Exhibit 99.2
LYNDONBANK
CONDENSED BALANCE SHEETS
| | | September 30 | | | December 31 | |
| | | 2007 | | | 2006 | |
| | | (Unaudited) | | | | |
| ASSETS | | | | | | |
| Cash and cash equivalents | | $ | 8,791,349 | | | $ | 5,216,255 | |
| Investments in available-for-sale securities (at fair value) | | | 24,330,330 | | | | 33,941,908 | |
| Federal Home Loan Bank stock, at cost | | | 1,006,700 | | | | 870,200 | |
| Loans, net | | | 111,979,578 | | | | 109,461,794 | |
| Premises and equipment, net | | | 5,298,846 | | | | 5,306,888 | |
| Bank-owned life insurance | | | 3,526,604 | | | | 3,431,821 | |
| Other assets | | | 1,695,543 | | | | 1,644,095 | |
| Total assets | | $ | 156,628,950 | | | $ | 159,872,961 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| Deposits: | | | | | | | | |
| Noninterest-bearing | | $ | 19,403,583 | | | $ | 19,816,688 | |
| Interest-bearing | | | 103,122,616 | | | | 101,885,766 | |
| Total deposits | | | 122,526,199 | | | | 121,702,454 | |
| Securities sold under agreements to repurchase | | | 6,631,267 | | | | 5,033,267 | |
| Federal Home Loan Bank advances | | | 12,000,000 | | | | 17,200,000 | |
| Capital lease obligations | | | 950,287 | | | | 970,643 | |
| Other liabilities | | | 289,603 | | | | 635,196 | |
| Total liabilities | | | 142,397,356 | | | | 145,541,560 | |
| | | | | | | | | |
| Shareholders' equity: | | | | | | | | |
| Common stock | | | 653,400 | | | | 653,400 | |
| Paid-in capital | | | 2,138,439 | | | | 2,138,439 | |
| Retained earnings | | | 14,210,059 | | | | 14,168,462 | |
| Treasury stock | | | (2,259,270 | ) | | | (2,259,270 | ) |
| Accumulated other comprehensive loss | | | (511,034 | ) | | | (369,630 | ) |
| Total shareholders' equity | | | 14,231,594 | | | | 14,331,401 | |
| Total liabilities and shareholders' equity | | $ | 156,628,950 | | | $ | 159,872,961 | |
The accompanying notes are an integral part of these financial statements.
LYNDONBANK
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
| For the Nine Months Ended September 30, | | 2007 | | | 2006 | |
| | | | | | | |
| Interest and dividend income | | | | | | |
| Loans, including fees | | $ | 6,242,869 | | | $ | 5,421,401 | |
| Investment income | | | 1,101,739 | | | | 1,263,635 | |
| Total interest and dividend income | | | 7,344,608 | | | | 6,685,036 | |
| | | | | | | | | |
| Interest Expense: | | | | | | | | |
| Deposits | | | 2,421,095 | | | | 1,846,422 | |
| Other borrowings | | | 658,473 | | | | 367,941 | |
| Total interest expense | | | 3,079,568 | | | | 2,214,363 | |
| Net interest and dividend income | | | 4,265,040 | | | | 4,470,673 | |
| Provision for loan losses | | | 30,000 | | | | 0 | |
| Net interest and dividend income after the provision for loan losses | | | 4,235,040 | | | | 4,470,673 | |
| | | | | | | | | |
| Noninterest income: | | | | | | | | |
| Service charges on deposits accounts | | | 417,865 | | | | 450,888 | |
| Securities gains, net | | | 51,449 | | | | 0 | |
| Gain on sales of loans | | | 150 | | | | 11,040 | |
| Increase in cash surrender value of bank owned life insurance | | | 94,783 | | | | 87,715 | |
| Other income | | | 336,151 | | | | 240,136 | |
| Total noninterest income | | | 900,398 | | | | 789,779 | |
| Noninterest expense: | | | | | | | | |
| Salaries and employee benefits | | | 2,337,317 | | | | 2,342,912 | |
| Occupancy and equipment expense | | | 1,054,513 | | | | 795,916 | |
| Advertising expense | | | 78,504 | | | | 85,523 | |
| Professional fees | | | 136,982 | | | | 6,069 | |
| Other operating expenses | | | 1,049,866 | | | | 1,078,993 | |
| Total noninterest expenses | | | 4,657,182 | | | | 4,309,413 | |
| Income before income taxes | | | 478,256 | | | | 951,039 | |
| Income tax expense | | | 55,721 | | | | 129,200 | |
| Net income | | $ | 422,535 | | | $ | 821,839 | |
| Net income per share of common stock | | | $0.40 | | | | $0.78 | |
| Average shares outstanding | | | 1,058,132 | | | | 1,058,132 | |
The accompanying notes are an integral part of these financial statements.
LYNDONBANK
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | 2007 | | | 2006 | |
| | | | | | | |
| Cash flows from operating activities: | | | | | | |
| Net income | | $ | 422,535 | | | $ | 821,839 | |
| Adjustment to reconcile net income to net cash provided by | | | | | | | | |
| operating activities: | | | | | | | | |
| Securities gain, net | | | (51,449 | ) | | | 0 | |
| Amortization of securities, net of accretion | | | 5,348 | | | | 37,305 | |
| Provision for loan losses | | | 30,000 | | | | 0 | |
| Change in deferred loan origination fees, net | | | (2,532 | ) | | | (2,074 | ) |
| Amortization of premium/discount on purchased loans, net | | | 1,217 | | | | 5,167 | |
| Decrease in loans held-for-sale | | | 0 | | | | 320,000 | |
| Depreciation and amortization | | | 364,965 | | | | 250,029 | |
| Gain on sales of loans | | | (150 | ) | | | (11,040 | ) |
| Increase in cash surrender value of bank owned life insurance | | | (94,783 | ) | | | (87,715 | ) |
| Changes in operating assets and liabilities | | | (308,290 | ) | | | 178,163 | |
| Net cash provided by operating activities | | | 336,861 | | | | 1,511,674 | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Decrease in available-for-sale securities | | | 9,822,979 | | | | 2,152,151 | |
| Purchases of Federal Home Loan Bank stock | | | (136,500 | ) | | | 124,200 | |
| Net increase in loans, net | | | (2,486,469 | ) | | | (10,610,177 | ) |
| Purchases of premises and equipment, net | | | (782,239 | ) | | | (528,013 | ) |
| Net cash provided by (used in) investing activities | | | 6,417,771 | | | | (8,861,839 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Net change in total deposits | | | 823,745 | | | | 6,193,788 | |
| Net change in borrowings | | | (3,602,000 | ) | | | 856,386 | |
| (Payments on) increase in capital lease obligations | | | (20,356 | ) | | | 499,897 | |
| Sale of treasury stock | | | 0 | | | | 9,090 | |
| Dividend paid | | | (380,927 | ) | | | (602,887 | ) |
| Net cash (used in) provided by financing activities | | | (3,179,538 | ) | | | 6,956,274 | |
| | | | | | | | | |
| Net change in cash and cash equivalents | | | 3,575,094 | | | | (393,891 | ) |
| Cash and Cash equivalents, beginning of period | | | 5,216,255 | | | | 8,395,084 | |
| Cash and Cash equivalents, end of period | | $ | 8,791,349 | | | $ | 8,001,193 | |
| | | | | | | | | |
| Supplemental disclosures: | | | | | | | | |
| Interest paid | | | 3,079,568 | | | | 2,214,363 | |
| Income taxes paid | | | 55,721 | | | | 129,200 | |
The accompanying notes are an integral part of these financial statements.
LyndonBank
Notes to the Condensed Unaudited Financial Statements
September 30, 2007
Note 1 - General
The interim condensed financial statements in this report have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including Regulation S-X and have not been audited. These condensed financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the financial statements fairly present the financial position and the results of operations for the interim periods. However, the results of operations are not necessarily indicative of the results of operations which LyndonBank may achieve for future interim periods or the entire year. For further information, refer to the financial statements and footnotes accompanying this Current Report on Form 8-K/A.
Note 2 - Recent Accounting Pronouncements
In June 2006 the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -an interpretation of FASB Statement 109" (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2007. The adoption of FIN 48 is not expected to have a material impact on the Bank's financial statements.
In September 2006, the FASB ratified the consensus reached by the Emerging Issues Task Force ("EITF") on Issue No. 06-4 "Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements," (EITF Issue 06-4). EITF 06-4 requires companies with an endorsement split-dollar life insurance arrangement to recognize a liability for future postretirement benefits. The effective date is for fiscal years beginning after December 15, 2007, with earlier application permitted. Companies should recognize the effects of applying this issue through either (a) a change in accounting principle through a cumulative effect adjustment to retained earnings or (b) a change in accounting principle through retrospective application to all periods. The Bank is currently evaluating and has not yet determined the impact the new issue is expected to have on its financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities including an amendment of FASB Statement No. 115” (SFAS 159). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement also established presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. The new standard is effective at the beginning of the Bank’s fiscal year beginning January 1, 2008, and early application may be elected in certain circumstances. The Bank is currently evaluating and has not yet determined the impact the new standard is expected to have on its financial position, results of operations or cash flows.
Note 3 - Pending Merger
On August 1, 2007, LyndonBank entered into an Agreement and Plan of Merger with Community Bancorp., Derby, Vermont, and its wholly-owned subsidiary, Community National Bank, pursuant to which, among other things, the Company agreed to merge with and into Community National Bank, with Community National Bank surviving (the “Merger”).
Subject to the terms and conditions of the Agreement, upon consummation of the Merger, LyndonBank shareholders will be entitled to receive $25.25, without interest, for each outstanding share of LyndonBank common stock that they own. Completion of the transaction is subject to the prior approval of the Office of the Comptroller of the Currency and the shareholders of LyndonBank. The parties expect the Merger to close on or about December 31, 2007.
