UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 2000 ---------------------------------------- Commission File No. 33-12756-B COMMUNITY BANCORP, INC. ----------------------- A Massachusetts Corporation IRS Employer Identification No. 04-2841993 17 Pope Street, Hudson, Massachusetts 01749 Telephone - (978)568-8321 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 ------- ------- Common Stock $2.50 par value 5,914,441 shares outstanding as of October 31, 2000 PART I - FINANCIAL INFORMATION ------------------------------ COMMUNITY BANCORP, INC. Item 1. CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2000 1999 ------------ ----------- ASSETS Cash and due from banks $ 13,973,265 $ 21,010,959 Federal funds sold 43,648,334 6,924,026 Securities available for sale, at market 50,052,557 41,808,065 Securities held to maturity (market value $80,051,955 at 9/30/00 and $84,164,551 at 12/31/99) 81,303,607 86,225,017 Mortgage loans held for sale 542,585 332,686 Loans 174,611,096 164,360,466 Less allowance for possible loan losses 2,921,459 3,041,873 ----------- ----------- Total net loans 171,689,637 161,318,593 ----------- ----------- Premises and equipment, net 6,269,151 6,342,891 Other assets, net 5,015,959 4,034,338 ----------- ----------- Total assets $372,495,095 $327,996,575 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits Noninterest bearing $ 69,984,367 $ 68,082,062 Interest bearing 239,519,249 208,340,246 ----------- ----------- Total deposits 309,503,616 276,422,308 ----------- ----------- Federal funds purchased and securities sold under repurchase agreements 30,199,671 21,766,424 Other liabilities 2,251,275 1,496,572 ----------- ----------- Total liabilities 341,954,562 299,685,304 ----------- ----------- 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, 6,398,436 shares issued, 5,914,441 shares outstanding, (5,921,824 shares outstanding at 12/31/99) 15,996,090 15,996,090 Surplus 101,378 0 Undivided profits 17,215,152 14,757,255 Treasury stock, at cost, 483,995 shares, (476,612 shares at 12/31/99) (2,414,762) (2,217,972) Accumulated other comprehensive loss (357,325) (224,102) ----------- ----------- Total stockholders' equity 30,540,533 28,311,271 Total liabilities and ----------- ----------- stockholders' equity $372,495,095 $327,996,575 =========== =========== <FN> See accompanying notes. -2- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three months ended Nine months ended September 30, September 30, -------------------- --------------------- 2000 1999 2000 1999 --------- --------- ---------- ---------- Interest income: Interest and fees on loans $4,006,894 $3,534,547 $11,377,812$10,207,944 Interest and div. on securities: Taxable interest 1,769,880 1,650,568 5,230,079 4,689,408 Nontaxable interest 148,701 141,779 442,673 414,424 Dividends 22,741 19,489 64,079 55,089 Interest on federal funds sold 538,837 227,696 1,087,578 528,686 --------- --------- ---------- ---------- Total interest income 6,487,053 5,574,079 18,202,221 15,895,551 --------- --------- ---------- ---------- Interest expense: Deposits 1,994,128 1,772,584 5,530,052 4,986,964 Short term borrowings 465,709 237,514 1,200,202 682,454 --------- --------- --------- --------- Total interest expense 2,459,837 2,010,098 6,730,254 5,669,418 --------- --------- --------- --------- Net interest income 4,027,216 3,563,981 11,471,967 10,226,133 --------- --------- ---------- ---------- Provision for loan losses 0 0 0 0 Net interest income after --------- --------- ---------- ---------- provision for loan losses 4,027,216 3,563,981 11,471,967 10,226,133 --------- --------- ---------- ---------- Noninterest income: Merchant credit card assessments 381,757 310,905 1,134,551 924,788 Service charges 167,858 143,684 479,161 442,388 Other charges, commissions, fees 263,392 300,782 793,736 880,924 Gains on sales of loans, net 19,962 5,938 66,196 55,705 Gains on sales of securities, net 0 0 0 0 Other 22,978 17,394 68,852 66,408 --------- --------- ---------- ---------- Total noninterest income 855,947 778,703 2,542,496 2,370,213 --------- --------- ---------- ---------- Noninterest expense: Salaries and benefits 1,556,912 1,410,644 4,459,155 4,029,691 Data processing and ATM network 287,446 253,085 811,846 734,610 Occupancy, net 215,405 179,039 600,722 565,827 Furniture and equipment 96,431 101,703 295,247 275,306 Credit card processing 340,904 330,735 1,006,000 884,775 Professional fees 108,020 104,730 296,792 279,897 Printing, stationery & supplies 54,695 71,026 180,817 203,823 Marketing and advertising 56,537 57,974 212,122 231,052 Other 316,642 265,091 917,403 788,897 --------- --------- ---------- ---------- Total noninterest expense 3,032,992 2,774,027 8,780,104 7,993,878 --------- --------- ---------- ---------- Income before income taxes 1,850,171 1,568,657 5,234,359 4,602,468 Income taxes 662,949 552,598 1,871,190 1,642,932 --------- --------- ---------- ---------- Net income $1,187,222 $1,016,059 $3,363,169 $2,959,536 ========= ========= ========== ========== Earnings per common share $ .201 $ .172 $ .569 $ .501 Dividends per share $ .053 $ .046 $ .153 $ .134 Weighted average number of shares 5,914,441 5,921,894 5,912,157 5,905,476 <FN> See accompanying notes. -3- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three months ended Nine months ended September 30, September 30, --------------------- ---------------------- 2000 1999 2000 1999 ---------- --------- ---------- --------- Net income $1,187,222 $1,016,05 $3,363,169 $2,959,536 Other comprehensive income: Unrealized securities gains (losses) arising during period 217,003 31,029 (225,234) (169,235) Income tax (expense) benefit on securities gains (losses) arising during period (88,820) (12,700) 92,011 69,268 ---------- --------- ---------- --------- Net unrealized securities gains (losses) arising during period 128,183 18,329 (133,223) (99,967) Less: reclassification adjustment for securities (gains) losses included in income 0 0 0 0 Income tax expense (benefit) on securities (gains) losses included in income 0 0 0 0 --------- --------- --------- --------- Net reclassification adjustments for securities (gains) losses included in net income 0 0 0 0 --------- --------- --------- --------- Other comprehensive income (loss) 128,183 18,329 (133,223) (99,967) --------- --------- --------- --------- Comprehensive income $1,315,405 $1,034,388 $3,229,946 $2,859,569 ========= ========= ========= ========= <FN> See accompanying notes. -4- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended September 30, ------------------------- 2000 1999 ---------- ---------- Cash flows from operating activities: Net income $ 3,363,169 $ 2,959,536 Adjustments to reconcile net income to net cash provided by operating activities: (Increase) decrease in mortgage loans held (209,899) 1,225,023 for sale Premium on sale of mortgages 0 59,938 Depreciation and amortization 700,471 677,075 Increase in other liabilities 585,962 302,478 Increase in taxes payable 92,707 121,373 Increase in interest payable 14,023 95,112 (Increase) in other assets (731,952) (129,783) (Increase) in interest receivable (167,717) (279,359) ---------- ---------- Total adjustments 283,595 2,071,857 ---------- ---------- Net cash provided by operating activities 3,646,764 5,031,393 ---------- ---------- Cash flows from investing activities: Maturities and principal repayments of securities available for sale 4,689,753 9,652,800 Maturities and principal repayments of securities held to maturity 10,285,874 19,708,408 Purchases of securities available for sale (13,160,212) (14,035,128) Purchases of securities held to maturity (5,364,030) (21,391,119) Net change in federal funds sold (36,724,309) 6,223,377 Net change in loans and other real estate owned (10,330,854) (20,399,259) Acquisition of property, plant and equipment (626,731) (1,189,916) ---------- ----------- Net cash used in investing activities (51,230,509) (21,430,837) ---------- ----------- Cash flows from financing activities: Net change in deposits 33,081,308 22,946,641 Net change in federal funds purchased 0 0 Net change in repurchase agreements 8,433,247 3,894,236 Purchase of treasury stock (327,132) 0 Sale of treasury stock 231,720 261,744 Dividends paid (873,092) (770,004) ---------- ---------- Net cash provided by financing activities 40,546,051 18,544,145 ---------- ---------- Net (decrease)increase in cash and due from banks(7,037,694) 2,144,701 ---------- ---------- Cash and due from banks at beginning of period 21,010,959 17,601,043 ---------- ---------- Cash and due from banks at end of period $13,973,265 $19,745,744 ---------- ---------- <FN> See accompanying notes. -5- COMMUNITY BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 _________________________________________________________________________ 1. BASIS OF PRESENTATION --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results expected for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report to shareholders and Form 10-K for the year ended December 31, 1999. 2. 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 the periods presented, as there is no dilution effect. Earnings per share is based on the weighted average number of shares outstanding during the period. 3. STOCK SPLIT ----------- Effective April 28, 2000, the Company's Board of Directors approved a 2- for-1 stock split of the company's common stock, par value $2.50, effected in the form of a stock dividend. The accompanying consolidated financial statements have been retroactively restated for all periods presented to reflect the stock split. 4. 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 a 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 a 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. -6- 5. 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. 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. 6. RECLASSIFICATIONS ----------------- Certain amounts in the prior period's financial statements have been reclassified to be consistent with the current period's presentation. The reclassifications have no effect on net income. -7- PART I - FINANCIAL INFORMATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Summary - ------- The Company recorded net income of $3,363,169 for the nine months ended September 30,2000, representing an increase of $403,633 or 13.6% over $2,959,536 for the same period in 1999. Earnings per share of $.569 for the current period represented an increase of $.068 from $.501 for the nine months ended September 30, 1999. The improvement in net income resulted primarily from an increase in net interest income and noninterest income, partially offset by increases in salaries and benefits, data processing and ATM network, occupancy, credit card processing, and other expense. Deposits of $309,503,616 at September 30, 2000 increased by $33,081,308 or 12.0% from $276,422,308 at December 31, 1999. The increase in deposits occurred primarily in the interest-bearing categories. Loans of $174,611,096 at September 30, 2000 increased by $10,250,630 or 6.2% from $164,360,466 at December 31, 1999. This increase took place in the commercial, residential real estate, and instalment loan categories. Noncurrent loans (nonaccrual loans, troubled debt restructurings and loans 90 days or more past due but still accruing) totaled $711,269 and $684,649 at September 30, 2000 and December 31, 1999, respectively. Assets of $372,495,095 at September 30, 2000 represented a $44,498,520 or 13.6% increase from $327,996,575 at December 31, 1999. Nine months ended September 30, 2000 as Compared To Nine months ended September 30, 1999 ------------------------------------ Net Interest Income - ------------------- Interest income for the nine months ended September 30, 2000 was $18,202,221, representing an increase of $2,306,670 or 14.5% from $15,895,551 for the nine months ended September 30, 1999, primarily due to higher average loan, federal funds sold, and securities balances and higher average interest rates in 2000. Interest expense was $6,730,254 representing an increase of $1,060,836 or 18.7% from $5,669,418 for the nine months ended September 30, 1999, primarily due to higher average interest bearing deposit and repurchase agreement balances and higher average interest rates in 2000. Net interest income for the nine months ended September 30, 2000 was $11,471,967 representing an increase of $1,245,834 or 12.2% from $10,226,133 for the nine months ended September 30, 1999. Noninterest Income and Expense - ------------------------------ Noninterest income for the nine months ended September 30, 2000 was $2,542,496 representing an increase of $172,283 or 7.3% from $2,370,213 for the nine months ended September 30, 1999. This increase was primarily the result of increases in merchant credit card assessments and service charges, partially offset by a reduction in other charges, commissions and fees. -8- Noninterest expense for the nine months ended September 30, 2000 of $8,780,104 was up $786,226 or 9.8% from $7,993,878 for the same period in 1999. This increase was primarily the result of increases in salaries and employee benefits, data processing and ATM network, occupancy, furniture and equipment, credit card processing and other expense, partially offset by a reduction in printing, stationary and supplies and marketing and advertising expense. Most of the non-inflationary increases in noninterest expense were the result of costs associated with the operation of two new Community National Bank offices opened during the second quarter of 1999, the establishment by the Bank of an investment management and trust department in the second quarter of 2000, and the Bank's continued investment in technology to enhance customer service and product delivery systems. Provision for Loan Losses - ------------------------- There was no provision for loan losses for the nine months ended September 30, 2000 or 1999, reflecting management's continuing evaluation of the adequacy of the allowance for loan losses and its belief that the allowance is adequate. Income Taxes - ------------ Income tax expense of $1,871,190 for the nine months ended September 30, 2000 compared to $1,642,932 for the same period in 1999. The increase was the result of an increase in taxable income during the current period. Net Income - ---------- Net income of $3,363,169 for the first nine months of 2000 represented an increase of $403,633 or 13.6% from $2,959,536 recorded for the first nine months of 1999. Earnings per share of $.569 for the current period represented an increase of $.068 from $.501 for the nine months ended September 30, 1999. Three months ended September 30, 2000 as Compared To Three months ended September 30, 1999 ------------------------------------- Net Interest Income - ------------------- Interest income for the three months ended September 30, 2000 was $6,487,053, representing an increase of $912,974 or 16.4% from $5,574,079 for the three months ended September 30, 1999, primarily due to higher average loan, federal funds sold and securities balances and higher average interest rates in 2000. Interest expense was $2,459,837, representing an increase of $449,739 or 22.4% from $2,010,098 for the three months ended September 30, 1999, primarily due to higher average interest bearing deposit and repurchase agreement balances and higher average interest rates in 2000. Net interest income for the three months ended September 30, 2000 was $4,027,216, representing an increase of $463,235 or 13.0% from $3,563,981 for the three months ended September 30, 1999. Noninterest Income and Expense - ------------------------------ Noninterest income for the three months ended September 30, 2000 was $855,947, representing an increase of $77,244 or 9.9% from $778,703 for the three months ended September 30, 1999. This increase was primarily the result of an increase in merchant credit card assessments, service charges and gains on sales of loans, partially offset by a decrease in other charges, commissions and fees. Noninterest expense for the three months ended September 30, 2000 of $3,032,992 was up $258,965 or 9.3% from $2,774,027 for the corresponding -9- period in 1999. This increase was primarily the result of increases in salaries and benefits, data processing and ATM, credit card processing and other expense, partially offset by a decrease in furniture and equipment and printing, stationary and supplies expense. Most of the non-inflationary increases in non-interest expense were the result of costs associated with the Bank's new Sudbury branch office which was opened in June of 1999, the establishment by the Bank of an investment management and trust department in the second quarter of 2000, and the Bank's continued investment in technology to enhance customer service and product delivery systems. Provision for Loan Losses - ------------------------- There was no provision for loan losses for the three months ended September 30, 2000 or 1999, reflecting management's continuing evaluation of the adequacy of the allowance for loan losses and its belief that the allowance is adequate. Income Taxes - ------------ Income tax expense of $662,949 for the three months ended September 30, 2000 compared to $552,598 for the corresponding period in 1999.The increase was the result of an increase in taxable income during the current period. Net Income - ---------- Net income of $1,187,222 for the three months ended September 30, 2000 represented an increase of $171,163 or 16.8% from $1,016,059 recorded for the corresponding period in 1999. Earnings per share of $.201 for the current period represented an increase of $.029 from $.172 for the three months ended September 30, 1999. 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 principle 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 September 30, 2000 the allowance was $2,921,459 representing 1.7% of total loans, compared to $3,041,873, representing 1.9% of total loans at December 31, 1999. 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 non-accrual loan data, economic forecasts and the overall prevailing banking environment. These reviews are of necessity -10- dependent upon estimates, appraisals and judgements 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 it's 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 estimates 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 judgements 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. 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 -11- 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. During the second quarter of 2000 there were no significant changes in loan concentrations, loan quality or loan terms. 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 of obligations of the U.S. Treasury, U.S. government sponsored agencies, mortgage backed securities and obligations of various municipalities. Those assets are used in part to secure public deposits and as collateral for repurchase agreements. Total securities were $131,356,164 at September 30, 2000, representing an increase of $3,323,082 or 2.6% from $128,033,082 at December 31, 1999. Securities classified as available for sale were $50,052,557 and $41,808,065 at September 30, 2000 and December 31, 1999 respectively. There were no sales of securities during the nine months ended September 30, 2000. Liquidity and Capital Resources - ------------------------------- The Company's primary sources of liquidity are customer deposits, amortization and pay-offs of loan principal and maturities of investment securities. These sources provide funds for loan originations, the purchase of investment securities and other activities. Deposits are considered a relatively stable source of funds. At September 30, 2000 and 1999, deposits were $309.5 and $277.4 million, respectively. Management anticipates that deposits will grow moderately during the remainder of 2000. 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 which provides additional borrowing opportunities. Bank regulatory authorities have established a capital measurement tool called "Tier 1" leverage capital. A 4.00% ratio of Tier 1 capital to assets now constitutes the minimum capital standard for most banking organizations. At September 30, 2000, the Company's Tier 1 leverage capital ratio was 8.29%. 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 September 30, 2000 the Company's Tier 1 and total risk-based capital ratios were 15.58% and 16.83%, respectively. The Bank is categorized as "well capitalized" under the Federal Deposit Insurance Corporation Improvement Act of 1991 (F.D.I.C.I.A.). Effective April 28, 2000, the Company's Board of Directors approved a 2-for-1 stock split of the company's common stock, par value $2.50, effected in the form of a stock dividend. The accompanying consolidated financial statements have been retroactively restated for all periods presented to reflect the stock split. -12- On September 20, 2000, the Company's Board of Directors declared a third quarter 2000 cash dividend of $.053 per share of common stock to shareholders of record at September 1, 2000, payable on October 13, 2000. Asset/Liability Management - -------------------------- The Company has an asset/liability management committee which oversees all asset/liability activities of the Company. The committee establishes general guidelines each year and meets regularly to review the Company's operating results 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. 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 it's interest rate sensitive assets in response to such changes. The Company's negative one-year cumulative gap position at September 30, 2000, representing the excess of repricing liabilities versus repricing assets within a one year time frame, was 2.7% expressed as a percentage of total assets. Cautionary Statement Regarding Forward-Looking Information - ---------------------------------------------------------- This Quarterly Report on Form 10-Q, including Management's Discussion and Analysis of Financial Condition and Results of Operations, contains, in addition to historical information, "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. When used in this and other Reports filed by the Company, the words "anticipate", "estimate", "expect", "objective", and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a variety of risks and uncertainties. In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, risk factors that could cause the Company's actual results to differ materially from those contemplated in any forward-looking statement include, but are not limited to, changes in political and economic conditions, interest rate fluctuations, competitive product and pricing pressures, adverse changes in asset quality, increased inflation, risks related to Year 2000 issues (particularly with respect to compliance by third parties on which the Company relies), and adverse legislative or regulatory changes. 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 September 30, 2000, the Company has experienced no Year 2000 related problems. All mission-critical and non-mission critical systems are performing correctly. The Company is aware of no credit problems on the part of its borrowers, no deposit balance reductions, and no disruptions of utility or other third-party services related to the Year 2000 issue, and the Company has experienced no Year 2000 related loss of revenue. -13- PART II - OTHER INFORMATION --------------------------- Item 5. OTHER INFORMATION Effective April 28, 2000, the Company's Board of Directors approved a for-1 stock split of the Company's common stock, par value $2.50, effected in the form of a stock dividend. On September 20, 2000, the Company's Board of Directors declared a second quarter 2000 cash dividend of $.053 per share of common stock to shareholders of record at September 1, 2000, payable on October 13, 2000. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 27 Article 9 - Financial Data Schedule for the nine months ended September 30, 2000 (b) The Company did not file a Form 8-K during the quarter ended September 30, 2000. -14- SIGNATURES ---------- Pursuant to the requirements 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, INC. Date: October 31, 2000 By: /s/ James A. Langway --------------------- James A. Langway President & Chief Executive Officer Principal Executive Officer Date: October 31, 2000 By: /s/ Donald R. Hughes, Jr. -------------------------- Donald R. Hughes, Jr. Treasurer and Clerk, Principal Financial Officer and Principal Accounting Officer -15- EXHIBIT INDEX ------------- EXHIBIT DESCRIPTION ------- ----------- 27 Article 9 - Financial Data Schedule for the nine months ended September 30, 2000 -16-