CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Six Months Ended June 30, 1998
Commission File Number 0-16435
COMMUNITY BANCORP.
(Exact Name of Registrant as Specified in its Chapter)
Vermont 03-0284070
(State of Incorporation) (IRS Employer Identification Number)
Derby Road, Derby, Vermont 05829
(Address of Principal Executive Offices) (zip code)
Registrant's Telephone Number: (802) 334-7915
Not Applicable
------------------------------------------------------------
Former Name, Former Address and Formal Fiscal Year
(If Changed Since Last Report)
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 for such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes ( X ) No ( )
At June 30, 1998, there were 3,096,641 shares issued of the Corporation's
$2.50 par value common stock, and 3,067,005 shares outstanding.
Total Pages - 22 Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
COMMUNITY BANCORP. AND SUBSIDIARIES
Balance Sheet
(Unaudited) June 30 December 31 June 30
1998 1997 1997
Assets
<S> <C> <C> <C>
Cash and due from banks,
non-interest bearing 4,664,432 10,657,610 4,121,145
Cash and due from banks, interest bearing 6,187,903 0 0
Federal funds sold 3,000,000 3,650,000 0
Total cash and cash equivalents 13,852,335 14,307,610 4,121,145
Securities held-to-maturity (market value
$32,549,812 at 6/30/98, $34,125,823 at
12/31/97, and $38,072,403 at 6/30/97) 32,529,187 34,125,802 39,783,574
Securities available-for-sale 17,151,875 8,039,063 7,966,875
Restricted equity securities 1,141,650 1,099,750 1,099,750
Loans 151,216,726 150,115,852 148,274,710
Allowance for loan losses (1,656,773) (1,502,202) (1,477,985)
Unearned net loan fees (856,900) (866,589) (878,980)
Net loans 148,703,053 147,747,061 145,917,745
Bank premises and equipment, net 3,162,125 3,285,661 3,363,139
Accrued interest receivable 1,616,553 1,460,298 1,640,389
Other real estate owned, net 526,881 1,088,867 862,321
Other assets 2,049,096 1,847,292 1,537,254
Total assets 220,732,755 213,001,404 206,292,192
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Demand, non-interest bearing 20,417,677 20,297,137 18,578,559
NOW and money market accounts 43,607,369 40,562,693 36,632,260
Savings 31,076,430 30,053,422 32,449,124
Time deposits, $100,000 and over 19,622,020 18,182,338 16,733,224
Other time deposits 79,955,239 78,484,811 76,377,176
Total deposits 194,678,735 187,580,401 180,770,343
Short term borrowings 0 0 938,000
Borrowed funds 4,060,000 4,060,000 4,065,000
Accrued interest and other liabilities 913,595 776,646 551,701
Subordinated convertible debentures 51,000 104,000 118,000
Total liabilities 199,703,330 192,521,047 186,443,044
Stockholders' Equity
Common stock - $2.50 par value;
6,000,000 shares authorized and
3,096,641 shares issued at 6/30/98,
3,074,326 issued at 12/31/97, and
3,025,356 issued at 6/30/97 7,741,603 7,685,815 7,563,390
Additional paid-in capital 8,396,006 7,978,435 7,626,641
Retained earnings 5,304,334 5,227,535 5,109,439
Unrealized gain on securities
available-for-sale, net of tax 32,727 33,709 (5,287)
Less: treasury stock, at cost;
29,636 shares at 6/30/98, 29,629 shares
at 12/31/97, and 29,623 shares at 6/30/97 (445,245) (445,137) (445,035)
Total stockholders' equity 21,029,425 20,480,357 19,849,148
Total liabilities and stockholders' equity 220,732,755 213,001,404 206,292,192
</TABLE>
<TABLE>
<CAPTION>
COMMUNITY BANCORP. AND SUBSIDIARIES
Statements of Income
(Unaudited)
For The Second Quarter Ended June 30, 1998 1997 1996
Interest income
<S> <C> <C> <C>
Interest and fees on loans 3,390,922 3,454,297 3,331,846
Interest and dividends on investment securities
U.S. Treasury securities 530,696 524,065 516,227
U.S. Government agencies 20,660 20,839 20,660
States and political subdivisions 148,978 143,179 231,120
Dividends 18,840 17,625 16,597
Interest on BankBoston sweep account 58,969 0 0
Interest on federal funds sold 38,357 11,798 28,312
Total interest income 4,207,422 4,171,803 4,144,762
Interest expense
Interest on deposits 2,001,997 1,865,780 2,085,813
Interest on other borrowed funds 49,443 54,837 2,124
Interest on subordinated debentures 1,590 3,140 6,251
Total interest expense 2,053,030 1,923,757 2,094,188
Net interest income 2,154,392 2,248,046 2,050,574
Provision for loan losses (160,000) (105,000) (122,500)
Net interest income after provision 1,994,392 2,143,046 1,928,074
Other operating income
Trust department income 35,141 28,527 29,793
Service fees 171,032 176,173 163,395
Security gains (losses) 0 0 (1,928)
Other 307,600 421,904 177,556
Total other operating income 513,773 626,604 368,816
Other operating expenses
Salaries and wages 700,956 768,276 658,466
Pension and other employee benefits 177,422 183,159 169,909
Occupancy expenses, net 322,297 309,910 297,559
Trust department expenses 19,399 5,906 4,919
Other 541,167 670,777 504,515
Total other operating expenses 1,761,241 1,938,028 1,635,368
Income before income taxes 746,924 831,622 661,522
Applicable income taxes (credit) 188,982 219,983 148,667
Net Income 557,942 611,639 512,855
Earnings per common share on weighted average 0.18 0.21 0.18
Weighted average number of common shares
Used in computing earnings per share 3,037,797 2,964,565 2,850,511
Dividends per share 0.15 0.14 0.13
All 1996 per share data restated to reflect 5% stock dividend
paid on February 1, 1997.
Per share data for current year to date and all per share data
for 1997 and 1996 restated to reflect a 100% stock dividend
paid on June 1, 1998.
</TABLE>
<TABLE>
<CAPTION>
COMMUNITY BANCORP. AND SUBSIDIARIES
Statements of Income
(Unaudited)
For the Six Months Ended June 30, 1998 1997 1996
Interest income
<S> <C> <C> <C>
Interest and fees on loans 6,869,308 6,778,815 6,564,634
Interest and dividends on investment securities
U.S. Treasury securities 987,892 1,058,564 1,007,963
U.S. Government agencies 41,079 41,566 31,483
States and political subdivisions 292,161 281,784 427,490
Dividends 37,404 34,803 34,415
Interest on BankBoston sweep account 120,657 0 0
Interest on federal funds sold 83,371 16,740 110,913
Total interest income 8,431,872 8,212,272 8,176,898
Interest expense
Interest on deposits 3,943,019 3,747,654 4,170,636
Interest on other borrowed funds 96,243 67,517 4,039
Interest on subordinated debentures 3,818 6,423 11,651
Total interest expense 4,043,080 3,821,594 4,186,326
Net interest income 4,388,792 4,390,678 3,990,572
Provision for loan losses (360,000) (310,000) (160,000)
Net interest income after provision 4,028,792 4,080,678 3,830,572
Other operating income
Trust department income 65,840 56,424 59,070
Service fees 332,543 338,559 274,464
Security gains (losses) 0 0 (1,928)
Other 412,153 518,142 291,219
Total other operating income 810,536 913,125 622,825
Other operating expenses
Salaries and wages 1,408,907 1,397,204 1,298,896
Pension and other employee benefits 351,736 316,490 320,776
Occupancy expenses, net 643,930 600,479 598,676
Trust department expenses 27,416 11,754 7,994
Other 1,138,864 1,141,338 958,164
Total other operating expenses 3,570,853 3,467,265 3,184,506
Income before income taxes 1,268,475 1,526,538 1,268,891
Applicable income taxes (credit) 302,855 394,811 288,817
Net Income 965,620 1,131,727 980,074
Earnings per common share on weighted average 0.32 0.38 0.35
Weighted average number of common shares
Used in computing earnings per share 3,049,672 2,949,261 2,836,781
Book value per share on shares outstanding $6.86 $6.69 $6.38
All 1996 per share data restated to reflect 5% stock dividend
paid on February 1, 1997.
Per share data for current year to date and all per share data
for 1997 and 1996 restated to reflect a 100% stock dividend
paid on June 1, 1998.
</TABLE>
<TABLE>
<CAPTION>
COMMUNITY BANCORP. AND SUBSIDIARIES
Statement of Cash Flows
For the Six Months Ended June 30, 1998 1997 1996
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net Income 965,620 1,131,727 980,074
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 201,563 188,341 187,396
Provisions for possible loan losses 360,000 310,000 160,000
Provisions for deferred taxes (65,717) 39,087 61,587
Securities (gains) losses 0 0 1,928
Loss (gain) on sales of OREO (2,112) (7,729) (8,710)
Subsequent writedowns on OREO 26,592 129,446 12,320
Amortization of bond premium (37,632) 9,591 36,882
Increase (decrease) in taxes payable 66,572 (102,041) (36,770)
(Increase) decrease in interest receivable (156,255) (101,752) (253,447)
(Increase) decrease in other assets (92,747) (212,776) (249,992)
Increase (decrease) in unamortized loan fees (9,689) (25,323) (12,808)
Interest (decrease) in interest payable (7,847) 15,834 (35,495)
Increase (decrease) in accrued expenses (24,182) (70,879) (175,893)
Increase (decrease) in other liabilities 99,885 (18,195) 41,347
Net cash provided by operating activities 1,324,051 1,285,331 708,419
Cash flows from investing activities:
Investments - held to maturity
Maturities and paydowns 7,023,652 2,599,612 4,206,448
Purchases (5,414,330)(4,437,879)(21,093,137)
Investments - available for sale
Sales and maturities 2,000,000 0 8,000,000
Purchases (11,089,375) 0 0
Purchase of restricted equity securities (41,900) (36,700) (23,300)
Investment in limited partnership (40,312) 0 0
Increase in loans, net of payments (1,322,470)(3,449,102) (5,131,819)
Capital expenditures (78,027) (130,121) (220,702)
Recoveries of loans charged off 127,967 73,585 48,088
Costs incurred in acquiring OREO 0 0 0
Proceeds from sales of OREO 425,706 149,838 261,264
Net cash used in investing activities (8,409,089)(5,230,767)(13,953,158)
Cash flows from financing activities:
Net increase in demand deposits,
NOW, money mkt. and savings 4,188,224 (2,344,798) 11,630,808
Net increase in certificates of deposit 2,910,110 (739,335) (935,922)
Net increase (decrease) in borrowed funds 0 3,338,000 0
Payments to acquire treasury stock (108) (4,822) (82)
Dividends paid (468,463) (427,862) (381,146)
Net cash provided by financing activities 6,629,763 (178,817) 10,313,658
Net increase in cash and cash equivalents (455,275)(4,124,253) (2,931,081)
Cash and cash equivalents:
Beginning 14,307,610 8,245,398 8,893,955
Ending 13,852,335 4,121,145 5,962,874
Supplemental schedule of cash paid during the year
Interest paid 4,050,132 1,907,923 4,210,170
Income taxes paid 302,000 457,765 264,000
Supplemental schedule of noncash investing
and financing activities:
Net change in securities valuation ($1,488) ($20,076) ($82,849)
OREO acquired in settlements of loans $126,466 $614,108 $384,779
Debentures converted to common stock $53,001 $52,000 $57,000
5% Stock dividend at market value $0 $1,294,006 $0
100% Stock dividend at par value $3,823,576 $0 $0
Dividends paid
Dividends payable $908,153 $817,997 $695,906
Dividends reinvested ($439,690) ($390,135) ($314,760)
$468,463 $427,862 $381,146
</TABLE>
<TABLE>
AVERAGE BALANCES AND INTEREST RATES
The table below presents the following information:
Average earning assets (including non-accrual loans)
Average interest bearing liabilities supporting earning assets
Interest income and interest expense as a rate/yield
<CAPTION>
For the First Six Months Ended:
1998 1997
Average Income/ Rate/ Average Income/ Rate/
Balance Expense Yield Balance Expense Yield
EARNING ASSETS
<S> <C> <C> <C> <C> <C> <C>
Loans (gross) 149,882,090 6,869,309 9.24% 146,254,287 6,778,815 9.35%
Taxable Investment
Securities 34,962,181 1,028,971 5.93% 37,211,050 1,100,130 5.96%
Tax Exempt Investment
Securities(1) 12,008,710 436,388 7.33% 10,696,718 420,555 7.93%
Federal Funds Sold 3,250,000 83,371 5.17% 667,624 16,740 5.06%
BankBoston sweep
account(2) 5,558,029 120,657 4.38% N/A N/A N/A
Other Securities(3) 1,265,026 41,549 6.62% 1,232,345 39,021 6.39%
TOTAL 206,926,036 8,580,245 8.36% 196,062,024 8,355,261 8.59%
INTEREST BEARING LIABILITIES
Savings Deposits 30,431,567 413,532 2.74% 32,089,159 436,737 2.74%
NOW & Money Market
Funds 42,715,557 774,187 3.65% 38,988,639 690,185 3.57%
Time Deposits 98,535,190 2,753,108 5.63% 94,073,070 2,620,731 5.62%
Other Borrowed Funds 4,060,000 96,244 4.78% 2,371,452 67,517 5.74%
Repurchase
Agreements(4) 17,686 395 4.50% N/A N/A N/A
Subordinated
Debenture 78,000 3,818 9.87% 133,000 6,423 9.74%
TOTAL 175,838,000 4,041,284 4.63% 167,655,320 3,821,593 4.60%
Net Interest Income 4,538,961 4,533,668
Net Interest Spread(5) 3.73% 3.99%
Interest Differential(6) 4.42% 4.66%
<FN>
<F01> Income on investment securities of state and political subdivisions
is stated on a fully taxable basis (assuming a 34 percent tax rate).
<F02> BankBoston sweep account is a new interest bearing account effective
for the 1998 calendar year.
<F03> Included in other securities are taxable industrial development bonds
(VIDA), with income of approximately $4,145 for 1998 and $4,218 for 1997.
<F04> Repurchase agreements were established during the second quarter of 1998.
<F05> Net interest Spread is the difference between the yield on earning assets
and the rate paid on interest bearing liabilities.
<F06> Interest differential is net interest income divided by average earning
assets.
</TABLE>
<TABLE>
CHANGES IN INTEREST INCOME AND INTEREST EXPENSE
The following table summarizes the variances in income
for the first six months of 1998 and 1997 resulting from
volume changes in assets and liabilities and fluctuations
in rates earned and paid.
<CAPTION>
Variance Variance
RATE / VOLUME Due to Due to Total
Rate(1) Volume(1) Variance
INCOME EARNING ASSETS
<S> <C> <C> <C>
Loans (78,120) 168,614 90,494
Taxable Investment Securities (4,973) (66,186) (71,159)
Tax Exempt Investment Securities(2) (35,893) 51,726 15,833
Federal Funds Sold 1,701 64,930 66,631
BankBoston sweep account(3) N/A N/A N/A
Other Securities 1,490 1,038 2,528
Total Interest Earnings (115,795) 220,122 104,327
INTEREST BEARING LIABILITIES
Savings Deposits (680) (22,525) (23,205)
NOW & Money Market Funds 17,844 66,158 84,002
Time Deposits 7,724 124,653 132,377
Other Borrowed Funds (19,481) 48,208 28,727
Repurchase Agreements(3) N/A
Subordinated Debentures 87 (2,692) (2,605)
Total Interest Expense 5,494 213,802 219,296
<FN>
<F01> Items which have shown a year-to-year increase in volume have
variances allocated as follows:
Variance due to rate = Change in rate x new volume
Variance due to volume = Change in volume x old rate
Items which have shown a year-to-year decrease in volume have
variances allocated as follows:
Variance due to rate = Change in rate x old volume
Variances due to volume = Change in volume x new rate
<F02> Income on tax exempt securities is stated on a fully taxable basis.
The assumed rate is 34%.
<F03> BankBoston sweep accounts and repurchase agreements were established
during the 1998 calendar, therefore, no variances are available.
</TABLE>
<TABLE>
COMMUNITY BANCORP.
EARNINGS PER SHARE
<CAPTION>
For The Second Quarter Ended June 30 1998 1997 1996
<S> <C> <C> <C>
Net Income 557,942 611,639 512,855
Average Number of Common Shares Outstanding 3,037,797 2,964,565 2,850,511
Earnings Per Common Share 0.18 0.21 0.18
<CAPTION>
For The Six Months Ended June 30 1998 1997 1996
Net Income 965,620 1,131,727 980,074
Average Number of Common Shares Outstanding 3,049,672 2,949,261 2,836,781
Earnings Per Common Share 0.32 0.38 0.35
</TABLE>
PART I.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE RESULTS OF OPERATIONS
For the Six Months Ended June 30, 1998
Community Bancorp. is a bank holding company whose subsidiaries include
Community National Bank and Liberty Savings Bank. On December 31, 1997,
Community Bancorp. acquired all of the outstanding stock and assets of Liberty
Savings Bank, a New Hampshire guaranty savings bank. Currently this bank does
not have any offices or deposit taking authority, and shares the mailing
address of Community Bancorp. Once a suitable location is found for Liberty
Savings Bank, this bank will initially operate as a lending facility, with
the intent to take deposits and operate as a full service bank sometime in the
future. Management is working with the board of directors to find a suitable
location in the northern part of New Hampshire for this endeavor. Community
National Bank has a small customer base in the state of New Hampshire and
hopes to broaden its base through Liberty Savings Bank. Most of the Bancorp's
business is conducted through Community National Bank, therefore, the following
narrative is based primarily on this Bank's operations. The Balance Sheet and
Statements of Income preceding this section are consolidated figures for
Community Bancorp. and subsidiaries ("Company"), and can be used in
conjunction with the other reports following them to provide a more detailed
comparison of the information disclosed in the following narrative.
LIQUIDITY
Liquidity management refers to the ability of the Company to adequately
cover fluctuations in assets and liabilities. Meeting loan demand (assets)
and covering the withdrawal of deposit funds (liabilities) are two key
components of the liquidity management process. The repayment of loans and
growth in deposits are two of the major sources of liquidity. Our time
deposits greater than $100,000 increased $2.9 million or 17.3% for the first
six months of 1998 compared to 1997 to a balance of $19.6 million. Other time
deposits increased from $76.4 million at the end of the first six months of
1997 to $80 million at the end of the first six months of 1998, an increase
of $3.6 million or 4.7%. A review of these deposits, primarily the time
deposits over $100,000 indicates that they are primarily generated locally
and regionally and are established customers of the Company. The Company has
no brokered deposits. NOW and money market accounts increased $7 million, or
by 19%, from $36.6 million for the first six months of 1997 to $43.6 million
for the first six months of 1998. Savings accounts decreased $1.4 million to
end the first six months of 1998 at $31 million compared to $32.4 million a
year ago. Our gross loan portfolio increased from $148.3 million for the
first six months of 1997 to $151.2 million at the end of the first six months
of 1998, or 2%. Of this total portfolio of $151.2 million, $81.9 million are
scheduled to reprice or mature within one year, compared to $80.3 million a
year ago. Federal funds were sold at the end of the first six months of 1998
totaling $3 million compared to a purchase of $938 thousand for the same time
period a year ago. At the end of the first six months of 1998, the Company
held in it's investment portfolio treasuries classified as "Available-for-
Sale" at a market price of $17.2 million, compared to almost $8 million for
the same period in 1997. In terms of liquidity, these securities are
considered short term, thereby increasing the portfolio of liquid assets.
Securities classified as "Restricted Equity Securities" are made up of
equity securities the Company is required to maintain in the form of Federal
Home Loan Bank of Boston (FHLB) and Federal Reserve stock. As of June 30,
1998, these securities totaled $1.14 million compared to $1.1 million for
last year's six month period. The Company also has access to a total of
$102.5 million in liquid assets consisting of two credit lines with a total
available of $6.1 million, and approximately $96.4 million of borrowing
capacity through FHLB. Of this total, approximately $4 million is currently
advanced against our credit lines at FHLB. Additionally, the Company has in
it's investment portfolio securities classified as "Held-to-Maturity" with a
book value of $32.53 million, of which $4 million are pledged, netting a
balance of $28.53 million, with a net market value of $28.55 million.
RESULTS OF OPERATIONS
Net income for the second quarter ended June 30, 1998 was $557,942,
representing a decrease of 8.78%, and an increase of 8.79% respectively, over
the net income figures of $611,639 for the second quarter ended June 30, 1997,
and $512,855 for the same period ended in 1996. The results of this are
earnings per share of $0.18 for the second quarter of 1998 versus $0.21 for
the second quarter of 1997 and $0.18 for the second quarter of 1996. A two-
for-one stock split was declared, to be accomplished by a 100% stock dividend,
payable June 1, 1998, to shareholders of record as of May 15, 1998. This
transaction was contingent upon the approval by the Company's shareholders
of a proposal to increase the number of shares the Company may issue. This
proposal was voted on and passed at the annual shareholders meeting held May 5,
1998. As a result of the stock split, all per share data has been restated
for all periods including the first six months of 1998. Prior to the stock
split, the Board of Directors declared a cash dividend of $0.30 per share
payable on May 1, 1998, to shareholders of record as of April 15, 1998. Net
income for the first six months of 1998 was $965,620
compared to $1.13 million for the first six months
GRAPHICS of 1997, and $980,074 for the same period in 1996,
representing a decrease of 14.7% for 1998 versus
1997, and an increase of 15.5% for 1997 versus 1996.
Earnings per share for the first six months were
$0.32 for 1998, $0.38 for 1997, and $0.35 for 1996. The second quarter of
1998 was not as profitable as 1997, and only slightly better than 1996. Net
income for the first six months of 1998 was less than both comparison periods.
Contributing factors in both the second quarter and six months comparison
periods were increases in the provisions for loan losses, as well as trust
expenses.
Net interest income, the difference between interest income and expense,
represents the largest portion of the Company's earnings, and is affected by
the volume, mix, rate sensitivity of earning assets as well as interest
bearing liabilities, market interest rates and the amount of non-interest
bearing funds which support earning assets.
Net interest income for the second quarter comparison period started at
$2.05 million for 1996 and increased to $2.25 million for 1997, and then
decreased to $2.15 million for 1998, resulting in an increase of 9.6% for
1997 versus 1996, and a decrease of 4.2% for 1998 versus 1997. Total interest
income for the second quarter of 1998 increased slightly compared to 1997,
with an increase of $35,619 or .85% and increased by $27,041 or .65% for the
second quarter of 1997 compared to 1996. Interest expense decreased for the
second quarter of 1997 compared to the second quarter of 1996 by $170,431 or
8.14%, while an increase of $129,273 or 6.72% was recognized for 1998 versus
1997. Net interest income for the first six months started at $4 million for
1996 and increased 10% to $4.4 million for 1997, and ended the first six
months of 1998 at $4.39 million, a decrease of $1,886 or .04%. Total interest
income for the first six months increased $35,374 or .43% for 1997 versus
1996, and an increase of $219,600 or 2.67% is noted for 1998 versus 1997.
Total interest expense decreased $364,732 or 8.7% for the first six months of
1997 compared to 1996 while an increase of $221,486 or 5.8% is noted for the
first six months of 1998 versus 1997. Respectively, the decrease and increase
for 1997 versus 1996, and 1998 versus 1997 were contributing factors to the
favorable increase and decrease in net income. A review of the six month
figures for interest earned on loans, the major source of interest income,
reveals an increase of 3.3% for 1997 compared to 1996 and an increase of 1.3%
for 1998 compared to 1997, while interest paid on deposits, the major source
of interest expense, shows a decrease of 10.2% and an increase of 5.2%,
respectively. The result is a tax equivalent spread for the first six months
equaling 3.7% for 1998, versus 4% for 1997 and 3.7% for 1996.
The following paragraphs are comparisons of average balances and the
respective average yield. Reference can be made to the tables labeled
"Average Balances and Interest Rates" and "Changes in Interest Income and
Interest Expense" for a more detailed look at these variances. Keep in mind
that income on tax exempt securities is stated at the tax equivalent yield,
therefore, for these two tables the interest figures presented for these
securities are higher than those presented on the consolidated statement of
income for the six months ended 1998, 1997, and 1996.
The average volume of loans increased by $3.6 million or 2.5%, while the
yield on those loans decreased from 9.35% for the first six months of 1997
to 9.24% for the first six months of 1998, a decrease of 11 basis points.
Income from loans for the first six months of 1998 increased to $6.87 million
or by 1.3% compared to $6.78 million for the same period in 1997.
The average volume of taxable investments decreased to just under $35
million or by 6%, and the yield on these investments for the first six
months of 1998 fell by 3 basis points to end the six month comparison period
at 5.93% versus 5.96% a year ago. Of this total taxable investment of
approximately $35 million, approximately $17 million are investments
classified as available-for-sale, with the remaining $18 million classified
as held-to-maturity. Income for the first six months decreased in 1998
compared to 1997 by $71,159 to a reported income figure of $1.03 million
versus $1.1 million a year ago.
An increase is noted in the average volume of tax-exempt investments
reported at $10.7 million for the first six months of 1997 versus $12 million
for the same period in 1998, an increase of 12.3%. All of these investments
are classified as held-to-maturity. Income on these investments increased as
well from $420,555 to $436,388 for the first six months of 1997 and 1998
respectively. The tax equivalent yield for the first six months of 1998
decreased 60 basis points to a reported 7.33% compared to 7.93% for the same
period in 1997.
Other securities ended the six month period in 1998 at an average volume
of $1.27 million, resulting in a 2.7% increase compared to the same period
last year. Of this total, $1.1 million are equity securities and, under the
guidelines, are classified as available-for-sale with the remaining $150
thousand classified as held-to-maturity. Income increased slightly for 1998
compared to 1997, with reported figures of $41,549 and $39,021, respectively.
The Company currently has no investments classified as trading securities,
and due to the guidelines of its investment policy, does not intend to carry
any of these securities. The yield on treasuries remains above the yield on
other short term investments such as federal funds, therefore, the Company
continues to invest more in these higher yielding treasuries.
The average volume of federal funds sold increased from $667,624 to $3.3
million for the comparison periods, an increase of $2.6 million. Interest
income on federal funds sold followed suit increasing to $83,371 with an
average yield of 5.17% for the first six months of 1998, compared to income
of $16,740 with an average yield of 5.06% for the first six months of 1997,
an increase in income of $66,631, and an increase in yield of 11 basis points.
Another form of earning assets has been added to our portfolio in the form
of a sweep account through BankBoston. This account was set up during the
first six months of 1998, and currently maintains an average volume of $5.6
million with an average yield of 4.38%.
In total, our average earning assets increased to $206.9 million or by
5.5% during the first six months of 1998, compared to the same period in
1997, while the average yield on those earning assets decreased by 23 basis
points to end the six month period in 1998 at 8.36% compared to 8.59% for the
same period last year.
A decrease of $1.7 million is noted in the average volume of savings
deposits, with reported first six months ending figures of $30.4 million for
1998 versus $32.1 million for 1997. Interest expense associated with savings
accounts decreased from $436,737 for the first six months of 1997 to $413,532
for the same period in 1998 while the yield remained at an average rate of
2.74%.
An increase of $3.7 million is reported in the average volume of NOW &
money market funds, which ended the first six months of 1998 at an average
volume of $42.7 million compared to an average volume as of June 30, 1997
of almost $39 million. Interest expense on these funds increased to $774,187
with an average yield of 3.65% for the first six months of 1998 compared to
$690,185 with an average yield of 3.57% for the first six months of 1997.
The average volume of time deposits increased from $94 million for the
first six months of 1997 to $98.5 million for the same time period in 1998,
an increase of $4.5 million or 4.74%. Interest expense on time deposits
increased to $2.75 million with an average yield of 5.63% for the first six
months of 1998, compared to $2.62 million with an average yield of 5.62% for
the same time period in 1997, an increase of $132,377 or 5.05%.
Other borrowed funds increased to an average volume of $4.1 million with
an average yield of 4.78%, resulting in an increase in volume of $1.7 million
with a decrease in yield of 96 basis points.
A repurchase agreement was established during the second quarter of 1998
with a year to date average volume of $17,686, and a yield of 4.50%. This
account was set up with our business customers in mind, and currently serves
one customer, with other agreements pending.
Subordinated debentures continued to decrease in the first half of 1998
to end the six month period at an average volume of $78,000 with a yield of
9.87%. Redemption activity was more frequent for the 9% debentures compared
to the 11% debentures for the calendar years 1994 - 1996, but, because the
redemption period for the 11% debentures has now begun, an increase in
redemption activity is noted for these debentures as well. Actual figures
show balances at the end of the first six months of 1998 of $24,000 for 9%
debentures, and $27,000 for 11% debentures. The redemption period refers to
the period of time prior to maturity in which the redemption price is greater.
The redemption period for the 9% debentures is now in its final phase. The
redemption prices and time periods for the respective debentures are as
follows:
<TABLE>
<CAPTION>
11% Debentures
<S> <C>
August 1, 1996 - July 31, 1998 104%
August 1, 1998 - July 31, 2000 103%
August 1, 2000 - July 31, 2002 102%
August 1, 2002 - July 31, 2004 101%
<CAPTION>
9% Debentures
August 1, 1996 - July 31, 1998 101%
</TABLE>
In summary, the tax equivalent net interest
income increased from $4.53 million for the first
six months of 1997 to $4.54 million for the first
six months of 1998, an increase of .12%. The net
interest spread as defined on the "Average Balances
and Interest Rates" report, was 3.73% for the first GRAPHICS
six months of 1998, compared to 3.99% for the same
period in 1997. This 23 basis point decrease in
yield on assets compared to the 3 basis point
increase in the average rate paid on interest earning
liabilities, created the 26 basis points decrease in
net interest spread.
ALLOWANCE FOR POSSIBLE LOSSES ON LOANS
Management follows strict underwriting guidelines, and has established
a thorough loan-by-loan review policy. These measures help to insure the
adequacy of the loan loss coverage. An ongoing review of the loan portfolio
is conducted by the Executive Officers and the Board of Directors, which
meets to discuss, among other matters, potential exposures. Factors
considered are each borrower's financial condition, the industry or sector
for the economy in which the borrower operates, and overall economic
conditions. Existing or potential problems are noted and addressed by senior
management in order to assess the risk of probable loss or delinquency. A
variety of loans are reviewed periodically by an independent firm in order to
assure accuracy and compliance with various policies and procedures set by
the regulatory authorities. The Company also employs a Credit Administration
Officer whose duties include, among others, a review of the loan portfolio
including delinquent and non-performing loans.
Specific Allocations are made in situations management feels are at a
greater risk for loss. A quarterly review of the Qualitative Factors, which
among others are "Levels of, and Trends in, Delinquencies and Non-Accruals"
and "National and Local Economic Trends and Conditions", helps to ensure that
areas with potential risk are noted and coverage increased or decreased to
reflect the trends in delinquencies and non-accruals. Residential first
mortgage loans make up the largest part of the loan portfolio and have the
lowest historical loss ratio which helps to alleviate the overall risk.
The valuation allowance for loan losses of $1.66 million as of June 30,
1998 constitutes 1.1% of the total gross loan portfolio, compared to $1.48
million or 1% for the same period in 1997. In management's opinion, this is
adequate and reasonable, particularly in view of the fact that as of June 30,
1998, $122.3 million of the total loan portfolio, or 81% consists of real
estate mortgage loans; and of this total, $98.3 million or 65% constitute one
to four family residential mortgage loans. Figures for the same period a year
ago are $120.1 million in real estate mortgage loans, or 81%, with a one to
four family mortgage loan portfolio of $96.3 million or 65%. This large loan
volume together with the low historical loan loss experience help to support
our basis for loan loss coverage. Furthermore, if the eligible loan portfolio
base were reduced by the aggregate of the residential mortgage loan sector of
the portfolio, the valuation allowance for loan losses of $1.66 million would
constitute 3.14% of the eligible loans, compared to 2.84% a year ago. In
management's opinion, a loan portfolio consisting of 81% in residential and
commercial real estate secured mortgage loans is by far more stable and less
vulnerable than a portfolio with a higher concentration of unsecured
commercial and industrial loans or personal loans.
In May, 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." The Company adopted this new rule effective for the
1995 calendar year as required. This statement allows the Company to classify
its in-substance foreclosures as loans and disclose them as impaired loans, as
long as regulatory guidelines are followed. Loans will generally be valued at
the lower of either the present value of expected future cash flows discounted
at the loan's effective interest rate or at the loan's observable market price
or the fair value of the collateral if the loan is collateral dependent. This
new rule was immaterial upon implementation, and continues to have no signif-
icant effect on the financial position or results of operation of the Corpora-
tion as of the date of this report.
Non-Performing assets for the company are made up of three different types
of loans, "90 Days or More Past Due", "Other Real Estate Owned" (OREO), and
"Non-Accruing Loans". A comparison of these non-performing assets for 1998
and 1997 reveals an increase in non-accruing loans of $859,045 or 66.5%, and
a decrease of $335,440 or 38.9% in our OREO portfolio as well as a decrease
in loans 90 days or more past due of $38,912 or 8.7%. The portfolio of non-
accruing loans which make up the biggest portion of the non-performing assets,
consists of $1.86 million or 88.5% of real estate secured mortgage loans for
the first six months of 1998, compared to $1.12 million or 89.1% for the same
period in 1997.
<TABLE>
<CAPTION>
Non-performing assets as of June 30, 1998 and 1997 were made up of the
following:
1998 1997
<S> <C> <C>
Non-Accruing loans $2,100,679 $1,261,634
Loans past due 90 day or more and still accruing 408,176 447,088
Other real estate owned 526,881 862,321
Total $3,035,736 $2,571,043
</TABLE>
GRAPHICS GRAPHICS
These totals of $3.04 million for 1998 and $2.57 million for 1997 equal
2.0% and 1.7%, respectively, of total gross loans, as well as 1.45% and 1.30%,
respectively of total assets. As of June 30, 1998, our reserve coverage of
non-performing assets was 55% versus 58% a year ago.
Other real estate owned is made up of property that the Company owns in
lieu of foreclosure or through normal foreclosure proceedings, and property
that the Company does not hold title to but is in actual control of, known as
in-substance foreclosure. The value of the property is determined prior to
transferring the balance to other real estate owned. The balance transferred
to OREO is the lesser of the appraised value of the property, or book value
of the loan. A write-down may be deemed necessary to bring the book value of
the loan equal to the appraised value. Appraisals are then done periodically
thereafter charging any additional write-downs to the appropriate expense
account.
Our current portfolio of other real estate owned totals $526,881. Eight
properties were obtained through the normal foreclosure process, and two
properties were deeded in lieu of foreclosure. All of our properties are
located in Vermont and consist of the following; land in Jay; a single family
residence in Barton and one in Newport; three commercial condominium units in
Newport; an apartment building in Newport Center and one in Orleans; a
commercial building in Newport; and a commercial building in Derby. The
Company is actively attempting to sell all of the other real estate owned,
and expects no material loss on any of these properties. Currently, the
Company has a purchase and sale contract on one of the commercial condominium
units in Newport. Other real estate owned is by definition a non-earning
asset, and as such has a negative impact on the Company's earnings.
OTHER OPERATING INCOME AND EXPENSES
Total other operating income for the second quarter of 1998 was $513,773
compared to $626,604 for the second quarter of 1997, and $368,816 for the
second quarter of 1996, a decrease of $112,831 or 18% for 1998 versus 1997,
and an increase of $257,788 or 70% for 1997 versus 1996. Other income
reports the biggest decrease for 1998 versus 1997 at a reported $114,304
decrease. A gain from the sale of inventory associated with an OREO property
was recognized during the second quarter of 1997, contributing immensely to
the increase for 1997 versus 1996, and the decrease for 1998 versus 1997.
An increase in income from sold loans for the second quarter of 1998 helped
to offset a portion of this decrease in other income. Service fees decreased
$5,141 or by 3% for 1998 versus 1997, while an increase of $12,778 or 7.8% is
noted for 1997 versus 1996. Trust department income increased $6,614 or by
23.2% for the second quarter of 1998 versus 1997, while a decrease of 4.3% is
noted for the second quarter of 1997 compared to 1996. Total other operating
income for the first six months of 1998 ended at $810,536 compared to $913,125
for the same period in 1997 and $622,825 for 1996. The results are a decrease
of $102,589 or 11.2% for 1998 versus 1997 and an increase of $290,300 or
46.6%, for 1997 versus 1996. Again, other income showed the biggest decrease
reported at $105,985 or 20.5% for 1998 versus 1997 with an increase of
$226,923 or 77.9% for 1997 versus 1996. Service fees reported a decrease
in the six month comparison figure for 1998 versus 1997, with a figure of
$332,543 for the first six months of 1998 compared to $338,559 for the same
period in 1997, while an increase is reported for the same time periods of
1997 versus 1996 amounting to $64,095 in additional income. The manner in
which fees are assessed was changed in 1997, helping to create this increase
in other income.
Total other operating expenses for the second quarter of 1998 was $1.76
million compared to $1.94 million for 1997, and $1.64 million for 1996
resulting in a decrease of 9% for 1998 versus 1997, and an increase of 18.5%
for 1997 versus 1996. Salaries, the largest portion of other operating
expenses, showed a decrease of $67,320, or 8.8% for 1998 versus 1997, and an
increase of $109,810, or 16.7% for 1997 versus 1996. Other expenses reported
the biggest decrease for 1998 versus 1997 totaling $129,610 or 19.3%, while
in the comparison of 1997 versus 1996, it reported the biggest increase of
$166,262, or 33%. A major factor for the decrease for 1998 versus 1997, and
the increase for 1997 versus 1996 was a write-down of $119,000 on an OREO
property during the second quarter of 1997. Total operating expense for the
six month comparison periods increased from $3.2 million for 1996 to $3.5
million for 1997 and then increased to $3.6 million for 1998, resulting in
increases of 8.9% for 1997 versus 1996 and 3% for 1998 versus 1997. Other
expense reported the only decrease for 1998 versus 1997, while it again topped
the list of increases for 1997 versus 1996 due in part to the write-down
mentioned above as well as an increase in the loss on a limited partnership
that Community National Bank is involved in. Occupancy expenses reported the
biggest increase at $43,451, or 7.24% for 1998 versus 1997, while it reported
the smallest increase of $1,803, or .3% for 1997 versus 1996. The increase in
1998 is due in part to an increase in the expense for depreciation and taxes
on bank property. Pension and other employee benefits notes the next biggest
increase for 1998 versus 1997, while the 1997 versus 1996 comparison shows
the only decrease, beginning at a figure of $320,776 for the first six months
of 1996, decreasing to $316,490 for the first six months of 1997, and then
increased $35,246 to end at an expense figure of $351,736 as of June 30, 1998.
An increase in medical claims is a key reason for this increase in 1998.
All components of other operating expenses are monitored by management,
however, a quarterly review is performed on crucial components to assure that
the accruals for these expenses are accurate. This helps alleviate the need
to make drastic adjustments to these accounts that in turn effect the net
income of the company.
APPLICABLE INCOME TAXES
Income before taxes increased from $661,522 for the second quarter of 1996
to $831,622 for the second quarter of 1997, and then decreased to $746,924 for
the second quarter of 1998, an increase of $170,100 or 25.7% for 1997 versus
1996, and a decrease of $84,698 or 10.2% for 1998 versus 1997. As a result,
provisions for income taxes for the second quarter of 1997 increased $71,316
compared to the same period for 1996, and decreased $31,001 for the second
quarter of 1998 compared to the second quarter of 1997, ending the second
quarter period of 1998 at $188,982. Income before taxes for the first six
months increased from $1.3 million for 1996 to $1.5 million for 1997, and then
decreased to $1.3 million for the six months ended June 30, 1998, with income
taxes calculated at $288,817, $394,811, and $302,855, respectively.
EFFECTS OF INFLATION
Rates of inflation affect the reported financial condition and results
of operations of all industries, including the banking industry. The effect
of monetary inflation is generally magnified in bank financial and operating
statements. As costs and prices rise during periods of monetary inflation,
cash and credit demands of individuals and businesses increase, and the
purchasing power of net monetary assets declines. The Corporation depends
primarily on a strong net interest income to enable their purchasing power
to remain aggressive.
FINANCIAL CONDITION
The Financial Condition of the Corporation should be examined in terms and
trends in sources and uses of funds. The table entitled "Average Balances and
Interest Rates" is a comparison of daily average balances and is indicative of
how sources and uses of funds have been managed. Reference to this table can
once again be made to follow the comparative figures in the paragraphs below.
Average earning assets grew by 5.5% in the first six months of 1998 as
compared to the same period in 1997 to an average volume of $206.9 million.
Loans, which totaled $149.9 million in 1998 and $146.3 million in 1997,
comprised 72.4% and 74.6% respectively, of our earning assets with the average
volume of loans increasing $3.6 million or 2.5% in the first six months of
1998, compared to the same period in 1997. On June 30, 1998, residential
real estate mortgages made up 65% of our portfolio, commercial loans made
up 23% and personal loans made up 12%, compared to 65%, 22%, and 13% respec-
tively, in 1997.
Taxable investments made up 17% of our average earning assets in the first
six months of 1998 compared to 19% in 1997 to end the period at an average
volume of almost $35 million.
Tax-exempt investments of $12 million made up 5.8% of our average earning
assets in the first six months of 1998, compared to $10.7 million or 5.5% in
1997.
Federal funds sold, which had an average volume of $3.3 million, made up
1.6% of our earning assets in the first six months of 1998, compared to an
average volume of $667,624 or .34% of earning assets for the same period in
1997. BankBoston sweep account comprised 2.7% of our earning assets, and
ended the first six months of 1998 at an average volume of $5.6 million.
And ending the list of earning assets, other securities increased to $1.27
million making up .61% in 1998 compared to $1.23 million comprising .62%
in 1997.
Historically, the Company has funded its growth by steady increases in its
core deposits. The Company has no brokered deposits as mentioned earlier, nor
does it rely on large certificates or other forms of volatile deposits to fund
its growth in earning assets. As interest rates decline, there is a shift to
savings and money market accounts, as customers await an opportunity to rein-
vest at higher rates. Conversely as rates increase, funds shift from savings
and money market accounts to certificates of deposit to lock in higher yields.
Currently, rates on CD's are slightly higher than they were last year at this
time, and the Company is experiencing a shift into these deposits. Time
deposits increased approximately 4.7% to an average volume of $98.5 million,
accounting for 56% of the total interest bearing accounts for the first six
months of 1998, compared to $94.1 million in average volume and 56.1% of total
interest bearing accounts for the first six months of 1997.
Savings accounts decreased 5.2% to an average volume of $30.4 million
accounting for 17.3% of the total interest bearing accounts for the first
six months of 1998, compared to an average volume of $32.1 million and 19%
of total interest bearing accounts for the first six months of 1997.
An increase of $3.7 million is noted in NOW and money market funds
with an average volume of $42.7 million reported at the end of the first
six months of 1998 compared to approximately $39 million at the end of the
first six months of 1997. These volumes accounted for 24.3% and 23.3%
respectively, of the total interest bearing liability accounts.
Other borrowed funds accounts for 2.3% of total interest bearing
liabilities for the first six months of 1998 with an average volume of
$4.1 million. Repurchase agreements makes up the least at an average
balance as of June 30, 1998 of $17,686, comprising .01% of total interest
bearing liabilities, while subordinated debentures ends the list with an
average volume of $78,000 comprising .04% compared to $133,000 comprising
.08% a year ago.
CAPITAL RESOURCES
The Corporation's stockholders' equity, which started the year at
$20,480,357, was increased through earnings of $965,620 and sales of common
stock of $492,691 through dividend reinvestment and debenture conversions.
It was decreased by dividends of $908,153, purchase of treasury stock of $108
and adjustment of $982 for valuation of allowance for securities to end the
first six months of 1998 at $21,029,425 with a restated book value of $6.86
per share. All stockholders'equity is unrestricted. Additionally, it is
noted that the net unrealized gain on valuation allowance for securities has
decreased since the beginning of the year. A review of this activity shows
that as the maturity date of the investments gets closer, the market price
becomes favorably better, therefore, material loss is greatly reduced.
The Company is required to maintain minimum amounts of capital to "risk
weighted" assets, as defined by the banking regulators. The minimum
requirements for Tier I and Total Capital are 4% and 8%, respectively. As of
June 30, 1998, the Company continued to maintain ratios far above the minimum
requirements with reported ratios of approximately 19% for Tier I and 20% for
Total Capital.
The Corporation intends to continue the Company's past policy of
maintaining a strong capital resource position to support its asset size
and level of operations. Consistent with that policy, management will
continue to anticipate the Corporation's future capital needs.
From time to time the Corporation may make contributions to the capital
of its subsidiaries, Community National Bank and Liberty Savings Bank. At
present, regulatory authorities have made no demand on the Corporation to make
additional capital contributions to the Company's capital.
OTHER MATTERS
The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the
year 2000, which could result in miscalculations or system failures. Based
on preliminary information, costs of addressing potential problems are not
currently expected to have a material adverse impact on the Company's
financial position, results of operations or cash flows in future periods.
However, if the Company, its customers or vendors are unable to resolve such
processing issues in a timely manner, it could result in a material financial
risk. Accordingly, the Company plans to devote the necessary resources to
resolve all significant year 2000 issues in a timely manner.
PART II.
Item 1
Legal Proceedings
Community National Bank is currently involved in a lawsuit against the
State of Vermont. The issue involves OREO property that is on "filled land"
on the shores of Lake Memphremagog in the City of Newport. According to a
so-called "public trust doctrine", the State of Vermont might have ownership
of any lands created by filling any portion of the navigable waters of the
state. The result of this is that the Bank has been unable to sell these
properties because some attorneys will not clear title to the property. The
suit filed is an attempt to clear title to said properties by seeking judicial
clarification of the public trust doctrine. The outcome of the suit is not
likely to have a material impact on the financial statements of the Bank or
consolidated Company.
There are no pending legal proceedings to which the Company is a party
or of which any of its property is the subject, other than routine litigation
incidental to its banking business.
Item 4 Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security holders at the
Annual Meeting of Shareholders of Community Bancorp. on May 5, 1998:
1. To elect four directors to serve until the Annual Meeting of Shareholders
in 2001;
2. To ratify the selection of the independent public accounting firm of A.M.
Peisch & Company as the Corporation's external auditors for the fiscal
year ending December 31, 1998; and
3. To consider and act upon a proposal to amend the Corporation's Articles
of Association to increase the number of authorized shares of common
stock from the current 2,000,000 to 6,000,000.
The results are as follows:
<TABLE>
<CAPTION>
WITHELD/ BROKER
MATTER FOR AGAINST FOR NON-VOTE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <S>
Election of Directors:
Michael H. Dunn 1,084,930.16607 62,523.2283 1,210.611731 -0-
Marcel M. Locke 1,140,597.93247 5,855.4619 1,210.611731 -0-
Stephen P. Marsh 1,092,347.05157 55,106.3428 1,210.611731 -0-
Dale Wells 1,147,043.70687 409.6875 1,210.611731 -0-
Selection of Auditors
A.M. Peisch & Company 1,148,177.84990 915.925549 1,570.235643 -0-
Amend Articles of
Association to increase
authorized shares 1,123,709.59814 7,745.0643 17,209.343658 -0-
</TABLE>
Item 5 Other Information
Effective June 29, 1998 the Securities and Exchange Commission amended
its proxy solicitation rules governing the use by a company of discretionary
authority conferred in a proxy. Under the amended rule, unless a proponent
notifies the Company of his or her intention to present a proposal for action
at a meeting within the time period prescribed by the rule, the Company will
be permitted to use its discretionary authority conferred in the proxy to vote
on the proposal, even if the proposal has not been discussed in the Company's
proxy statement. In order to be timely under the amended rule, notice must
be furnished to the Company no later than 45 days prior to the date of mailing
of the prior year's proxy statement. Accordingly, shareholders of Community
Bancorp. are advised that the Company will be permitted to utilize the
discretionary authority conferred in the proxy for the 1999 Annual Meeting
of Shareholders as to any shareholder proposal submitted for action at such
Meeting, unless the proponent furnishes notice of the proposal to the
Company no later than February 15, 1999.
Reference is made to the Company's proxy statement for the 1998 Annual
Meeting of Shareholders for a description of the notification requirements
in connection with any shareholder proposal sought to be included in the
Company's proxy statement for the 1999 Annual Meeting.
Item 6
Exhibits and Reports on Form 8-K
Form 8-K dated December 31, 1997, announcing the acquisition of Liberty
Savings Bank, was filed on January 26, 1998.
Form 8-K dated March 10, 1998, announcing the two for one stock split for
Community Bancorp., was filed on March 23, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY BANCORP.
DATED: September 9, 1998 By: /s/ Richard C. White
-------------------------------
Richard C. White, President
DATED: September 9, 1998 By: /s/ Stephen P. Marsh
-------------------------------
Stephen P. Marsh,
Vice President & Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,664
<INT-BEARING-DEPOSITS> 6,188
<FED-FUNDS-SOLD> 3,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,294
<INVESTMENTS-CARRYING> 32,529
<INVESTMENTS-MARKET> 32,549
<LOANS> 151,217
<ALLOWANCE> 1,657
<TOTAL-ASSETS> 220,733
<DEPOSITS> 194,679
<SHORT-TERM> 0
<LIABILITIES-OTHER> 914
<LONG-TERM> 4,111
0
0
<COMMON> 7,742
<OTHER-SE> 13,288
<TOTAL-LIABILITIES-AND-EQUITY> 220,733
<INTEREST-LOAN> 6,869
<INTEREST-INVEST> 1,359
<INTEREST-OTHER> 204
<INTEREST-TOTAL> 8,432
<INTEREST-DEPOSIT> 3,943
<INTEREST-EXPENSE> 4,043
<INTEREST-INCOME-NET> 4,389
<LOAN-LOSSES> 360
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,571
<INCOME-PRETAX> 1,268
<INCOME-PRE-EXTRAORDINARY> 1,268
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 966
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
<YIELD-ACTUAL> 8.05
<LOANS-NON> 2,101
<LOANS-PAST> 408
<LOANS-TROUBLED> 130
<LOANS-PROBLEM> 2,681
<ALLOWANCE-OPEN> 1,502
<CHARGE-OFFS> 333
<RECOVERIES> 128
<ALLOWANCE-CLOSE> 1,657
<ALLOWANCE-DOMESTIC> 1,657
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 94
</TABLE>
