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, 2001
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
5,940,606 shares outstanding
as of September 30, 2001
PART I - FINANCIAL INFORMATION
COMMUNITY BANCORP, INC.
Item 1. CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2001 2000
------------ ------------
ASSETS
- ------
Cash and due from banks $ 20,075,804 $ 16,472,547
Federal funds sold 33,308,618 31,136,266
Securities available for sale, at market value 61,890,003 50,110,202
Securities held to maturity (market value
$92,608,700 at 9/30/01 and $92,302,813
at 12/31/00) 90,666,011 92,441,522
Mortgage loans held for sale 293,396 295,742
Loans 182,942,693 176,029,265
Less allowance for possible loan losses 2,744,477 2,812,392
------------ ------------
Total net loans 180,198,216 173,216,873
------------ ------------
Premises and equipment, net 6,237,196 6,234,641
Other assets, net 4,427,041 4,959,718
------------ ------------
Total assets $397,096,285 $374,867,511
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits
Noninterest bearing $ 73,500,762 $ 75,969,408
Interest bearing 253,543,418 231,159,424
------------ ------------
Total deposits 327,044,180 307,128,832
------------ ------------
Federal funds purchased and securities
sold under repurchase agreements 31,356,591 33,463,166
Other liabilities 2,981,376 2,460,642
------------ ------------
Total liabilities 361,382,147 343,052,640
------------ ------------
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,
5,940,606 shares outstanding, (5,914,441
shares outstanding at 12/31/00) 15,996,090 15,996,090
Surplus 219,120 101,378
Undivided profits 20,832,947 18,052,893
Treasury stock, at cost, 457,830 shares,
(483,995 shares at 12/31/00) (2,297,019) (2,414,762)
Accumulated other comprehensive income 963,000 79,272
------------ ------------
Total stockholders' equity 37,714,138 31,814,871
------------ ------------
Total liabilities and
stockholders' equity $397,096,285 $374,867,511
============ ============
<FN>
The accompanying notes are an integral part of these unaudited, consolidated
financial statements
-2-
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2001 2000 2001 2000
---------- ---------- --------- ----------
Interest income:
Interest and fees on loans $3,907,472 $4,006,894 $11,900,663$11,377,812
Interest and div. on securities:
Taxable interest 1,745,168 1,769,880 5,484,599 5,230,079
Nontaxable interest 232,040 148,701 640,885 442,673
Dividends 98,686 22,741 218,825 64,079
Interest on federal funds sold 338,310 538,837 1,149,416 1,087,578
--------- --------- ---------- ----------
Total interest income 6,321,676 6,487,053 19,394,388 18,202,221
--------- --------- ---------- ----------
Interest expense:
Deposits 1,821,468 1,994,128 5,808,359 5,530,052
Short term borrowings 298,523 465,709 1,075,232 1,200,202
--------- --------- --------- ---------
Total interest expense 2,119,991 2,459,837 6,883,591 6,730,254
--------- --------- --------- ---------
Net interest income 4,201,685 4,027,216 12,510,797 11,471,967
--------- --------- ---------- ----------
Provision for loan losses -- -- -- --
--------- --------- ---------- ----------
Net interest income after
provision for loan losses 4,201,685 4,027,216 12,510,797 11,471,967
--------- --------- ---------- ----------
Noninterest income:
Merchant credit card assessments 469,183 381,757 1,359,549 1,134,551
Service charges 154,155 167,858 468,037 479,161
Other charges, commissions, fees 321,277 263,392 969,430 793,736
Gains on sales of loans, net 48,703 19,962 153,443 66,196
Other 25,683 22,978 80,795 68,852
--------- --------- --------- ---------
Total noninterest income 1,019,001 855,947 3,031,254 2,542,496
--------- --------- --------- ---------
Noninterest expense:
Salaries and benefits 1,447,677 1,556,912 4,681,198 4,459,155
Data processing and ATM network 301,060 287,446 908,336 811,846
Occupancy, net 228,333 215,405 716,580 600,722
Furniture and equipment 101,248 96,431 308,927 295,247
Credit card processing 417,212 340,904 1,189,871 1,006,000
Professional fees 139,111 108,020 358,174 296,792
Printing, stationery & supplies 61,117 54,695 180,550 180,817
Marketing and advertising 34,853 56,537 155,858 212,122
Other 348,851 316,642 1,068,161 917,403
--------- --------- --------- ---------
Total noninterest expense 3,079,462 3,032,992 9,567,655 8,780,104
--------- --------- --------- ---------
Income before income taxes 2,141,224 1,850,171 5,974,396 5,234,359
Income taxes 734,574 662,949 2,090,907 1,871,190
--------- --------- --------- ---------
Net income $1,406,650 $1,187,222 $3,883,489 $3,363,169
========= ========= ========= =========
-3-
Basic earnings per common share $ .236 $ .201 $ .655 $ .569
Diluted earnings per common share $ .236 $ .201 $ .655 $ .569
Dividends per share $ .066 $ .053 $ .186 $ .153
Basic weighted average number
of shares 5,940,606 5,914,441 5,929,105 5,912,157
Diluted weighted average number
of shares 5,948,455 5,914,441 5,932,877 5,912,157
<FN>
The accompanying notes are an integral part of these unaudited, consolidated
financial statements.
-4-
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net income $1,406,650 $1,187,222 $3,883,489 $3,363,169
Other comprehensive income:
Unrealized securities gains
(losses) arising during period 726,708 217,003 1,496,069 (225,234)
Income tax (expense) benefit on
securities gains (losses)
arising during period (297,441) (88,820) (612,341) 92,011
------- -------- ------- --------
Net unrealized securities gains
(losses) arising during period 429,267 128,183 883,728 (133,223)
Less: reclassification
adjustment for securities
(gains) losses included in
income -- -- -- --
Income tax expense (benefit) on
securities (gains) losses
included in income -- -- -- --
-------- -------- -------- -------
Net reclassification adjustments
for securities (gains) losses
included in net income -- -- -- --
-------- -------- -------- --------
Other comprehensive income (loss) 429,267 128,183 883,728 (133,223)
---------- ---------- ---------- ----------
Comprehensive income $1,835,917 $1,315,405 $4,767,217 $3,229,946
========== ========== ========== ==========
<FN>
The accompanying notes are an integral part of these unaudited, consolidated
financial statements.
-5-
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
September 30,
--------------------------
2001 2000
----------- -----------
Cash flows from operating activities:
Net income $ 3,883,489 $ 3,363,169
Adjustments to reconcile net income
to net cash provided by operating
activities:
Decrease (increase) in mortgage loans held
For sale 2,346 (209,899)
Depreciation and amortization 758,446 700,471
Amortization of investment securities
discounts and premiums, net 52,459 40,519
(Decrease) increase in other liabilities (114,516) 585,962
Increase in taxes payable 20,540 92,707
(Decrease) increase in interest payable (29,132) 14,023
Decrease (increase) in other assets 254,603 (731,952)
Decrease (increase) in interest receivable 228,074 (167,717)
---------- ----------
Total adjustments 1,172,820 324,114
---------- ----------
Net cash provided by operating activities 5,056,309 3,687,283
---------- ----------
Cash flows from investing activities:
Maturities and principal repayments of
securities available for sale 15,732,486 4,713,436
Maturities and principal repayments of
securities held to maturity 45,204,565 10,221,672
Purchases of securities available for sale (26,070,269) (13,160,212)
Purchases of securities held to maturity (43,427,461) (5,364,030)
Net change in federal funds sold (2,172,352) (36,724,309)
Net change in loans and other real estate
owned (6,960,722) (10,330,854)
Acquisition of property, plant and equipment (761,002) (626,731)
---------- ----------
Net cash used in investing activities (18,454,755) (51,271,028)
---------- ----------
Cash flows from financing activities:
Net change in deposits 19,915,348 33,081,308
Net change in repurchase agreements (2,106,575) 8,433,247
Purchase of treasury stock -- (327,132)
Sale of treasury stock 235,485 231,720
Dividends paid (1,042,555) (873,092)
---------- ----------
Net cash provided by financing activities 17,001,703 40,546,051
---------- ----------
Net increase(decrease)in cash and due from banks 3,603,257 (7,037,694)
---------- ----------
Cash and due from banks at beginning
of period 16,472,547 21,010,959
---------- ----------
Cash and due from banks at end of period $20,075,804 $13,973,265
========== ==========
<FN>
The accompanying notes are an integral part of these unaudited, consolidated financial statements.
-6-
Supplemental disclosures:
1. Cash paid for interest was $6,912,713 and $6,716,231 for the nine months
ended September 30, 2001 and 2000, respectively.
2. Cash paid for income taxes was $2,070,367 and $1,778,483 for the nine
months ended September 30, 2001 and 2000, respectively.
-7-
COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001
_____________________________________________________________________________
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United
States 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 accounting principles generally accepted 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 unaudited 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, 2000.
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. Earnings per share is based on the weighted
average number of shares outstanding during the period.
A reconciliation between basic and diluted earnings per share from continuing
operations is as follows:
Three Months Ended
--------------------------------------
September 30, 2001 September 30, 2001
------------------ ------------------
Net earnings $ 1,406,650 $ 1,187,222
Basic EPS:
Basic common shares 5,940,606 5,914,441
Basic EPS $ .236 $ .201
Diluted EPS:
Basic common shares 5,940,606 5,914,441
Plus: impact of stock options 7,849 --
Diluted common shares 5,948,455 5,914,441
Diluted EPS $ .236 $ .201
-8-
3. 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.
4. OPERATING SEGMENTS
------------------
The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", which established standards for reporting
information about operating segments in financial statements. 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 adoption of SFAS No. 131 did not
have any material effect on the Company's primary financial statements or
results of operations.
The Company has identified its reportable operating business segment as
"Community Banking". The Company's community banking segment consists of
commercial and retail banking. The community banking segment is managed as a
single strategic unit and derives its revenues from a wide range of banking
services, including investing and lending activities and the acceptance of
demand, savings and time deposits. Nonreportable operating segments of the
Company's operations which do not have similar characteristics to the community
banking operations and do not meet the thresholds requiring separate disclosure
are included in the "Other" category in the disclosure of business segments
below. The nonreportable segment represents the holding company financial
information.
The accounting policies used in the disclosure of business segments are the
same as those described in the summary of significant accounting policies. The
consolidation adjustments reflect certain eliminations of intersegment revenue,
cash and investments in the subsidiary. Reportable segment-specific
information, and the reconciliation to consolidated financial information, are
as follows:
Adjustments
Community and
Banking Other Eliminations Consolidated
----------- ----------- ------------ ------------
September 30, 2001
Investment securities $152,556,014 $ -- $ -- $152,556,014
Net loans 180,198,216 -- -- 180,198,216
Total assets 397,096,285 -- -- 397,096,285
Total interest income 19,394,388 9,749 (9,749) 19,394,388
Total interest expense 6,893,329 -- (9,738) 6,883,591
Net interest income 12,501,059 -- 9,738 12,510,797
Net income $ 3,879,030 $3,883,489 $(3,879,030) $ 3,883,489
_____________________________________________________________________________
-9-
Adjustments
Community and
Banking Other Eliminations Consolidated
----------- ----------- ------------ ------------
September 30, 2000
Investment securities $131,356,164 $ -- $ -- $131,556,164
Net loans 171,689,637 -- -- 171,689,637
Total assets 372,495,095 -- -- 372,495,095
Total interest income 18,202,221 8,430 (8,430) 18,202,221
Total interest expense 6,738,715 -- (8,461) 6,730,254
Net interest income 11,463,506 -- 8,461 11,471,967
Net income $ 3,359,344 $3,363,169 $(3,359,344) $ 3,363,169
______________________________________________________________________________
5. 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.
-10-
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 $3,883,489 for the nine months ended
September 30, 2001, representing an increase of $520,320 or 15.5% over
$3,363,169 for the same period in 2000. Basic earnings per share of $.655 for
the current period represented an increase of $.086 from $.569 for the nine
months ended September 30, 2000.
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, furniture
and equipment, credit card processing, professional fees and other expense.
Deposits of $327,044,180 at September 30, 2001 increased by $19,915,348 or 6.5%
from $307,128,832 at December 31, 2000. The increase in deposits occurred in
the interest-bearing categories.
Loans of $182,942,693 at September 30, 2001 increased by $6,913,428 or 3.9%
from $176,029,265 at December 31, 2000. This increase took place in the
commercial and installment loan categories, partially offset by a decrease in
home equity loans. Noncurrent loans (nonaccrual loans, troubled debt
restructurings and loans 90 days or more past due but still accruing) totaled
$358,318 and $560,295 at September 30, 2001 and December 31, 2000,
respectively.
Assets of $397,096,285 at September 30, 2001 represented an $22,228,774 or 5.9%
increase from $374,867,511 at December 31, 2000.
Nine months ended September 30, 2001 as Compared To
Nine months ended September 30, 2000
------------------------------------
Net Interest Income
- -------------------
Interest income for the nine months ended September 30, 2001 was $19,394,388,
representing an increase of $1,192,167 or 6.5% from $18,202,221 for the nine
months ended September 30, 2000, primarily due to higher average loan, Federal
funds sold and securities balances, partially offset by lower average interest
rates in 2001. Interest expense was $6,883,591, representing an increase of
$153,337 or 2.3% from $6,730,254 for the nine months ended September 30, 2000,
primarily due to higher average interest bearing deposit and repurchase
agreement balances, partially offset by lower average interest rates in 2001.
Net interest income for the nine months ended September 30, 2001 was
$12,510,797, representing an increase of $1,038,830 or 9.1% from $11,471,967
for the nine months ended September 30, 2000.
Noninterest Income and Expense
- ------------------------------
Noninterest income for the nine months ended September 30, 2001 was $3,031,254,
representing an increase of $488,758 or 19.2% from $2,542,496 for the nine
months ended September 30, 2000. This increase was primarily the result of
increases in merchant credit card assessments, other charges, commissions and
fees, and gains on sales of loans.
-11-
Noninterest expense for the nine months ended September 30, 2001 of $9,567,655
was up $787,551 or 9.0% from $8,780,104 for the same period in 2000. This
increase was primarily the result of increases in salaries and employee
benefits, data processing and ATM network, furniture and equipment, credit card
processing, professional fees, and other expense, partially offset by a
reduction in marketing and advertising.
Provision for Loan Losses
- -------------------------
There was no provision for loan losses for the nine months ended September 30,
2001 or 2000, 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 $2,090,907 for the nine months ended September 30, 2001
compared to $1,871,190 for the same period in 2000. The increase was the
result of an increase in taxable income during the current period.
Net Income
- ----------
Net income of $3,883,489 for the first nine months of 2001 represented an
increase of $520,320 or 15.5% from $3,363,169 recorded for the first nine
months of 2000. Basic earnings per share of $.655 for the current period
represented an increase of $.086 from $.569 for the nine months ended September
30, 2000.
Three months ended September 30, 2001 as Compared To
Three months ended September 30, 2000
-------------------------------------
Net Interest Income
- -------------------
Interest income for the three months ended September 30, 2001 was $6,321,676,
representing an decrease of $165,377 or 2.5% from $6,487,053 for the three
months ended September 30, 2000, primarily due to lower average interest rates,
partially offset by higher average loan, federal funds sold and securities
balances, in 2001. Interest expense was $2,119,991, representing a decrease of
$339,846 or 13.8% from $2,459,837 for the three months ended September 30,
2000, primarily due to lower average interest rates, partially offset by higher
average interest bearing deposit and repurchase agreement balances, in 2001.
Net interest income for the three months ended September 30, 2001 was
$4,201,685, representing an increase of $174,469 or 4.3% from $4,027,216 for
the three months ended September 30, 2000.
Noninterest Income and Expense
- ------------------------------
Noninterest income for the three months ended September 30, 2001 was $1,019,001
representing an increase of $163,054 or 19.0% from $855,947 for the three
months ended September 30, 2000. This increase was primarily the result of an
increase in merchant credit card assessments, other charges, commissions and
fees, and gains on sales of loans.
Noninterest expense for the three months ended September 30, 2001 of $3,079,462
was up $46,470 or 1.5% from $3,032,992 for the corresponding period in 2000.
This increase was primarily the result of increases in data processing and ATM
network, occupancy, credit card processing, professional fees and other
expense, partially offset by decreases in salaries and benefits, and marketing
and advertising.
-12-
Provision for Loan Losses
- -------------------------
There was no provision for loan losses for the three months ended September 30,
2001 or 2000, 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 $734,574 for the three months ended September 30, 2001
compared to $662,949 for the corresponding period in 2000. The increase was
the result of an increase in taxable income during the current period.
Net Income
- ----------
Net income of $1,406,650 for the three months ended September 30, 2001
represented an increase of $219,428 or 18.5% from $1,187,222 recorded for the
corresponding period in 2000. Earnings per share of $.236 for the current
period represented an increase of $.035 from $.201 for the three months ended
September 30,2000.
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 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.
-13-
There are inherent 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.
Securities
- ----------
The Company's securities portfolio consists of obligations of the U.S.
Government sponsored agencies, mortgage backed securities, obligations of
various municipalities, and corporate bonds. Those assets are used in part to
secure public deposits and as collateral for repurchase agreements. Total
securities were $152,556,014 at September 30, 2001, representing an increase of
$10,004,290 or 7.0% from $142,551,724 at December 31, 2000. Securities
classified as available for sale were $61,890,003 and $50,110,202 at September
30, 2001 and December 31, 2000 respectively. There were no sales of securities
during the six months ended September 30, 2001.
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, 2001 and 2000, deposits were $327,044,180
and $309,503,616, respectively. Management anticipates that deposits will grow
moderately during the remainder of 2001.
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, 2001, the Company's Tier 1 leverage capital ratio was 8.75%.
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, 2001 the Company's Tier 1 and total risk-based capital ratios
were 15.83% and 17.08%, respectively. The Bank is categorized as "well
capitalized" under the Federal Deposit Insurance Corporation Improvement Act of
1991 (F.D.I.C.I.A.).
On September 20, 2001, the Company's Board of Directors declared a third
quarter 2001 cash dividend of $.066 per share of common stock to shareholders
of record at September 1, 2001, payable on October 15, 2001.
-14-
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, 2001, representing the excess of
repricing liabilities versus repricing assets within a one year time frame, was
2.6% 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, and adverse legislative or
regulatory changes.
-15-
PART II - OTHER INFORMATION
---------------------------
Item 5. OTHER INFORMATION
On February 22, 2001, the Company's Board of Directors approved the "2001
Directors' Plan", a stock option plan which provides incentives to present and
future directors of the Company who are not employees of the Company or its
subsidiaries. The aggregate number of shares of the Company's common stock
reserved for grant under the Plan is 30,000. The Board of Directors has
granted options under the Plan for the purchase of an aggregate of 9,000 shares
of the Company's common stock at a price of $10.00 per share, the fair market
value on February 22, 2001. The granted options fully vest over a four year
period. The Company filed a Form S-8 Registration Statement with the
Securities and Exchange Commission pursuant to the Plan on April 19, 2001.
On February 22, 2001, the Company's Board of Directors approved the "2001
Incentive Stock Option Plan for Key Employees", a stock option plan which
provides incentives to present and future key employees of the Company and its
subsidiaries. The aggregate number of shares of the Company's common stock
reserved for grant under the Plan is 384,000. On February 22, 2001, the Board
of Directors granted options under the Plan, subject to the Plan's approval
by the Company's shareholders, at the fair market value of the shares on the
approval date. The Plan was approved by the Company's shareholders at the
April 10, 2001 Annual Meeting. The granted options fully vest over a four year
period and have an exercise price of $10.00 per share, the fair market value on
April 10, 2001. The Company filed a Form S-8 Registration Statement with the
Securities and Exchange Commission pursuant to the Plan on April 19, 2001.
On September 18, 2001, the Company's Board of Directors declared a third
quarter 2001 cash dividend of $.066 per share of common stock to shareholders
of record at September 1, 2001, payable on October 15, 2001.
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Company did not file a Form 8-K during the quarter ended September
30, 2001.
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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: November 1, 2001 By: /s/ James A. Langway
__________________________
James A. Langway
President & Chief Executive Officer
Principal Executive Officer
Date: November 1, 2001 By: /s/ Donald R. Hughes, Jr.
__________________________
Donald R. Hughes, Jr.
Treasurer and Clerk,
Principal Financial Officer and
Principal Accounting Officer
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