UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 15, 2001 was $36,822,080.
The total number of shares of common stock outstanding at March 15, 2001
was 5,914,441.
Documents Incorporated By Reference
Parts II, III and IV incorporate information by reference from the Annual
Report to shareholders for the year ended December 31, 2000.
PART I
------
ITEM 1. BUSINESS
Community Bancorp, Inc., a Massachusetts corporation ("Company"), is
a registered bank holding company under the Bank Holding Company Act of
1956, as amended. The Holding Company has one subsidiary, Community
National Bank, a national banking association ("Bank"). The Holding
Company owns all the outstanding shares of the Bank. At present, the
Holding Company conducts no activities independent of the Bank. In 1992,
the Bank formed Community Securities Corporation as a wholly owned
subsidiary. The activities of this subsidiary consist of buying, selling,
dealing in or holding securities in its own behalf and not as a broker.
In 1998, the Bank formed Community Benefits Consulting, Inc. as a wholly
owned subsidiary. The activities of this subsidiary consist of providing
consulting services to small businesses in the areas of employee benefits
and human resources administration.
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 commercial, real estate, installment and other
loans. The Bank also offers official checks, traveler's checks, safe
deposit boxes and other customary bank services to its customers. In 1994
the Bank introduced a telephone banking service allowing customers to
perform account inquiries and other functions using a Touch Tone
telephone. In 1995 the Bank introduced a PC-based office banking system
for businesses that allows business customers to access their accounts and
perform a number of functions directly through an office PC. In 1996 the
Bank introduced a PC-based home banking and bill payment system for
consumers. In 1997, the Bank formed a third-party arrangement with Murphy
Insurance Brokerage, Ltd. for the purpose of providing insurance products
and services to the bank's customers and the general public. In 1999, the
Bank introduced fully-transactional Internet-based online banking services
for both retail and business customers. In 2000 the Bank introduced
investment management and trust services.
The business of the Bank is not significantly affected by seasonal
factors.
In the last five years the Bank derived its operating income from
the following sources:
% of Operating Income
--------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Interest and fees on loans 55% 56% 55% 60% 63%
Interest and dividends on
securities and federal funds sold 33 31 31 28 26
Charges, fees and other sources 12 13 14 12 11
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
Competition
The Bank generally concentrates its activities within a 20 mile
radius of Hudson, Massachusetts and currently operates full service branch
offices in Hudson, Acton, Boxborough, Concord, Framingham, Marlborough, Stow
and Sudbury, Massachusetts. These communities are generally characterized
by a growing residential population and moderate to high household income.
-2-
In addition to its main office, the Bank also operates a full service
branch office and a consumer lending office in the Town of Hudson. The
Bank operates three remote ATM facilities in Hudson and Marlborough.
The banking business in the Bank's market area is highly
competitive. The Bank competes actively with other banks, as well as with
other financial institutions engaged in the business of accepting deposits
or making loans, such as savings and loan associations, savings banks and
finance companies. In the Bank's general market area there are
approximately 1 national bank, 3 Massachusetts trust companies, 8 savings
banks, 2 cooperative banks and 6 credit unions. Since several of the
competing institutions are significantly larger than the Bank in assets
and deposits, the Bank strongly emphasizes a personal approach to service
while utilizing the latest in technology in order to meet and surpass the
vigorous competition. The Bank also faces competition from numerous other
banks, both local and nation-wide, which utilize the Internet to solicit
and service customers. The 1999 passing by Congress of the Gramm-Leach-
Bliley Act, which eliminates previous barriers to combinations of banking
organizations with insurance companies and securities firms, could result
in significant changes taking place within the various financial services
industries. Certain provisions of the Act were effective upon enactment,
while others become effective over time. The Company continues to monitor
developments resulting from the passage of this legislation.
Regulation of the Company
The Company is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended. It is subject to the supervision
and examination of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board") and files with the Federal Reserve Board the
reports as required under the Bank Holding Company Act.
The Bank Holding Company Act requires prior approval by the Federal
Reserve Board of the acquisition by the Company of substantially all the
assets or more than five percent of the voting stock of any bank. The
Bank Holding Company Act also allows the Federal Reserve Board to
determine (by order or by regulation) what activities are so closely
related to banking as to be a proper incident of banking, and thus,
whether the Company can engage in such activities or transactions between
the affiliated banks and the Company or other affiliates. The Bank
Holding Company Act prohibits the Company and the Bank from engaging in
certain tie-in arrangements in connection with any extension of credit,
sale of property or furnishing of services.
Regulation of the Bank
The Bank is a national banking association chartered under the
National Bank Act. As such, it is subject to the supervision of the
Comptroller of the Currency and is examined by his office. In addition,
it is subject to examination by the Federal Reserve Board, by reason of
its membership in the Federal Reserve System, and by the Federal Deposit
Insurance Corporation, by reason of the insurance of its deposits by such
corporation. Areas in which the Bank is subject to regulation by federal
authorities include reserves, loans, investments, issuances of various
types of securities, participation in mergers and consolidations, and
certain transactions with or in the stock of the Company.
Employees
The Company and the Bank employ 122 full-time equivalent employees.
-3-
Distribution of Assets, Liabilities and Stockholders' Equity; Interest
Rates and Interest Differential
The following tables present the condensed average balance sheets
and the components of net interest differential for the three years ended
December 31, 2000, 1999 and 1998. The total dollar amount of interest
income from earning assets and the resultant yields are calculated on a
taxable equivalent basis.
2000
------------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
------------ ----------- -----
Federal funds sold $ 26,890,957 $ 1,696,050 6.31%
Securities:
Taxable 114,423,018 7,187,807 6.28%
Non-taxable (1) 13,137,948 911,054 6.93%
Total loans and leases (1)(2) 169,014,121 15,485,363 9.16%
----------- ---------- ----
Total earning assets 323,466,044 25,280,274 7.82%
----------
Reserve for loan losses (2,914,363)
Other non interest-
bearing assets 27,322,739
-----------
Total average assets $347,874,420
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $133,044,768 $ 3,163,311 2.38%
Time deposits 84,386,262 4,497,957 5.33%
Federal funds purchased and
repurchase agreements 32,246,526 1,693,324 5.25%
----------- --------- ----
Total interest-bearing
liabilities 249,677,556 9,354,592 3.75%
---------
Non interest-bearing deposits 66,238,341
Other non interest-bearing
liabilities 2,117,075
Stockholders' equity 29,841,448
-----------
Total average liabilities
and stockholders' equity $347,874,420
===========
Net interest income $15,925,682
==========
Net yield on interest
earning assets 4.92%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $315,609. A federal tax
rate of 34% was used in performing this calculation.
(2) The average balances of non-accruing loans and loans held for sale
are included in the loan balance.
-4-
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential (Continued)
1999
------------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
------------ ----------- -----
Federal funds sold $ 16,626,364 $ 824,531 4.96%
Securities:
Taxable 107,354,336 6,502,696 6.06%
Non-taxable (1) 11,870,957 821,184 6.92%
Total loans and leases (1)(2) 154,304,452 13,994,518 9.07%
----------- ---------- ----
Total earning assets 290,156,109 22,142,929 7.63%
----------
Reserve for loan losses (3,022,301)
Other non interest-
bearing assets 27,133,289
-----------
Total average assets $314,267,097
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $112,910,766 $ 2,238,683 1.98%
Time deposits 88,705,026 4,563,234 5.14%
Federal funds purchased and
repurchase agreements 24,461,823 1,027,751 4.20%
----------- --------- ----
Total interest-bearing
liabilities 226,077,615 7,829,668 3.46%
---------
Non interest-bearing deposits 59,254,021
Other non interest-bearing
liabilities 1,838,508
Stockholders' equity 27,096,953
-----------
Total average liabilities
and stockholders' equity $314,267,097
===========
Net interest income $14,313,261
==========
Net yield on interest
earning assets 4.93%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $302,204. A federal tax
rate of 34% was used in performing this calculation.
(2) The average balances of non-accruing loans and loans held for sale
are included in the loan balance.
-5-
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential (Continued)
1998
------------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
------------ ----------- -----
Federal funds sold $ 21,759,343 $ 1,155,014 5.31%
Securities:
Taxable 97,953,145 5,854,481 5.98%
Non-taxable (1) 9,908,169 699,584 7.06%
Total loans and leases (1)(2) 138,310,868 13,210,520 9.55%
----------- ---------- ----
Total earning assets 267,931,525 20,919,599 7.81%
----------
Reserve for loan losses (3,121,829)
Other non interest-
bearing assets 24,798,936
-----------
Total average assets $289,608,632
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $113,384,703 $ 2,665,123 2.35%
Time deposits 72,259,015 3,984,185 5.51%
Federal funds purchased and
repurchase agreements 23,234,738 1,025,804 4.41%
----------- --------- ----
Total interest-bearing
liabilities 208,878,456 7,675,112 3.67%
---------
Non interest-bearing deposits 54,657,106
Other non interest-bearing
liabilities 1,860,238
Stockholders' equity 24,212,832
-----------
Total average liabilities
and stockholders' equity $289,608,632
===========
Net interest income $13,244,487
==========
Net yield on interest
earning assets 4.94%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $259,818. A federal tax
rate of 34% was used in performing this calculation.
(2) The average balances of non-accruing loans and loans held for sale
are included in the loan balance.
-6-
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential (Continued)
The following table shows, for the periods indicated, the dollar
amount of changes in interest income and interest expense resulting from
changes in volume and interest rates. The total dollar amount of interest
income from earning assets is calculated on a taxable equivalent basis.
2000 as compared to 1999
Due to a change in:
--------------------------------------
Volume Rate Total
---------- ---------- ----------
Interest income from:
Federal funds sold $ 647,063 $ 224,456 $ 871,519
Securities:
Taxable 448,932 236,179 685,111
Non-taxable 88,683 1,187 89,870
Loans & leases 1,351,971 138,874 1,490,845
--------- --------- ---------
Total 2,536,649 600,696 3,137,345
--------- --------- ---------
Interest expense on:
Interest-bearing deposits:
Savings, money market and NOW 472,985 451,643 924,628
Time deposits (233,817) 168,540 (65,277)
Federal funds purchased and
repurchase agreements 408,724 256,849 665,573
--------- --------- ---------
Total 647,892 877,032 1,524,924
--------- --------- ---------
Net interest income $1,888,757 $ (276,336) $1,612,421
========= ========= =========
1999 as compared to 1998
Due to a change in:
--------------------------------------
Volume Rate Total
---------- ---------- ----------
Interest income from:
Federal funds sold $ (254,325) $ (76,158) $ (330,483)
Securities:
Taxable 569,852 78,363 648,215
Non-taxable 135,471 (13,871) 121,600
Loans & leases 1,447,890 (663,892) 783,998
--------- --------- ---------
Total 1,898,888 (675,558) 1,223,330
--------- --------- ---------
Interest expense on:
Interest-bearing deposits:
Savings, money market and NOW (6,917) (419,523) (426,440)
Time deposits 846,408 (267,359) 579,049
Federal funds purchased and
repurchase agreements 50,739 (48,793) 1,947
--------- --------- ---------
Total 890,231 (735,675) 154,556
--------- --------- ---------
Net interest income $1,008,657 $ 60,117 $1,068,774
========= ========= =========
<FN>
Note: The change due to the volume/rate variance has been allocated to
volume.
-7-
Securities Portfolio
The following table indicates the carrying value of the Company's
consolidated securities portfolio at December 31, 2000, 1999 and 1998.
(in $000)
2000 1999 1998
-------- -------- -------
U.S. Government obligations $ -- $ 4,099 $14,166
U.S. Government agencies and corp. 125,009 110,219 91,953
Obligations of states and political
subdivisions 16,273 12,580 11,571
Other securities 1,270 1,225 1,054
------- ------- ------
Total $142,552 $128,033 $118,744
======= ======= =======
The following table shows the maturities, carrying value and weighted
average yields of the Company's consolidated securities portfolio at
December 31, 2000. The yields are calculated by dividing the annual
interest, net of amortization of premiums and accretion of discounts,
by the amortized cost of the securities at the dates indicated. The
yields on state and municipal securities are presented on a taxable
equivalent basis.
After one After five
Maturing: Within but within but within After
one year five years ten years ten years
------------ ------------ ------------ ------------
(in $000) Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
U.S. Govt. obli-
gations held to
maturity $ -- -- $ -- -- $ -- -- $ -- --
U.S. Govt. obli-
gations avail-
able for sale -- -- -- -- -- -- -- --
U.S. Govt. agencies
& corps. held to
maturity 1,986 7.18% 34,464 6.18% 4,866 7.39% -- --
U.S. Govt. agencies
& corps. available
for sale 11,995 6.40% 18,182 6.34% -- -- -- --
State and political
subdivisions
held to maturity 1,174 7.12% -- -- 2,756 6.55% 12,343 7.72%
Mortgage-backed
securities avail-
able for sale -- -- 5,505 4.32% 1,798 4.62% 11,360 6.62%
Mortgage-backed
securities held to
maturity 1,293 6.35% 6,518 6.52% 15,512 6.52% 11,530 6.95%
Other securities -- -- -- -- -- -- 1,270 6.00%
<FN>
Current estimated prepayment speed assumptions were used in estimating
the maturities of mortgage-backed securities in the above table. At
December 31, 2000 the Company did not own securities of any issuer where the
aggregate book value of such securities exceeded ten percent of the
Company's stockholders' equity.
-8-
Loan Portfolio
The following table summarizes the distribution of the Bank's loan
portfolio as of December 31 for each of the years indicated:
(in $000)
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Commercial and industrial $ 24,206 $ 23,419 $ 21,127 $ 18,066 $ 17,227
Real estate - residential 76,945 66,788 55,055 54,211 49,790
Real estate - commercial 57,870 58,485 47,399 48,329 45,106
Real estate - construction 2,077 1,454 2,795 4,868 4,833
Mortgage loans held for sale 296 333 1,330 2,173 1,222
Loans to individuals 14,165 13,544 13,197 13,571 13,221
Other 766 670 651 795 171
------- ------- ------- ------- -------
Total loans $176,325 $164,693 $141,554 $142,013 $131,570
======= ======= ======= ======= =======
Loan maturities for commercial and real estate (construction) loans
only at December 31, 2000 were as follows: $9,932,397 due in one year or
less; $12,404,669 due after one year through five years; $3,946,819 due
after five years. Of the Bank's commercial and real estate (construction)
loans due after one year, $7,559,111 have floating or adjustable rates and
$8,792,377 have fixed rates.
Nonaccrual, Past Due and Restructured Loans
It is the policy of the Bank to discontinue the accrual of interest
on loans when, in management's judgment, the collection of the full amount
of interest is considered doubtful. This will generally occur once a loan
has become 90 days past due, unless the loan is well secured and in the
process of collection. The following table sets forth information on
nonaccrual, past due loans and restructured loans as of December 31 for
each of the years indicated:
(in $000)
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Nonaccrual loans $ 558 $ 684 $ 913 $ 633 $ 897
Accruing loans past due
90 days or more 2 -- 2 239 370
Restructured loans -- -- -- -- --
----- ----- ----- ----- -----
Total $ 560 $ 684 $ 915 $ 872 $1,267
===== ===== ===== ===== =====
<FN>
For the period ended December 31, 2000, the reduction of interest
income associated with nonaccrual and restructured loans was $46,284.
The interest on these loans that was included in interest income for
2000 was $37,370.
Potential Problem Loans
As of December 31, 2000 other than the above, there were no loans
where management had serious doubts as to the ability of the borrowers to
comply with the present loan repayment terms.
Concentrations of Credit
As of December 31, 2000, except as disclosed in the above table,
there were no concentrations of loans exceeding 10% of total loans.
-9-
Summary of Loan Loss Experience
The following table summarizes historical data with respect to loans
outstanding, loan losses and recoveries, and the allowance for possible
loan losses at December 31 for each of the years indicated:
(in $000)
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Average outstanding loans (1) $169,014 $154,304 $138,311 $136,844 $129,443
======= ======= ======= ======= =======
Allowance for possible loan losses
(in $000)
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
Balance at beginning of period $ 3,042 $ 2,981 $ 3,216 $ 3,482 $ 3,455
Charge-offs:
Commercial and industrial (111) (36) (37) (133) (39)
Real estate - residential (42) -- (132) (16) (53)
Real estate - commercial (118) -- (59) (99) --
Real estate - construction -- -- -- -- --
Loans to individuals (200) (76) (76) (118) (138)
----- ----- ----- ----- -----
Total charge-offs (471) (112) (304) (366) (230)
Recoveries:
Commercial and industrial 58 153 48 35 147
Real estate - residential 27 1 6 41 1
Real estate - commercial 18 8 2 -- 79
Real estate - construction -- -- -- -- --
Loans to individuals 138 11 13 24 30
----- ----- ----- ----- -----
Total recoveries 241 173 69 100 257
Net (charge-off) recovery (230) 61 (235) (266) 27
Provision for possible
loan losses -- -- -- -- --
----- ----- ----- ----- -----
Balance at end of period $ 2,812 $ 3,042 $ 2,981 $ 3,216 $ 3,482
===== ===== ===== ===== =====
Ratio of net charge-offs to
average loans .14% (.00%) .17% .19% (.00%)
==== ==== ==== ==== ====
<FN>
(1) Includes the aggregate average balance of loans held for sale.
The provision for loan losses is based upon management's estimation
of the amount necessary to maintain the allowance for loan losses at an
adequate level to absorb inherent losses in the loan portfolio, as
determined by current and anticipated economic conditions and other
pertinent factors. The methodology for assessing the adequacy of the
overall allowance consists of an evaluation of its three components:
1. The valuation allowance for loans specifically identified as
impaired.
2. The formula allowance for the various loan portfolio categories.
3. The unallocated allowance.
-10-
Summary of Loan Loss Experience (Continued)
The following table reflects the allocation of the allowance for
loan losses and the percent of loans in each category to total outstanding
loans, including loans held for sale, as of December 31 for each of the
years indicated:
2000 1999 1998
-------------------- -------------------- --------------------
Percent of Percent of Percent of
loans in loans in loans in
category to category to category
(in $000) Amount total loans Amount total loans Amount total loans
------- ----------- ------- ----------- ------- -----------
Commercial &
industrial $ 398 13.7% $ 263 14.6% $ 238 15.4%
Real estate -
residential 249 43.7% 596 40.8% 197 39.8%
Real estate -
commercial 815 32.9% 227 35.5% 518 33.5%
Real estate -
construction 41 1.2% 15 0.9% 35 2.0%
Loans to
individuals 170 8.5% 128 8.2% 130 9.3%
Unallocated 1,139 N/A 1,813 N/A 1,863 N/A
----- ----- ----- ----- ----- -----
Total $2,812 100.0% $3,042 100.0% $2,981 100.0%
===== ===== ===== ===== ===== =====
1997 1996
-------------------- --------------------
Percent of Percent of
loans in loans in
category to category to
(in $000) Amount total loans Amount total loans
------- ----------- ------- -----------
Commercial &
industrial $ 318 12.7% $ 195 13.1%
Real estate -
residential 198 39.7 166 38.8%
Real estate -
commercial 565 34.1% 767 34.2%
Real estate -
construction 62 3.4% 82 3.7%
Loans to
individuals 126 10.1% 126 10.2%
Unallocated 1,947 N/A 2,146 N/A
----- ----- ----- -----
Total $3,216 100.0% $3,482 100.0%
===== ===== ===== =====
<FN>
The allocation of the allowance for possible loan losses to the
categories of loans shown above includes both specific potential loss
estimates for individual loans and general allocations deemed to be
reasonable to provide for additional potential losses within the
categories of loans set forth.
-11-
Deposits
The following table shows the average deposits and average interest
rate paid for each of the last three years:
2000 1999 1998
----------------- ----------------- -----------------
Average Average Average Average Average Average
(in $000) Balance Rate Balance Rate Balance Rate
-------- ------- -------- ------- -------- -------
Demand deposits $ 66,238 -- $ 59,254 -- $ 54,658 --
NOW/FlexValue
deposits 36,010 .85% 31,778 0.79% 30,382 1.10%
Money market
deposits 35,211 3.08% 27,824 2.66% 27,273 2.87%
Savings deposits 61,824 2.83% 53,309 2.34% 55,729 2.78%
Time deposits 84,386 5.33% 88,705 5.14% 72,259 5.51%
------- ---- ------- ---- ------- ----
Total $283,669 2.70% $260,870 2.61% $240,301 2.77%
======= ==== ======= ==== ======= ====
As of December 31, 2000, the Bank had certificates of deposit in
amounts of $100,000 or more aggregating $30.6 million. These certificates
of deposit mature as follows:
Maturity Amount (in $000)
-------- ----------------
3 months or less $ 8,703
Over 3 months through 6 months 5,670
Over 6 months through 12 months 10,485
Over 12 months 5,753
------
Total $30,611
======
-12-
Return on Equity and Assets
The following table summarizes various financial ratios of the
Company for each of the last three years:
Years ended December 31,
----------------------------
2000 1999 1998
---- ---- ----
Return on average total
assets (net income divided
by average total assets) 1.30% 1.25% 1.31%
Return on average
stockholders' equity
(net income divided by
average stockholders'
equity) 15.19% 14.45% 15.72%
Dividend payout ratio
(total declared dividends
per share divided by net
income per share) 27.27% 27.40% 24.94%
Equity to assets (average
stockholders' equity as
a percentage of average
total assets) 8.58% 8.62% 8.36%
-13-
Short-Term Borrowings
The Bank engages in certain borrowing agreements throughout the
year. These are in the ordinary course of the Bank's business. Such
short-term borrowings consist of securities sold under repurchase
agreements, which are short-term borrowings from customers, federal funds
purchased and, during the fourth quarter of 1999, a short-term loan from
the Federal Home Loan Bank of Boston to cover potential Year 2000
liquidity requirements. (That loan was repaid on December 28, 1999). The
following table summarizes such short-term borrowings at December 31 for
each of the years indicated:
Weighted Max. Weighted
average amount average
interest out- Average interest
Balance, rate at standing amount rate
end of end of at any out- during
period period month-end standing period
---------- -------- --------- ---------- --------
Year ended
12/31/00
- ----------
Federal
Funds
Purchased $ -- -- $ -- $ -- --
Repurchase
Agreements $33,463,166 5.78% $44,089,321 $32,246,526 5.25%
Year ended
12/31/99
- ----------
Federal
Funds
Purchased $ -- -- $ -- $ -- --
Repurchase
Agreements $21,766,424 4.79% $28,306,070 $23,283,740 4.05%
Federal Home
Loan Bank Loan -- -- $10,000,000 $1,178,082 5.27%
Year ended
12/31/98
- ----------
Federal
Funds
Purchased $ -- -- $ -- $ -- --
Repurchase
Agreements $19,747,496 3.79% $32,342,233 $23,226,519 4.41%
-14-
ITEM 2. PROPERTIES
The Bank's Main Office (approximately 32,000 square feet) at 17 Pope
Street, Hudson, Massachusetts, the Consumer Loan Center (2,623 square
feet) at 12 Pope Street, Hudson, Massachusetts, the Hudson South Office
(1,040 square feet) at 177 Broad Street, Hudson, Massachusetts, the
Marlborough Center Office (1,800 square feet) at 96 Bolton Street,
Marlborough, Massachusetts, and the Framingham Office (a 4,450 square foot
branch office with a separate 2,050 square foot building leased to a
tenant) at 35 Edgell Road, Framingham, Massachusetts, are owned by the
Bank.
The Bank's Stow Office (1,228 square feet) at 159 Great Road, Stow,
Massachusetts, the Concord Office (1,200 square feet) at 1134 Main Street,
Concord, Massachusetts, the Acton Office (2,100 square feet) at 274 Great
Road, Acton, Massachusetts, the Marlborough East Office (1,110 square
feet) at 500 Boston Post Road, Marlborough, Massachusetts, the Boxborough
Office (1,350 square feet) at 629 Massachusetts Avenue, Boxborough,
Massachusetts, and the Sudbury Office (2,700 square feet) at 450 Boston
Post Road, Sudbury, Massachusetts, are leased by the Bank from third
parties.
All properties occupied by the Bank are in good condition and are
adequate at present and for the foreseeable future for the purposes for
which they are being used. In the opinion of management the properties
are adequately insured.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding. The Bank is
involved in various routine legal actions arising in the normal course of
business. Based on its knowledge of the pertinent facts and the opinions
of legal counsel, management believes the aggregate liability, if any,
resulting from the ultimate resolution of these actions will not have a
material effect on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter ended December 31, 2000.
-15-
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no established public trading market for the Company's
common stock.
The record number of holders of the Company's common stock was
approximately 472 as of March 15, 2001.
The Company customarily declares quarterly cash dividends on its
outstanding common stock. The following table sets forth the cash
dividends per share declared for the years 2000 and 1999:
2000 1999
------ ------
First quarter $ .049 $ .044
Second quarter .051 .045
Third quarter .053 .046
Fourth quarter .056 .047
----- -----
Total $ .209 $ .182
===== =====
For a discussion of restrictions on the ability of the Bank to pay
dividends to the Company, see footnote 11 on page 19 of the Annual Report
to Shareholders for the year ended December 31, 2000, which is hereby
incorporated by reference.
On March 21, 2000 the Company purchased 36,348 shares of its common
stock from a non-affiliate at a per share price of $9.00. The aggregate
cash price of that purchase was $327,132. The repurchased shares were
accounted for as treasury stock.
Effective April 28, 2000 the Company's Board of Directors approved a
two-for-one stock split of the Company's common stock, par value $2.50,
effected in the form of a 100% stock dividend. All share and per-share
amounts have been restated to reflect the retroactive effect of the stock
split.
On May 2, 2000 the Company sold 17,715 unregistered shares of its
common stock to the Community Bancorp, Inc. 401(k) Savings Plan and 11,250
unregistered shares of its common stock to the Community Bancorp, Inc.
Employee Stock Ownership Plan at a per share price of $8.00. The
aggregate cash price of these sales was $231,720. Registration of such
shares involved in the above transactions was not required because the
transactions were exempt pursuant to the private offering provisions of
the Securities Act and the rules thereunder. Alternatively, the Company
believes that registration of shares issued to its 401(k) Plan was not
required because the transaction did not constitute a "sale" under Section
2(3) of the Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
A five year summary of selected consolidated financial data for the
Company is presented on page 1 of the Annual Report to Shareholders for
the year ended December 31, 2000 and is hereby incorporated by reference.
-16-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and
results of operations is contained on pages 26 through 28 of the Annual
Report to Shareholders for the year ended December 31, 2000 and is hereby
incorporated by reference.
Cautionary Statement Regarding Forward-Looking Information
This report on Form 10-K, including Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains, in
addition to historic 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 and adverse legislative or regulatory changes.
Allowance for Loan Losses
The allowance for loan losses is based on management's estimate of the
amount required to reflect the risks in the loan portfolio, based on
circumstances and conditions known or anticipated at each reporting date.
The methodology for assessing the appropriateness of the allowance
consists of a review of the following three key elements:
- The valuation allowance for loans specifically identified as impaired
- The formula allowance for the various loan portfolio classifications
- The unallocated allowance
The valuation allowance reflects specific estimates of potential losses
on individual impaired loans. When each impaired loan is evaluated, if the
difference between the net present value of the loan (or fair value of the
collateral if the loan is collateral-dependent) is lower than the recorded
loan balance, the difference represents the valuation allowance for that
loan.
The formula allowance is a percentage-based reflection of historical
loss experience and assigns required allowance allocations by loan
classification based on fixed percentages of all outstanding loan balances
and commitments to extend credit. The formula allowance employs a risk-
rating model that grades loans based on their general characteristics of
credit quality and relative risk. When a loan's credit quality becomes
suspect, it 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.
In addition to the valuation allowance and the formula allowance,
there is an unallocated allowance that recognizes the estimation risks
-17-
associated with the valuation and the formula allowance calculations, and
that reflects management's evaluation of various conditions, the effect of
which are not directly measurable in determining the valuation and formula
allowances. The unallocated allowance is adjusted for qualitative factors
including, among others, general economic and business conditions, credit
quality trends, loan volumes and concentrations and specific industry
conditions within portfolio segments.
There are inherence uncertainties with respect to determining the
adequacy of the allowance for loan losses. Because of these inherent
uncertainties, actual losses may differ from the amounts reflected in
these consolidated financial statements. Factors considered in evaluating
the adequacy of the allowance includes previous loss experience, current
economic conditions and their effect on borrowers, the performance of
individual loans in relation to contract terms, and the estimated fair
values of underlying collateral. Losses are charged against the allowance
when management believes the collectibility of principal is doubtful.
-18-
Asset/Liability Management and Interest Rate Risk
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 Company's ability to adjust the rates of its interest
rate sensitive assets in response to such changes. The Company's positive
one-year cumulative gap position at December 31, 2000, which represents
the excess of repricing assets versus repricing liabilities, was 2.11%
expressed as a percentage of total assets.
The following table presents rate-sensitive assets and rate-sensitive
liabilities as of December 31, 2000:
--------------------------------------------------------------------------
(Dollars in thousands) 1 to 6 7 to 12 1 to 2 2 to 5 Over 5
Months Months Years Years Years Total
---------- --------- ---------- --------- --------- ----------
RATE-SENSITIVE ASSETS
Federal funds sold $ 31,136 $ -- $ -- $ -- $ -- $ 31,136
Securities 44,443 23,851 12,105 41,638 20,515 142,552
Adjustable-rate loans 54,753 12,666 18,656 38,001 14,035 138,111
Fixed-rate loans 3,655 2,898 4,516 11,081 15,768 37,918
Loans held for sale 296 -- -- -- -- 296
--------- --------- ---------- ---------- -------- ---------
Total $ 134,283 $ 39,415 $ 35,277 $ 90,720 $ 50,318 $ 350,013
--------- --------- ---------- --------- -------- ---------
RATE-SENSITIVE LIABILITIES
Demand deposits $ -- $ -- $ -- $ -- $ 75,969 $ 75,969
NOW/FlexValue accounts* -- -- -- -- 43,511 43,511
Money market accounts 34,689 -- -- -- -- 34,689
Savings accounts -- -- -- -- 38,471 38,471
Cash management accounts 27,839 -- -- -- -- 27,839
Certificates of deposit 44,147 25,650 7,171 9,682 -- 86,650
Short term borrowings 32,484 979 -- -- -- 33,463
--------- --------- ---------- --------- -------- ---------
Total $ 139,159 $ 26,629 $ 7,171 $ 9,682 $ 157,951 $ 340,592
--------- --------- ---------- --------- -------- ---------
Gap $ (4,876) $ 12,786 $ 28,106 $ 81,038 $(107,633) $ 9,421
========== ========= ========= ========= ========= =========
Cumulative Gap $ (4,876) $ 7,910 $ 36,016 $ 117,054 $ 9,421
========== ========= ========= ========= =========
Gap as a percent of
total assets (1.30%) 3.41% 7.50% 21.62% (28.71%)
Cumulative gap as a
percent of total assets (1.30%) 2.11% 9.61% 31.23% 2.52%
* Cumulative gap as a
percent of total
assets if NOW and
FlexValue accounts
are considered
immediately
withdrawable (12.90%) (9.50%) (2.00%) 19.62% 2.52%
<FN>
Whenever possible, maturity dates or contractual repricing dates have
been used in the preparation of the above table. In addition to those
factors, certain assumptions are utilized such as the estimation of
prepayments associated with certain loans and mortgage-backed securities.
The Bank's historical experience over the past eleven years, during which
-19-
time interest rates have risen and fallen significantly, has demonstrated
that savings account balances, demand deposit balances, NOW account
balances and FlexValue account balances are rate insensitive. Other
deposit categories are considered to be rate sensitive. That rate
sensitivity or insensitivity is reflected in the above table.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk is the sensitivity of income to variations in
interest rates over a specified time horizon. The primary goal of
interest rate risk management is to control this risk within limits
approved by the Board of Directors and narrower guidelines approved by the
Asset/Liability Committee. Those limits and guidelines reflect the
Company's tolerance for interest rate risk.
The Company also uses simulation analysis to measure the exposure of
net interest income to changes in interest rates over a one year time
horizon. Simulation analysis involves projecting future income and
expense from the Company's assets and liabilities under various interest
rate scenarios.
The Company's interest rate risk policy specifies that if overnight
interest rates were to shift up or down by 200 basis points over four
quarters (i.e. 50 basis points per quarter for four consecutive quarters),
estimated net interest income for the subsequent twelve months should decline
by no more than 5.00% of net interest income. The following table sets
forth the Company's estimated net interest income exposure, assuming an
immediate, parallel shift in interest rates:
Rate Change Estimated Exposure to
(Basis Points) Net Interest Income
-------------- ---------------------
+200 0.98%
-200 (0.38%)
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are included on page
1 and on pages 3 through 25 of the Annual Report to shareholders for the
year ended December 31, 2000 and are hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in the Company's independent public
accountants or disagreements with the Company's accountants on accounting
or financial disclosure during the 24 months ended December 31, 2000 or in
any period subsequent to the most recent financial statements.
-20-
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as to each of the Directors and
Executive Officers of the Company and the Bank, such person's age,
position, term of office, and all business experience during the past five
years. All Directors of the Company have served since 1984, except Mr.
Frias who has been a Director of the Company since 1985, Mr. Parker who
has been a Director of the Company since 1986, Messrs. Hughes and Webster
who have been Directors of the Company since 1995, and Ms. Colosi who has
been a Director of the Company since 1999. Each Director of the Company
is also a Director of the Bank. Each executive officer holds office until
the first Director's meeting following the annual meeting of stockholders
and thereafter until his or her successor is elected and qualified.
Business Experience
Term of During Past
Name Age Position Office Five Years
---- --- -------- ------- --------------------
Richard K. 49 Senior Vice Senior Vice President,
Bennett President Community National Bank
of Bank
Grace L. Blunt 46 Senior Vice Senior Vice President,
President Community National Bank,
of Bank Assistant Clerk,
Community Bancorp, Inc.
Alfred A. 83 Director of 2003 Retired
Cardoza Company and
Bank
Jennie Lee 45 Director of 2003 President and Treasurer,
Colosi Company and E. T.& L. Construction,
Bank Inc.
Antonio Frias 61 Director of 2003 President and Treasurer,
Company and S & F Concrete
Bank Contractors, Inc.;
Secretary/Clerk, Frias
Bros. Service Station
John P. Galvani 44 Senior Vice Senior Vice President,
President Community National Bank
of Bank
I. George Gould 84 Director of 2002 Chairman, Gould's, Inc.
Company and
Bank
Horst Huehmer (1) 73 Director of 2001 Retired; formerly
Company and Manager, Hudson Light
Bank and Power Department
-21-
Donald R. (1) 51 Treasurer and 2001 Executive Vice
Hughes, Jr. Clerk of President and Cashier,
Company; Exec. Community National Bank;
Vice President Treasurer and Clerk,
of Bank; Director Community Bancorp, Inc.
of Company and
Bank
James A. Langway 61 President & 2002 President and CEO,
CEO of Company Community National Bank
and Bank; and Community
Director of Bancorp, Inc.
Company and
Bank
Robert E. Leist 47 Senior Vice Senior Vice President,
President Community National Bank
of Bank
Janet A. Lyman 54 Senior Vice Senior Vice President,
President Community National Bank
of Bank
Dennis F. 63 Chairman of 2003 President and
Murphy, Jr. the Board, Treasurer, D. F.
Company and Murphy Insurance
Bank Agency, Inc.;
Treasurer, Village
Real Estate
David L. 72 Director of 2002 Chairman of the Board,
Parker (2) Company and Larkin Lumber Co.
Bank
Mark Poplin (1) 77 Director of 2001 President and
Company and Treasurer, Poplin
Bank Supply Co.;
Secretary, Poplin
Furniture Co.
David W. 59 Director of 2001 President & Treasurer,
Webster (1,2) Company and Knight Fuel Co., Inc.
Bank
<FN>
(1) Messrs. Huehmer, Hughes, Poplin and Webster have been nominated
for election at the 2001 Annual Meeting to serve until 2004.
(2) Mr. Webster's wife and Mr. Parker are cousins.
No Director holds a directorship in any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of such Act or
any company registered as an investment company under the Investment
Company Act of 1940.
-22-
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all plan and non-plan compensation
awarded to, earned by or paid to the CEO and the four most highly
compensated other executive officers whose aggregate compensation by the
Company and the Bank exceeded $100,000.
Summary Compensation Table
--------------------------
Annual Compensation
--------------------------------------------
(a) (b) (c) (d) (i) (1)
Name and All Other
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
James A. Langway 2000 $226,562 $75,000 $ 8,974
President and CEO 1999 217,848 93,800 9,151
of the Company and 1998 211,503 90,000 9,500
the Bank
Donald R. Hughes, Jr. 2000 133,874 25,000 8,493
Treasurer and Clerk of 1999 128,725 31,538 8,828
Company; Executive Vice 1998 122,595 30,036 8,877
President and Cashier
of the Bank
John P. Galvani 2000 98,730 16,000 5,536
Senior Vice President 1999 93,712 15,931 5,440
of the Bank 1998 89,250 15,173 5,526
Richard K. Bennett 2000 98,347 22,850 5,759
Senior Vice President 1999 94,564 16,076 5,589
of the Bank 1998 90,061 15,310 5,584
Robert E. Leist 2000 91,948 15,723 3,622
Senior Vice President 1999 88,421 15,032 3,220
of the Bank 1998 84,210 14,316 3,359
<FN>
Notes:
1. The Company maintains an Employee Stock Ownership Plan (ESOP) for
employees age 21 or older who are participants in the Company's
Retirement Plan and who meet other requirements. The Company also
maintains a 401(k) Savings Plan (401(k) Plan) for employees age 21
or over and who meet other requirements. Messrs. Langway, Hughes,
Galvani, Bennett and Leist are participants in the Company's ESOP
and 401(k) Plans. Of the $8,974 reported above for 2000 in column
(i) for Mr. Langway, $3,007 represents Company ESOP contributions,
$4,800 represents Company 401(k) Plan contributions and $1,167
represents group life insurance premiums paid by the Company. Of
the $8,493 reported above for 2000 in column (i) for Mr. Hughes,
$2,851 represents Company ESOP contributions, $4,766 represents
Company 401(k) Plan contributions and $876 represents group life
insurance premiums paid by the Company. Of the $5,536 reported
above for 2000 in column (i) for Mr. Galvani, $2,100 represents
Company ESOP contributions, $3,094 represents Company 401(k) Plan
contributions and $342 represents group life insurance premiums
-23-
paid by the Company. Of the $5,759 reported above for 2000 in
column (i) for Mr. Bennett, $2,222 represents Company ESOP
contributions, $3,195 represents Company 401(k) Plan contributions
and $342 represents group life insurance premiums paid by the
Company. Of the $3,622 reported above for 2000 in column (i) for
Mr. Leist, $1,901 represents Company ESOP contributions, $1,379
represents Company 401(k) Plan contributions and $342 represents
group life insurance premiums paid by the Company.
Compensation of Directors
The Bank paid its Directors an annual fee of $10,800 in 2000. The
Chairman of the Board was paid $18,000 in 2000. Director fees are paid on
a monthly basis. Effective January 1, 2001, outside Directors receive an
additional annual fee of $2,000, which is paid annually. The Company pays
no compensation to its Directors for their services.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company has entered into five-year Employment Agreements with
James A. Langway, President and Chief Executive Officer of the Company,
and with Donald R. Hughes, Jr., Treasurer and Clerk of the Company, which
specify the employee's duties and minimum compensation during the period
of the Employment Agreement. Each Employment Agreement is extended for one
additional year, on the anniversary of the commencement date, unless prior
notice is given by either party. Employment by the Company shall
terminate upon the employee's resignation, death, disability, or for
"cause" as defined in the Employment Agreement. If employment is
involuntarily terminated by the Company for any reason except for cause,
or if the Employment Agreement is not renewed at its expiration, the
Company is required to make additional payments to the employees. During
the term of the Employment Agreement and for one year afterwards, the
employee cannot compete with the Company within its market area.
The Company has also entered into Severance Agreements with Mr.
Langway and Mr. Hughes regarding termination of employment by the Company
or Bank subsequent to a "change in control" of the Company, as defined in
the Severance Agreement. Following the occurrence of a change in control,
if the employee's employment is terminated (except because of gross
dereliction of duty, death, retirement, disability or conviction for
criminal misconduct) or is involuntarily terminated for "good reason" as
defined in the Severance Agreement, then the employee shall be entitled to
a lump sum payment from the Company approximately equal to three times his
average annual compensation for the previous five years, plus accrued
vacation pay and bonus awards. If Mr. Langway or Mr. Hughes is entitled
to receive benefits under both his Employment Agreement and his Severance
Agreement, he must choose the agreement under which he will claim
benefits.
The Company has entered into an Executive Supplemental Income
Agreement with James A. Langway, President and Chief Executive Officer of
the Company, which commenced July 12, 1988 and which specifies benefits
payable to Mr. Langway for a ten (10) year period following the date on
which he ceases to be employed by the Company. The Agreement provides
that the Company will pay Mr. Langway $40,774 each year, increased by
increases in the Consumer Price Index, for a ten (10) year period
following the date he ceases to be employed by the Company for any cause
whatsoever after attaining age 55. The Agreement was amended on January
-24-
26, 1990, increasing the annual base retirement benefit to be paid to Mr.
Langway from $40,774 to $60,774 each year, increased by increases in the
Consumer Price Index in the same manner as the original Agreement. Mr.
Langway attained age 55 during 1994. The Company records annual expense
in anticipation of future payments expected to be made under this
Agreement. The annual expense amount recorded is determined by an
independent actuary based on Mr. Langway's life expectancy at the time he
begins receiving payments. During 2000, the Company recorded $46,992 in
such expense.
The Bank has entered into "change in control" Severance Agreements
with five Senior Vice Presidents.
-25-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and related notes set forth information
regarding stock owned by each of the directors of the Company and Bank,
and by all directors and executive officers of the Company and Bank as a
group, at March 15, 2001.
Amount and Nature of
Beneficial Ownership
Title (Number of shares) (1) Percent
of Name of ------------------------------------- of
Class Beneficial Owner Sole (2) Shared (3) Total Class
---- ---------------- -------- ---------- ----- -------
Common Alfred A. Cardoza 650 44,522 45,172 .8%
Stock
($2.50 Jennie Lee Colosi 2,000 2,372 4,372 .1
par)
Antonio Frias 72,001 -- 72,001 1.2%
I. George Gould 18,470 194,582 (4) 213,052 3.6%
Horst Huehmer 1,400 43,864 45,264 .8%
Donald R. Hughes, Jr. 4,000 256,065 (4,5) 260,065 4.4%
James A. Langway 187,290 510,729 (4,6,7) 698,019 11.8%
Dennis F. Murphy, Jr. 397,448 468,168 865,616 14.6%
David L. Parker 56,084 16,400 (8) 72,484 1.2%
Mark Poplin 1,728 305,380 (9) 307,108 5.2%
David W. Webster 1,500 140,168 141,668 2.4%
All directors and
executive officers
of the Company and
Bank as a group
(16 persons) 745,427 1,306,760 (4) 2,052,187 34.7%
<FN>
(1) Based upon information provided to the Company by the indicated
persons. Certain directors may disclaim beneficial ownership of
certain of the shares listed beside their names.
(2) Indicates sole voting and investment power.
(3) Indicates shared voting and investment power.
(4) Includes 171,088 shares held by the Company's ESOP for which
Messrs. Gould, Hughes and Langway are co-trustees.
(5) Includes 29,977 shares held by the Company's 401(k) plan for
which Mr. Hughes has voting power in certain circumstances.
(6) Includes 38,657 shares held by the Company's 401(k) plan for
which Mr. Langway has voting power in certain circumstances.
-26-
(7) Includes 106,856 shares held by the Mark poplin Family Trust
and 193,628 shares held by the Shirley E. Poplin Family Trust,
for which Mr. Langway is a trustee. Mr. Langway disclaims any
beneficial interest in these shares.
(8) Includes 4,000 shares held by the Unitarian Church of Marlboro
and Hudson, MA, for which Mr. Parker is a trustee.
(9) Includes 106,856 shares held by the Mark Poplin Family Trust
and 193,628 shares held by the Shirley E. Poplin Family Trust.
The following persons own beneficially more than five percent of the
outstanding stock of the Company as of March 15, 2001:
Amount and
Title Name and Address Nature of Percent
of of Beneficial Beneficial of
Class Owner Ownership Class
----- ---------------- ---------- -------
Common Stock Dennis F. Murphy, Jr. 865,616 shares 14.6%
($2.50 par) 188 Prospect Hill Rd.
Still River, MA 01467
James A. Langway 698,019 shares (1,2) 11.8%
1143 Grove Street
Framingham, MA 01701
Mark Poplin 307,108 shares (3) 5.2%
6 Greenway Street, #306
Wayland, MA 01778
Einar P. Robsham 303,800 shares 5.1%
164 Cochituate Road
Wayland, MA 01778
<FN>
(1) Includes 171,088 shares held by the Company's ESOP, for which
Mr. Langway is a trustee, and 38,657 shares held by the
Company's 401(k) plan, for which Mr. Langway has voting power
in certain circumstances.
(2) Includes 106,856 shares held by the Mark Poplin Family Trust
and 193,628 shares held by the Shirley E. Poplin Family Trust,
for which Mr. Langway is a trustee. Mr. Langway disclaims any
beneficial interest in these shares.
(3) Includes 106,856 shares held by the Mark Poplin Family Trust
and 193,628 shares held by the Shirley E. Poplin Family Trust.
-27-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, through its wholly-owned bank subsidiary, has had,
currently has, and expects to continue to have in the future, banking
(including loans and extensions of credit) transactions in the ordinary
course of its business with its Directors, Executive Officers, members of
their families and associates. Such banking transactions have been and
are on substantially the same terms, including interest rates, collateral
and repayment conditions, as those prevailing at the same time for
comparable transactions with others and did not involve more than the
normal risk of collectibility or present other unfavorable features.
In October of 1997 the Bank entered into a third-party insurance
sales agreement with Murphy Insurance Brokerage, Ltd. ("Murphy
Brokerage"). By entering into the agreement, the Bank implemented a
decision of the Board of Directors to expand the Bank's product line by
providing the public with access to insurance products. The agreement
between the Bank and Murphy Brokerage is structured in the form of a lease
arrangement for floor space in the Bank's Main Office located at 17 Pope
Street, Hudson, Massachusetts. Murphy Brokerage is a subsidiary of D. F.
Murphy Insurance Agency, Inc., which is owned by Dennis F. Murphy, Jr.,
Chairman of the Company's Board of Directors. The third-party agreement
between the Bank and Murphy Brokerage had no material affect on the
Company's 2000 financial statements or results of operations.
-28-
PART IV
-------
ITEM 14. EXHIBITS AND FINANCIAL STATEMENTS
(a) 1. & 2. Index to Consolidated Financial Statement Schedules
The following consolidated financial statements, which are included
in the Annual Report to Shareholders of Community Bancorp, Inc. for the
year ended December 31, 2000, are hereby incorporated by reference:
Annual Report to
Shareholders
Description page reference
----------- ----------------
Consolidated balance sheets at
December 31, 2000 and 1999 3
Consolidated statements of income for
the years ended December 31, 2000,
1999 and 1998 4
Consolidated statements of comprehensive
income for the years ended December 31,
2000, 1999 and 1998 5
Consolidated statements of stockholders'
equity for the years ended December 31, 2000,
1999 and 1998 6
Consolidated statements of cash flows
for the years ended December 31, 2000,
1999 and 1998 7
Notes to consolidated financial statements 8 - 24
<FN>
With the exception of the aforementioned information, and
information incorporated by reference in Items 5, 6, 7, and 8, the Annual
Report to Shareholders for the year ended December 31, 2000 is not deemed
to be filed as part of this Form 10-K. Certain schedules required by
Regulation S-X have been omitted as the items are either not applicable or
are presented in the notes to the financial statements contained in the
Annual Report to Shareholders for the year ended December 31, 2000.
3. Exhibits
See accompanying Exhibit Index.
(b) The Company did not file a Form 8-K during the quarter ended
December 31, 2000.
-29-
EXHIBIT INDEX
-------------
3.1 Articles of Organization of Company
Amendments to Articles of Organization,
(dated prior to April 12, 1988) (a)
3.1.i Amendment to Articles of Organization,
dated April 12, 1988
3.2 By-Laws of Company (a)
10.1 Community Bancorp, Inc. Employee Stock
Ownership Plan (as amended and restated
effective January 1, 1985) (b)
10.2 Employment Agreement dated August 19, 1986
between Community Bancorp, Inc. and
James A. Langway (c)
10.3 Severance Agreement dated June 10, 1986
between Community Bancorp, Inc. and
James A. Langway (d)
10.4 Employment Agreement dated August 19, 1986
between Community Bancorp, Inc. and
Donald R. Hughes, Jr. (c)
10.5 Severance Agreement dated June 10, 1986
between Community Bancorp, Inc. and
Donald R. Hughes, Jr. (d)
10.6 Executive Supplemental Income Agreement
dated July 12, 1988 between Community
Bancorp, Inc. and James A. Langway (e)
10.7 Amendment to Executive Supplemental
Income Agreement dated January 26, 1990
between Community Bancorp, Inc. and
James A. Langway. (f)
10.8 Stock Purchase Agreement dated March 29,
1993 by and among Community Bancorp, Inc.
and certain specified persons. (g)
10.9 Shareholder Rights Agreement dated May 24,
1996 between Community Bancorp, Inc. and
Cambridge Trust Company. (h)
10.10 Form of Severance Agreement dated February 19,
1998 between Community National Bank and five
Senior Vice Presidents. (i)
10.11 First Amendment to Shareholder Rights
Agreement dated February 15, 2000.
13. 2000 Annual Report to Shareholders
21. Subsidiaries of Company Page 32
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(a) Incorporated herein by reference to Exhibits 3.1, and 3.2 and filed
as part of Company's Amendment No. 1 to the Registration Statement on
Form S-18 (File No. 33-12756-B) filed with Commission on April 16,
1987.
(b) Incorporated herein by reference to Exhibit 10.1 as part of Company's
Registration Statement on Form S-18 (File No. 33-12756-B) filed with
the Commission on March 19, 1987.
(c) Incorporated herein by reference to Exhibits 5.8 and 5.9 filed as
part of Company's Amendment No. 2 to the Offering Statement on Form
1-A (File No. 24B-2076) filed with the Commission on August 14, 1986.
(d) Incorporated herein by reference to Exhibits 5.2 and 5.4 filed as
part of Company's Offering Statement on Form 1-A (File No. 24B-2076)
filed with the Commission on June 24, 1986.
(e) Incorporated herein by reference as filed as part of the Company's
December 31, 1988 Form 10-K (File No. 33-12756-B), filed with the
Commission on March 30, 1989.
(f) Incorporated herein by reference as filed as part of the Company's
December 31, 1989 Form 10-K (File No. 33-12756-B), filed with the
Commission on March 29, 1990.
(g) Incorporated herein by reference as filed as part of the Company's
December 31, 1992 Form 10-K (File No. 33-12756-B), filed with the
Commission on March 30, 1993.
(h) Incorporated herein by reference as filed as part of the Company's
Form 8-K (File No. 33-12756-B), filed with the Commission on May 31,
1996.
(i) Incorporated herein by reference as filed as part of the Company's
December 31, 1998 Form 10-K (File No. 33-12756-B), filed with the
Commission on March 24, 1999.
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SUBSIDIARIES OF COMPANY
-----------------------
1. Community National Bank, a national banking association.
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COMMUNITY BANCORP, INC.
Date: March 12, 2001 By: /s/ Donald R. Hughes, Jr.
-------------------------
Donald R. Hughes, Jr.
Treasurer and Clerk
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date Name and Capacity
---- ----------------
March 12, 2001 /s/ James A. Langway
---------------------------------
James A. Langway, President & CEO
Principal Executive Officer
March 12, 2001 /s/ Donald R. Hughes, Jr.
---------------------------------
Donald R. Hughes, Jr., Treasurer & Clerk,
Principal Financial Officer and Principal
Accounting Officer
March 12, 2001 /s/ James A. Langway
---------------------------------
James A. Langway, Director
March 12, 2001 /s/ Donald R. Hughes, Jr.
---------------------------------
Donald R. Hughes, Jr., Director
March 14, 2001 /s/ David W. Webster
---------------------------------
David W. Webster, Director
March 15, 2001 /s/ Alfred A. Cardoza
---------------------------------
Alfred A. Cardoza, Director
March 16, 2001 /s/ David L. Parker
---------------------------------
David L. Parker, Director
March 20, 2001 /s/ Jennie Lee Colosi
---------------------------------
Jennie Lee Colosi, Director
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SUPPLEMENTAL INFORMATION
------------------------
Copies of the Notice of Annual Meeting of Shareholders,
Proxy Statement and Proxy For Annual Meeting of Shareholders for
the Registrant's 2001 annual meeting of shareholders, to be held
on April 10,2001, have been submitted separately as an EDGAR
Submission Type DEF 14A. Such material is not deemed to be filed
with the Commission or otherwise subject to the liabilities of
Section 18 of the Securities Exchange Act.
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