 6.9%, in deposits. This increase was partially offset by a $36.6 million decrease in borrowed funds, which totaled $36.0 million at December 31, 2025, compared to $72.6 million at December 31, 2024. The increase in deposits, which were $1.1 billion at December 31, 2025, compared to $1.0 billion at December 31, 2024, was attributable to the combined effect of an increase in core deposits (demand deposit accounts, both interest bearing and non-interest bearing) of $16.6 million, or 3.3%, an increase of $17.6 million, or 10.4%, in money market funds, and an increase of $35.2 million, or 18.8% in time deposits. These increases were minimally offset by a decrease of $382,537, or 0.3%, in savings accounts. The Company has been offering competitive interest rates for retail time deposits, and accessing the brokered deposit market, accounting for the increase in these funds. An increase in deposit balances is typical in the third and fourth quarters of the calendar year, with balances increasing through year end due in part to municipal accounts collecting tax payments.

Total interest income increased $5.9 million, or 10.7%, year over year due primarily to the increase in the volume of the loan portfolio.

Total interest expense decreased $363,623, or 1.8%, for the year ended December 31, 2025 compared to 2024, driven mostly by the decrease in reliance on borrowed funds partially offset by the increase in interest-bearing deposit accounts and time deposits. Please refer to the interest rate sensitivity discussion in the Interest Rate Risk and Asset and Liability Management section for more information on the potential impact of changes in the yield curve on net interest income.

The credit loss expense for the year ended 2025 was $1.4 million compared to $1.1 million for 2024, an increase of 21.20% year over year. The current period credit loss expense considers several factors, including loan growth and changes in balances of the loan segments within the current portfolio, as well as changes in forecasts, in the historical loss rate and in qualitative factors. During the fourth quarters of 2024 and 2025, certain qualitative factors used in the ACL calculation were adjusted to better reflect expected credit losses in the loan portfolio. Please refer to Note 1 of the audited consolidated financial statements as well as the ACL and credit loss expense discussion in the Credit Risk section of this MD&A.

Consolidated net income in 2025 increased $4.2 million, or 32.9%, from $12.8 million for 2024 to $17.0 million for 2025. A $5.9 million increase in interest income coupled with a minimal increase of $240 thousand in the credit loss expense year over year, resulted in a substantial increase of $6.0 million in net interest income after credit loss expense. Non-interest income increased $727,089, or 10.1%, while non-interest expense increased $1.5 million, or 6.0% year over year. These changes, along with other significant changes in non-interest income and non-interest expense are discussed in the appropriate sections of this MD&A.

Equity capital increased to $113.7 million, with a book value per share of $20.36 as of December 31, 2025, compared to equity capital of $98.0 million and a book value of $17.24 as of December 31, 2024. This increase in equity capital reflected net income for 2025 of $17.0 million and a decrease of $6.2 million, net of tax, in the accumulated other comprehensive loss, which was offset in part by dividends paid totaling $4.0 million. This unrealized loss position is considered temporary and does not impact the Company’s regulatory capital ratios. In the fourth quarter of 2025, the Company completed the optional redemption of the 15 remaining outstanding shares of the Company’s Series A Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock at an aggregate redemption price of $1,500,000 plus accrued dividends. The preferred stock value of $1,500,000 was included in the Company’s equity capital as of December 31, 2024.

On December 17, 2025, the Company's Board of Directors declared a quarterly cash dividend of $0.25 per common share, payable on February 1, 2026 to shareholders of record on January 15, 2026.

Effective on February 2, 2026, the Company’s common stock, which previously traded on the OTCQX platform, began trading on the Nasdaq stock exchange (Capital Market tier).

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. 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 2025 was reported at 2.6%.

As of December 31, 2025, all 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 government monetary policy.