Business Context and Reporting Period
Company: Community Bancorp. (Community National Bank)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and nine months ended September 30, 2025
Overview: Community Bancorp. is a smaller reporting company and non-accelerated filer headquartered in Derby, Vermont. The company operates as a bank holding company with a primary focus on commercial and residential lending in northern New England. As of September 30, 2025, total assets were $1.23 billion, a decrease of 1.8% from year-end 2024, driven primarily by a reduction in overnight deposits and federal funds sold, partially offset by loan growth.
Key Financial Metrics
| Metric | Q3 2025 (Three Months) | Q3 2024 (Three Months) | YTD 2025 (Nine Months) | YTD 2024 (Nine Months) |
|---|---|---|---|---|
| Net Income | $4.75 million | $3.11 million | $12.33 million | $8.67 million |
| Earnings Per Share (Diluted) | $0.84 | $0.55 | $2.18 | $1.55 |
| Net Interest Income | $10.51 million | $8.66 million | $29.84 million | $25.12 million |
| Net Interest Margin (Tax-Equivalent) | 3.79% | 3.29% | 3.64% | 3.25% |
| Credit Loss Expense | $258,753 | $460,745 | $990,853 | $1,105,906 |
| Return on Average Assets | 1.58% | 1.09% | 1.39% | 1.04% |
| Return on Average Equity | 17.40% | 13.09% | 15.92% | 12.71% |
| Total Loans | $961.88 million | $927.94 million (Dec 2024) | N/A | N/A |
| Total Deposits | $1.01 billion | $1.00 billion (Dec 2024) | N/A | N/A |
| Book Value Per Share | $19.64 | $17.24 (Dec 2024) | N/A | N/A |
Material Changes vs. Prior Period
- Profitability Surge: Net income for Q3 2025 increased 52.4% year-over-year to $4.75 million, and YTD net income rose 42.3% to $12.33 million. This was driven by a $2.1 million increase in net interest income after credit loss expense for the quarter.
- Net Interest Margin Expansion: The tax-equivalent net interest margin improved to 3.79% in Q3 2025 from 3.29% in Q3 2024. This expansion resulted from a 26 basis point increase in the yield on interest-earning assets and a 27 basis point decrease in the cost of interest-bearing liabilities.
- Reduced Credit Costs: Credit loss expense decreased 43.8% in Q3 2025 compared to the prior year, attributed to favorable economic forecasts and adjustments to qualitative factors, despite loan portfolio growth.
- Asset Composition: Loans increased by $33.9 million (3.7%) since year-end 2024, led by growth in Commercial Real Estate (CRE) and residential real estate. Conversely, cash and cash equivalents decreased by $50.1 million, largely due to a $52 million drop in overnight deposits and the payoff of borrowings.
- Deposit Mix Shift: Time deposits increased by $32.4 million (17.3%) year-to-date, while money market funds and interest-bearing transaction accounts declined. The company utilized brokered time deposits to fund loan growth.
Guidance, Outlook, and Risks
- Dividend Increase: On September 18, 2025, the Board declared a quarterly cash dividend of $0.25 per common share, a 4% increase from the previous quarter and the fourth annual increase since 2020.
- Capital Management: The company continues a stock repurchase program authorized in July 2024. As of September 30, 2025, 37,453 shares had been repurchased for $701,454. The Board also approved the redemption of the remaining 15 shares of Series A Preferred Stock, completed in Q4 2025.
- Interest Rate Risk: Management utilizes an Asset Liability Committee (ALCO) to monitor interest rate risk. Simulations indicate that a 200 basis point rise in rates would decrease Net Interest Income (NII) by 1.6%, while a 100 basis point drop would decrease NII by 0.5%. The company remains within ALCO policy limits.
- Key Risks:
- Trade Policy: Management is assessing risks to the local Vermont economy stemming from trade policy developments between the U.S. and Canada, Vermont's largest international trading partner.
- Government Shutdown: Qualitative factors in the Allowance for Credit Losses (ACL) were adjusted upward for purchased loans and residential junior lien segments to reflect uncertainty regarding the impact of a recent government shutdown.
- Cybersecurity: Ongoing risks related to data breaches and third-party vendor security are noted as potential threats to financial performance and reputation.
Investor Verification Checklist
- Loan Growth Quality: Verify the composition of the $33.9 million loan growth, specifically the concentration in Commercial Real Estate (50% of portfolio) and the impact of the government shutdown on credit quality in purchased and junior lien segments.
- Deposit Stability: Review the shift in deposit mix, noting the $32.4 million increase in time deposits (including brokered CDs) versus the decline in core transaction and money market accounts.
- Investment Portfolio Valuation: Confirm the status of the Available-for-Sale (AFS) securities portfolio, which held $13.8 million in unrealized losses as of September 30, 2025, primarily due to interest rate fluctuations.
- Capital Ratios: Validate that the company remains "well-capitalized" under regulatory standards, with a Common Equity Tier 1 ratio of 12.56% and Total Capital ratio of 15.47% as of September 30, 2025.
- Non-Interest Income: Assess the sustainability of the 65.6% year-over-year increase in income from CFS Partners, driven by a change in ownership share from 33.3% to 50% and equity market performance.