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, 1997
-------------------------------------------
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 20, 1998 was $21,391,092.
The total number of shares of common stock outstanding at March 20, 1998 was
2,926,257.
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, 1997.
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
(formerly 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. In 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 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.
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
--------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Interest and fees on loans 60 63 65 64 67
Interest and dividends on
securities 28 26 24 24 21
Charges, fees and other sources 12 11 11 12 12
--- --- --- --- ---
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. The Bank
operates three remote ATM facilities in Hudson and Marlboro.
-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 market area there are approximately 2 national banks,
4 Massachusetts trust companies, 6 savings banks, 1 cooperative bank 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 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.
Accounting Pronouncements
- -------------------------
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", effective for financial statements
issued for fiscal years beginning after December 15, 1997. This statement
establishes standards for reporting comprehensive income and its components
(revenues, expenses, gains and losses). Components of comprehensive income
are net income and all other non-owner changes in equity. The Statement
requires that an enterprise (a) classify items of other comprehensive income
by their nature in a financial statement and (b) display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. Reclassification of
-2-
financial statements for earlier periods provided for comparative purposes is
required. The Company will adopt this Statement for the fiscal year ending
December 31, 1998.
In June 1997 the Financial Accounting Standards Board also issued SFAS
No. 131, "Disclosures About Segments of an Enterprise and Related
Information", effective for financial statements issued for fiscal years
beginning after December 15, 1997. This Statement establishes standards for
reporting information about segments in annual and interim financial
statements. SFAS No. 131 introduces a new model for segment reporting called
the "management approach." The management approach is based on the way the
chief operating decision-maker organizes segments within a company for making
operating decisions and assessing performance. Reportable segments are based
on products and services, geography, legal structure, management structure and
any other manner in which management disaggregates a company. The Company will
adopt this Statement for the fiscal year ending December 31, 1998. However,
the Company's management believes SFAS No. 131 will have no impact on the
Company's presentation of its financial statements as its business is
considered to comprise a single segment.
Employees
- ---------
The Company and the Bank employ 107 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, 1997, 1996 and 1995. The total dollar amount of interest income from
earning assets and the resultant yields are calculated on a taxable
equivalent basis.
1997
------------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
------------ ----------- ------
Federal funds sold $ 8,534,521 $ 464,016 5.44%
Securities:
Taxable 86,006,643 5,241,159 6.09%
Non-taxable (1) 6,544,073 472,507 7.22%
Total loans and leases (1)(2) 136,844,378 13,186,467 9.64%
----------- ---------- ----
Total earning assets 237,929,615 19,364,149 8.14%
----------
Reserve for loan losses (3,394,971)
Other non interest-
bearing assets 22,530,388
-----------
Total average assets $257,065,032
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $100,555,499 $ 2,451,529 2.44%
Time deposits 68,313,627 3,687,605 5.40%
Federal funds purchased and
repurchase agreements 15,799,413 756,088 4.79%
----------- --------- ----
Total interest-bearing
liabilities 184,668,539 6,895,222 3.73%
---------
Non interest-bearing deposits 49,067,530
Other non interest-bearing
liabilities 1,984,377
Stockholders' equity 21,344,586
-----------
Total average liabilities
and stockholders' equity $257,065,032
===========
Net interest income $12,468,927
==========
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 $194,199. 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)
1996
------------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
------------ ----------- ------
Federal funds sold $ 11,361,749 $ 590,663 5.20%
Securities:
Taxable 78,493,267 4,619,558 5.89%
Non-taxable (1) 2,752,956 192,885 7.01%
Total loans and leases (1)(2) 129,443,069 12,495,000 9.65%
----------- ---------- ----
Total earning assets 222,051,041 17,898,106 8.06%
===========
Reserve for loan losses (3,503,861)
Other non interest-
bearing assets 21,384,220
-----------
Total average assets $239,931,400
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $ 94,508,038 $ 2,258,835 2.39%
Time deposits 66,704,196 3,581,610 5.37%
Federal funds purchased and
repurchase agreements 11,798,277 527,313 4.47%
----------- --------- ----
Total interest-bearing
liabilities 173,010,511 6,367,758 3.68%
---------
Non interest-bearing deposits 44,425,461
Other non interest-bearing
liabilities 1,977,905
Stockholders' equity 20,517,523
-----------
Total average liabilities
and stockholders' equity $239,931,400
===========
Net interest income $11,530,348
==========
Net yield on interest
earning assets 5.19%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $137,004. 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)
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 $141,196. 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.
1997 as compared to 1996
--------------------------------------
Due to a change in:
-------------------
Volume Rate Total
---------- ---------- ----------
Interest income from:
Federal funds sold $ (153,915) $ 27,268 $ (126,647)
Securities:
Taxable 464,614 156,987 621,601
Non-taxable 273,841 5,781 279,622
Loans & leases 704,411 (12,944) 691,467
--------- --------- ---------
Total $1,288,951 $ 177,092 $1,466,043
========= ========= =========
Interest expense on:
Interest-bearing deposits:
Savings, money market and NOW $ 145,440 $ 47,254 $ 192,694
Time deposits 85,984 20,011 105,995
Federal funds purchased and
repurchase agreements 191,021 37,754 228,775
--------- --------- ---------
Total $ 422,444 $ 105,020 $ 527,464
--------- --------- ---------
Net interest income $ 866,507 $ 72,072 $ 938,579
========= ========= =========
1996 as compared to 1995
--------------------------------------
Due to a change in:
-------------------
Volume Rate Total
---------- ---------- ----------
Interest income from:
Federal funds sold $ 220,678 $ (37,001) $ 183,686
Securities:
Taxable 529,408 34,745 564,143
Non-taxable 61,121 (14,663) 46,458
Loans & leases 235,550 (190,551 44,999
--------- --------- ---------
Total $1,046,766 $ (207,480) $ 839,286
--------- --------- ---------
Interest expense on:
Interest-bearing deposits:
Savings, money market and NOW $ 110,811 $ (269,549) $ (158,738)
Time deposits 263,631 0 263,631
Federal funds purchased and
repurchase agreements 15,911 (37,796) (21,885)
--------- --------- ---------
Total $ 390,353 $ (307,345) $ 83,008
--------- --------- ---------
Net interest income $ 656,413 $ 99,865 $ 756,278
========= ========= =========
<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, 1997, 1996 and 1995.
(in $000)
1997 1996 1995
------ ------ ------
U.S. Government obligations $21,134 $16,002 $17,160
U.S. Government agencies and corp. 64,667 67,043 54,627
Obligations of states and political
subdivisions 8,414 4,141 1,941
Other securities 969 888 888
------ ------ ------
Total $95,184 $88,074 $74,616
====== ====== ======
The following table shows the maturities, carrying value and weighted
average yields of the Company's consolidated securities portfolio at December
31, 1997. 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 $2,996 5.82% $1,013 5.09% $ 0 0% $ 0 0%
U.S. Govt. obli-
gations avail-
able for sale 3,992 6.08% 13,133 6.21% 0 0% 0 0%
U.S. Govt. agencies
& corps. held to
maturity 999 5.80% 3,992 6.47% 4,978 6.62% 0 0%
U.S. Govt. agencies
& corps. available
for sale 3,999 5.91% 0 0% 0 0% 0 0%
State and political
subdivisions
held to maturity 1,740 6.80% 656 7.61% 0 0% 6,019 7.65%
Mortgage-backed
securities avail-
able for sale 14,274 6.19% 2,513 5.73% 0 0% 0 0%
Mortgage-backed
securities held to
maturity 10,889 6.19% 17,341 6.65% 5,681 6.63% 0 0%
Other securities 0 0% 0 0% 0 0% 969 6.25%
<FN>
Current estimated prepayment speed assumptions were used in estimating
the maturities of mortgage-backed securities in the above table. At December
31, 1997, 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) 1997 1996 1995 1994 1993
- --------- ------ ------ ------ ------ ------
Commercial and industrial $ 18,066 $ 17,227 $ 13,784 $ 13,685 $ 11,108
Real estate - commercial 48,329 45,106 44,983 50,195 45,488
Real estate - residential 54,211 49,790 50,979 44,246 43,167
Real estate - construction 4,868 4,833 3,903 3,330 4,586
Mortgage loans held for sale 2,173 1,222 1,057 559 14,172
Loans to individuals 13,571 13,221 13,178 10,850 10,311
Other 795 171 188 173 514
------- ------- ------- ------- -------
Total loans $142,013 $131,570 $128,072 $123,038 $129,346
======= ======= ======= ======= =======
Loan maturities for commercial and real estate (construction) loans at
December 31, 1997 were as follows: $9,180,622 due in one year or less;
$9,865,047 due after one year through five years; $3,888,640 due after five
years. Of the Bank's commercial and real estate (construction) loans due
after one year, $8,924,480 have floating or adjustable rates and $4,829,207
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) 1997 1996 1995 1994 1993
- --------- ------ ------ ------ ------ ------
Nonaccrual loans $ 633 $ 897 $1,650 $ 909 $1,681
Accruing loans past due 90
days or more 239 370 160 66 346
Restructured loans 0 0 0 1,155 1,357
----- ----- ----- ----- -----
Total $ 872 $1,267 $1,810 $2,130 $3,384
===== ===== ===== ===== =====
<FN>
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 and transferred to "Other Real Estate
Owned" in August of 1996.
For the period ended December 31, 1997, the reduction of interest
income associated with nonaccrual and restructured loans was $124,394. The
interest on these loans that was included in interest income for 1997 was
$19,475.
Potential Problem Loans
- -----------------------
As of December 31, 1997, 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, 1997, 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) 1997 1996 1995 1994 1993
- --------- ------- ------- ------- ------- -------
Average outstanding loans (1) $136,844 $129,443 $127,034 $120,018 $122,411
======= ======= ======= ======= =======
Allowance for possible loan losses
- ----------------------------------
(in $000) 1997 1996 1995 1994 1993
------- ------- ------- ------- -------
Balance at beginning of period $ 3,482 $ 3,455 $ 3,703 $ 3,910 $ 4,178
Charge-offs:
Commercial and industrial (133) (39) (31) (506) (305)
Real estate - commercial (99) 0 (415) 0 (455)
Real estate - residential (16) (53) (70) (221) (169)
Real estate - construction 0 0 0 0 0
Loans to individuals (118) (138) (113) (112) (87)
----- ----- ----- ----- -----
Total charge-offs (366) (230) (629) (839) (1,016)
Recoveries:
Commercial and industrial 35 147 105 174 60
Real estate - commercial 0 79 18 3 44
Real estate - residential 41 1 100 128 11
Real estate - construction 0 0 0 0 0
Loans to individuals 24 30 38 27 33
----- ----- ----- ----- -----
Total recoveries 100 257 261 332 148
Net (charge-off) recovery (266) 27 (368) (507) (868)
Provision for possible
loan losses 0 0 120 300 600
----- ----- ----- ----- -----
Balance at end of period $ 3,216 $ 3,482 $ 3,455 $ 3,703 $ 3,910
===== ===== ===== ===== =====
Ratio of net charge-offs to
average loans .19% .00% .29% .42% .71%
===== ===== ===== ===== =====
<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.
-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:
1997 1996 1995
-------------------- -------------------- --------------------
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 $ 318 12.7% $ 195 13.1% $ 165 10.9%
Real estate -
commercial 565 34.1% 767 34.2% 746 35.1%
Real estate -
residential 198 39.7% 166 38.8% 174 40.7%
Real estate -
construction 62 3.4% 82 3.7% 96 3.0%
Loans to
individuals 126 10.1% 126 10.2% 100 10.3%
Unallocated 1,947 N/A 2,146 N/A 2,174 N/A
----- ----- ----- ----- ----- -----
Total $3,216 100.0% $3,482 100.0% $3,455 100.0%
===== ===== ===== ===== ===== =====
1994 1993
-------------------- --------------------
Percent of Percent of
loans in loans in
category to category to
(in $000) Amount total loans Amount total loans
- --------- ------ ----------- ------ -----------
Commercial &
industrial $ 165 11.2% $ 157 8.6%
Real estate -
commercial 1,440 40.9% 1,986 35.2%
Real estate -
residential 222 36.1% 217 44.6%
Real estate -
construction 45 2.8% 32 3.6%
Loans to
individuals 87 9.0% 126 8.0%
Unallocated 1,744 N/A 1,392 N/A
----- ----- ----- -----
Total $3,703 100.0% $3,910 100.0%
===== ===== ===== =====
<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:
1997 1996 1995
---------------- ---------------- ----------------
Average Average Average Average Average Average
(in $000) Balance Rate Balance Rate Balance Rate
- --------- ------- ------- ------- ------- ------- -------
Demand deposits $ 49,068 0.00% $ 44,426 0.00% $ 39,366 0.00%
NOW deposits 22,560 1.20% 22,544 1.29% 21,621 1.78%
Money market
deposits 27,996 2.74% 27,924 2.75% 26,812 2.91%
Savings deposits 49,999 2.83% 44,040 2.73 41,417 3.02%
Time deposits 68,314 5.40% 66,704 5.37% 61,842 5.37%
------- ---- ------- ---- ------- ----
Total $217,937 2.82% $205,638 2.84% $191,058 3.00%
======= ==== ======= ==== ======= ====
As of December 31, 1997, the Bank had certificates of deposit in
amounts of $100,000 or more aggregating $21.2 million. These certificates of
deposit mature as follows:
Maturity Amount (in $000)
-------- ----------------
3 months or less $10,251
Over 3 months through 6 months 2,826
Over 6 months through 12 months 6,075
Over 12 months 2,032
------
Total $21,184
======
-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,
--------------------------------
1997 1996 1995
---- ---- ----
Return on average total
assets (net income divided
by average total assets) 1.33% 1.31% 1.19%
Return on average
stockholders' equity
(net income divided by
average stockholders'
equity) 16.07% 15.36% 14.41%
Dividend payout ratio
(total declared dividends
per share divided by net
income per share) 24.43% 24.99% 27.86%
Equity to assets (average
stockholders' equity as
a percentage of average
total assets) 8.30% 8.55% 8.24%
-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 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
12/31/97 period period month-end standing period
- --------------------------------------------------------------------------
Federal
Funds
Purchased $ 3,000,000 7.05% $ 3,000,000 $ 55,616 5.95%
Repurchase
Agreements 13,637,063 4.71% 20,135,834 15,743,797 4.78%
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
12/31/96 period period month-end standing period
- --------------------------------------------------------------------------
Federal
Funds
Purchased $ 0 0% $ 0 $ 2,732 6.40%
Repurchase
Agreements 11,454,687 4.45% 14,435,268 11,795,545 4.39%
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%
-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 and the Marlboro
Center Office (1,800 square feet) at 96 Bolton Street, Marlboro,
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 Marlboro office (1,110 square feet) at 500
Boston Post Road, Marlboro, Massachusetts and the Boxboro office (679 square
feet) at 629 Mass Avenue, Boxboro, 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, 1997.
-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 437 as of March 20, 1998.
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 1997 and 1996:
1997 1996
------ ------
First quarter $.068 $ .061
Second quarter .070 .062
Third quarter .072 .064
Fourth quarter .075 .066
----- -----
Total $ .285 $ .253
===== =====
For a discussion of restrictions on the ability of the Bank to pay
dividends to the Company, see footnote 12 on page 21 of the Annual Report to
Shareholders for the year ended December 31, 1997, 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, 1997 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 26 through 29 of the Annual Report to
Shareholders for the year ended December 31, 1997 and is hereby incorporated
by reference.
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, 1997, which represents the excess of
repricing assets versus repricing liabilities, was 3.2% expressed as a
percentage of total assets.
-16-
The following table presents rate-sensitive assets and rate-sensitive
liabilities as of December 31, 1997:
(Dollars in thousands) December 31, 1997
- ---------------------------------------------------------------------------------------------------
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 $ 14,600 $ $ $ $ $ 14,600
Securities 21,252 15,631 25,557 15,097 17,647 95,184
Adjustable-rate loans 53,154 13,662 19,150 22,002 506 108,474
Fixed-rate loans 5,491 3,480 5,489 9,343 9,736 33,539
--------- --------- ---------- ---------- -------- ---------
Total $ 94,497 $ 32,773 $ 50,196 $ 46,442 $ 27,889 $ 251,797
--------- --------- ---------- --------- -------- ---------
RATE-SENSITIVE LIABILITIES
Demand deposits $ $ $ $ $ 55,679 $ 55,679
NOW accounts* 26,744 26,744
Money market accounts 29,057 29,057
Savings accounts 34,814 34,814
Cash management accounts 15,580 15,580
Certificates of deposit 38,904 18,366 5,797 7,789 59 70,915
Short term borrowings 16,637 16,637
--------- --------- ---------- --------- -------- ---------
Total $ 100,178 $ 18,366 $ 5,797 $ 7,789 $ 117,296 $ 249,426
--------- --------- ---------- --------- -------- ---------
Gap $ (5,681) $ 14,407 $ 44,399 $ 38,653 $ (89,407) $ 2,371
========== ========= ========= ========= ======== =========
Cumulative Gap $ (5,681) $ 8,726 $ 53,125 $ 91,778 $ 2,371
========== ========= ========= ========= ========
Gap as a percent of
total assets (2.07%) 5.26% 16.23% 14.13% (32.68%)
Cumulative gap as a
percent of total assets (2.07%) 3.19% 19.42% 33.55% 0.87%
* Cumulative gap as a
percent of total
assets if NOW accounts
are considered
immediately
withdrawable (11.85%) (6.59%) 9.64% 23.77% 0.87%
<FN>
The "adjustable-rate loans" and "fixed-rate loans" figures in the above table
include loans held for sale. For purposes of this table, the Bank's FlexValue
deposit account balances have been included in the "Money market accounts"
category. Whenever possible, maturity dates or contractual repricing dates
were used in the preparation of the above table. In addition to those factors,
certain assumptions are utilized in preparing the table. The Bank's
historical experience over the past ten years, during which time interest
rates have risen and fallen significantly, has shown that savings account
balances, demand deposit balances and NOW 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.
-17-
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 limits on interest rate risk specify that if interest
rates were to shift immediately up or down by 200 basis points, estimated net
interest income for the subsequent twelve months should decline by no more
than $500,000. 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 $517,567
-200 (399,180)
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are included on page
1 and on pages 9 through 25 of the Annual Report to shareholders for the year
ended December 31, 1997 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, 1997 or in any period
subsequent to the most recent financial statements.
-18-
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. 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. 45 Senior Vice Senior Vice President,
Bennett President Vice President,
of Bank Community National Bank
Grace L. Blunt 43 Senior Vice Senior Vice President,
President Vice President, Community
of Bank National Bank, Assistant
Clerk, Community Bancorp,
Inc.
Alfred A. 80 Director of 2000 Retired
Cardoza (1) Company and
Bank
Argeo R. 74 Director of 2000 Retired; formerly
Cellucci (1) Company and President and Treasurer,
Bank Washington Street
Motors, Inc.; President,
Cellucci Hudson Corp.
Antonio 58 Director of 2000 President and Treasurer,
Frias (1) Company and S & F Concrete
Bank Contractors, Inc.;
Secretary/Clerk, Frias
Bros. Service Station
John P. Galvani 41 Senior Vice Senior Vice President,
President Vice President,
of Bank Community National Bank
I. George Gould 81 Director of 1999 Chairman, Gould's, Inc.
Company and
Bank
Horst Huehmer 70 Director of 1998 Retired; formerly
Company and Manager, Hudson Light
Bank and Power Department
-19-
Donald R. 48 Treasurer and 1998 Executive Vice
Hughes, Jr. Clerk of President, Community
Company; Exec. National Bank;
Vice President Treasurer and Clerk,
of Bank; Director Community Bancorp, Inc.
of Company and
Bank
James A. Langway 58 President & 1999 President and CEO,
CEO of Company Community National Bank
and Bank; and Community
Director of Bancorp, Inc.
Company and
Bank
Robert E. Leist 44 Senior Vice Senior Vice President,
President Vice President,
of Bank Community National Bank
Janet A. Lyman 51 Senior Vice Senior Vice President,
President Vice President,
of Bank Community National Bank
Dennis F. 60 Chairman of 2000 President and
Murphy, Jr. (1) the Board, Treasurer, D. F.
Company and Murphy Insurance
Bank Agency, Inc.;
Treasurer, Village
Real Estate
David L. 69 Director of 1999 Chairman of the Board,
Parker (2) Company and Larkin Lumber Co.
Bank
Mark Poplin 74 Director of 1998 President and
Company and Treasurer, Poplin
Bank Supply Co.;
Secretary, Poplin
Furniture Co.
David W. 56 Director of 1998 President & Treasurer,
Webster (2) Company and A. T. Knight Fuel Co.,
Bank Inc.
<FN>
(1) Messrs. Huehmer, Hughes, Poplin and Webster have been nominated for
election at the 1998 Annual Meeting to serve until 2001.
(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.
-20-
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 1997,
1996 and 1995.
Summary Compensation Table
--------------------------
Annual Compensation
---------------------------------------------
(a) (b) (c) (d) (i) (1)
Name and All Other
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
James A. Langway 1997 $205,353 $75,000 $ 8,989
President and CEO 1996 195,574 68,451 8,838
of the Company and 1995 186,261 55,000 2,982
the Bank
Donald R. Hughes, Jr. 1997 116,757 28,605 8,104
Treasurer and Clerk of 1996 111,197 27,244 7,825
Company; Executive Vice 1995 105,902 26,740 2,062
President of the Bank
Richard K. Bennett 1997 85,772 14,581 5,037
Senior Vice President 1996 81,688 13,887 3,999
of the Bank 1995 77,798 13,615 1,335
<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 and
Bennett are participants in the Company's ESOP and 401(k) Plans. Of
the $8,989 reported above for 1997 in column (i) for Mr. Langway,
$3,520 represents Company ESOP contributions, $4,750 represents
Company 401(k) Plan contributions and $719 represents group life
insurance premiums paid by the Company. Of the $8,104 reported above
for 1997 in column (i) for Mr. Hughes, $3,240 represents Company ESOP
contributions, $4,361 represents Company 401(k) Plan contributions and
$504 represents group life insurance premiums paid by the Company. Of
the $5,037 reported above for 1997 in column (i) for Mr. Bennett,
$2,266 represents Company ESOP contributions, $2,663 represents
Company 401(k) Plan contributions and $108 represents group life
insurance premiums paid by the Company.
Compensation of Directors
- -------------------------
The Bank paid its Directors an annual fee of $9,098 in 1997. The
Chairman of the Board was paid $15,164 in 1997. Director fees are paid on a
monthly basis. The Company pays no compensation to its Directors for their
services.
-21-
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 expectancy at the time he
begins receiving payments. During 1997, the Company recorded $47,340 in such
expense.
-22-
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, 1998.
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 12,600 9,886 22,486 .8%
Stock
($2.50 Argeo R. Cellucci 6,728 0 6,728 .2%
par)
Antonio Frias 19,858 0 19,858 .7%
I. George Gould 9,235 108,828 (4) 118,063 4.0%
Horst Huehmer 18,532 4,100 22,632 .8%
Donald R. Hughes, Jr. 2,000 111,859 (4,5) 113,859 3.9%
James A. Langway 91,170 101,746 (4,6,7) 192,916 6.6%
Dennis F. Murphy, Jr. 193,724 250,948 444,672 15.2%
David L. Parker 22,514 21,784 (8) 44,298 1.5%
Mark Poplin 45,428 107,336 152,764 5.2%
David W. Webster 750 76,741 (7) 77,491 2.6%
All directors and
officers of the
Company and Bank
as a group
(20 persons) 423,867 719,799 (4,9) 1,143,666 39.1%
<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 73,075 shares held by the Company's ESOP for which Messrs. Gould,
Hughes and Langway are co-trustees.
(5) Includes 8,784 shares held by the Company's 401(k) plan for which Mr.
Hughes has voting power in certain circumstances.
(6) Includes 15,132 shares held by the Company's 401(k) plan for which Mr.
Langway has voting power in certain circumstances.
-23-
(7) Includes 13,314 shares held in the name of Katherine A. Knight, for
whose estate Mr. Langway and Mr. Webster's wife are co-executors.
(8) Includes 2,000 shares held by the Unitarian Church of Marlboro and Hudson,
MA, for which Mr. Parker is a trustee, and 13,584 shares held in the name
of Arline Parker, for whom Mr. Parker has power of attorney.
(9) Includes 64,563 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, 1998:
Amount and
Title Name and Address Nature of Percent
of of Beneficial Beneficial of
Class Owner Ownership Class
----- ---------------- ---------- -------
Common Stock Dennis F. Murphy, Jr. 444,672 shares 15.2%
($2.50 par) 44 Wilder Road
Bolton, MA 01740
James A. Langway 192,916 shares (1) 6.6%
1143 Grove Street
Framingham, MA 01701
Mark Poplin 152,764 shares 5.2%
108 Barretts Mill Road
Concord, MA 01742
Einar P. Robsham 151,900 shares 5.2%
164 Cochituate Road
Wayland, MA 01778
<FN>
(1) Includes 73,075 shares held by the Company's ESOP for which Mr. Langway
is a trustee, 15,132 shares held by the Company's 401(k) plan for which
Mr. Langway has voting power in certain circumstances, and 13,314 shares
held in the name of Katherine A. Knight, for whose estate Mr. Langway is
a co-executor.
-24-
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"). Entering into the
agreement was intended to implement a decision of the Board of Directors to
expand the Bank's product line by offering insurance products to the public.
The extent and the form of the arrangement between the Bank and Murphy are
still under discussion based on regulatory issues and the volume of sales
which can be reasonably expected. Murphy Insurance Brokerage, Ltd. is a
subsidiary of Murphy Insurance Agency, Inc., which is owned by Dennis F.
Murphy, Jr., Chairman of the Company's Board of Directors. The third-party
arrangement between the Bank and Murphy had no material affect on the
Company's 1997 financial statements or results of operations.
-25-
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, 1997, are hereby incorporated by reference:
Annual Report to
Shareholders
Description page reference
Consolidated balance sheets at
December 31, 1997 and 1996 9
Consolidated statements of income for
the years ended December 31, 1997,
1996 and 1995 10
Consolidated statements of stockholders'
equity for the years ended December 31, 1997,
1996 and 1995 11
Consolidated statements of cash flows
for the years ended December 31, 1997,
1996 and 1995 12 - 13
Notes to consolidated financial statements 14 - 24
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, 1997 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, 1997.
3. Exhibits
--------
See accompanying Exhibit Index.
(b) The Company did not file a Form 8-K during the quarter ended December 31,
1997.
-26-
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. 1997 Annual Report to shareholders
21. Subsidiaries of Company Page 29
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.
-27-
(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.
-28-
SUBSIDIARIES OF COMPANY
-----------------------
1. Community National Bank, a national banking association.
-29-
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, 1998 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, 1998 /s/ James A. Langway
- -------------- ---------------------------------
James A. Langway, President & CEO
Principal Executive Officer
March 20, 1998 /s/ Donald R. Hughes, Jr.
- -------------- ---------------------------------
Donald R. Hughes, Jr., Treasurer & Clerk,
Principal Financial Officer and Principal
Accounting Officer
March 20, 1998 /s/ James A. Langway
- -------------- ---------------------------------
James A. Langway, Director
March 20, 1998 /s/ Donald R. Hughes, Jr.
- -------------- ---------------------------------
Donald R. Hughes, Jr., Director
March 20, 1998 /s/ Alfred A. Cardoza
- -------------- ---------------------------------
Alfred A. Cardoza, Director
March 20, 1998 /s/ I. George Gould
- -------------- ---------------------------------
I. George Gould, Director
March 20, 1998 /s/ Argeo R. Cellucci
- -------------- ---------------------------------
Argeo R. Cellucci, Director
March 20, 1998 /s/ Mark Poplin
- -------------- ---------------------------------
Mark Poplin, Director
-30-
SUPPLEMENTAL INFORMATION
------------------------
Copies of the Notice of Annual Meeting of Shareholders, Proxy
Statement and Proxy For Annual Meeting of Shareholders for the
Registrant's 1997 annual meeting of shareholders, to be held on April 14,
1998, 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.
-31-