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, 1995
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 - (508) 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 20, 1996 was $14,074,942.
The total number of shares of common stock outstanding at March 20, 1996
was 3,158,946.
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, 1995.
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, Hudson
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. During
1992, the Company formed Community Securities Corporation, a wholly
owned subsidiary of the Bank. The activities of the subsidiary consist
of buying, selling, dealing in or holding securities in its own behalf
and not as a broker.
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 March of 1996 the Bank introduced a
PC-based home banking system for consumers.
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
--------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Interest and fees on loans 65 64 67 69 71
Interest and dividends on
securities 24 24 21 16 13
Charges, fees and other sources 11 12 12 15 16
--- --- --- --- ---
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, Boxboro, Concord, Marlboro and Stow,
Massachusetts. These communities are generally characterized by a
growing residential population and moderate to high household income.
In addition to its main office, the Bank also operates a full service
branch office in the Town of Hudson.
-1-
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 area, there are
approximately 3 national banks, 3 Massachusetts trust companies, 6
savings banks, 2 cooperative banks and 4 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 in order to meet and surpass the vigorous competition.
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 131 full-time and part-time
officers and employees.
-2-
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, 1995, 1994 and 1993. The total dollar amount of
interest income from earning assets and the resultant yields are
calculated on a taxable equivalent basis.
1995
-----------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
----------- ---------- ------
Federal funds sold $ 7,115,616 $ 406,977 5.72%
Securities:
Taxable 69,470,273 4,055,415 5.84%
Non-taxable (1) 1,879,882 146,427 7.79%
Total loans and leases (1)(2) 127,033,820 12,450,001 9.80%
----------- ---------- ----
Total earning assets 205,499,591 17,058,820 8.30%
----------
Reserve for loan losses (3,779,610)
Other non interest-
bearing assets 20,993,896
-----------
Total average assets $222,713,877
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $ 89,849,771 $ 2,417,573 2.69%
Time deposits 61,842,194 3,317,979 5.37%
Federal funds purchased and
repurchase agreements 11,453,322 549,198 4.80%
----------- ---------- ----
Total interest-bearing
liabilities $163,145,287 $ 6,284,750 3.85%
----------
Non interest-bearing deposits 39,366,065
Other non interest-bearing
liabilities 1,853,949
Stockholders' equity 18,348,576
-----------
Total average liabilities
and stockholders' equity $222,713,877
===========
Net interest income $10,774,070
==========
Net yield on interest
earning assets 5.24%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $141,197. 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.
-3-
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential (Continued)
1994
-----------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
----------- ---------- ------
Federal funds sold $ 1,527,940 $ 61,642 4.03%
Securities:
Taxable 69,513,479 3,871,111 5.57%
Non-taxable (1) 1,072,378 92,522 8.63%
Total loans and leases (1)(2) 120,017,690 10,524,329 8.77%
----------- ---------- ----
Total earning assets 192,131,487 14,549,604 7.57%
----------
Reserve for loan losses (3,860,367)
Other non interest-
bearing assets 21,227,612
-----------
Total average assets $209,498,732
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $ 88,782,185 $ 1,854,068 2.09%
Time deposits 53,789,007 2,288,637 4.25%
Federal funds purchased and
repurchase agreements 11,971,422 379,483 3.17%
Short term debt 41,968 3,370 8.03%
----------- ---------- ----
Total interest-bearing
liabilities $154,584,582 $ 4,525,558 2.93%
----------
Non interest-bearing deposits 37,001,536
Other non interest-bearing
liabilities 1,392,148
Stockholders' equity 16,520,466
-----------
Total average liabilities
and stockholders' equity $209,498,732
===========
Net interest income $10,024,046
==========
Net yield on interest
earning assets 5.22%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $119,672. 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)
1993
-----------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
----------- ---------- ------
Federal funds sold $ 7,202,134 $ 212,159 2.95%
Securities:
Taxable 57,320,210 3,264,003 5.69%
Non-taxable (1) 941,222 99,664 10.59%
Total loans and leases (1)(2) 122,410,863 10,569,755 8.63%
----------- ---------- -----
Total earning assets 187,874,439 14,145,581 7.53%
----------
Reserve for loan losses (4,284,600)
Other non interest-
bearing assets 21,964,558
-----------
Total average assets $205,554,397
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $ 84,931,434 $ 1,803,486 2.12%
Time deposits 56,477,215 2,316,614 4.10%
Federal funds purchased and
repurchase agreements 13,185,487 317,572 2.41%
Short term debt 390,411 27,707 7.10%
----------- ---------- ----
Total interest-bearing
liabilities $154,984,547 $ 4,465,379 2.88%
---------- ----
Non interest-bearing deposits 33,041,837
Other non interest-bearing
liabilities 2,203,930
Stockholders' equity 15,324,083
-----------
Total average liabilities
and stockholders' equity $205,554,397
===========
Net interest income $ 9,680,202
==========
Net yield on interest
earning assets 5.15%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $113,075. 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)
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.
1995 as compared to 1994
--------------------------------------
Due to a change in:
-------------------
Volume Rate Total
--------- ---------- ----------
Interest income from:
Federal funds sold $ 319,513 $ 25,822 $ 345,335
Securities:
Taxable (3,382) 187,686 184,304
Non-taxable 62,913 (9,008) 53,905
Loans & leases 689,490 1,236,182 1,925,672
--------- --------- ---------
Total $1,068,533 $1,440,683 $2,509,216
--------- --------- ---------
Interest expense on:
Interest-bearing deposits:
Savings, money market and NOW $ 30,812 $ 532,693 $ 563,505
Time deposits 426,905 602,437 1,029,342
Federal funds purchased and
repurchase agreements (25,419) 195,134 169,715
Short term debt (3,370) (3,370)
--------- --------- ---------
Total $ 428,928 $1,330,264 $1,759,192
--------- --------- ---------
Net interest income $ 639,605 $ 110,419 $ 750,024
========= ========= =========
1994 as compared to 1993
--------------------------------------
Due to a change in:
-------------------
Volume Rate Total
---------- ---------- ----------
Interest income from:
Federal funds sold $ (228,300) $ 77,783 $ (150,517)
Securities:
Taxable 675,892 (68,784) 607,108
Non-taxable 11,306 (18,448) (7,142)
Loans & leases (216,801) 171,375 (45,426)
--------- --------- ---------
Total $ 242,097 $ 161,926 $ 404,023
--------- --------- ---------
Interest expense on:
Interest-bearing deposits:
Savings, money market and NOW $ 76,061 $ (25,479) $ 50,582
Time deposits (112,693) 84,716 (27,977)
Federal funds purchased and
repurchase agreements (38,299) 100,210 61,911
Short term debt (27,968) 3,631 (24,337)
--------- --------- ---------
Total $ (102,898) $ 163,077 $ 60,179
--------- --------- ---------
Net interest income $ 344,995 $ (1,151) $ 343,844
========= ========= =========
<FN>
Note: The change due to the volume/rate variance has been allocated to
volume.
-6-
Securities Portfolio
- --------------------
The following table indicates the carrying value of the Company's
consolidated securities portfolio at December 31, 1995, 1994 and 1993.
(in $000) 1995 1994 1993
- --------- ------ ------ ------
U.S. Government obligations $17,160 $12,881 $11,431
U.S. Government agencies and corp. 54,627 56,990 50,560
Obligations of states and political
subdivisions 1,941 1,569 891
Other securities 888 1,125 781
------ ------ ------
Total $74,616 $72,565 $63,663
====== ====== ======
The following table shows the maturities, carrying value and weighted
average yields of the Company's consolidated securities portfolio at
December 31, 1995. 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 $2,004 5.70% $7,101 5.25% $ 0 0% $ 0 0%
U.S. Govt. obli-
gations avail-
able for sale 4,031 5.22% 4,024 5.22% 0 3 0 0%
U.S. Govt. agencies
& corps. held to
maturity 0 0% 9,545 6.03% 3,000 6.03 0 0%
U.S. Govt. agencies
& corps. available
for sale 0 0% 2,016 5.27% 0 0% 0 0%
State and political
subdivisions
held to maturity 501 7.00% 1,440 7.00% 0 0% 0 0%
Mortgage-backed
securities avail-
able for sale 0 0% 0 0% 6,444 5.16% 7,276 6.33%
Mortgage-backed
securities held to
maturity 0 0% 5,849 5.51% 14,004 6.02% 6,493 6.20%
Other securities 0 0% 0 0% 0 0% 888 6.15%
Current estimated prepayment speed assumptions were used in estimating
the maturities of mortgage-backed securities in the above table. At
December 31, 1995, 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.
-7-
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) 1995 1994 1993 1992 1991
- --------- ------ ------ ------ ------ ------
Commercial and industrial $ 13,784 $ 13,685 $ 11,108 $ 10,218 $ 10,414
Real estate - commercial 44,983 50,195 45,488 45,882 50,900
Real estate - residential 50,979 44,246 43,167 46,370 45,487
Real estate - construction 3,903 3,330 4,586 3,168 1,764
Mortgage loans held for sale 1,057 559 14,172 11,273 7,318
Loans to individuals 13,178 10,850 10,311 9,223 10,066
Other 188 173 514 113 35
------- ------- ------- ------- -------
Total loans $128,072 $123,038 $129,346 $126,247 $125,984
======= ======= ======= ======= =======
Loan maturities for commercial and real estate (construction) loans
at December 31, 1995 were as follows: $10,651,655 due in one year or
less; $5,912,540 due after one year through five years; $1,121,384 due
after five years. Of the Bank's commercial and real estate
(construction) loans due after one year, $2,578,505 have floating or
adjustable rates and $5,912,540 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 judgement, 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) 1995 1994 1993 1992 1991
- --------- ----- ----- ----- ----- -----
Nonaccrual loans $1,650 $ 909 $1,681 $2,028 $1,630
Accruing loans past due 90
days or more 160 66 346 232 584
Restructured loans 0 1,155 1,357 1,735 0
----- ----- ----- ----- -----
Total $1,810 $2,130 $3,384 $3,995 $2,214
===== ===== ===== ===== =====
The entire "restructured loans" balance at December 31, 1994 in the
above table was comprised of a single loan. That loan was placed on
nonaccrual status in September of 1995.
For the period ended December 31, 1995, the reduction of interest
income associated with nonaccrual and restructured loans was $108,279.
The interest on these loans that was included in interest income for 1995
was $103,069.
Potential Problem Loans
- -----------------------
As of December 31, 1995, 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, 1995, except as disclosed in the above table, there
were no concentrations of loans exceeding 10% of total loans.
-8-
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) 1995 1994 1993 1992 1991
- --------- ------- ------- ------- ------- -------
Average outstanding loans (1) $127,034 $120,018 $122,411 $124,741 $125,190
======= ======= ======= ======= =======
Allowance for possible loan losses
- ----------------------------------
(in $000) 1995 1994 1993 1992 1991
- --------- ------ ------ ------ ------ ------
Balance at beginning of period $ 3,703 $ 3,910 $ 4,178 $ 3,968 $ 2,366
Charge-offs:
Commercial and industrial (31) (506) (305) (318) (451)
Real estate - residential (70) (221) (169) (390) (564)
Real estate - commercial (415) (455) (505) (811)
Real estate - construction (416)
Loans to individuals (113) (112) (87) (217) (236)
----- ----- ----- ----- -----
(629) (839) (1,016) (1,430) (2,478)
Recoveries:
Commercial and industrial 105 174 60 54 171
Real estate - residential 100 128 11 11 53
Real estate - commercial 18 3 44 32 15
Real estate - construction 60
Loans to individuals 38 27 33 118 61
----- ----- ----- ----- -----
261 332 148 215 360
Net charge-offs (368) (507) (868) (1,215) (2,118)
Provision for possible
loan losses 120 300 600 1,425 3,720
----- ----- ----- ----- -----
Balance at end of period $ 3,455 $ 3,703 $ 3,910 $ 4,178 $ 3,968
===== ===== ===== ===== =====
Ratio of net charge-offs to
average loans .29% .42% .71% .97% 1.69%
===== ===== ===== ===== =====
<FN>
(1) Includes the aggregate average balance of loans held for sale.
The provision for possible loan losses is based upon management's
estimation of the amount necessary to maintain the allowance at an
adequate level to absorb inherent possible losses in the loan portfolio,
as determined by current and anticipated economic conditions and other
pertinent factors. Significant credits classified as "substandard" and
"doubtful", in accordance with applicable bank regulatory guidelines, are
individually analyzed to estimate inherent possible losses associated with
each such credit. A portion of the allowance for possible loan losses is
set aside or "allocated" against such estimated inherent losses, without
regard to if or when those estimated losses will actually be realized.
Additional "unallocated" reserves are provided for estimated inherent losses
in pools of loans. Such allocated and unallocated reserves are established
to absorb potential future losses and may or may not reflect the Company's
actual loss history for any specific category of loans.
-9-
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 as of December 31 for each of the years indicated:
1995 1994 1993
------------------- ------------------- ------------------
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 $ 165 10.9% $ 165 11.2% $ 157 8.6%
Real estate -
commercial 746 35.1% 1,440 40.9% 1,986 35.2%
Real estate -
residential 174 40.7% 222 36.1% 217 44.6%
Real estate -
construction 96 3.0% 45 2.8% 32 3.6%
Loans to
individuals 100 10.3% 87 9.0% 126 8.0%
Unallocated 2,174 N/A 1,744 N/A 1,392 N/A
----- ----- ----- ----- ----- -----
Total $3,455 100.0% $3,703 100.0% $3,910 100.0%
===== ===== ===== ===== ===== =====
1992 1991
------------------- -------------------
Percent of Percent of
loans in loans in
category to category to
(in $000) Amount total loans Amount total loans
- --------- ------ ----------- ------ -----------
Commercial &
industrial $ 360 8.1% $ 471 8.3%
Real estate -
commercial 1,615 36.7% 2,061 36.1%
Real estate -
residential 210 45.3% 154 46.2%
Real estate -
construction 87 2.5% 43 1.4%
Loans to
individuals 207 7.4% 362 8.0%
Unallocated 1,699 N/A 877 N/A
----- ----- ----- -----
Total $4,178 100.0% $3,968 100.0%
===== ===== ===== =====
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.
-10-
Deposits
- --------
The following table shows the average deposits and average interest
rate paid for each of the last three years:
1995 1994 1993
---------------- ---------------- ----------------
Average Average Average Average Average Average
(in $000) Balance Rate Balance Rate Balance Rate
- --------- ------- ------- ------- ------- ------- -------
Demand deposits $ 39,366 0.00% $ 37,001 0.00% $ 33,042 0.00%
NOW deposits 21,621 1.78% 21,025 1.95% 19,305 1.79%
Money market
deposits 26,812 2.91% 27,047 2.34% 27,528 2.42%
Savings deposits 41,417 3.02% 40,711 2.58% 38,098 2.53%
Time deposits 61,842 5.37% 53,789 3.81% 56,477 3.79%
------- ---- ------- ---- ------- ----
Total $191,058 3.00% $179,573 2.31% $174,450 2.36%
======= ==== ======= ==== ======= ====
As of December 31, 1995, the Bank had certificates of deposit in
amounts of $100,000 or more aggregating $19.1 million. These
certificates of deposit matured as follows:
Maturity Amount (in $000)
-------- ----------------
3 months or less $ 9,179
Over 3 months through 6 months 3,456
Over 6 months through 12 months 5,151
Over 12 months 1 275
------
Total $19,061
======
-11-
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,
----------------------------------
1995 1994 1993
---- ---- ----
Return on average total
assets (net income divided
by average total assets) 1.19% 1.00% .73%
Return on average
stockholders' equity
(net income divided by
average stockholders'
equity) 14.41% 12.74% 9.82%
Dividend payout ratio
(total declared dividends
per share divided by net
income per share) 27.86% 31.91% 35.39%
Equity to assets (average
stockholders' equity as
a percentage of average
total assets) 8.24% 7.89% 7.46%
-12-
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 consisted of securities sold under repurchase
agreements, which are short-term borrowings from customers, and federal
funds purchased. 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
Year Balance, rate at standing amount rate
ended end of end of at any out- during
12/31/95 period period month-end standing period
- -----------------------------------------------------------------------
Federal
Funds
Purchased $ 1,000,000 6.40% $ 6,200,000 $ 1,536,438 6.12%
Repurchase
Agreements 8,289,963 4.38% 14,374,499 9,916,887 4.56%
Weighted Max. Weighted
average amount average
interest out- Average interest
Year Balance, rate at standing amount rate
ended end of end of at any out- during
12/31/94 period period month-end standing period
- ------------------------------------------------------------------------
Federal
Funds
Purchased $10,900,000 6.65% $10,900,000 $ 1,446,000 4.64%
Repurchase
Agreements 4,040,801 3.67% 15,752,377 10,526,000 2.95%
Weighted Max. Weighted
average amount average
interest out- Average interest
Year Balance, rate at standing amount rate
ended end of end of at any out- during
12/31/93 period period month-end standing period
- ------------------------------------------------------------------------
Federal
Funds
Purchased $ 0 0% $ 0 $ 32,000 3.14%
Repurchase
Agreements 11,518,659 2.61% 16,431,328 13,154,287 2.39%
-13-
ITEM 2. PROPERTIES
The Bank's Main Office (approximately 32,000 square feet) at 17 Pope
Street, Hudson, Massachusetts, the former Mortgage Production Office
(2,623 square feet) at 12 Pope Street, Hudson, Massachusetts, the Hudson
South Office (1,040 square feet) at 177 Broad Street, Hudson,
Massachusetts and the Marlboro Center Office (1,800 square feet) at 96
Bolton Street, Marlboro, MA, are owned by the Bank.
The Bank's Stow Office (1,228 square feet) at 159 Great Road, Stow,
Massachusetts, Concord office (1,200 square feet) at 1134 Main Street,
Concord, Massachusetts, Marlboro office (1,110 square feet) at 500
Boston Post Road, Marlboro, Massachusetts and Boxboro office (679 square
feet) at 629 Mass Avenue, Boxboro, Massachusetts are leased by the Bank
from third parties.
The Bank's Acton office (2,100 square feet) at 274 Great Road,
Acton, Massachusetts, is leased from I. George Gould, a Director of the
Company and Bank, and his wife, as trustees of Nagog Knoll Realty Trust
under a lease dated January 1, 1993, which expires on December 31, 1997.
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
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.
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, 1995.
-14-
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 456
as of March 20, 1996.
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 1995 and 1994:
1995 1994
------ ------
First quarter $ .057 $ .050
Second quarter .058 .053
Third quarter .059 .055
Fourth quarter .060 .058
------ ------
Total $ .234 $ .214
====== ======
For a discussion of restrictions on the ability of the Bank to pay
dividends to the Company, see footnote 12 on page 18 of the Annual
Report to Shareholders for the year ended December 31, 1995, which is
hereby incorporated by reference.
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, 1995 and is hereby incorporated by reference.
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 22 through 26 of the Annual
Report to Shareholders for the year ended December 31, 1995 and is
hereby incorporated by reference.
For a discussion of restrictions on the ability of the Bank to pay
dividends to the Company, see footnote 12 on page 18 of the Annual
Report to shareholders for the year ended December 31, 1995, which is
hereby incorporated by reference.
-15-
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are included on page
1 and pages 8 through 20 of the Annual Report to shareholders for the
year ended December 31, 1995 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, 1995 or in any period subsequent to the most recent financial
statements.
-16-
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 and Executive Officers of the Company have
served since 1984, except Mr. Frias who has been a Director of the
Company since 1985, Mr. D. Parker who has been a Director of the Company
since 1986, and Messrs. Hughes and Webster who have been Directors of
the Company since 1995. 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. 43 Senior Vice Senior Vice President,
Bennett President Vice President,
of Bank Hudson National Bank
Grace L. Blunt 41 Senior Vice Senior Vice President,
President Vice President,
of Bank Hudson National Bank
Alfred A. 78 Director of 1997 Retired
Cardoza Company and
Bank
Argeo R. 72 Director of 1997 Retired; formerly
Cellucci Company and President and Treasurer,
Bank Washington Street Motors,
Inc.; President, Cellucci
Hudson Corp.
Antonio Frias 56 Director of 1997 President and Treasurer,
Company and S & F Concrete
Bank Contractors, Inc.;
Secretary/Clerk, Frias
Bros. Service Station
John P. Galvani 39 Senior Vice Senior Vice President,
President Vice President,
of Bank Hudson National Bank
I. George 79 Director of 1996 Chairman, Gould's, Inc.
Gould (1) Company and
Bank
Horst Huehmer 68 Director of 1998 Retired; formerly
Company and Manager, Hudson Light
Bank and Power Department
-17-
Donald R. 46 Treasurer and 1996 Executive Vice
Hughes, Jr. (2) Clerk of President, Hudson
Company; Exec. National Bank;
Vice President Treasurer and Clerk,
of Bank; Director Community Bancorp, Inc.
of Company and
Bank
James A. 56 President & 1996 President and CEO,
Langway (1) CEO of Company Hudson National Bank
and Bank; and Community
Director of Bancorp, Inc.
Company and
Bank
Robert E. Leist 42 Senior Vice Senior Vice President,
President Vice President,
of Bank Hudson National Bank
Janet A. Lyman 49 Senior Vice Senior Vice President,
President Vice President,
of Bank Hudson National Bank
Dennis F. 58 Chairman of 1997 President and
Murphy, Jr. the Board, Treasurer, D. F.
Company and Murphy Insurance
Bank Agency, Inc.;
Treasurer, Village
Real Estate
David L. 67 Director of 1996 Treasurer, Larkin
Parker (1, 3) Company and Lumber Co.
Bank
Mark Poplin 72 Director of 1998 President and
Company and Treasurer, Poplin
Bank Supply Co.;
Secretary, Poplin
Furniture Co.
David W. 54 Director of 1996 President & Treasurer,
Webster (2, 3) Company and A. T. Knight Fuel Co.,
Bank Inc.
<FN>
(1) Messrs. Gould, Langway and Parker have been nominated for
election at the 1996 Annual Meeting to serve until 1999.
(2) Messrs. Hughes and Webster have been nominated for election at
the 1996 Annual Meeting to serve until 1998
(3) Mr. Parker and Mr. Webster's wife 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.
-18-
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 other executive officers
whose aggregate compensation exceeded $100,000 by the Company and the
Bank for 1995, 1994 and 1993.
Summary Compensation Table
--------------------------
Annual Compensation
-------------------
(a) (b) (c) (d) (i) (1)
Name and All Other
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
James A. Langway 1995 $186,261 $55,000 $ 2,982
President and CEO 1994 177,392 44,348 2,924
of the Company and 1993 170,570 30,703 2,827
the Bank
Donald R. Hughes, Jr. 1995 105,902 26,740 2,062
Treasurer and Clerk of 1994 100,859 20,172 1,936
Company; Executive Vice 1993 96,980 15,032 1,808
President of the Bank
<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 and
Hughes are participants in the Company's ESOP and 401(k) Plans.
Of the $2,982 reported above for 1995 in column (i) for James A.
Langway, $0 represented Company ESOP contributions, $2,310
represented Company 401(k) Plan contributions and $672 represented
group life insurance premiums paid by the Company. Of the $2,062
reported above for 1995 in column (i) for Donald R. Hughes, Jr.,
$0 represented Company ESOP contributions, $1,589 represented
Company 401(k) Plan contributions and $473 represented group life
insurance premiums paid by the Company.
Compensation of Directors
- -------------------------
The Company pays no compensation to its Directors for their services
as a Director. Directors of the Bank were each paid an annual fee of
$8,579 in 1995. The Chairman of the Board was paid $14,299 in 1995.
Director fees are paid on a monthly basis.
-19-
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 commenced August 1, 1986 and 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 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
expectency at the time he begins receiving payments. During 1995, the
Company recorded $56,484 in such expense.
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
officers and Directors of the Company and Bank as a group at March 20,
1996.
Amount and
Title Nature of Percent
of Name of Beneficial of
Class Beneficial Owner Ownership (1,2) Class
----- ---------------- --------------- -------
Common Stock Alfred A. Cardoza 22,486 shares 0.7%
($2.50 par)
Argeo R. Cellucci 6,728 shares 0.2%
Antonio Frias 101,938 shares 3.2%
I. George Gould 117,499 shares (3) 3.7%
Horst Huehmer 22,632 shares 0.7%
Donald R. Hughes, Jr. 94,886 shares (3 & 5) 3.0%
James A. Langway 196,099 shares (3,4 & 6) 6.2%
Dennis F. Murphy, Jr. 442,640 shares 14.0%
David L. Parker 22,274 shares 0.7%
Mark Poplin 170,174 shares 5.4%
David W. Webster 78,560 shares (4) 2.5%
All directors and
officers of the
Company and Bank
as a group
(22 persons) 1,148,240 shares (3,4 & 7) 36.3%
<FN>
(1) Based upon information provided to the Company by the indicated
persons.
(2) Unless indicated in another footnote to this tabulation, a person
has sole voting and investment power with respect to the shares set
forth opposite his or her name.
(3) Includes 56,853 shares held by the Company's ESOP for which Messrs.
Gould, Hughes and Langway are co-trustees.
(4) Includes 47,700 shares held by the R. A. Knight Special Trust for
which Mr. Webster's wife and Mr. Langway are co-trustees.
(5) Includes 6,033 shares held by the Company's 401(k) plan for which
Mr. Hughes has voting power in certain circumstances.
-21-
(6) Includes 11,339 shares held by the Company's 401(k) plan for which
Mr. Langway has voting power in certain circumstances.
(7) Includes 35,102 shares held by the Company's 401(k) plan for which
Grace L. Blunt, Senior Vice President, and Robert E. Leist, Senior
Vice President, are co-trustees.
The following persons own beneficially more than five percent of
the outstanding stock of the Company as of March 20, 1996:
Amount and
Title Name and Address Nature of Percent
of of Beneficial Beneficial of
Class Owner Ownership Class
----- ---------------- ----------- -------
Common Stock Dennis F. Murphy, Jr. 442,640 shares 14.0%
($2.50 par) 44 Wilder Road
Bolton, MA 01740
James A. Langway 196,099 shares (1 & 2) 6.2%
1143 Grove Street
Framingham, MA 01701
Mark Poplin 170,174 shares 5.4%
108 Barretts Mill Road
Concord, MA 01742
<FN>
(1) Includes 56,853 shares held by the Company's ESOP for which Mr.
Langway co-trustee, and 47,700 shares held by the R. A. Knight
Special Trust for which Mr. Langway is co-trustee.
(2) Includes 11,339 shares held by the Company's 401(k) plan for which
Mr. Langway has voting power in certain circumstances.
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.
I. George Gould and his wife, as trustees of Nagog Knoll Realty
Trust, own the premises at 274 Great Road, Acton, Massachusetts which
are leased to the Bank for use as a full service branch office. The
lease for that office, dated January 1, 1993, expires December 31, 1997
and carries a five year renewal option. In 1995 and 1994, the Bank made
payments aggregating $29,400 and $28,686, respectively, for rental of
such premises.
-22
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, 1995, are hereby incorporated by reference:
Annual Report to
Shareholders
Description page reference
----------- ----------------
Consolidated balance sheets at
December 31, 1995 and 1994 8
Consolidated statements of income for
the years ended December 31, 1995,
1994 and 1993 9
Consolidated statements of stockholders'
equity for the years ended December 31, 1995,
1994 and 1993 10
Consolidated statements of cash flows
for the years ended December 31, 1995,
1994 and 1993 11 - 12
Notes to consolidated financial statements 13 - 20
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, 1995 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, 1995.
3. Exhibits
--------
See accompanying Exhibit Index.
(b) The Company did not file a Form 8-K during the quarter ended
December 31, 1995.
-23-
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 specific persons. (g)
13. 1995 Annual Report to shareholders
21. Subsidiaries of Company Page 26
27. Financial Data Schedule
<FN>
(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.
-24-
(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.
-25-
SUBSIDIARIES OF COMPANY
-----------------------
1. Hudson National Bank, a national banking association.
-26-
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 20, 1996 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 20, 1996 /s/ James A. Langway
---------------------------------
James A. Langway, President & CEO
Principal Executive Officer
March 20, 1996 /s/ Donald R. Hughes, Jr.
----------------------------------
Donald R. Hughes, Jr., Treasurer &
Clerk, Principal Financial Officer
and Principal Accounting Officer
March 20, 1996 /s/ James A. Langway
----------------------------------
James A. Langway, Director
March 20, 1996 /s/ Donald R. Hughes, Jr.
----------------------------------
Donald R. Hughes, Jr., Director
March 21, 1996 /s/ I. George Gould
----------------------------------
I. George Gould, Director
March 21, 1996 /s/ Mark Poplin
----------------------------------
Mark Poplin, Director
March 22, 1996 /s/ Alfred A. Cardoza
----------------------------------
Alfred A. Cardoza, Director
March 22, 1996 /s/ David L. Parker
----------------------------------
David L. Parker, Director
-27-
SUPPLEMENTAL INFORMATION
------------------------
The Notice of Annual Meeting of Shareholders, Proxy Statement and Proxy
For Annual Meeting of Shareholders for the Registrant's 1996 annual meeting
of shareholders, to be held on April 9, 1996, are being 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.
-28-