[The annual report front cover contains a color graphic and the
following text.]
1999 Annual Report
Community Bancorp, Inc.
Parent Company of Community National Bank
[The following text appears on the inside front cover.]
Table of Contents
Selected Consolidated Financial Data - - - - - - - - - - - 1
Message to Stockholders and Friends - - - - - - - - - - - - 2
Consolidated Balance Sheets - - - - - - - - - - - - - - - - 4
Consolidated Statements of Income - - - - - - - - - - - - - 5
Consolidated Statements of Comprehensive Income - - - - - - 6
Consolidated Statements of Stockholders' Equity - - - - - - 7
Consolidated Statements of Cash Flows - - - - - - - - - - - 8
Notes to Consolidated Financial Statements - - - - - - - - 9
Report of Independent Public Accountants - - - - - - - - - 24
Management's Discussion and Analysis of
Financial Condition and Results of Operations - - - - - - - 25
Directors & Officers - - - - - - - - - - - - - - - - - - - Inside back cover
Selected Consolidated Financial Data
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Total assets $327,996,575 $300,886,831 $273,550,527 $250,002,458 $237,580,796
Total deposits 276,422,308 254,408,735 232,788,534 217,181,869 207,039,865
Total net loans 161,318,593 137,242,930 136,624,294 126,866,560 123,558,839
Allowance for possible loan losses 3,041,873 2,981,012 3,215,559 3,481,705 3,455,098
Total interest income 21,840,725 20,659,783 19,169,951 17,761,102 16,917,624
Total interest expense 7,829,668 7,675,112 6,895,222 6,367,758 6,284,750
Net interest income 14,011,057 12,984,671 12,274,729 11,393,344 10,632,874
Gains (losses) on sales of securities 0 0 8,587 (9,460) 0
Provision for possible loan losses 0 0 0 0 120,000
Net income 3,915,217 3,805,761 3,429,859 3,152,098 2,643,877
Earnings per share 1.33 1.30 1.17 1.01 0.84
Dividends per share 0.363 0.323 0.285 0.253 0.234
[Five-year bar graphs for the following categories appear in this space.
Data for the graphs was obtained from the above table.]
Total Assets (in millions)
Net Income (in millions)
Earnings Per Share (in dollars)
Total Deposits (in millions)
Total Net Loans (in millions)
Net Interest Income (in millions)
-1-
To Our Stockholders and Friends
We are very pleased to report that Community Bancorp, Inc. and its
subsidiary, Community National Bank, achieved another record-breaking
year in 1999, while at the same time continued to plan for the future.
The Company recorded net income of $3,915,217 for the year, compared
to $3,805,761 recorded in 1998. Earnings per share of common stock
was $1.33, compared to $1.30 in the previous year. Although this
increase in income is somewhat less than we have realized in
previous years, it was achieved during a period in which the Company
made a considerable investment in the future by opening two new Community
National Bank branch offices, one in Framingham and the second in Sudbury.
These new branches represent investments which are expected to enhance
earnings in the coming years.
During 1999, Community Bancorp achieved a return on assets (ROA) of 1.25%
and a return on equity (ROE) of 14.45%, comparing favorably to peer
institutions. The Company's asset quality remains very high, and at
year-end past due loans represented only 0.8% of total outstanding loans.
As a result of our continued strong performance during the year, the Board
of Directors increased the cash dividend to stockholders in each of the
four quarters. Total dividends declared in 1999 were $.363 per share,
representing a 12.4% increase over $.323 declared in 1998.
In order to expand our market and provide financial services to individuals
and businesses in additional communities, during 1999 we focused our attention
on new branches. In the spring, we opened our ninth branch office, at 35 Edgell
Road in Framingham. Grand Opening celebrations included prizes and product
specials. In December, we hosted the Metrowest Chamber of Commerce Holiday
After Hours, which was very well received by the town's business community.
Many of our staff members have familial roots in Framingham. Those community
ties have contributed to our success in the past, and we look forward to the
same success in Framingham.
In June of 1999, we opened our tenth branch office, at 450 Boston Post Road
in Sudbury. After renovating and expanding an existing building that was
previously in poor condition and detracted from the beauty of the town, our
new facility adds considerably to the business district of the Sudbury
community. The Grand Opening celebration consisted of product specials and
a donation to the Goodnow Library, based on the number of new accounts opened
during the promotional period. Both the Framingham and Sudbury branches were
a natural extension of our current branch network. These additions allow us to
offer products and services to a larger and more demographically diverse market
area.
A "virtual" Internet branch, www.combanc.com, was also introduced during 1999.
Although CNB's Internet web site has offered valuable banking information and
the ability to open new accounts to the public for several years, our new
Internet branch provides customers with 24 hour a day, 7 day a week interactive
access to their accounts. The ability to obtain online balance information,
transfer funds between accounts, view transaction listings, make loan payments,
pay bills and better manage their finances has been very well received by our
customers. The Internet branch also offers a wide array of banking products
including deposits accounts, loans and lines of credit, as well as ancillary
products such as debit and ATM cards. Most products can be applied for directly
online.
-2-
The Internet branch will offer even more to our customers in 2000, with the
introduction of TurboTax online tax preparation and filing services,
60-second loan approvals, investment research, and personalized shopping
options. A series of marketing campaigns will be used to introduce these
enhancements to our customers and the public.
During the summer of 1999, Community National Bank and a local market research
firm conducted a customer "Satisfaction Survey" to gauge our customers'
perceptions not only about our service level but our product line as well.
As in past years, CNB and its staff received high marks for the level of
service we consistently offer to our customers across our market area. The
research indicated that we outperform our peers in all areas of customer
service, and our customers perceive our fees and minimum balance requirements
to be among the most competitive in the area.
The hard work and diligent preparations on the part of Community National
Bank's Year 2000 Committee resulted in the millennium date change being a
relative non-event. Over the past several years, the committee had addressed
every possible Y2K problem and prepared detailed contingency plans. We kept
our customers informed of the committee's progress on a regular basis to allay
any potential concerns. By the final week of December, our staff was ready to
handle a significant increase in customer questions and concerns about Y2K, and
we had prepared for an increase in cash withdrawals from customer accounts.
However, our work and effort paid off and the ringing in of 2000 proved to be
"business as usual". Customer service and account access were never
interrupted, our ATMs performed properly and the transition into the New
Year proved to be flawless.
In keeping with our philosophy of providing our customers with innovative
and beneficial financial services, we will be introducing an Investment
Management and Trust Department during the first quarter of 2000. This new
department will expand our product line and provide us with an exciting
opportunity to develop new customer relationships and add value to our
existing relationships. The Investment Management and Trust department
will allow us to offer financial planning, investment management and trust
services, while we continue to offer our current brokerage, mutual fund
and insurance programs.
Each year, the Company's activities are designed with one overall purpose in
mind: to enhance shareholder value through consistent, long-term earnings
growth. That purpose continually guides us in all we do. We sincerely
appreciate the support the shareholders have provided to the Board of
Directors, management and staff over the years.
Sincerely,
/s/ James A. Langway /s/ Dennis F. Murphy, Jr.
- -------------------- -------------------------
James A. Langway Dennis F. Murphy, Jr.
President and Chief Executive Officer Chairman of the Board
-3-
Consolidated Balance Sheets
December 31, 1999 and 1998
1999 1998
----------- -----------
ASSETS
Cash and due from banks $ 21,010,959 $ 17,601,043
Federal funds sold 6,924,026 17,000,000
Securities available for sale at fair value (Note 2) 41,808,065 31,685,402
Securities held to maturity (fair value $84,164,551
in 1999 and $87,832,432 in 1998) (Note 2) 86,225,017 87,058,589
Mortgage loans held for sale 332,686 1,330,278
Loans (Notes 3 and 9) 164,360,466 140,223,942
Less allowance for possible loan losses
(Notes 4 and 12) 3,041,873 2,981,012
----------- -----------
Total net loans 161,318,593 137,242,930
Premises and equipment, net (Note 5) 6,342,891 5,576,789
Other assets, net (Note 1) 4,034,338 3,391,800
----------- -----------
Total assets $327,996,575 $300,886,831
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (Note 10):
Noninterest bearing $ 68,082,062 $ 60,511,257
Interest bearing 208,340,246 193,897,478
----------- -----------
Total deposits 276,422,308 254,408,735
----------- -----------
Securities sold under repurchase
agreements and federal funds purchased 21,766,424 19,747,496
Other liabilities (Note 7) 1,496,572 1,265,351
----------- -----------
Total liabilities 299,685,304 275,421,582
----------- -----------
Commitments (Notes 8 and 12)
Stockholders' equity:
Preferred stock, $2.50 par value, 100,000 shares
authorized, none issued or outstanding
Common stock, $2.50 par value, 12,000,000 shares
authorized, 3,199,218 shares issued,
2,960,912 shares outstanding, (2,944,588 shares
outstanding at December 31, 1998) 7,998,045 7,998,045
Surplus 638,619 524,106
Undivided profits 22,116,681 19,274,861
Treasury stock, at cost, 238,306 shares,
(254,630 at December 31, 1998) (2,217,972) (2,364,573)
Accumulated other comprehensive (loss)
income (Note 1) (224,102) 32,810
----------- -----------
Total stockholders' equity 28,311,271 25,465,249
----------- -----------
Total liabilities and stockholders'
equity $327,996,575 $300,886,861
=========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
-4-
Consolidated Statements of Income
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Interest income:
Interest and fees on loans $13,947,164 $13,167,815 $13,138,908
Interest and dividends on securities:
Taxable interest 6,427,831 5,790,375 5,181,809
Nontaxable interest 566,334 482,473 325,868
Dividends 74,865 64,106 59,350
Interest on federal funds sold 824,531 1,155,014 464,016
---------- ---------- ----------
Total interest income 21,840,725 20,659,783 19,169,951
---------- ---------- ----------
Interest expense:
Interest on deposits 6,801,917 6,649,308 6,139,134
Interest on federal funds purchased and
securities sold under repurchase
agreements 1,027,751 1,025,804 756,088
---------- ---------- ----------
Total interest expense 7,829,668 7,675,112 6,895,222
---------- ---------- ----------
Net interest income 14,011,057 12,984,671 12,274,729
---------- ---------- ----------
Provision for possible loan losses
(Note 4) 0 0 0
---------- ---------- ----------
Net interest income after provision
for possible loan losses 14,011,057 12,984,671 12,274,729
---------- ---------- ----------
Noninterest income:
Merchant credit card processing
assessments 1,296,041 1,194,584 1,028,404
Service charges 589,697 590,255 611,089
Other charges, commissions and fees 1,169,175 1,107,893 883,316
Gains on sales of loans, net 71,661 224,388 41,744
Gains on sales of securities, net 0 0 8,587
Other 89,172 83,367 81,488
---------- ---------- ----------
Total noninterest income 3,215,746 3,200,487 2,654,628
---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits (Note 7) 5,632,576 5,176,505 4,777,520
Data processing and ATM network 1,010,383 953,841 807,568
Occupancy 761,857 609,638 584,484
Furniture and equipment 370,549 385,150 342,466
Credit card processing 1,258,102 1,097,664 891,461
Printing, stationery and supplies 280,008 259,901 289,061
Professional fees 420,423 387,635 431,195
Marketing and advertising 326,348 311,551 383,339
Other 1,076,763 1,015,040 938,415
---------- ---------- ----------
Total noninterest expense 11,137,009 10,196,925 9,445,509
---------- ---------- ----------
Income before income tax expense 6,089,794 5,988,233 5,483,848
Income tax expense 2,174,577 2,182,472 2,053,989
---------- ---------- ----------
Net income $ 3,915,217 $ 3,805,761 $ 3,429,859
========== ========== ==========
Earnings per common share (Note 1) $ 1.33 $ 1.30 $ 1.17
Weighted average number of shares
outstanding 2,954,800 2,938,360 2,940,158
========== ========= =========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
-5-
Consolidated Statements of Comprehensive Income
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Net income $ 3,915,217 $ 3,805,761 $ 3,429,859
---------- ---------- ----------
Other comprehensive income:
Unrealized securities (losses) gains
arising during period (434,930) (173,276) 255,855
Income tax benefit (expense) on
securities (losses) gains during period 178,018 71,390) (106,103)
---------- ---------- ----------
Net unrealized securities (losses)
gains arising during period (256,912) (101,886) 149,752
---------- ---------- ----------
Less: reclassification adjustment for
securities (gains) included in income 0 0 (8,587)
Income tax expense on securities
(gains) included in income 0 0 3,561
---------- ---------- ----------
Net reclassification adjustment for
securities (gains) included in
net income 0 0 (5,026)
---------- ---------- ----------
Other comprehensive (loss) income (256,912) (101,886 144,726
---------- ---------- ----------
Comprehensive income (Note 1) $ 3,658,305 $ 3,703,875 $ 3,574,585
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
-6-
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1999, 1998 and 1997
Accumulated
Other
Common Undivided Treasury Comprehensive
Stock Surplus Profits Stock Income
----- ------- ---------- -------- -------------
Balance, December 31, 1996 $ 7,998,045 $ 374,580 $13,826,958 $(2,348,419) $ (10,030)
Net income 3,429,859
Cash dividends declared
($.285 per share) (838,027)
Purchase of 24,301 shares
of treasury stock (291,612)
Reissuance of 15,546 shares
of treasury stock 39,540 110,479
Change in accumulated other
comprehensive income (Note 1) 144,726
- -------------------------- --------- ------- --------- --------- ---------
Balance, December 31, 1997 7,998,045 414,120 16,418,790 (2,529,552) 134,696
Net income 3,805,761
Cash dividends declared
($.323 per share) (949,690)
Reissuance of 18,331 shares
of treasury stock 109,986 164,979
Change in accumulated other
comprehensive income (Note 1) (101,886)
- -------------------------- --------- ------- ---------- --------- -------
Balance, December 31, 1998 7,998,045 524,106 19,274,861 (2,364,573) 32,810
Net income 3,915,217
Cash dividends declared
($.363 per share) (1,073,397)
Purchase of 35 shares of
treasury stock (630)
Reissuance of 16,359 shares
of treasury stock 114,513 147,231
Change in accumulated other
comprehensive income (Note 1) (256,912)
- -------------------------- --------- ------- ---------- --------- -------
Balance, December 31, 1999 $7,998,045 $638,619 $22,116,681 $(2,217,972) $(224,102
========= ======= ========== ========= =======
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
-7-
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Net income $ 3,915,217 $ 3,805,761 $ 3,429,859
Adjustments to reconcile net income to net
cash provided by operating activities:
Decrease (increase) in mortgage loans held
for sale 997,592 843,044 (951,157)
Premium on sale of mortgages 157,569 193,368 162,766
Depreciation and amortization 906,015 834,209 802,623
Deferred (prepaid) income taxes 91,991 (6,691) 80,729
Increase (decrease) in other liabilities 82,050 (192,937) 72,638
Increase (decrease) in taxes payable 83,454 (183,595) (40,301)
Increase (decrease)in interest payable 62,346 (56,143) (616)
(Increase) decrease in other assets, net (361,070) 23,449 (201,423)
(Increase) in interest receivable (365,378) (146,039) (229,236)
---------- ---------- ----------
Total adjustments 1,654,569 1,308,665 (303,977)
---------- ---------- ----------
Net cash provided by operating activities 5,569,786 5,114,426 3,125,882
---------- ---------- ----------
Cash flows used in investing activities:
Purchases of securities held to maturity (23,815,119) (62,344,812) (16,731,111)
Purchases of securities available for sale (22,967,923) (5,482,625) (17,560,698)
Maturities and principal repayments of
securities held to maturity 24,648,691 31,590,326 17,174,567
Maturities and principal repayments of
securities available for sale 12,410,077 12,499,965 5,342,727
Sales of securities held to maturity 0 0 2,000,000
Sales of securities available for sale 0 0 2,913,737
Net change in federal funds sold 10,075,974 (2,400,000) (3,300,000)
Net change in loans (24,090,657) (564,601) (9,910,398)
Sales of other real estate owned 0 170,000 15,600
Acquisition of premises and equipment (1,672,117) (1,773,032) (592,386)
---------- ---------- ----------
Net cash used in investing activities (25,411,074) (28,304,779) (20,647,962)
---------- ---------- ----------
Cash flows from financing activities:
Net change in deposits 22,013,573 21,620,201 15,606,665
Net change in securities sold under
repurchase agreements 2,018,928 6,110,432 2,182,377
Net change in federal funds purchased 0 (3,000,000) 3,000,000
Purchase of treasury stock (630) 0 (291,612)
Reissuance of treasury stock 261,744 274,965 150,019
Dividends paid (1,042,411) (918,869) (812,269)
---------- ---------- ----------
Net cash provided by financing activities 23,251,204 24,086,729 19,835,180
---------- ---------- ----------
Net increase in cash and due from banks 3,409,916 896,376 2,313,100
Cash and due from banks at beginning of year 17,601,043 16,704,667 14,391,567
---------- ---------- ----------
Cash and due from banks at end of year $21,010,959 $17,601,043 $16,704,667
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
Supplemental Disclosures:
1. Interest paid was $7,767,322, $7,731,255 and $6,895,838 in 1999, 1998 and 1997, respectively.
2. Income tax paid was $2,091,123, $2,278,267 and $2,094,290 in 1999, 1998 and 1997, respectively.
-8-
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
Community Bancorp, Inc. (the "Company"), a Massachusetts corporation
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended, and its wholly-owned subsidiary, Community National Bank,
(the "Bank"), a national banking association. The Bank has also formed
Community Securities Corporation and Community Benefits Consulting, Inc. as
wholly-owned subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.
At present, the Company conducts no activities independent of the Bank. The
Bank has eight offices and is engaged in substantially all of the business
operations normally conducted by an independent commercial bank in
Massachusetts. Banking services offered include the acceptance of checking,
savings, and time deposits, and the making of commercial, real estate,
installment and other loans. The Bank also offers official checks, safe
deposit boxes, Internet banking and bill payment services and other
customary banking services to its customers.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Securities
Debt securities that the Company has the positive intent and ability to hold
to maturity are reported at amortized cost. Securities purchased to be held
for indefinite periods of time and not intended to be held until maturity
are classified as "available for sale" securities. Securities classified as
available for sale are reported at fair value with unrealized gains and
losses excluded from earnings and reported net of taxes in accumulated other
comprehensive income. Securities held for indefinite periods of time include
securities that management may use in conjunction with the Company's
asset/liability in management program and that may be sold in response to
changes in interest rates, prepayment risks or other economic factors. When
securities classified as available for sale are sold, the adjusted cost of
each specific security sold is used to calculate gains or losses on sale,
which are included in earnings.
Premises and equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization, which is computed by using both the straight-line and
accelerated methods. Estimated useful lives are as follows:
Buildings................30 to 40 years
Buildings and leasehold
improvements.............5 to 25 years
Furniture and equipment...3 to 10 years
Cash and due from banks
Included in cash and due from banks as of December 31, 1999 and 1998 is
approximately $7,558,000 and $7,611,000, respectively, that is subject to
Federal Reserve withdrawal restrictions.
Allowance for possible loan losses
Material estimates that are particularly susceptible to significant change
in the near term relate to the determination of the allowance for possible
loan losses. The allowance for possible loan losses is increased through a
provision for possible loan losses charged to expense, increased by recoveries
and decreased by charge-offs. The provision is based on management's
periodic evaluation of the amount necessary to maintain the allowance at an
adequate level. Management's periodic evaluation of the adequacy of the
allowance is based on specific credit reviews, past loan loss experience,
current economic conditions and trends, known and inherent risks in the loan
portfolio, adverse situations that may affect the borrower's ability to
repay, the estimated value of any underlying collateral and the volume and
risk characteristics of the loan portfolio. While management uses available
information to recognize losses on loans, future additions to the allowance
may be necessary.
-9-
The Company accounts for loan losses in accordance with Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of
a Loan" (SFAS No. 114). For purposes of this Statement, a loan is considered
to be impaired when it is probable that a creditor will be unable to collect
all amounts due according to the contractual terms of the loan agreement. The
allowance for possible loan losses related to loans that are identified as
impaired is based on discounted cash flows using the loan's effective interest
rate or the fair value of the collateral for certain collateral dependent loans.
The Financial Accounting Standards Board also issued SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan - Income Recognition and Disclosures"
(SFAS No. 118), which amended SFAS No. 114 by allowing creditors to use their
existing methods of recognizing interest income on impaired loans.
Securities sold under repurchase agreements
The Company sells securities under open-ended repurchase agreements with
certain customers. The principal balance of the repurchase agreements
changes daily. Specific securities are not sold and securities are not
transferred to the name of the customers. Instead, the customer has an
interest in a portion of the U.S. Government securities held in the
Company's investment portfolio.
Earnings per share
The Company adopted Financial Accounting Standards Board Statement No. 128,
"Earnings Per Share" (SFAS No. 128), effective December 31, 1997. This
Statement requires the presentation of "basic" earnings per share, which
excludes the effect of dilution, and "diluted" earnings per share, which
includes the effect of dilution. The Company's "basic" and "diluted"
earnings per share computations are identical in 1999, 1998 and 1997, as
there is no dilution effect. Earnings per share is based on the weighted
average number of shares outstanding during the year.
Loan sales and loans held for sale
In accordance with Financial Accounting Standards Board Statement No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" (SFAS No. 125), the Company capitalizes the
rights to service mortgage loans for others and assesses those rights for
impairment based on the fair value of those rights.
The loan servicing asset, included in other assets, represents the estimated
present value of the interest rate differential resulting from the sale of
loans with servicing rights retained. This amount is amortized over the
estimated lives of the underlying loans sold. The loan servicing asset
totaled $223,795 and $185,229 at December 31, 1999 and 1998, respectively.
At December 31, 1999 and 1998, the Company was servicing mortgage loans for
others of approximately $96,238,000 and 108,181,000, respectively.
Comprehensive Income
The Company adopted Financial Accounting Standards Board Statement No. 130,
"Reporting Comprehensive Income" (SFAS No. 130), effective January 1, 1998.
Components of comprehensive income are net income and all other non-owner
changes in equity. The Statement requires that an enterprise (a) classify
items of other comprehensive income by their nature in the financial statement
and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of the statement of financial position. Reclassification of financial
statements for earlier periods provided for comparative purposes is required.
The Company has chosen to disclose comprehensive income in the Consolidated
Statements of Comprehensive Income. Prior year data has been restated to
conform to the requirements of SFAS No. 130.
Operating Segments
The Company adopted Financial Accounting Standards Board Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information" (SFAS
No. 131), during 1998. SFAS No. 131 established standards for reporting
information about operating segments in annual financial statements and
requires selected information about operating segments in interim financial
reports issued to the stockholders. It also established standards for related
disclosures about products and services, and geographic areas. Operating
segments are defined as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision-maker, or decision making group, in deciding how to
allocate resources and in assessing performance.
-10-
The Company has one reportable segment: community banking. At present, the
Company conducts no activities independent of the Bank. The Bank is engaged
in substantially all of the business operations customarily conducted by an
independent commercial bank in Massachusetts. Banking services offered
include acceptance of checking, savings and time deposits, and the making of
consumer, commercial, real estate and other loans. The Bank also offers
official checks, traveler's checks, safe deposit boxes, Internet banking
and bill payment services and other customary banking services to its
customers.
Computer software costs
The Company adopted American Institute of Certified Public Accountants
(AICPA) Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1) effective
January 1, 1999. SOP 98-1 requires computer software costs associated
with internal-use software to be expensed as incurred until certain
capitalization criteria are met. The adoption of SOP 98-1 did not have
any material impact on the Company's financial statements or results of
operations.
Start-up activities costs
The Company adopted AICPA Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities" (SOP 98-5) effective January 1, 1999. SOP 98-5
requires all costs associated with pre-opening, pre-operating and organizational
activities to be expensed as incurred. The adoption of SOP 98-5 did not have
any material impact on the Company's financial Statements or results of
operations.
Revenue recognition
Interest on loans, securities and other earning assets is accrued and
credited to operations based on contractual rates and principal amounts
outstanding. Nonrefundable loan fees and certain related costs are deferred
and recognized as income over the life of the loan as an adjustment of the
yield.
It is the policy of the Company to discontinue the accrual of interest on
loans when, in the judgment of management, the ultimate collectibility of
principal or interest becomes doubtful. The accrual of interest income
generally is discontinued when a loan becomes 90 days past due as to
principal or interest. When interest accruals are discontinued, unpaid
interest credited to income in the current year is reversed, and interest
accrued in prior years is charged to the allowance for possible loan losses.
Management may elect to continue the accrual of interest when the estimated
net realizable value of collateral is sufficient to cover the principal
balance and accrued interest. Otherwise, interest income is subsequently
recognized only to the extent cash payments are received.
Reclassifications
Certain amounts in prior year's financial statements have been reclassified
to be consistent with the current year's presentation. The
reclassifications have no effect on net income.
-11-
2. Securities
The amortized cost and fair values of securities at December 31, 1999
and 1998 were as follows:
1999
--------------------------------------------------------
Gross Gross
Securities Held Amortized Unrealized Unrealized Fair
to Maturity Cost Gains Losses Value
--------------- --------- ---------- ---------- -----
U.S. Government obligations $ 0 $ 0 $ 0 $ 0
U.S. Government agencies
and corporations 34,464,097 0 814,076 33,650,020
Obligations of states and
political subdivisions 12,579,893 5,623 322,109 12,263,408
Mortgage-backed securities 39,181,027 20 929,924 38,251,123
------------ ---------- ---------- -----------
$ 86,225,017 $ 5,643 $ 2,066,109 $ 84,164,551
============ ========== ========== ===========
Gross Gross
Securities Held Amortized Unrealized Unrealized Fair
Available for Sale Cost Gains Losses Value
------------------ --------- ---------- ---------- -----
U.S. Government obligations $ 3,997,985 $ 11,395 $ 0 $ 4,009,380
U.S. Government agencies
and corporations 25,805,725 138 191,819 25,614,044
Mortgage-backed securities 11,158,381 48,651 247,747 10,959,285
Other securities 1,225,356 0 0 1,225,356
------------ ---------- ---------- -----------
$ 42,187,447 $ 60,184 $ 439,566 $ 41,808,065
============ ========== ========== ===========
1998
--------------------------------------------------------
Gross Gross
Securities Held Amortized Unrealized Unrealized Fair
to Maturity Cost Gains Losses Value
--------------- --------- ---------- ---------- -----
U.S. Government obligations $ 1,000,458 $ 483 $ 0 $ 1,000,941
U.S. Government agencies
and corporations 28,446,008 165,426 0 28,611,434
Obligations of states and
political subdivisions 11,571,113 407,267 0 11,978,380
Mortgage-backed securities 46,041,010 222,979 22,312 46,241,677
------------ ---------- ---------- -----------
$ 87,058,589 $ 796,155 $ 22,312 $ 87,832,432
============ ========== ========== ===========
Gross Gross
Securities Held Amortized Unrealized Unrealized Fair
Available for Sale Cost Gains Losses Value
------------------ --------- ---------- ---------- -----
U.S. Government obligations $ 13,011,174 $ 154,136 $ 0 $ 13,165,310
U.S. Government agencies
and corporations 2,990,631 38,919 0 3,029,550
Mortgage-backed securities 14,573,840 70,439 207,693 14,436,586
Other securities 1,053,956 0 0 1,053,956
------------ ---------- ---------- -----------
$ 31,629,601 $ 263,494 $ 207,693 $ 31,685,402
============ ========== ========== ===========
The amortized cost and fair value of securities at December 31, 1999 by
contractual maturity are shown in the following table. Actual maturities may
differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.
-12-
Securities Held to Maturity Securities Available for Sale
--------------------------- -----------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
Within one year $ 1,619,000 $ 1,619,000 $ 3,997,985 $ 4,009,380
One to five years 34,464,097 33,650,019 19,836,584 19,680,374
Five to ten years 2,756,293 2,620,984 5,969,141 5,933,670
Ten to fifteen years 8,204,600 8,023,424 0 0
Mortgage-backed securities 39,181,027 38,251,124 11,158,381 10,959,285
Other securities 0 0 1,225,356 1,225,356
----------- ---------- ---------- ----------
$86,225,017 $84,164,551 $42,187,447 $41,808,065
========== =========== ========== ==========
Securities with a book value of $38,587,000 and $42,410,000 at December 31,
1999 and 1998, respectively, were pledged to secure public funds on deposit
and for other purposes. There were no sales of securities in 1999 or 1998.
3. Loans
The composition of the loan portfolio at December 31, 1999 and 1998 was as
follows:
1999 1998
---- ----
Commercial and industrial $ 23,418,982 $ 21,127,456
Real estate - residential 66,788,010 55,054,776
Real estate - commercial 58,484,839 47,398,631
Real estate - residential
construction 1,454,210 2,794,688
Loans to individuals 13,544,009 13,196,604
Other 670,416 651,787
----------- -----------
Total loans $164,360,466 $140,223,942
============ ===========
Substantially all of the Company's loan portfolio is collateralized by assets
in the New England region, especially central Massachusetts. The Company
generally requires collateral when extending credit and, with respect to loans
secured by real estate, Company policy requires appropriate appraisals and
repayment sources.
Total impaired loans at December 31, 1999 and 1998 that required a related
allowance were $91,695 and $120,728, respectively, and the allowance allocated
to such loans was $41,250 and $41,250 respectively. In addition, at
December 31, 1999 and 1998, the Company had impaired loans of $592,954 and
$792,423, respectively, that did not require a related allowance. Interest
payments on impaired loans are recorded as principal reductions if the remaining
loan balance is not expected to be repaid in full. If full collection of the
remaining loan balance is expected, interest payments are recognized as interest
income on a cash basis. Impaired loans averaged $858,968 and $813,447 during
1999 and 1998, respectively. The Company recorded interest income on impaired
loans of $100,081, $82,456 and $19,475 during 1999, 1998 and 1997, respectively.
At December 31, 1999 and 1998, accruing loans 90 days or more past due totaled
$0 and $1,404, respectively, and nonaccruing loans totaled $684,649 and
$913,151, respectively. There were no troubled debt restructurings at
December 31, 1999 or 1998. The reduction of interest income associated with
nonaccrual and restructured loans for the years ended December 31, 1999, 1998
and 1997 was as follows:
1999 1998 1997
---- ---- ----
Interest income per original terms $ 154,141 $ 146,326 $ 143,869
Income recognized 100,081 82,456 19,475
-------- -------- --------
Foregone interest income $ 54,060 $ 63,870 $ 124,394
======== ======== ========
-13-
4. Allowance for Possible Loan Losses
Activity in the allowance for possible loan losses for the years ended
December 31, 1999, 1998 and 1997 was as follows:
Balance, December 31, 1996 $3,481,705
Provision for possible losses 0
Charge-offs (366,139)
Recoveries 99,993
---------
Balance, December 31, 1997 3,215,559
Provision for possible losses 0
Charge-offs (303,525)
Recoveries 68,978
---------
Balance, December 31, 1998 2,981,012
Provision for possible losses 0
Charge-offs (112,538)
Recoveries 173,399
---------
Balance, December 31, 1999 $3,041,873
=========
5. Premises and Equipment
The composition of premises and equipment at December 31, 1999 and 1998 was as
follows:
1999 1998
---- ----
Premises $ 6,496,431 $ 5,985,628
Equipment 4,097,218 2,961,737
---------- -----------
10,593,649 8,947,365
Less accumulated depreciation and
amortization 4,250,758 3,370,576
---------- -----------
$ 6,342,891 $ 5,576,789
========== ===========
Total depreciation and amortization expense for the years ended December 31,
1999, 1998 and 1997 was $906,015, $834,209 and $802,623, respectively, and is
included in data processing, occupancy and furniture and equipment expense.
6. Income Taxes
The components of income tax expense for the years ended December 31, 1999,
1998 and 1997 are as follows:
1999 1998 1997
---- ---- ----
Current:
Federal $ 1,644,242 $ 1,713,257 $ 1,531,216
State 438,344 475,906 442,044
---------- ---------- ----------
Total current 2,082,586 2,189,163 1,973,260
---------- ---------- ----------
Deferred:
Federal 68,392 (10,307) 54,614
State 25,599 3,616 26,115
---------- ---------- ----------
Total deferred (prepaid) 91,991 (6,691) 80,729
---------- ---------- ----------
Total $ 2,174,577 $ 2,182,472 $ 2,053,989
========== ========== ==========
-14-
The difference between the income tax provision computed by applying the
statutory federal income tax rate of 34% to income before income taxes and
the actual income tax provision is summarized as follows:
1999 1998 1997
---- ---- ----
Income tax expense
at statutory rates $ 2,070,524 $ 2,035,999 $ 1,864,508
State income taxes, net of
federal income tax benefit 304,883 316,485 308,984
Tax-exempt interest (206,274) (175,993) (132,117)
Other, net 5,444 5,981 12,614
---------- ---------- ----------
$ 2,174,577 $ 2,182,472 $ 2,053,989
========== ========== ==========
The Company has recorded in other assets a net deferred tax asset of $737,890.
Realization is dependent on the generation of sufficient taxable income in
future years. Although realization is not assured, management believes it
is more likely than not that the full amount of the net deferred tax asset
will be realized. However, the amount realizable could be reduced if estimates
of future taxable income are reduced.
At December 31, 1999 and 1998, the Company's net deferred tax asset, included
in other assets in the accompanying consolidated balance sheets, consisted of
the following components:
1999 1998
---- ----
Gross deferred tax asset:
Provision for possible loan losses $ 893,647 $ 899,555
Employee benefits and other
compensation arrangements 323,512 328,752
Other 14,197 20,003
--------- ---------
1,231,356 1,248,310
Gross deferred tax liability:
Accelerated tax depreciation (181,020) (228,531)
Other (312,446) (366,799)
--------- ---------
(493,466) (595,330)
--------- ---------
Net deferred tax asset $ 737,890 $ 652,980
========= =========
7. Employee Benefits
The Company has a defined benefit pension plan covering all eligible employees.
The benefits are based on years of service and the employees' compensation as
defined in the Plan agreement. The Company's funding policy is to make annual
contributions to the Plan equal to at least the minimum amount required for
actuarial purposes. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those to be earned in the future.
-15-
The following table sets forth the Plan's funded status and amounts recognized
in the Company's consolidated balance sheets at December 31, 1999 and 1998:
1999 1998
---- ----
Change in benefit obligation:
Benefit obligation at beginning of year $(3,751,742) $(3,161,057)
Service cost (249,962) (247,666)
Interest cost (233,992) (226,980)
Actuarial gain 636,872 (265,151)
Benefits paid 283,338 149,112
--------- ---------
Benefit obligation at end of year (3,315,486) (3,751,742)
--------- ---------
Change in plan assets:
Fair value of assets at beginning of year 2,998,392 2,831,044
Actual return on plan assets 194,640 (166,661)
Employer contributions 408,201 483,121
Benefits paid (283,338) (149,112)
--------- ---------
Fair value of plan assets at end of year 3,317,895 2,998,392
--------- ---------
Funded status 2,409 (753,350)
Unrecognized net loss 288,507 902,877
Unrecognized prior service cost 9,656 11,036
Unrecognized net asset (35,814) (44,767)
--------- ---------
Prepaid benefit cost $ 264,758 $ 115,796
========= =========
The following weighted-average assumptions were used in accounting for the
Company's pension plan for the years ended December 31, 1999, 1998 and 1997:
1999 1998 1997
---- ---- ----
Discount rate 7.50% 6.50% 7.25%
Expected return on plan assets 8.00% 8.00% 8.00%
Rate of compensation increase 4.00% 4.00% 5.00%
Net periodic benefit cost for the years ended December 31, 1999, 1998 and
1997 included the following components:
1999 1998 1997
---- ---- ----
Service cost $ 249,962 $ 247,666 $ 213,920
Interest cost 233,992 226,980 202,397
Expected return on plan assets (244,119) (228,798) (188,254)
Amortization of prior service cost 1,380 1,380 1,380
Amortization of transition obligation (8,953) (8,954) (8,954)
Amortization of unrecognized gain 0 0 6,481
Recognized net loss 26,977 0 0
--------- --------- ---------
Net periodic benefit cost $ 259,239 $ 238,274 $ 226,970
========= ========= =========
-16-
The Company has an Employee Stock Ownership Plan (ESOP) that enables eligible
employees to own common stock. Annual cash contributions of $70,000 were
made to the ESOP in 1999, 1998 and 1997.
The Company implemented a 401(k) plan in 1989, covering all eligible employees.
The Company matches a percentage of each participant's annual contribution to
the plan as determined by the Board of Directors each year. Compensation
expense recorded in 1999, 1998 and 1997 related to this plan was approximately
$85,800, $81,400 and $78,900, respectively.
8. Commitments
The Company leases branch offices and equipment under noncancelable agreements
expiring at various dates through 2008 that require various minimum annual
rentals. Rental expense totaled approximately $246,000, $185,000 and $170,000,
for 1999, 1998 and 1997, respectively. The total future minimum rental
commitments at December 31, 1999 aggregate $1,155,098. Rental commitments for
each of the next five fiscal years and thereafter are as follows:
2000 $241,604
2001 208,182
2002 187,352
2003 109,350
2004 113,400
Thereafter 295,210
The Company is not party to any legal proceedings. The Bank is involved in
various routine legal actions arising in the normal course of business, none
of which is believed by management, based on its knowledge of the pertinent
facts and opinions of legal counsel, to be material to the financial condition
or operations of the Company.
9. Loans to Related Parties
The schedule below discloses indebtedness of certain parties related to the
Company:
Balance Balance
January 1 New Loans Repayments December 31
---------- --------- ---------- -----------
1998 $ 5,780,049 $1,373,994 $ 1,613,213 $ 5,540,830
1999 $ 5,540,830 $2,039,431 $ 1,706,514 $ 5,873,747
These loans were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not involve more than normal risk
of collectibility.
10. Deposits
Deposits consisted of the following at December 31, 1999 and 1998:
1999 1998
---- ----
Demand deposits $ 68,082,062 $ 60,511,257
Money-market deposits 32,523,219 25,419,293
NOW and FlexValue deposits 32,372,157 36,319,201
Cash management investment deposits 17,444,396 22,238,050
Savings deposit 36,672,396 36,059,685
Time certificates of deposit in
denominations of $100,000 or more 25,347,341 19,130,242
Other time deposits 63,980,737 54,731,007
----------- -----------
$276,422,308 $254,408,735
=========== ============
-17-
11. Condensed Financial Information of Community Bancorp, Inc.
The following tables disclose certain parent-company-only financial
information at December 31, 1999 and 1998, and for each of the three
years in the period ended December 31, 1999:
Balance Sheets
1999 1998
---- ----
Assets:
Cash and cash equivalents $ 631,460 $ 366,631
Investment in subsidiary, at equity 27,645,540 25,066,007
Other assets 281,306 250,290
---------- ----------
Total assets $ 28,558,306 $ 25,682,928
=========== ==========
Liabilities and stockholders' equity:
Other liabilities $ 247,035 $ 217,679
---------- ----------
Total liabilities 247,035 217,679
---------- ----------
Stockholders' equity:
Preferred stock, $2.50 par value, 100,000
shares authorized, none issued or outstanding
Common stock, $2.50 par value, 12,000,000 shares
authorized, 3,199,218 shares issued,
2,960,912 shares outstanding, (2,944,588 shares
outstanding at December 31, 1998) 7,998,045 7,998,045
Surplus 638,619 524,106
Undivided profits 22,116,681 19,274,861
Treasury stock at cost, 238,306 shares
(254,630 shares at December 31, 1998) (2,217,972) (2,364,573)
Accumulated other comprehensive income (224,102) 32,810
---------- ----------
Total stockholders' equity 28,311,271 25,465,249
---------- ----------
Total liabilities and stockholders' equity $28,558,306 $25,682,928
=========== ==========
Statements of Income
Years ended December 31,
------------------------------------------
1999 1998 1997
---- ---- ----
Income:
Dividends from subsidiary bank $ 1,073,397 $ 949,690 $ 979,641
Other income 357,592 341,027 326,669
----------- ----------- ----------
Total income 1,430,989 1,290,717 1,306,310
----------- ----------- ----------
Expenses:
Other 352,237 343,499 344,822
----------- ----------- ----------
Total expenses 352,237 343,499 344,822
----------- ----------- ----------
Income before undistributed net income of
subsidiary bank 1,078,752 947,218 961,488
Equity in undistributed net income of
subsidiary bank 2,836,465 2,858,543 2,468,371
----------- ----------- ----------
Net income $ 3,915,217 $ 3,805,761 $ 3,429,859
=========== =========== ===========
-18-
Statements of Cash Flows
Years ended December 31,
-----------------------------------------
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
Net income $ 3,915,217 $ 3,805,761 $ 3,429,859
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed net income
of subsidiary bank (2,836,465) (2,858,543) (2,468,371)
Increase in other assets (30,996) (30,821) (2,935)
Increase (decrease) in other liabilities 29,356 32,538 (8,698)
---------- ---------- ----------
Total adjustments (2,838,105) (2,856,826) (2,480,004)
---------- ---------- ----------
Net cash provided by operating activities 1,077,112 948,935 949,855
---------- ---------- ----------
Cash flows from financing activities:
Purchase of treasury stock (630) 0 (291,612)
Reissuance of treasury stock 261,744 274,965 150,019
Dividends declared (1,073,397) (949,690) (838,027)
---------- ---------- ----------
Net cash used in financing activities (812,283) (674,725) (979,620)
---------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents 264,829 274,210 (29,765)
Cash and cash equivalents at beginning of year 366,631 96,421 122,186
---------- ---------- ----------
Cash and cash equivalents at end of year $ 631,460 $ 366,631 $ 92,421
========== ========== ===========
Cash and cash equivalents consist of a money market demand deposit account on
deposit with the subsidiary bank.
The approval of the Comptroller of the Currency is required for a national bank
to pay dividends if the total of all dividends declared in any calendar year
exceeds the bank's net profits (as defined) for that year combined with its
retained net profits for the preceding two calendar years. During 2000,
Community National Bank can, under this formula, declare dividends to
Community Bancorp, Inc. of approximately $5,695,000, plus an additional
amount equal to the Bank's net profit for 2000, up to the date of any such
dividend declaration, without the approval of the Comptroller of the Currency.
12. Financial Instruments With Off-Balance-Sheet Risk
The Company is party to financial instruments with off-balance-sheet risk in
the normal course of business. These financial instruments primarily consist
of commitments to extend credit and standby letters of credit. Loan
commitments are made to accommodate the financial needs of the Company's
customers. Standby letters of credit commit the Company to make payments on
behalf of customers when certain specified future events occur. They are
primarily issued to guarantee other customer obligations. Both arrangements
have credit risk essentially the same as that involved in extending loans to
customers and are subject to the Company's normal credit policies. Collateral
typically is obtained based on management's credit assessment of the
customer. Loan commitments and standby letters of credit usually have fixed
expiration dates or other termination clauses. Some commitments and letters of
credit expire without being drawn upon. Accordingly, the total commitment
amounts do not necessarily represent future cash requirements of the Company.
-19-
The Company's maximum exposure to credit loss for loan commitments (unfunded
loans and unused lines of credit) and standby letters of credit outstanding at
December 31, 1999 and 1998 was as follows:
1999 1998
---- ----
Commitments to extend credit:
Fixed-rate (6.99% to 9.00%) $ 1,378,747 $ 1,241,424
Adjustable rate 40,544,958 36,125,831
Standby letters of credit $ 246,693 $ 615,530
=========== ===========
Commitments to extend credit on a fixed-rate basis expose the Company to a
certain amount of interest rate risk if market rates of interest substantially
increase during the commitment period.
The Company has also sold mortgage loans with recourse in the event of the
default of the borrower. Loans sold with recourse are accounted for as sales in
the accompanying financial statements, with provisions made for anticipated
losses under the recourse provisions. At December 31, 1999 and 1998, the
outstanding balance of such mortgages totaled approximately $194,000 and
$254,000, respectively.
Fees associated with the Company's off-balance-sheet financial instruments are
minimal; therefore, the fair value of off-balance-sheet financial instruments
is not material.
13. Regulatory Capital
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1999, that the Company and the Bank met all capital adequacy requirements
to which they are subject.
As of December 31, 1999 and 1998, the most recent notification from the Office
of the Comptroller of the Currency categorized the Bank as "well capitalized"
under the regulatory framework for prompt corrective action. To be categorized
as "well capitalized", the Bank must maintain total risk-based, Tier 1 risk-
based and Tier 1 leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the Bank's category.
-20-
The Company's and the Bank's actual capital amounts and ratios at December 31,
1999 and 1998 are presented in the following table (dollars are in thousands):
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
--------------- ----------------- -----------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
As of December 31, 1999:
Company (consolidated):
Total capital
(to risk-weighted >
assets) $30,815 16.80% $14,676 - 8.00% N/A N/A
Tier 1 capital
(to risk-weighted >
assets) 28,513 15.54% 7,338 - 4.00% N/A N/A
Tier 1 capital >
(to average assets) 28,513 9.07% 12,571 - 4.00% N/A N/A
Bank:
Total capital
(to risk-weighted > >
assets) 30,157 16.43% 14,676 - 8.00% $18,345 - 10.00%
Tier 1 capital
(to risk-weighted > >
assets) 27,847 15.18% 7,338 - 4.00% 11,007 - 6.00%
Tier 1 capital > >
(to average assets) 27,847 8.86% 12,571 - 4.00% 15,713 - 5.00%
As of December 31, 1998:
Company (consolidated):
Total capital
(to risk-weighted >
assets) $27,434 17.08% $12,850 - 8.00% N/A N/A
Tier 1 capital
(to risk-weighted >
assets) 25,414 15.82% 6,425 - 4.00% N/A N/A
Tier 1 capital >
(to average assets) 25,414 8.78% 11,584 - 4.00% N/A N/A
Bank:
Total capital
(to risk-weighted > >
assets) 27,035 16.83% 12,850 - 8.00% $16,063 - 10.00%
Tier 1 capital
(to risk-weighted > >
assets) 25,015 15.57% 6,425 - 4.00% 9,638 - 6.00%
Tier 1 capital > >
(to average assets) 25,015 8.64% 11,584 - 4.00% 14,480 - 5.00%
-21-
14. Disclosures about Fair Value of Financial Instruments
In December 1991, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments" (SFAS No. 107). This statement requires disclosure of
fair value information about financial instruments, whether or not recognized
in the balance sheet, for which it is practicable to estimate that value. In
cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
SFAS No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and due from banks and federal funds sold: The carrying amounts reported
in the balance sheet for cash and due from banks and federal funds sold
approximate those assets' fair values.
Securities (including mortgage-backed securities, securities held to maturity
and securities available for sale): Fair values for securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans: For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair
values for certain one-to-four family residential mortgages are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. The fair
values for credit card loans and other consumer loans are based on carrying
values, as the loans reprice frequently at current market rates. The fair
values for other loans (e.g., commercial real estate and rental property
mortgage loans, and commercial and industrial loans) are estimated using
discounted cash flow analysis, using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality. The
carrying amount of accrued interest receivable approximates its fair value.
Off-balance-sheet instruments: The fair value of lending commitments discussed
in Note 12 is not considered material nor has it been reflected in the
estimation of the fair value of the related loans.
Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
interest and noninterest checking, passbook savings and certain types of money
market accounts) are, by definition, equal to the amount payable on demand at
the reporting date (i.e., their carrying amounts). The carrying amounts for
variable-rate, fixed-term money market accounts and certificates of deposit
approximate their fair values at the reporting date. Fair values for
fixed-rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on certificates
to a schedule of aggregated expected monthly maturities on time deposits.
Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements and other short-term borrowings
approximate their fair values.
Commitments to extend credit/sell loans: The fair value of commitments is
estimated using the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the present
creditworthiness of customers. For fixed-rate loan commitments and obligations
to deliver fixed-rate loans, fair value also considers the difference between
committed rates and current levels of interest rates.
Values not determined: SFAS No. 107 excludes certain financial instruments
from its disclosure requirements, including real estate included in banking
premises and equipment, the intangible value of the Bank's portfolio of loans
serviced (both for itself and for others) and related servicing network and the
intangible value inherent in the Bank's deposit relationships (i.e. core
deposits) among others. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Bank.
-22-
The carrying amount and estimated fair values of the Bank's financial
instruments at December 31, 1999 and 1998 are as follows:
1999
-----------------------------
Carrying Estimated
Amount Fair Value
------------ -----------
Financial instrument assets:
Cash and cash equivalents $ 27,934,985 $ 27,934,985
Securities 128,033,082 125,972,616
Loans, including held for sale, net 161,651,279 163,282,691
Financial instrument liabilities:
Deposits 276,422,308 276,851,881
Short-term borrowings 21,766,424 21,766,424
1998
------------------------------
Carrying Estimated
Amount Fair Value
------------ -----------
Financial instrument assets:
Cash and cash equivalents $ 34,601,043 $ 34,601,043
Securities 118,743,991 119,517,834
Loans, including held for sale, net 138,573,208 141,091,987
Financial instrument liabilities:
Deposits 254,408,735 254,796,482
Short-term borrowings 19,747,496 19,747,496
-23-
[The following report appears on Arthur Andersen LLP letterhead]
Report of Independent Public Accountants
To the Board of Directors and Stockholders of Community Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of Community
Bancorp, Inc. (a Massachusetts corporation) and subsidiary as of December 31,
1999 and 1998, and the related consolidated statements of income,
comprehensive income, stockholders' equity and cash flows for the three
years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Community Bancorp,
Inc. and subsidiary as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the three years then ended, in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
January 25, 2000
-24-
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Summary
The Company recorded net income of $3,915,217 for the year ended December 31,
1999, representing an increase of $109,456 or 2.9% over $3,805,761 recorded
in 1998. Earnings per share of $1.33 for the current period compared to $1.30
for the year ended December 31, 1998. The improvement in net income resulted
primarily from increases in net interest income and noninterest income,
partially offset by an increase in noninterest expense.
Deposits of $276,422,308 at December 31, 1999 increased by $22,013,573 or
8.7% from $254,408,735 at December 31, 1998. The increase occurred in both
interest bearing and noninterest bearing deposit categories.
Loans of $164,360,466 at December 31, 1999 increased by $24,136,524 or 17.2%
from $140,223,942 at December 31, 1998. The increase took place primarily in
the commercial loan and residential mortgage loan categories. Noncurrent loans
(nonaccrual loans and loans 90 days or more past due but still accruing)
totaled $684,649 and $914,555 at December 31, 1999 and 1998, respectively.
There were no accruing troubled debt restructurings at December 31, 1999 or
1998. Other real estate owned totaled $10,359 at December 31, 1999, and $0 at
December 31, 1998.
Assets of $327,996,575 at December 31, 1999 represented a $27,109,744 or 9.0%
increase over $300,886,831 at December 31, 1998.
1999 Compared to 1998
Interest income for the year ended December 31, 1999 was $21,840,725,
representing an increase of $1,180,942 or 5.7% over $20,659,783 for the year
ended December 31, 1998, primarily due to a $22,224,584 or 8.3% increase in
average earning assets, partially offset by lower average interest rates,
during 1999. The weighted average taxable equivalent yield on net earning
assets was 7.61% and 7.81% in 1999 and 1998, respectively. Interest expense
of $7,829,668 in 1999 represented an increase of $154,556 or 2.0% from
$7,675,112 in 1998, primarily due to a $17,199,159 or 8.2% increase in average
interest bearing liabilities, partially offset by lower average interest rates,
during 1999. The weighted average cost of interest bearing liabilities was
3.46% in 1999 and 3.67% in 1998. Net interest income for 1999 was $14,011,057,
representing an increase of $1,026,386 or 7.9% compared to $12,984,671 recorded
in 1998.
Noninterest income for the year ended December 31, 1999 was $3,215,746,
representing an increase of $15,259 or .5% from $3,200,487 in 1998. This
increase resulted primarily from increases in merchant credit card processing
asssessments and other charges, commissions and fees, much of which was offset
by a reduction in gains on sales of loans. The decrease in gains on sales of
loans resulted from a significant reduction in the volume of residential
mortgages originated for sale in the secondary market during 1999 as compared
to 1998.
Noninterest expense for the year ended December 31, 1999 of $11,137,009
represented an increase of $940,084 or 9.2% from $10,196,925 recorded during
1998. This increase was the result of increases in all primary noninterest
expense categories. Noninterest expense attributed to the two new Community
National Bank branches that were opened during 1999 was approximately $502,000.
The Company does not anticipate adopting a program of branch openings or
acquisitions during 2000.
There was no provision for possible loan losses in 1999 or 1998, reflecting
management's continuing evaluation of the adequacy of the allowance for possible
loan losses and its belief that the allowance is adequate. Management will
continue its ongoing assessment of the adequacy of the allowance for possible
loan losses during 2000 and may adjust the provision for possible loan losses
if necessary.
Income tax expense of $2,174,577 for the year ended December 31, 1999 compared
to $2,182,472 for 1998, resulting from an increase in nontaxable income and
decrease in taxable income during the current period.
Net income of $3,915,217 for the year ended December 31, 1999 represented an
increase of $109,456 or 2.9% over $3,805,761 recorded in 1998. The foregoing
discussion summarized the primary components of this increase in earnings.
1998 Compared to 1997
Interest income for the year ended December 31, 1998 was $20,659,783,
representing an increase of $1,489,832 or 7.8% over $19,169,951 for the year
ended December 31, 1997, primarily due to a $30,001,910 or 12.6% increase in
average earning assets, partially
-25-
offset by lower average interest rates, during 1998. The weighted average
taxable equivalent yield on net earning assets was 7.81% and 8.14% in 1998 and
1997, respectively. Interest expense of $7,675,112 in 1998 represented an
increase of $779,890 or 11.3% from $6,895,222 in 1997, primarily due to an
$24,209,917 or 13.1% increase in average interest bearing liabilities,
partially offset by lower average interest rates, during 1998. The weighted
average cost of interest bearing liabilities was 3.67% in 1998 and 3.73% in
1997. Net interest income for 1998 was $12,984,671, representing an increase
of $709,942 or 5.8% compared to $12,274,729 recorded in 1997.
Noninterest income for the year ended December 31, 1998 was $3,200,487,
representing an increase of $545,859 or 20.6% from $2,654,628 in 1997. This
increase resulted primarily from increases in merchant credit card
processing, gains on sales of loans and other charges, commissions and fees,
partially offset by reductions in service charges and gains on sales of
securities.
Noninterest expense for the year ended December 31, 1998 of $10,196,925
represented an increase of $751,416 or 8.0% from $9,445,509 recorded during
1997. This increase was the result of increases in all primary noninterest
expense categories.
There was no provision for possible loan losses in 1998 or 1997, reflecting
management's continuing evaluation of the adequacy of the allowance for
possible loan losses and its belief that the allowance is adequate.
Income tax expense of $2,182,472 for the year ended December 31, 1998
compared to $2,053,989 for 1997, the result of an increase in taxable income
during the current period.
Net income of $3,805,761 for the year ended December 31, 1998 represented an
increase of $375,902 or 11.0% over $3,429,859 recorded in 1997. The foregoing
discussion summarized the primary components of this increase in earnings.
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at a level believed by
management to be adequate to absorb inherent losses in the loan portfolio,
including commitments to extend credit (i.e. lines of credit). The allowance
is charged when management determines that the repayment of the principal on a
loan is in doubt. Subsequent recoveries, if any, are credited to the allowance.
The allowance is maintained at an adequate level through the provision for
possible loan losses, which is a charge to operating income. At December 31,
1999 the allowance was $3,041,873, representing 1.9% of total loans, compared
to $2,981,012, representing 2.1% of total loans at December 31, 1998.
The potential for loss in the loan portfolio reflects the risks and
uncertainties inherent in the extension of credit. The determination of the
adequacy of the allowance for possible loan losses is based upon management's
assessment of risk elements in the portfolio, factors affecting loan quality
and assumptions about the economic environment in which the Company operates.
Included in this assessment are specific credit reviews, past loan loss
experience, current economic conditions and trends, known and inherent risks
in the loan portfolio, adverse situations that may affect a borrower's ability
to repay, the estimated value of any underlying collateral and the volume and
risk characteristics of the loan portfolio. The assessment process includes
the identification and analysis of loss potential in various portfolio
segments utilizing a credit risk-rating system and specific reviews and
evaluations of significant problem credits. In addition, management reviews
overall portfolio quality through an analysis of current levels and trends in
charge-off, delinquency and nonaccrual loan data, forecasted economic
conditions and the overall prevailing banking environment. These reviews are
of necessity dependent upon estimates, appraisals and judgments which may
change quickly due to changes in economic conditions and the Company's
perception of how these factors may affect the financial condition of its
borrowers.
The methodology for assessing the adequacy of the overall allowance consists
of an evaluation of its three key components:
- The general allowance for the various loan portfolio classifications
- The valuation allowance for loans specifically identified as impaired
- The unallocated allowance
The general allowance is a percentage-based reflection of historical loss
experience and estimated inherent future losses within the loan portfolio.
The general allowance employs a risk-rating model that grades loans based on
their general characteristics of credit quality and relative risk. It is
calculated by applying various fixed percentages against the total of all
commitments to extend credit. Under this formula, the risk rating of a loan
demonstrating deteriorating credit quality is downgraded, the loan is placed
on the Company's internal "Watch List" and its allowance allocation is
increased. For the remainder of the loan portfolio, appropriate allowance
levels are estimated based on judgments regarding the type of loan, economic
conditions and trends, potential exposure to loss and other factors.
The valuation allowance reflects specific estimates of potential losses on
individual impaired loans. Such loans are evaluated for potential loss by
calculating the net present value of the expected future cash flows using the
loan's original effective interest rate, or estimating the fair value of the
collateral if the loan is collateral-dependent. When the difference between
the net present value of a loan (or the fair value of the collateral) is lower
than the recorded loan balance, the difference represents the valuation
allowance for that loan.
-26-
In addition to the general allowance and the valuation allowance, there is an
unallocated allowance that recognizes the estimation risks associated with the
general and the valuation allowance calculations, and that reflects management's
evaluation of various conditions, the effect of which are not directly
measurable in determining the general and valuation allowances. The
estimation of the inherent losses resulting from these conditions involves a
higher degree of uncertainty because they are not identified with any specific
loans or portfolio segments. The conditions evaluated in connection with
determining the unallocated allowance include the following:
- Current general economic and business conditions affecting the Company's
lending area
- Recent trends in collateral values
- Loan portfolio growth
- Changes in loan portfolio concentrations
- General seasoning of the loan portfolio
- Changes in specific industry conditions within the portfolio segments
- Recent loss experience in particular segments of the portfolio
- Duration of the current business cycle
- Results of the Company's independent credit reviews
- Results of regulatory examinations
When an evaluation of these conditions signifies a change in the level of
inherent portfolio risk, the Company may adjust the unallocated allowance
to reflect that change.
Periodic credit reviews are conducted to enable the Company to adjust the
general allowance through the loan risk-rating process, and to identify
loans requiring a specific valuation allowance. Although the Company
realized total loan growth of $24,136,524 or 17.2% during 1999, there were
no significant changes in loan concentrations, loan quality or loan terms
during the period. Estimation methods and assumptions affecting the
allowance remained unchanged from those used in prior years. There was no
significant reallocation of the allowance among the various segments of the
portfolio.
Securities
The Company's securities portfolio consists primarily of obligations of the
U.S. Treasury, U.S. Government sponsored agencies, mortgage-backed securities
and obligations of various municipalities. These assets are used in part to
secure public deposits and as collateral for repurchase agreements. Total
securities were $128,033,082 at December 31, 1999, representing an increase
of $9,289,091 or 7.8% from $118,743,991 at December 31, 1998. Total securities
averaged $119.2 million for 1999, an increase of $11.3 million or 10.5% over
$107.9 million for 1998. All mortgage-backed securities in the Company's
securities portfolio have been issued by U.S. Government sponsored agencies.
Management believes no other-than-temporary impairment has occurred with regard
to any security in the securities portfolio. The Company's liquidity position
provides the ability to hold all currently owned securities to maturity. There
were no sales of securities during 1999.
Liquidity and Capital Resources
The Company's principal sources of liquidity are customer deposits,
amortization and pay-offs of loan principal and the amortization and
maturities of securities. These sources provide funds for loan originations,
the purchase of securities and other activities. Deposits are considered a
relatively stable source of funds. At December 31, 1999 and 1998, deposits
were $276.4 million and $254.4 million, respectively. Management anticipates
that deposits will increase moderately during 2000.
Of the Company's $128.0 million in securities at December 31, 1999, $24.0
million or 18.8% mature within one year. As a nationally chartered member of
the Federal Reserve System, the Bank has the ability to borrow funds from the
Federal Reserve Bank of Boston by pledging certain of its investment securities
as collateral. Also, the Bank is a member of the Federal Home Loan Bank of
Boston which provides additional borrowing opportunities. In conjunction with
the Company's Year 2000 readiness preparations and contingency planning process,
the Bank made a special arrangement with Federal Home Loan Bank for a
$10,000,000 loan for the period of November 15, 1999 through March 15, 2000.
The purpose of the loan was to provide additional liquidity sufficient to fund
the potential increase in withdrawals from customer deposit accounts associated
with Year 2000 concerns. However, the potential increase in deposit account
withdrawals near the end of the year did not materialize. Therefore, the Bank
obtained permission from the Federal Home Loan Bank to repay the $10,000,000
loan on December 28, 1999, and the loan was repaid on that date.
Bank regulatory authorities have established a capital measurement tool called
Tier 1 leverage capital. A 4.00% ratio of Tier 1 leverage capital to assets now
constitutes the minimum capital standard for most banking organizations. At
December 31, 1999 and 1998, the Company's Tier 1 leverage capital ratio was
8.69% and 8.45%, respectively. Regulatory authorities have also implemented
risk-based capital guidelines requiring a minimum ratio of Tier 1 capital to
risk-weighted assets of 4.00% and a minimum ratio of total capital to risk-
weighted assets of 8.00%. At December 31, 1999, the Company's Tier 1 and total
risk-based capital ratios were 15.54% and 16.80%, respectively. At December 31,
1998, the Company's Tier 1 and total risk-based capital ratios were 15.82% and
17.08%, respectively. The Bank is categorized as "well capitalized" under the
Federal Deposit Insurance Corporation Improvement Act of 1991 (F.D.I.C.I.A.).
-27-
Asset/Liability Management and Interest Rate Risk
The Company has an Asset/Liability Management Committee which oversees all
asset/liability management activities. The committee establishes general
guidelines each year and meets regularly to review the Company's operating
results, to measure and monitor interest rate risk and to make strategic changes
when necessary. It is the Company's general policy to reasonably match the rate
sensitivity of its assets and liabilities in an effort to prudently manage
interest rate risk. A common benchmark of this sensitivity is the one year
gap position, which is a reflection of the difference between the speed and
magnitude of rate changes of interest rate sensitive liabilities as compared
with the Bank's ability to adjust the rates of its interest rate sensitive
assets in response to such changes. The Company's negative one year
cumulative gap position at December 31, 1999, which represents the excess of
repricing liabilities versus repricing assets, was -7.8% expressed as a
percentage of total assets.
During the first quarter of 1999, the Asset/Liability Management Committee
recommended that the Company increase its residential real estate loan
portfolio by approximately $12.0 million. That recommendation was made
following an analysis of the Company's balance sheet, its liquidity position,
the prevailing interest rate environment at that time and the alternative uses
of funds. The Company was successful in achieving that portfolio growth
through the origination of a combination of three and five year adjustable
rate, as well as fifteen year fixed rate, loans. The Committee also
recommended an increase in the Company's commercial real estate loan portfolio
for similar reasons. Although those recommendations resulted in an increase
in the negative one year cumulative gap position, the Company's overall
earnings position was strengthened by increasing the loan portfolios. The
combined growth in residential and commercial real estate loans was
approximately $22.8 million during 1999.
Year 2000
The following Year 2000 statements constitute a Year 2000 Readiness Disclosure
within the meaning of the Year 2000 Information and Readiness Disclosure Act of
1998.
As of March 1, 2000, the Company had experienced no Year 2000 related problems.
All mission-critical and non-mission-critical systems have performed
correctly. However, the Year 2000 issue still poses several potential risks
to the Company. A number of the Company's borrowers utilize computers and
computer software to varying degrees in conjunction with the operation of
their businesses. The customers and suppliers of those businesses may utilize
computers as well. Should the Company's borrowers, or the businesses on which
they depend, experience Year 2000 related computer problems, such borrowers'
cash flow could be disrupted, adversely affecting their ability to repay their
loans with the Company. The Company assessed its year 2000 exposure to credit
customers through the use of questionnaires and personal interviews during 1998
and 1999. Management's determination of the potential impact the Year 2000
issue could have on those customers' ability to continue servicing their debt
in a satisfactory manner has been factored into the Company's credit risk
rating system. As of March 1, 2000 the Company was aware of no credit problems
related to the Year 2000 issue.
Similar Year 2000 issues could affect certain of the Company's business
depositors, potentially causing interruptions in their cash flows that could
result in their inability to maintain historical deposit balance levels in
their accounts. Such an event could result in the reduction of deposit
balances available to the Company for loans, investments, etc. As of March 1,
2000 the Company was aware of no deposit balance reductions related to the
Year 2000 issue.
Certain utility services, such as electrical power and telecommunications
services, could be disrupted if those services experience Year 2000 related
problems. Also, should Year 2000 related problems occur which cause any of
the systems of certain third parties upon which the Company depends to become
inoperative, increased personnel costs could be incurred if additional staff
is required to perform functions that the inoperative systems would have
otherwise performed. As of March 1, 2000 the Company had experienced no
disruption of utility or other third-party services related to the Year 2000
issue.
The Company believes it is not possible to estimate the potential lost revenue
due to the remaining potential Year 2000 problems discussed above, as the
occurrence, extent and longevity of such potential problems cannot be
predicted. As of March 1, 2000 the Company had experienced no lost revenue
related to the Year 2000 issue.
The Company's estimated total cost to replace computer equipment, software
programs, or other equipment containing embedded microprocessors that were
not Year 2000 compliant was approximately $216,000, all of which was incurred
by June 30, 1999. System maintenance or modification costs were expensed as
incurred, while the cost of new hardware, software, or other equipment was
capitalized and amortized over their useful lives. There were no deferred
capital expenditures as a result of the Year 2000 issue.
-28-
[The following text appears on the inside back cover]
DIRECTORS & OFFICERS
- --------------------
COMMUNITY BANCORP, INC. AND COMMUNITY NATIONAL BANK
- ----------------------------------------------------
Chairman of the Board
- ---------------------
Dennis F. Murphy, Jr.
President and Treasurer of D. Francis Murphy Insurance Agency, Inc.
Directors:
- ---------
Alfred A. Cardoza
Retired
Jennie Lee Colosi
President and Treasurer of E. T. & L. Construction, Inc.
Antonio Frias
President and Treasurer of S & F Concrete Contractors, Inc.
I. George Gould
Chairman of the Board of Gould's, Inc.
Horst Huehmer
Retired
Donald R. Hughes, Jr.
Treasurer and Clerk of Community Bancorp, Inc.,
Executive Vice President of Community National Bank
James A. Langway
President and Chief Executive Officer
of Community Bancorp, Inc. and Community National Bank
David L. Parker
Chairman of the Board of Larkin Lumber Company
Mark Poplin
President and Treasurer of Poplin Supply Company
David W. Webster
President of Knight Fuel Company, Inc.
Officers:
- --------
James A. Langway
President and Chief Executive Officer
Donald R. Hughes, Jr.
Treasurer and Clerk
COMMUNITY NATIONAL BANK
- -----------------------
Officers
- --------
James A. Langway
President and Chief Executive Officer
Donald R. Hughes, Jr.
Executive Vice President
Robert P. Converse
Auditor
Joy A. Pare'
Executive Administrative Officer
Commercial Banking
- ------------------
John P. Galvani
Senior View President
Christal M. Bjork
Vice President
Daniel L. Heney
Vice President
Linda Glaser
Assistant Vice President
Jennifer D. Vasquezi
Commercial Loan Officer
Compliance/Personnel/Legal
- --------------------------
Grace L. Blunt, Esq.
Senior Vice President
Diane L. LeBlanc
Assistant Vice President
Financial Control
- -----------------
Robert E. Leist
Senior Vice President
Investment Management & Trust
- -----------------------------
R. Richard Wilson
V. P. and Investment Officer
Operations/EDP and Electronic Banking
- -------------------------------------
Janet A. Lyman
Senior Vice President
James P. Vasquezi
Vice President
Margaret M. Vasquezi
Assistant Vice President
Susan B. Gillespie
Operations Officer
Michelle M. Temple
Loan Servicing Officer
Retail Banking/Mortgage
- -----------------------
Richard K. Bennett
Senior Vice President
Nanci J. Pisani
V. P. - Business Development
Elizabeth M. Tewksbary
V. P. - Branch Administration
Rocco Vallande
V. P. - Consumer Lending
Linda Benway
Assistant Vice President
Denise M. Fernald
Branch Officer
Kelli Mason
Branch Officer
M. Jean Mickle
Branch Officer
Lois A. Seymour
Branch Officer
Raymond A. Murphy III
Facilities Officer
Lynda L. D'Orlando
Mortgage Officer
Sandra M. Borella
Mortgage Underwriting Officer
Clark Hooper
Security Officer
Suzanne Polagruto
Consumer Loan Officer
The Company's Securities and Exchange Commission filing on Form 10-K is
available to our stockholders upon request.
[The following text appears on the back cover.]
Community Bancorp, Inc.
Parent company of Community National Bank
[Community National Bank's logo appears in this space]
17 Pope Street
Hudson, Massachusetts 01749
tel 978-568-8321
fax 978-568-7129
877-CNB-DIRECT
Acton
270 Great Road
tel 978-263-8376
fax 978-266-2610
Boxborough
629 Massachusetts Avenue
tel 978-264-9092
fax 978-266-2600
Concord
1134 Main Street
tel 978-369-5421
fax 978-371-6600
Framingham
39 Edgell Road
tel 508-875-1333
fax 508-370-3885
Hudson South
177 Broad Street
tel 978-568-8813
fax 978-568-2610
Internet Branch
www.combanc.com
cnb-mail@combanc.com
Loan Center
12 Pope Street, Hudson
tel 978-568-8321
fax 978-562-9984
Marlborough Center
96 Bolton Street
tel 508-485-5003
fax 508-229-4602
Marlborough East
500 Boston Post Road
tel 508-485-3599
fax 508-229-4601
Stow
159 Great Road
tel 978-461-1600
fax 978-461-1610
Sudbury
450 Boston Post Road
tel 978-443-1620
fax 978-443-1626
ATM LOCATIONS:
New England Sports Center
Donald Lynch Blvd., Marlborough
Shaw's Supermarket
Route 85, Hudson
Solomon Pond Mall
Donald Lynch Blvd., Marlborough
Equal Opportunity Lender
Member FDIC