CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File No. 000-16435
COMMUNITY BANCORP.
(Exact name of registrant as specified in its charter)
Vermont 03-0284070
(State of Incorporation) (IRS Employer Identification No.)
Derby Road, Derby, Vermont 05829
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (802) 334-7915
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $2.50 par value per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES (X) NO ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
As of March 10, 2000, the date of the latest known sale of the registrant's
stock, the aggregate market value of the voting stock held by non-affiliates
of the registrant, based on the per share sale price of the stock on that
date, was $26,804,367.
There were 3,387,177 shares outstanding of the issuer's class of common stock
as of the close of business on March 10, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Report of Independent Public Accountants
Financial Statements:
Consolidated Statements of Condition as of December 31, 1999 and 1998
Consolidated Statements of Income for the fiscal years 1999, 1998 and 1997
Consolidated Statements of Changes in Stockholders' Equity for the fiscal
years 1999, 1998 and 1997
Consolidated Statements of Changes in Financial Position for the fiscal
years 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Condensed Financial Information (Parent Company Only)
Portions of the Annual Report to Shareholders for fiscal year 1999
incorporated by reference to Part II.
Portions of the Proxy Statement for the Annual Meeting to be held May 2,
2000 are incorporated by reference to Part III.
Total Number of Pages - 35
Exhibit Index Begins on Page 24
FORM 10-K ANNUAL REPORT
Table of Contents
PART I Page
Item I The Business 4
Organization and Operation 4
Distribution of Assets, Liabilities & Stockholders' Investment 10
Interest Income, Interest Expense and Interest Differential 11
Rate Volume Analysis 12
Investment Portfolio 13
Loan Portfolio 14
Summary of Loan Loss Experience 15
Non-Accrual, Past Due, and Restructured Loans 16
Deposits, Return on Equity and Assets 17
Item 2 Properties 18
Item 3 Legal Proceedings 19
Item 4 Submission of Matters to a Vote of Security Holders 19
PART II
Item 5 Market for Registrant's Common Equity
and Related Stockholder Matters 19
Item 6 Selected Financial Data 19
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 23
Item 7A Qualitative and Quantitative Disclosures About Market Risk 23
Item 8 Financial Statements and Supplementary Data 23
Item 9 Disagreements on Accounting and Financial Disclosures 23
PART III
Item 10 Directors and Executive Officers of the Registrant 23
Item 11 Executive Compensation 23
Item 12 Security Ownership of Certain Beneficial Owners and Management 23
Item 13 Certain Relationships and Related Transactions 23
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K 24
Signatures 35
PART I
Item 1. The Business
Organization and Operation
Community Bancorp. (The Corporation) was organized under the laws of the
State of Vermont in 1982 and became a registered bank holding company
under the Bank Holding Company Act of 1956, as amended, in October 1983
when it acquired all of the voting shares of Community National Bank (the
Bank). The Bank is one of two subsidiaries of the Corporation and
principally all of the Corporation's business operations are presently
conducted through it. Liberty Savings Bank (Liberty), a New Hampshire
guaranty savings bank, is the other subsidiary of Community Bancorp and is
presently inactive. On December 31, 1997, Community Bancorp. acquired all
of the outstanding stock of Liberty Savings Bank, as well as the assets
consisting of a U.S. Treasury Strip and a small amount of cash. Currently,
since no building was purchased at the time of acquisition, the main office
of Community National Bank serves as the mailing address for this bank.
Community National Bank was organized in 1851 as the Peoples Bank, and
was subsequently reorganized as the National Bank of Derby Line in 1865.
In 1975, after 110 continuous years of operation as the National Bank of
Derby Line, the Bank acquired the Island Pond National Bank and changed
its name to "Community National Bank."
Community National Bank provides a complete range of retail banking
services to the residents and businesses in northeastern Vermont. These
services include checking, savings and time deposit accounts, mortgage,
consumer and commercial loans, safe deposit and night deposit services,
automatic teller machine (ATM) facilities, credit card services, 24 hour
telephone banking and a full line of personal fiduciary services. The Bank
was among the first financial institutions to offer internet banking to the
Northeast Kingdom. This service was first offered to employees in order
for them to become more familiar with it, test the different uses, and work
out any potential problems. The Bank then began offering this service to
its customers near the end of the second quarter of 1999. Additionally, the
Bank maintains cash machines in three different businesses located in the
towns of Irasburg, West Danville and Concord, Vermont.
Competition
The Bank has five offices located in Orleans County, one office in Essex
County, and one office in Caledonia County, all in northeastern Vermont.
Its primary service area is in the towns of Derby and Newport, Vermont,
with approximately 59% of its total deposits as of December 31, 1999
derived from that area.
The Bank competes in all aspects of its business with other banks and
credit unions in northern Vermont, including two of the largest banks
in the state, which maintain branch offices throughout the Bank's
service area. Historically, competition in Orleans and Essex Counties
has come from The Chittenden Trust Company and The Howard Bank, N.A., a
subsidiary of Banknorth Group, Inc., based in Burlington, Vermont. The
Chittenden Trust Company maintains a branch office in Newport, and The
Howard Bank maintains one office in Barton, one office in Orleans, and
one office in St. Johnsbury. Competition in Caledonia County comprises
of the Passumpsic Savings Bank and Citizens Savings Bank, both based in
St. Johnsbury, Lyndonville Savings Bank and Trust Company, based in
Lyndonville, The Merchants Bank based in Burlington, and with two local
credit unions for deposits and consumer loans.
With recent changes in the regulatory framework of the banking industry,
the competition for deposits and loans has broadened to include not only
traditional rivals such as the mutual savings banks and stock savings
banks, but also several non-traditional rivals such as insurance companies,
brokerage firms, mutual funds and consumer finance companies.
Employees
As of December 31, 1999, the Bank employed 93 full-time employees and 25
part-time employees. Management of the Bank considers its employee
relations to be good.
Regulation and Supervision
Holding Company Regulations-As a registered bank holding company, the
Corporation is subject to on-going regulation supervision and examination
by the Board of Governors of the Federal Reserve System, under the Bank
Holding Company Act of 1956, as amended (the "Act"). A bank holding
company for example, must obtain the prior approval of the Board before
it acquires all or substantially all of the assets of any bank, or
acquires ownership or control of more than 5% of the voting shares of
a bank. Prior Federal Reserve Board approval is also required before
a bank holding company may acquire more than 5% of any outstanding
class of voting securities of a company other than a bank or a more
than 5% interest in its property.
The Act generally limits the activity in which the Corporation and its
subsidiaries may engage to certain specified activities, including those
activities which the Federal Reserve Board may find, by order or regulation,
to be so closely related to banking or managing or controlling banks as to
be a proper incident thereto. Some of the activities that the Federal
Reserve Board has determined to be closely related to banking are: (1)
making, and servicing loans that could be made by mortgage, finance,
credit card or factoring companies; (2) performing the functions of a trust
company; (3) certain leasing of real or personal property; (4) providing
certain financial, banking or economic data processing services; (5) except
as otherwise prohibited by law, acting as an insurance agent or broker with
respect to insurance that is directly related to the extension of credit or
the provision of other financial services or, under certain circumstances,
with respect to insurance that is sold in certain small communities in which
the bank holding company system maintains banking offices; (6) acting as an
underwriter for credit life insurance and credit health and accident insurance
directly related to extensions of credit by the holding company system; (7)
providing certain kinds of management consulting advice to unaffiliated banks
and non-bank depository institutions; (8) performing real estate appraisals;
(9) issuing and selling money order and similar instruments and travelers
checks and selling U.S. Savings Bonds; (10) providing certain securities
brokerage and related services for the account of bank customers; (11)
underwriting and dealing in certain government obligations and other
obligations such as bankers' acceptances and certificates of deposit; (12)
providing consumer financial counseling; (13) providing tax planning and
preparation services; (14) providing check guarantee services to merchants;
(15) operating a collection agency; and (16) operating a credit bureau.
The Corporation does not presently engage, directly or indirectly, in any
non-banking activities.
A bank holding company must also obtain prior Federal Reserve approval in
order to purchase or redeem its own stock if the gross consideration to be
paid, when added to the net consideration paid by the company for all
purchases or redemptions by the company of its equity securities within the
preceding 12 months, will equal 10% or more of the company's consolidated
net worth.
The Corporation is required to file with the Federal Reserve Board an annual
report and such additional information as the Board may require pursuant to
the Act. The Board may also make examinations of the Corporation and any
direct or indirect subsidiary of the Corporation.
Community Bancorp. and its subsidiaries, Community National Bank and Liberty
Savings Bank, are considered "affiliates" for the purposes of Section 18(j)
of the Federal Deposit Insurance Act, as amended, and Section 23A of the
Federal Reserve Act, as amended. Accordingly, they are subject to limitations
with respect to the Bank's ability to make loans and other extensions of
credit to or investments in the Corporation or in any other subsidiaries that
the Corporation may acquire. The Company is prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit or
lease or sale of any property of the furnishing of services.
Financial Modernization. On March 11, 2000 the federal Gramm-Leach-Bliley
financial modernization act ("Gramm-Leach-Bliley") became effective. Under
Gramm-Leach-Bliley, eligible bank holding companies will be permitted to
become financial holding companies and thereby affiliate with securities
firms and insurance companies and engage in a broader range of activities
than is otherwise permissible for bank holding companies. A bank holding
company is eligible to elect to become a financial holding company and to
engage in activities that are "financial in nature" if each of its
subsidiary banks is well capitalized for regulatory capital purposes, is
well managed and has at least a satisfactory rating under the Community
Reinvestment Act ("CRA"). Activities which are deemed "financial in
nature" under Gramm-Leach-Bliley would include securities underwriting,
dealing and market making; sponsoring mutual funds and investment companies;
insurance underwriting and agency; merchant banking activities; and activities
that the Federal Reserve Board has determined to be closely related to
banking. Gramm-Leach-Bliley also contains similar provisions authorizing
eligible national banks to engage indirectly through a financial subsidiary
and subject to limitations on investment, in activities that are financial
in nature, other than insurance underwriting, insurance company portfolio
investment, real estate development and real estate investment, through a
financial subsidiary of the bank. In order to be considered eligible for
these expanded activities, the bank must be well capitalized, well managed
and have at least a satisfactory CRA rating.
Implementation of Gramm-Leach-Bliley will likely result in structural changes
to the financial services industry, the full effect of which cannot be
predicted with any certainty.
The Corporation has registered its Common Stock under Section 12(g) of the
Securities Exchange Act of 1934 and is required to file annual and periodic
reports and proxy statements and other information with the Securities and
Exchange Commission.
Interstate Banking and Branching. Under the Riegle-Neal Interstate Banking
and Branching Efficiency Act of 1994, a bank holding company became able to
acquire banks in states other than its home state beginning September 29,
1995, without regard to the permissibility of such acquisitions under state
law, but subject to any state requirement that the bank has been organized
and operating for a minimum period of time, not to exceed five years, and
the requirement that the bank holding company, prior to or following the
proposed acquisition, controls no more than 10% of the total amount of
deposits of insured depository institutions in the United States and less
than 30% of such deposits in that state (or such lesser or greater amount
set by state law).
The Interstate Banking and Branching Act also authorizes banks to merge
across state lines, subject to certain restrictions, thereby creating
interstate branches, and to open new branches in a state in which it does
not already have banking operations if the state enacts a law permitting
such de novo branching.
Capital and Operational Requirements. The Federal Reserve Board, the OCC
and other banking regulators have issued substantially similar risk-based
and leverage capital guidelines applicable to U.S. banking organizations.
In addition, those regulatory agencies may from time to time require that a
banking organization maintain capital above the minimum levels, whether
because of its financial condition or actual or anticipated growth. The
Federal Reserve Board risk-based guidelines define a three-tier capital
framework. "Tier 1 capital" generally consists of common and qualifying
preferred shareholders' equity, less certain intangibles and other
adjustments. "Tier 2 capital" and "Tier 3 capital" generally consist of
subordinated and other qualifying debt, preferred stock that does not
qualify as Tier 1 capital and the allowance for credit losses up to 1.25%
of risk-weighted assets.
The sum of Tier 1, Tier 2 and Tier 3 capital, less investments in
unconsolidated subsidiaries, represents qualifying "total capital," at
least 50% of which must consist of Tier 1 capital. Risk-based capital
ratios are calculated by dividing Tier 1 capital and total capital by risk-
weighted assets. Assets and off-balance sheet exposures are assigned to
one of four categories of risk weights, based primarily on relative credit
risk. The minimum Tier 1 capital ratio is 4% and the minimum total capital
ratio is 8%. The "leverage ratio" requirement is determined by dividing
Tier 1 capital by adjusted average total assets. Although the stated
minimum ratio is 3%, most banking organizations are required to maintain
ratios of at least 100 to 200 basis points above 3%.
Prompt Corrective Action. The Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), among other things, identifies five
capital categories for insured depository institutions (well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized
and critically undercapitalized) and requires the respective U.S. federal
regulatory agencies to implement systems for "prompt corrective action"
for insured depository institutions that do not meet minimum capital
requirements within such categories. FDICIA imposes progressively more
restrictive constraints on operations, management and capital distributions,
depending on the category in which an institution is classified. Failure to
meet the capital guidelines could also subject a banking institution to
capital raising requirements. An "undercapitalized" bank must develop a
capital restoration plan and its parent holding company must guarantee that
bank's compliance with the plan. The liability of the parent holding company
under any such guarantee is limited to the lesser of 5% of the bank's assets
at the time it became undercapitalized or the amount needed to comply with
the plan. Furthermore, in the event of the bankruptcy of the parent holding
company, such guarantee would take priority over the parent's general
unsecured creditors. In addition, FDICIA requires the various regulatory
agencies to prescribe certain non-capital standards for safety and soundness
related generally to operations and management, asset quality and executive
compensation and permits regulatory action against a financial institution
that does not meet such standards.
The various federal bank regulatory agencies have adopted substantially
similar regulations that define the five capital categories identified by
FDICIA, using the total risk-based capital, Tier 1 risk-based capital and
leverage capital ratios as the relevant capital measures. Such regulations
establish various degrees of corrective action to be taken when an
institution is considered undercapitalized. Under the regulations, a
"well capitalized" institution must have a Tier 1 capital ratio of at least
6%, a total capital ratio of at least 10% and a leverage ratio of at least
5% and not be subject to a capital directive order. An "adequately
capitalized" institution must have a Tier 1 capital ratio of at least 4%,
a total capital ratio of at least 8% and a leverage ratio of at least 4%,
or 3% in some cases. Under these guidelines, Community National Bank is
considered "well capitalized."
The Federal bank regulatory agencies also have adopted regulations which
mandate that regulators take into consideration concentrations of credit
risk and risks from non-traditional activities, as well as an institution's
ability to manage those risks, when determining the adequacy of an
institution's capital. That evaluation will be made as part of the
institution's regular safety and soundness examination. Banking agencies
also have adopted final regulations requiring regulators to consider
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its off-balance
sheet position) in the determination of a bank's capital adequacy.
Concurrently, banking agencies have proposed a methodology for evaluating
interest rate risk. The banking agencies do not intend to establish an
explicit risk-based capital charge for interest rate risk but will continue
to assess capital adequacy for interest rate risk under a risk assessment
approach based on a combination of quantitative and qualitative factors and
have provided guidance on prudent interest rate risk management practices.
Distributions. The Corporation derives funds for cash distributions to its
shareholders primarily from dividends received from its subsidiary, Community
National Bank. The Bank is subject to various general regulatory policies and
requirements relating to the payment of dividends, including requirements to
maintain capital above regulatory minimums. The prior approval of the
Comptroller of the Currency is required if the total of all dividends
declared by a national bank in any calendar year will exceed the sum of such
bank's net profits for that last year and its retained net profits for the
preceding two calendar years, less any required transfers to surplus.
Federal law also prohibits national banks from paying dividends which would
be greater than the bank's undivided profits after deducting statutory bad
debt in excess of the bank's allowance for loan losses.
In addition, the Corporation and the Bank are subject to various general
regulatory policies and requirements relating to the payment of dividends,
including requirements to maintain adequate capital above regulatory
minimums. The appropriate federal regulatory authority is authorized to
determine under certain circumstances relating to the financial condition
of a bank or bank holding company that the payment of dividends would be an
unsafe or unsound practice and to prohibit such payment. The federal bank
regulatory authorities have indicated that paying dividends that deplete a
bank's capital base to an inadequate level would be an unsound and unsafe
banking practice and that banking organizations should generally pay
dividends only out of current operating earnings.
"Source of Strength" Policy. According to Federal Reserve Board policy,
bank holding companies are expected to act as a source of financial strength
to each subsidiary bank and to commit resources to support each such
subsidiary. This support may be required at times when a bank holding company
may not be able to provide such support. Similarly, under the cross-guarantee
provisions of the Federal Deposit Insurance Act, in the event of a loss
suffered or anticipated by the FDIC--either as a result of default of a
banking subsidiary of a bank holding company or related to FDIC assistance
provided to a subsidiary in danger of default--the other banking subsidiaries
of such bank holding company may be assessed for the FDIC's loss, subject to
certain exceptions.
Bank Regulation. The Bank is a national banking association and subject
to the provisions of the National Bank Act and federal and state statutes
and rules and regulations applicable to national banks. The primary
supervisory authority for the Bank is the Comptroller of the Currency.
The Comptroller's examinations are designed for the protection of the
Bank's depositors and not for its shareholders. The Bank is subject to
periodic examination by the Comptroller and must file periodic reports
with the Comptroller containing a full and accurate statement of its
affairs. The deposits of the Bank are insured by the Federal Deposit
Insurance Corporation ("FDIC"). Accordingly, the Bank is also subject
to regulation by the FDIC.
Liberty is subject to similar banking regulations and provisions in the state
of New Hampshire.
Effects of Government Monetary Policy
The earnings of the Company are affected by general and local economic
conditions and by the policies of various governmental regulatory
authorities. In particular, the Federal Reserve Board regulates money
and credit conditions and interest rates in order to influence general
economic conditions, primarily through open market operations and United
States Government Securities, varying the discount rate on member bank
borrowings, setting reserve requirements against member and nonmember
bank deposits, and regulating interest rates payable by member banks on
time and savings deposits. Federal Reserve Board monetary policies have
had a significant effect on the operating results of commercial banks,
including the Company, in the past and are expected to continue to do so
in the future.
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
The following tables summarize various consolidated information and provides
a three year comparison relating to the average assets, liabilities, and
stockholders' equity.
(Dollars in Thousands)
Year ended December 31, 1999 1998 1997
ASSETS
Balance % Balance % Balance %
Cash and Due from Banks
Non-Interest Bearing 5,212 2.25% 4,522 2.05% 4,979 2.37%
Taxable Investment
Securities(1) 49,832 21.54% 38,784 17.56% 35,649 17.00%
Tax-exempt Investment
Securities(1) 13,843 5.98% 13,060 5.91% 12,140 5.79%
Other Securities(1) 1,254 0.54% 1,270 0.57% 1,168 0.56%
Total Investment
Securities 64,929 28.06% 53,114 24.04% 48,957 23.35%
Overnight Deposits(2) 2,638 1.14% 3,339 1.51% 0 0.00%
Federal Funds Sold 2,897 1.25% 4,928 2.23% 2,583 1.23%
Loans, Net 147,128 63.59% 147,830 66.92% 145,778 69.53%
Premises and Equipment 4,144 1.79% 3,135 1.42% 3,328 1.59%
Other Real Estate Owned 678 0.29% 660 0.30% 997 0.48%
Other Assets 3,737 1.63% 3,368 1.46% 3,026 1.45%
Total Assets 231,363 100% 220,896 100% 209,648 100%
LIABILITIES
Demand Deposits 23,619 10.21% 20,857 9.44% 18,694 8.92%
Now and Money
Market Accounts 51,850 22.41% 44,916 20.34% 39,337 18.76%
Savings Accounts 32,748 14.15% 30,840 13.96% 31,907 15.22%
Time Deposits 94,694 40.93% 98,181 44.45% 94,751 45.19%
Total Deposits 202,911 87.70% 194,794 88.19% 184,689 88.09%
Other Borrowed Funds 4,059 1.75% 4,060 1.84% 4,061 1.94%
Repurchase Agreements(3) 1,305 0.56% 93 0.04% 0 0.00%
Other Liabilities 1,154 0.50% 1,020 0.46% 734 0.35%
Subordinated Debentures 20 0.02% 48 0.02% 107 0.05%
Total Liabilities 209,449 90.53% 200,015 90.55% 189,591 90.43%
STOCKHOLDERS' EQUITY
Common Stock 8,220 3.55% 6,174 2.79% 3,814 1.82%
Surplus 10,624 4.59% 8,293 3.75% 7,769 3.71%
Retained Earnings 3,654 1.58% 6,649 3.01% 8,916 4.25%
Less: Treasury Stock (447) -0.19% (445) -0.20% (445) -0.21%
Accumulated Other
Comprehensive Income(1) (137) -0.06% 210 0.10% 3 0.00%
Total Stockholders' Equity 21,914 9.47% 20,881 9.45% 20,057 9.57%
Total Liabilities and
Stockholders' Equity 231,363 100% 220,896 100% 209,648 100%
<FN>
<f01> FASB No. 115, an accounting method in which securities classified as Held
to Maturity are carried at book value and securities classified as
Available for Sale are carried at fair value with the unrealized gain
(loss), net of applicable income taxes, reported as a net amount in
accumulated other comprehensive income. The Company does not carry, nor
does it intend to carry, securities classified as Trading Securities.
<f02> Overnight deposits refers to the BankBoston sweep account established
during the first half of 1998 as another means of selling funds overnight.
<f03> Repurchase agreements were introduced during the second part of 1998 in an
effort to attract new business customers.
AVERAGE BALANCES AND INTEREST RATES
The table below presents the following information: average earning assets
(including non-accrual loans) and average interest-bearing liabilities
supporting earning assets; and interest income and interest expense as a
rate/yield.
(Dollars in Thousands)
1999 1998 1997
AVE. INC./ RATE/ AVE. INC./ RATE/ AVE. INC./ RATE/
BAL. EXP. YIELD BAL. EXP. YIELD BAL. EXP. YIELD
EARNING ASSETS
Loans(net)(1) 147,128 13,036 8.86% 147,830 13,758 9.31% 145,778 13,868 9.51%
Taxable Investment
Securities 49,832 2,715 5.45% 38,784 2,196 5.66% 35,649 2,117 5.94%
Tax-exempt Investment
Securities(2) 13,843 924 6.67% 13,060 930 7.12% 12,140 929 7.65%
Federal Funds
Sold 2,897 143 4.94% 4,928 237 4.81% 2,583 140 5.42%
Overnight
Deposits(3) 2,638 133 5.04% 3,339 185 5.54% N/A
Other
Securities(4) 1,254 85 6.78% 1,270 82 6.46% 1,168 79 6.76%
TOTAL 217,592 17,036 7.83% 209,211 17,388 8.31% 197,318 17,133 8.68%
INTEREST-BEARING LIABILITIES
Savings
Deposits 32,748 756 2.31% 30,840 807 2.62% 31,907 877 2.75%
NOW and Money
Market Funds 51,850 1,656 3.19% 44,916 1,565 3.48% 39,337 1,397 3.55%
Time Deposits 94,694 4,865 5.14% 98,181 5,496 5.60% 94,751 5,304 5.60%
Other Borrowed
Funds 4,059 203 5.00% 4,060 198 4.88% 4,061 245 6.03%
Repurchase
Agreements(5) 1,305 52 3.98% 93 4 4.30% N/A
Subordinated
Debentures 20 2 11.00% 48 5 10.42% 107 11 10.28%
TOTAL 184,676 7,534 4.08% 178,138 8,075 4.53% 170,163 7,834 4.60%
Net Interest Income 9,502 9,313 9,299
Net Interest Spread(6) 3.75% 3.78% 4.08%
Interest Differential(7) 4.37% 4.45% 4.71%
<FN>
<f01> Included in net loans are non-accrual loans with an average balance of
$1,894,097 for 1999, $2,004,438 for 1998, and $1,750,037 for 1997.
<f02> Income on investment securities of state and political subdivisions is
stated on a tax equivalent basis (assuming a 34% rate). The amount of
adjustment was $314,301 in 1999, $316,232 in 1998, and $315,855 in 1997.
<f03> Overnight deposits refers to the BankBoston sweep account established
during the first half of 1998 as another means of selling funds
overnight.
<f04> Included in other securities are taxable industrial development bonds
(VIDA), with income of $5,443 for 1999, $7,549 for 1998, $8,440 for 1997.
<f05> Repurchase agreements were introduced during the second part of 1998
in an effort to attract new business customers.
<f06> Net interest spread is the difference between the yield on earning
assets and the rate paid on interest-bearing liabilities.
<f07> Interest differential is net interest income divided by average
earning assets.
CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
The following table summarizes the variances in income for the years 1999,
1998, 1997, and 1996 resulting from volume changes in assets and liabilities
and fluctuations in rates earned and paid.
(Dollars in Thousands)
1999 vs. 1998 1998 vs. 1997 1997 vs. 1996
RATE VOLUME Variance(1) Variance(1) Variance(1)
Due to Total Due to Total Due to Total
Rate Volume Variance Rate Volume Variance Rate Volume Variance
Income-Earning Assets
Loans(2) (660) (62) (722) (305) 195 (110) (197) 689 492
Taxable
Investment
Securities (107) 626 519 (107) 186 79 28 (6) 22
Tax-Exempt
Investment
Securities (3) (62) 56 (6) (69) 70 1 (29) (156) (185)
Federal Funds
Sold 6 (100) (94) (30) 127 97 9 (115) (106)
Overnight
Deposits (17) (35) (52) 0 185 185 N/A
Other Securities 4 (1) 3 (4) 7 3 1 0 1
Total Interest
Earnings (836) 484 (352) (515) 770 255 (188) 412 224
Interest-Bearing Liabilities
Savings
Deposits (101) 50 (51) (42) (28) (70) (56) (11) (67)
NOW and Money
Market Funds (151) 242 91 (30) 198 168 (53) (73) (126)
Time Deposits (452) (179) (631) 0 192 192 (294) (83) (377)
Other Borrowed
Funds 5 0 5 (47) 0 (47) (42) 280 238
Repurchase
Agreements (4) 52 48 0 4 4 N/A
Subordinated
Debentures 0 (3) (3) 0 (6) (6) 1 (11) (10)
Total Interest
Expense (703) 162 (541) (119) 360 241 (444) 102 (342)
<FN>
<f01> 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
Variance due to volume = Change in volume x new rate
<f02> Total loans are stated net of unearned discount and allowance for loan
losses. Interest on non-accrual loans is excluded from income. The
principal balances of non-accrual loans are included in calculations
of the yield on loans.
<f03> Income on tax-exempt securities is stated on a tax equivalent basis.
The assumed rate is 34%.
INVESTMENT PORTFOLIO
The following tables show the classification of the investment portfolio
by type of investment security based on book value for Held to Maturity
securities and fair value for Available for Sale securities on December 31
for each of the last 3 years.
(Dollars in Thousands)
1999 1998 1997
U.S. Treasury Obligations:
Available-for-Sale 28,982 20,590 8,039
Held-to-Maturity 6,650 15,562 22,491
U.S. Agency Obligations 11,127 4,582 1,631
Obligations of State &
Political Subdivisions 12,110 9,734 10,004
Restricted Equity Securities 1,142 1,142 1,100
Total Investment Securities 60,011 51,610 43,265
The following is an analysis of the maturities and yields of investment
securities as defined:
(Available for Sale; fair value, Held to Maturity; book value)
December 31, 1999 1998 1997
U.S. Treasury & Agency Obligations
Fair Ave. Fair Ave. Fair Ave.
Available for Sale Value Yield Value Yield Value Yield
Due within 1 year 9,993 5.96% 0 0.00% 2,993 6.08%
Due after 1 year within 5 years 18,989 6.27% 20,590 6.16% 5,046 6.12%
Total 28,982 6.17% 20,590 6.16% 8,039 6.10%
Book Ave. Book Ave. Book Ave.
Held to Maturity Value Yield Value Yield Value Yield
Due within 1 year 1,000 6.38% 14,634 6.51% 8,965 5.78%
Due after 1 year within 5 years 14,824 5.30% 5,510 5.78% 15,157 5.69%
Due after 5 years within 10 years 1,953 6.93% 0 0.00% 0 0.00%
Total 17,777 5.54% 20,144 6.31% 24,122 5.72%
Obligations of State &
Political Subdivisions(1)
Book Ave. Book Ave. Book Ave.
Value Yield Value Yield Value Yield
Due within 1 year 8,738 6.40% 6,473 6.58% 6,624 7.94%
Due after 1 year within 5 years 1,507 7.18% 1,522 7.58% 1,543 7.91%
Due after 5 years within 10 years 600 7.78% 392 8.03% 363 8.03%
Due after 10 years 1,265 9.76% 1,347 9.65% 1,474 9.67%
Total 12,110 6.92% 9,734 7.21% 10,004 8.19%
Restricted Equity Securities
Total Restricted Equity Securities 1,142 6.00% 1,142 6.00% 1,100 6.76%
<FN>
<f01> Income on Obligations of State and Political Subdivisions is stated
on a tax equivalent basis assuming a 34 percent tax rate. Also
included are taxable industrial development bonds (VIDA) with a fair
value of $92,828 as of December 31, 1999, $123,546 as of December 31,
1998, and $150,235 as of December 31, 1997 with respective yields of
5.23%, 4.76%, and 5.55%.
LOAN PORTFOLIO
The following table reflects the composition of the Company's loan portfolio
for years ended December 31:
(Dollars in Thousands)
1999 1998 1997 1996 1995
TOTAL % OF TOTAL % OF TOTAL % OF TOTAL % OF TOTAL
% OF
LOANS TOTAL LOANS TOTAL LOANS TOTAL LOANS TOTAL LOANS
TOTAL
Real Estate Loans
Construction & Land
Development 1,620 1.06% 2,025 1.37% 1,091 0.73% 1,432 0.98% 912
0.66%
Farm Land 3,229 2.11% 2,634 1.78% 2,093 1.39% 2,148 1.48% 1,814
1.32%
1-4 Family
Residential 98,439 64.22% 98,407 66.34% 98,743 65.78% 94,393 64.83% 91,104
66.38%
Commercial
Real Estate 21,223 13.85% 19,555 13.18% 19,992 13.32% 20,602 14.15% 18,646
13.59%
Loans to Finance
Agricultural
Production 661 0.43% 829 0.56% 1,354 0.90% 1,222 0.84% 1,127
0.82%
Commercial &
Industrial 11,527 7.52% 8,767 5.91% 7,759 5.17% 7,084 4.87% 6,749
4.92%
Consumer
Loans 16,344 10.66% 16,008 10.79% 18,943 12.62% 18,556 12.74% 16,578
12.08%
All Other Loans 236 0.15% 110 0.07% 141 0.09% 166 0.11% 310
0.23%
Gross Loans 153,279 100% 148,335 100% 150,116 100% 145,603 100% 137,240
100%
Less:
Reserve for
Loan Losses (1,715)-1.12% (1,659)-1.12% (1,502)-1.00% (1,401)-0.96% (1,519)
- -1.11%
Deferred
Loan Fees (891)-0.58% (849)-0.57% (867)-0.58% (904)-0.62% (909)
- -0.66%
Net Loans 150,673 98.30% 145,827 98.31% 147,747 98.42% 143,298 98.42% 134,812
98.23%
MATURITY OF LOANS
The following table shows the estimated maturity of loans (excluding
residential properties of 1 - 4 families, consumer loans and other
loans) outstanding as of December 31, 1999.
Fixed Rate Loans Maturity Schedule
Within 1 - 5 After
1 Year Years 5 years Total
Real Estate
Construction & Land Development 1,420 0 0 1,420
Secured by Farm Land 15 15 858 888
Commercial Real Estate 151 501 5,083 5,735
Loans to Finance
Agricultural Production 17 170 0 187
Commercial & Industrial Loans 323 5,587 1,257 7,167
Total 1,926 6,273 7,198 15,397
Variable Rate Loans
Within 1 - 5 After
1 Year Years 5 years Total
Real Estate
Construction & Land Development 200 0 0 200
Secured by Farm Land 2,063 278 0 2,341
Commercial Real Estate 10,202 5,286 0 15,488
Loans to Finance
Agricultural Production 283 191 0 474
Commercial & Industrial Loans 3,637 723 0 4,360
Total 16,385 6,478 0 22,863
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the Company's loan loss experience for
each of the last five years.
(Thousands of Dollars)
December 31, 1999 1998 1997 1996 1995
Loans Outstanding
End of Period 153,279 148,335 150,116 145,603 137,240
Ave. Loans Outstanding
During Period 147,128 147,830 145,778 138,635 131,879
Loan Loss Reserve,
Beginning of Period 1,659 1,502 1,401 1,519 1,708
Loans Charged Off:
Real Estate 227 177 191 116 198
Commercial 41 41 104 86 17
Loans to Individuals 281 487 436 383 238
Total 549 705 731 585 453
Recoveries:
Real Estate 10 65 12 18 5
Commercial 8 17 27 16 20
Loans to Individuals 90 120 133 68 119
Total 108 202 172 102 144
Net Loans Charged Off 441 503 559 483 309
Provision Charged to Income 497 660 660 365 120
Loan Loss Reserve, End of Period 1,715 1,659 1,502 1,401 1,519
Net Losses as a Percent
of Ave. Loans 0.30% 0.34% 0.38% 0.35% 0.23%
Provision Charged to Income as
a Percent of Average Loans 0.34% 0.45% 0.45% 0.26% 0.09%
At End of Period:
Loan Loss Reserve as a Percent
of Outstanding Loans 1.12% 1.12% 1.00% 0.96% 1.11%
Factors considered in the determination of the level of loan loss
coverage include, but are not limited to historical loss ratios,
composition of the loan portfolio, overall economic conditions as
well as future potential losses.
The following table shows an allocation of the allowance for loan
losses, as well as the percent to the total allowance for the last
five years (the corporation has no foreign loans, therefore,
allocations for this category are not necessary).
December 31, 1999 % 1998 % 1997 % 1996 % 1995 %
Domestic
Residential
Real Estate 421 25% 559 33% 362 24% 490 35% 265 17%
Commercial 372 22% 475 29% 645 43% 307 22% 631 42%
Loans to
Individuals 356 21% 448 27% 487 32% 395 28% 485 32%
Unallocated 566 33% 177 11% 8 1% 209 15% 138 9%
Total 1,715 100% 1,659 100% 1,502 100% 1,401 100% 1,519 100%
NON-ACCURAL, PAST DUE, AND RESTRUCTURED LOANS
The following table summarizes the bank's past due, non-accrual,
and restructured loans:
(Dollars in Thousands)
December 31, 1999 1998 1997 1996 1995
Accruing Loans Past Due 90 Days or More:
Consumer 77 53 121 36 28
Commercial 0 119 19 5 15
Real Estate 732 246 211 360 249
Total Past Due 90 Days or More 809 418 351 401 292
Non-accrual Loans 1,758 2,228 1,486 1,255 1,389
Restructured Loans (incl. non-accrual) 0 126 136 506 359
Total Non-accrual, Past Due
and Restructured Loans 2,567 2,772 1,973 2,162 2,040
Other Real Estate Owned 435 542 1,089 663 761
Total Non Performing Loans 3,002 3,314 3,062 2,825 2,801
Percent of Gross Loans 1.96% 2.23% 2.04% 1.94% 2.04%
Reserve Coverage of Non performing Loans 57.13% 50.06% 49.05% 49.59% 54.23%
When a loan reaches non-accrual status, it is determined that future
collection of interest and principal is doubtful. At this point, the
Company's policy is to reverse the accrued interest and to discontinue
the accrual of interest until the borrower clearly demonstrates the
ability to resume normal payments. Our portfolio of non-accrual loans
for the years ended 1999, 1998, 1997, 1996, and 1995 are made up
primarily of commercial real estate loans and residential real estate
loans. Management does not anticipate any substantial effect to future
operations if any of these loans are liquidated. Although interest is
included in income only to the extent received by the borrower, deferred
taxes are calculated monthly, based on the accrued interest of all non-
accrual loans. This accrued interest amounted to $398,006 in 1999,
$363,713 in 1998, $216,770 in 1997, $309,388 in 1996, and $256,754 in
1995. The Company had total foreign loans of less than one percent in
1999, and has no concentration in any industrial category.
DEPOSITS
The average daily amount of deposits and rates paid on such deposits
is summarized for the last three years. (Dollars in Thousands)
December 31,
1999 1998 1997
Amount Rate Amount Rate Amount Rate
Non-Interest Bearing
Demand Deposits 23,619 0.00% 20,857 0.00% 18,694 0.00%
NOW & Money Market Funds 51,850 3.19% 44,916 3.48% 39,337 3.55%
Savings Deposits 32,748 2.31% 30,840 2.62% 31,907 2.75%
Time Deposits 94,694 5.14% 98,181 5.60% 94,751 5.60%
Total Deposits 202,911 3.59% 194,794 4.04% 184,689 4.10%
Increments of maturity of time certificates of deposit and other time
deposits of $100,000 or more issued by domestic offices outstanding on
December 31, 1999 are summarized as follows:
Time Certificates
Maturity Date of Deposit
3 Months or Less 1,679
Over 3 through 6 Months 5,190
Over 6 through 12 Months 3,814
Over 12 Months 5,211
Total 15,894
RETURN ON EQUITY AND ASSETS
The following table shows consolidated operating and capital ratios
of the Company for each of the last three years.
December 31,
1999 1998 1997
Return on Average Assets 1.01% 0.99% 1.02%
Return on Average Equity 10.65% 10.49% 10.69%
Dividend Payout Ratio 89.40% 83.69% 77.02%
Ave. Equity to Ave. Assets Ratio 9.47% 9.45% 9.57%
Item 2. Properties
Community Bancorp. does not own or lease real property. The Corporation's
offices are located at the main offices of the Bank. All of the Bank's
offices are located in Vermont. In addition to the main office in Derby,
the Bank maintains facilities located in; City of Newport, Towns of Barton
and St. Johnsbury, and Villages of Island Pond, Troy and Derby Line. As
mentioned earlier, the newly acquired Liberty Savings Bank shares the same
address as the main offices as it does not maintain a facility.
The Bank's main offices are located in a two-story brick building on U.S.
Route 5 in Derby, Vermont. The main banking lobby and adjacent offices
were constructed in 1972, expanded in 1978, and the most recent expansion
was completed in July 1993, providing us with a total of 15,000 square feet
at this location. The main office is equipped with a drive-up facility as
well as an Automated Teller Machine (ATM). Computer and similar support
equipment is also located in the main office building. The building
previously housing our computer equipment currently houses an office for
employees of the Bank's Administrative department, and also serves as a
conference center for the Bank as well as various non-profit organizations,
free of charge, upon request.
The Bank owns the Derby Line office located on Main Street in a renovated
bank building. The facility consists of a small banking lobby containing
approximately 200 square feet and a walk-up window area. Recently, the
walk-up window area was removed, and in its place, an ATM was installed.
Now all seven offices of the Bank are equipped with an ATM.
The Island Pond office is located in the renovated "Railroad Station"
acquired by the town of Brighton in 1993. The Bank leases approximately
two-thirds of the downstairs including a banking lobby, a drive-up window,
and an ATM. The other portion of the downstairs is occupied by an
information center, and the upstairs section houses the Island Pond
Historical Society.
The Barton office is located on Church Street, in a renovated facility.
This office is equipped with a banking lobby, a drive-up window, and an
ATM, making most deposit and withdrawal transactions possible at this
branch 24 hours a day. The facility is leased from Dean M. Comstock, who
is a member of the Bank's Barton Advisory Committee. The lease was entered
into in 1985 and provides a fifteen-year term. It is anticipated that the
lease will be renewed.
The Bank occupies condominium space in the state office building on Main
Street in Newport to house its Newport office. The Bank occupies approxi-
mately 3,084 square feet on the first floor of the building for a full
service banking facility equipped with a remote drive-up facility and an
ATM. In addition, the Bank owns approximately 4,400 square feet on the
second floor housing our trust department, marketing department, and an
office for our public relations coordinator, with room for future expansion.
The Bank's Troy office is located in a new facility, which was leased for
a few years and then purchased in 1992 from Tom and Eleanor Watts. The
bank currently occupies 2,200 square feet, and leases additional space to
another business. An ATM is available in this office to provide the same
type of limited 24-hour accessibility as all other offices.
The St. Johnsbury office is located at the corner of the I-91 Access Road
and Route 5 in the town of St. Johnsbury. The Bank occupies approximately
2,250 square feet in the front of the Price Chopper building. Fully
equipped with an Automatic Teller Machine and a drive-up window, this
office operates as a full service banking facility. The Bank leases this
space from Murphy Realty of St. Johnsbury. Peter Murphy is President of
Murphy Realty, and is a member of the Bank's St. Johnsbury Advisory
Committee.
Item 3. Legal Proceedings
Community National Bank is currently involved in a lawsuit against the State
of Vermont. The issue involves OREO property that is on "filled land" on
the shores of Lake Memphremagog in the City of Newport. According to a so-
called "public trust doctrine", the State of Vermont might have ownership
of any lands created by filling any portion of the navigable waters of the
state. The result of this is that the Bank has been unable to sell these
properties because some attorneys will not clear title to the property.
The suit filed is an attempt to clear title to said properties by seeking
judicial clarification of the public trust doctrine. The outcome of the
suit is not likely to have a material impact on the financial statements
of the Bank or consolidated Company. There are no material pending legal
proceedings, other than ordinary routine litigation incidental to the
business of the Bank, and the aforementioned to which the Bank is a party
or of which any of its property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II.
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Common Stock Performance by Quarter
Incorporated by reference to Page 40 of the Annual Report to Shareholders for
fiscal year 1999.
Item 6. Selected Financial Data
Following pages
SELECTED FINANCIAL DATA
(Not covered by Report of Independent Public Accountants)
(Dollars in thousands, except per share data)
Year Ended December 31, 1999 1998 1997 1996 1995
Total Interest Income 16,723 17,072 16,817 16,532 15,406
Less:
Total Interest Expense 7,535 8,077 7,834 8,177 8,248
Net Interest Income 9,188 8,995 8,983 8,355 7,158
Less:
Provision for Loan Losses 497 660 660 365 120
Other Operating Income 1,759 1,586 1,336 1,281 1,181
Less:
Other Operating Expense 7,330 7,021 6,759 6,397 5,943
Income Before Income Taxes 3,120 2,900 2,900 2,874 2,276
Less:
Applicable Income Taxes (1) 786 710 755 654 324
Net Income 2,334 2,190 2,145 2,220 1,952
Per Share Data: (2)
Earnings per Share 0.71 0.68 0.69 0.74 0.68
Cash Dividends Declared 0.64 0.60 0.56 0.52 0.48
Weighted Average Number of
Common Shares Outstanding 3,309,375 3,229,702 3,125,270 3,005,843 2,881,424
Number of Common Shares
Outstanding 3,358,507 3,266,508 3,165,821 3,049,798 2,933,784
Balance Sheet Data:
Net Loans 150,673 145,827 147,747 143,298 134,812
Total Assets 232,216 225,051 213,001 205,536 197,382
Total Deposits 201,843 197,797 187,580 183,854 178,884
Total Liabilities 210,035 203,049 192,521 186,425 179,801
Borrowed Funds 4,075 4,080 4,164 235 330
Total Shareholders' Equity 22,181 22,002 20,480 19,111 17,580
<FN>
<f01> Applicable Income Taxes above includes the income tax effect, assuming
a 34% tax rate, on securities gains (losses), which totaled $0 in each
1999, 1998, 1997, $(656) in 1996, and $6,272 in 1995.
<f02> All per share data for prior calendar years have been restated to
reflect a 5% stock dividend paid in the first quarter of 1999. A 100%
stock dividend was paid on June 1, 1998, requiring restatement of per
share data for the calendar years 1997, 1996, and 1995. Additionally,
a 5% stock dividend was declared payable during the first quarter of
1997, requiring restatement of per share data for the 1996 and 1995
calendar years.
QUARTERLY RESULTS OF OPERATIONS
The following is an unaudited summary of the quarterly results of operations
for the years ended December 31, 1999, 1998 and 1997.
(Dollars in thousands, except per share data)
1999 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
Interest Income 4,050 4,203 4,248 4,221
Interest Expense 1,872 1,889 1,897 1,876
Net Interest Income 2,178 2,314 2,351 2,345
Provisions For Loan Losses 150 150 115 82
Other Operating Expenses 1,847 1,829 1,826 1,827
Income Before Taxes 554 785 814 967
Applicable Income Taxes 143 219 210 214
Net Income 411 566 604 753
Net Income Per Share(1): 0.13 0.17 0.18 0.23
1998
Interest Income 4,225 4,207 4,325 4,315
Interest Expense 1,990 2,053 2,045 1,989
Net Interest Income 2,235 2,154 2,280 2,326
Provisions For Loan Losses 200 160 150 150
Other Operating Expenses 1,810 1,761 1,768 1,730
Income Before Taxes 522 747 744 888
Applicable Income Taxes 114 189 182 226
Net Income 408 558 562 662
Net Income Per Share(1): 0.13 0.17 0.17 0.21
1997
Interest Income 4,040 4,172 4,253 4,352
Interest Expense 1,897 1,924 1,999 2,014
Net Interest Income 2,143 2,248 2,254 2,338
Provisions For Loan Losses 205 105 215 135
Other Operating Expenses 1,529 1,685 1,815 1,761
Income Before Taxes 695 832 576 798
Applicable Income Taxes 175 220 125 236
Net Income 520 612 451 562
Net Income Per Share (1): 0.17 0.20 0.14 0.18
<FN>
<f01> All per share data for 1998 and 1997 restated to reflect a 5% stock
dividend paid during the first quarter of 1999. Per share data for
all 1997 quarters and the first quarter of 1998 restated to reflect
a 100% stock dividend paid on June 1, 1998.
CAPITAL RATIOS
Community Bancorp. and Subsidiaries
(Dollars in Thousands)
ANNUAL
GROWTH RATE
At December 31, 1999 1998 1997 99/'98 98/'97
Total Assets 232,216 225,051 213,001 3.18% 5.66%
LESS: Goodwill (3) 297 320 343
Allowance for Possible Loan Losses 1,715 1,659 1,502 3.38% 10.45%
Total Adjusted Assets 233,634 226,390 214,160 3.20% 5.71%
Gross Risk-Adjusted Assets 111,995 107,450 106,298 4.23% 1.08%
Allowance for Loan Loss over limit (2) 315 316 173 -0.32% 82.66%
Total Risk-Adjusted Assets 111,680 107,134 106,125 4.24% 0.95%
Shareholders' Equity 22,181 22,002 20,480 0.81% 7.43%
LESS:
Valuation Allowance for Securities (247) 236 34
Intangible Assets(3) 319 339 352
Total Adjusted Tier 1 Capital (1) 22,109 21,427 20,094 3.18% 6.63%
Eligible Discounted Subordinated Debt 16 16 42 0.00% -61.90%
Max. Allowance for Possible
Loan Losses (2) 1,400 1,343 1,329 4.24% 1.05%
Total Capital (Tier II) 23,525 22,786 21,465 3.24% 6.15%
1999 1998 1997
Tier l Capital/Total Adjusted Assets 9.46% 9.46% 9.38%
Tier ll Capital/Total Adjusted Assets 10.07% 10.06% 10.02%
Tier l Capital/Total Risk-Adjusted Assets 19.80% 20.00% 18.93%
Tier ll Capital/Total Risk-Adjusted Assets 21.06% 21.27% 20.23%
<FN>
<f01> Net unrealized holding gains and losses on available-for-sale
securities are excluded from common stockholders' equity for
regulatory capital purposes. However, National Banks continue
to deduct unrealized losses on equity securities in their
computation of Tier I Capital.
<f02> The maximum allowance for possible loan losses used in calculating
primary (Tier ll) capital is the lower of the period end allowance
for possible loan losses or 1.25% of gross risk - adjusted assets,
as implemented by regulatory capital guidelines.
<f03> Included in the 1999, 1998 and 1997 balances of intangible assets
are $296,974, $319,818 and $342,662, respectively, in goodwill
associated with the acquisition of Liberty Savings Bank. Excess
mortgage servicing rights totaling $21,817, $18,706, and $9,452
for 1999, 1998, and 1997, respectively, comprise the balance of
intangible assets.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated by reference to Pages 27-35 of the Annual Report to
Shareholders for fiscal year 1999.
Item 7a. Quantitative and Qualitative Disclosures About Market Risk
Incorporated by reference to Pages 29 - 31 of the Management's Discussion
of the Annual Report to Shareholders for the fiscal year 1999.
Item 8. Financial Statements and Supplementary Data
The financial statements and related notes of Community Bancorp. and
Subsidiaries are incorporated herein by reference from the Company's
annual report to shareholders for the fiscal year 1999, Page 12 through
Note 24 on Page 27.
Item 9. Disagreements on Accounting and Financial Disclosures
Inapplicable.
PART III.
Item 10. Directors and Executive Officers of the Registrant
Incorporated by reference to Pages 3, 4 and 9 of the Company's Proxy
Statement for the Annual Meeting of Shareholders on May 2, 2000.
Item 11. Executive Compensation
Incorporated by reference to the Company's Proxy Statement for the Annual
Meeting of Shareholders on May 2, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Incorporated by reference to the Company's Proxy Statement for the Annual
Meeting of Shareholders on May 2, 2000.
Item 13. Certain Relationships and Related Transactions
Incorporated by reference to the Company's Proxy Statement for the Annual
Meeting of Shareholders on May 2, 2000 and incorporated by reference to
the Annual Report to the shareholders for the fiscal year 1999, Page 23,
Note 16.
PART IV.
Item 14. Financial Statement Schedules, Exhibits and Reports on Form 8-K
(a) (1) and (2) Financial Statements
Financial statements are incorporated by reference to the Annual Report to
the shareholders for the fiscal year 1999.
(a) (3) Exhibits
The following exhibits are incorporated by reference:
Exhibit 3(i) - Restated Articles of Association filed as Exhibit 1 to the
Company's current report of Form 8-K filed with the Commission on September
8, 1998.
Exhibit 3(ii)- By-laws of Community Bancorp. are incorporated by reference
to Community Bancorp.'s Registration Statement dated May 20, 1983
(Registration No.2-83166).
Exhibit 4 - Indenture dated August 1, 1984 between Community Bancorp. and
Community National Bank as trustee, relating to $750,000 in principal amount
of 11% Convertible Subordinated Debentures due 2004 is incorporated by
reference to Community Bancorp.'s Registration Statement dated July 11,
1984 (Registration No. 2-92147).
Exhibit 10(iii) - Officer Incentive Plan* is incorporated by reference to page
11-12 of the Company's Proxy Statement for the Annual Meeting of Shareholders
on May 2, 2000.
Exhibit 13 - Portions of the Annual Report to Shareholders of Community
Bancorp. for Year Ended December 31, 1999, specifically mentioned in this
report, incorporated by reference.
Exhibit 27 - Financial Data Schedule is incorporated by reference to the EDGAR
Version of the form 10-K for the fiscal year 1999 file with the SEC.
The following exhibits are filed as part of this report:
Exhibit 10(i) - Directors Deferred Compensation Plan*
Exhibit 10(ii) - Description of Supplemental Retirement Plan*
Exhibit 11 - Computation of Per Share Earnings
Exhibit 21 - Subsidiaries of Community Bancorp.
Exhibit 23 - Consent of A.M. Peisch & Company
(b) Reports on Form 8-K
None
[FN]
<f*>Denotes compensatory plan or arrangement.
Exhibit 10(i)
DEFERRED COMPENSATION PLAN
Pursuant to due authorization by their Boards of Directors, Community
Bancorp. and Community National Bank, hereby constitute, establish and adopt
the following Deferred Compensation Plan:
I. Definitions:
The following words and terms as used in this Plan shall have the meaning
set forth below, unless a different meaning is clearly required by the context:
(A) "Plan" means the Deferred Compensation Plan for Directors of Community
Bancorp. and/or Community National Bank as set forth herein, or as amended
from time to time.
(B) "Effective date of this Plan" means 01/01/95.
(C) The word "Bank" shall mean the Community National Bank.
(D) The words "Boards of Directors" shall mean the Board of Directors of
Community Bancorp. and/or the Bank.
(E) The word "Director" means any duly elected or appointed member of the
Board of Directors of Community Bancorp. or Community National Bank.
(F) The words "member" and "participant" shall mean any Director who has
chosen to participate and has qualified for membership in this Plan as
hereinafter provided.
(G) The word "compensation" shall mean the usual fees, as established from
time to time by Community Bancorp. and/or the Bank and paid to a Director in
consideration of services performed as a Director including attendance at
meetings of the Board of Directors, Advisory Boards, or other committees, but
shall not include fees for appraisals.
(H) "Election to defer" shall mean a written statement signed by a Director
indicating the desire to participate in the Plan and the extent to which he or
she intends to participate.
II. Eligibility:
Any duly elected or appointed member of the Board of Directors of Community
Bancorp. and/or Community National Bank shall be eligible for participation in
the Plan.
A Director shall become a participant in the Plan by signing an "Election to
Defer", a specimen of which is attached to and made a part of this Plan.
A participant's membership in the Plan shall take effect on:
(1) the effective date of the Plan, if the participant has executed an
Election to Defer before the effective date of the Plan;
(2) immediately, if a Director executes an Election to Defer before earning
any compensation as a Director; or
(3) in all other cases on the first day of the month following the month
in which the Election to Defer is executed.
Membership in the Plan shall continue from month to month unless and until
a member indicates in writing the desire to refrain from future participation
in the Plan. Notification of a desire to refrain from future participation in
the Plan shall apply only to fees and compensation to be earned by a Director
after receipt of such notification; in no event shall such notification have
the effect of altering the manner of payment of fees or compensation deferred
pursuant to the Plan prior to receipt by the Deferred Compensation Committee
of such notification.
A participant in the Plan may at any time execute an amended Election to
Defer, changing the percentage of compensation to be deferred in the future,
changing the beneficiary named to receive the deferred compensation in the
event of his or her death, or specifying a different time of payment or
schedule of payment of compensation.
III. Deferral of Compensation:
A participant in the Plan may elect to defer all or any portion of the
fees to be earned by his or her services as a Director, including attendance
at meetings of the Board of Directors, Advisory Boards, or of other committees,
(but not fees earned for appraisals, if any). The balance of any compensation
earned by the participant and not deferred shall be payable in the year earned.
The amounts deferred will be credited the participant at such time as they
would have been payable had the participant not elected to become a member of
the Plan but the account will not be funded. Neither the Bancorp. nor the
Bank will set aside any money, in trust or otherwise, to guarantee payment of
any credits to the participant's account, but shall make payments, when due,
out of the Company's or Bank's general corporate funds.
IV. Payment of Deferred Compensation:
Compensation and fees, deferred pursuant to the Plan, and interest
accumulated thereon, shall be paid to a participant or to the designated
beneficiary in the event of death, at the time specified by the participant
in the Election to Defer. Payments may be made in a lump sum, or in annual
installments, as specified in the Election to Defer. Interest shall
accumulate and be credited to each participant's account at the rate in
effect for the Bank's 3-year Certificate of Deposit, or if no such
Certificate of Deposit is offered, at a rate determined by the Boards of
Directors, which rate may be changed from time to time, at the discretion
of said Boards.
V. Amendment:
This Plan may be amended any time and from time to time by the Boards of
Directors, provided, however, that no amendment shall cause or permit any
amount already credited to a member's account to be reduced or diminished.
VI. Miscellaneous:
No credits made to the account of a member of this Plan shall be subject
in any way to anticipation, alienation, sale, transfer, pledge, or voluntary
or involuntary attachment or encumbrance of any kind by a creditor of a
participant hereof; and any attempts to anticipate, alienate, sell, transfer,
assign, pledge or otherwise encumber any such credit, whether presently or
thereafter payable, shall be void. Deferrals shall remain subject to the
claims of any general creditors of Community National Bank and/or Community
Bancorp.
This Plan shall take effect as of 01/01/95.
IN WITNESS WHEREOF, the Community Bancorp. and Community National Bank
have caused this Deferred Compensation Plan to be executed and attested on
their behalf by its officer thereunto duly authorized this 10th day of
January, 1995.
COMMUNITY BANCORP.
By:
COMMUNITY NATIONAL BANK
By:
ELECTION TO DEFER
The undersigned Director of Community Bancorp. and/or Community National
Bank hereby elects to participate in the Deferred Compensation Plan effective
as of January 1, 1995.
Percentage of total fees and compensation to be deferred: ____%.
Payment of deferred compensation to commence on the first to occur of the
following:
_____ Termination of duties as Director.
_____ Attainment of the age of __ years.
_____ Incapacitating disability.
_____ Personal financial hardship
(check any options elected)
Payment will commence at the participant's death in any event, whether or
not participant has elected any of the above options.
Payment to be made to participant as follows:
_____ Lump sum.
_____ in equal _________ installments of ________________________________,
commencing on the first day of the month after said sums first become payable
and thereafter _______ until paid in full.
(indicate option chosen)
Beneficiary:
Payments to be made to beneficiary as follows:
_____ Lump sum.
_____ in equal monthly installments of _____________________________,
commencing on the first day of the month after said sums first become payable
and thereafter monthly until paid in full.
(In the event the designated beneficiary has predeceased the participant,
payment will be made to the estate of the participant.)
Signed this _____ day ________________, 19____, at ______________, Vermont.
_______________________
Exhibit 10(ii)
Description of Supplemental Retirement Plan
The Board of Directors adopted a Supplemental Retirement Plan for Mr.
White and the other Executive Officers of the Bank to replace estimated
benefits lost as a result of the previous termination of the Bank's defined
benefit pension plan. The plan is intended to provide an annual benefit at
retirement approximating 75% of the average annual bonus received by the
officer. It is estimated that this benefit, combined with the projected
benefits under the Bank's 401(k) plan, will be approximately equal to the
benefit that would have been provided to the Executive Officers under the
terminated defined benefit pension plan. Benefit payments will be funded by
annual contributions to a rabbi trust.
Exhibit 11
COMMUNITY BANCORP.
PRIMARY EARNINGS PER SHARE
For The Fourth Quarter Ended December 31, 1999 1998 1997
Net Income $753,166 $662,614 $562,499
Average Number of Common
Shares Outstanding. 3,358,506 3,266,510 3,165,681
Earnings Per Common Share $0.23 $0.21 $0.18
For the Years Ended December 31, 1999 1998 1997
Net Income $2,334,358 $2,190,374 $2,145,395
Average Number of Common
Shares Outstanding. 3,309,375 3,229,702 3,125,270
Earnings Per Common Share $0.71 $0.68 $0.69
All 1998 and 1997 per share data restated to reflect a 5% stock dividend
paid on February 1, 1999, and a 100% stock dividend paid on June 1, 1998.
GRAPHICS GRAPHICS
Exhibit 11 (cont'd.)
COMMUNITY BANCORP.
FULLY DILUTED EARNINGS PER SHARE
For The Fourth Quarter Ended December 31, 1999 1998 1997
Net Income $753,166 $662,614 $562,499
Adjustments to Net Income (Assuming Conversion
of Subordinated Convertible Debentures). 363 363 1,639
Adjusted Net Income $753,530 $662,978 $564,138
Average Number of Common Shares
Outstanding. 3,358,506 3,266,510 3,165,681
Increase in Shares (Assuming Conversion of
Subordinated Convertible Debentures). 8,557 8,557 28,167
Average Number of Common Shares Outstanding
(Fully Diluted). 3,367,063 3,275,067 3,193,848
Earnings Per Common Share
Assuming Full Dilution. $0.23 $0.21 $0.18
For the Years Ended December 31, 1999 1998 1997
Net Income $2,334,358 $2,190,374 $2,145,395
Adjustments to Net Income (Assuming Conversion
of Subordinated Convertible Debentures). 1,452 3,034 7,583
Adjusted Net Income $2,335,810 $2,193,408 $2,152,978
Average Number of Common
Shares Outstanding. 3,309,375 3,229,702 3,125,270
Increase in Shares (Assuming Conversion of
Subordinated Convertible Debentures). 8,557 16,691 33,933
Average Number of Common Shares Outstanding
(Fully Diluted). 3,317,933 3,246,393 3,159,203
Earnings Per Common Share Assuming
Full Dilution. $0.71 $0.68 $0.69
All 1998 and 1997 per share data restated to reflect a 5% stock dividend
paid on February 1, 1999, and a 100% stock dividend paid on June 1, 1998.
GRAPHICS GRAPHICS
Exhibit 21
Community Bancorp.'s subsidiaries include Community National Bank, a
banking corporation incorporated under the Banking Laws of The United
States, and Liberty Savings Bank, a New Hampshire guaranty savings bank.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Community Bancorp. of our report dated January 6, 2000, included in the
1999 Annual Report to Shareholders of Community Bancorp.
We also consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-18535) pertaining to the Community Bancorp.
Dividend Reinvestment Plan and in the Registration Statement (Form S-8 No. 33-
44713) pertaining to the Community Bancorp. Retirement Savings Plan of our
Report dated January 6, 2000, with respect to the consolidated financial
statements incorporated herein by reference of Community Bancorp. included
In the Annual Report (Form 10-K) for the year ended December 31, 1999.
/s/ A.M. Peisch & Company
March 28, 2000
St. Johnsbury, Vermont
VT Reg. No. 92-0000102
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COMMUNITY BANCORP.
BY: /s/ Richard C. White Date: March 28, 2000
Richard C. White, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
BY: /s/ Stephen P. Marsh Date: March 28, 2000
Stephen P. Marsh, Treasurer
and Chief Financial and
Accounting Officer
COMMUNITY BANCORP. DIRECTORS
/s/ Thomas E. Adams Date: March 28, 2000
Thomas E. Adams
/s/ Jacques R. Couture Date: March 28, 2000
Jacques R. Couture
/s/ Elwood G. Duckless Date: March 28, 2000
Elwood G. Duckless
/s/ Michael H. Dunn Date: March 28, 2000
Michael H. Dunn
/s/ Rosemary M. Lalime Date: March 28, 2000
Rosemary M. Lalime
/s/ Marcel Locke Date: March 28, 2000
Marcel Locke
/s/ Stephen P. Marsh Date: March 28, 2000
Stephen P. Marsh
/s/ Anne T. Moore Date: March 28, 2000
Anne T. Moore
/s/ Dale Wells Date: March 28, 2000
Dale Wells
/s/ Richard C. White Date: March 28, 2000
Richard C. White