CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Three Months Ended March 31, 1999
Commission File Number 000-16435
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 March 31, 1999, there were 3,318,937 shares issued of the Corporation's
$2.50 par value common stock and 3,289,066 shares outstanding.
Total Pages - 21 Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
COMMUNITY BANCORP. AND SUBSIDIARIES
Consolidated Statement of Condition
( Unaudited ) March 31 December 31 March 31
<S> <C> <C> <C>
Assets
Cash and due from banks 4,593,779 4,896,947 8,389,764
Federal funds sold and overnight deposits 5,416,287 15,527,141 3,475,000
Total cash and cash equivalents 10,010,066 20,424,088 11,864,764
Securities held-to-maturity (fair value
$36,730,979 at 03/31/99, $30,038,323 at
12/31/98, and $34,431,08 at 03/31/98 36,748,701 29,877,851 34,417,776
Securities available-for-sale 26,606,250 20,590,000 15,045,313
Restricted equity securities 1,141,650 1,141,650 1,099,750
Loans 146,260,052 148,335,346 149,398,013
Allowance for loan losses (1,713,265) (1,658,967) (1,553,433)
Unearned net loan fees (834,316) (848,963) (864,058)
Net loans 143,712,471 145,827,416 146,980,522
Bank premises and equipment, net 4,193,700 3,010,041 3,220,527
Accrued interest receivable 1,815,911 1,460,671 1,577,022
Other real estate owned, net 772,834 541,903 746,935
Other assets 2,066,008 2,177,043 1,876,996
Total assets $227,067,591 $225,050,663 $216,829,605
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Demand, non-interest bearing 21,784,045 21,743,065 19,201,814
NOW and money market accounts 49,721,114 49,939,162 42,308,496
Savings 31,991,579 30,512,230 30,954,505
Time deposits, $100,000 and over 17,763,625 17,874,124 18,462,314
Other time deposits 78,180,313 77,728,713 80,277,987
Total deposits $199,440,676 $197,797,294 $191,205,116
Borrowed funds 4,060,000 4,060,000 4,060,000
Repurchase agreements 460,624 288,241 0
Accrued interest and other liabilities 1,059,226 883,069 824,398
Subordinated convertible debentures 20,000 20,000 93,000
Total liabilities $205,040,526 $203,048,604 $196,182,514
Stockholders' Equity
Common stock - $2.50 par value;
6,000,000 shares authorized and 3,318,937
shares issued at 03/31/99, 3,296,154
issued at 12/31/98, and 3,220,031 shares
issued at 03/31/98 8,297,342 7,851,516 3,872,172
Additional paid-in capital 10,392,774 8,756,453 8,177,074
Retained earnings 3,665,801 5,604,096 9,025,740
Accumulated other comprehensive income 119,171 235,375 17,270
Less: treasury stock, at cost;
29,871 shares at 03/31/99, 29,646 shares
at 12/31/98, and 29,630 shares at 03/31/98(448,023) (445,381) (445,165)
Total stockholders' equity $22,027,065 $22,002,059 $20,647,091
Total liabilities and stockholders'
equity $227,067,591 $225,050,663 $216,829,605
</TABLE>
<TABLE>
COMMUNITY BANCORP. AND SUBSIDIARIES
Statements of Income
( Unaudited )
<CAPTION>
For The First Quarter Ended March 31, 1999 1998 1997
<S> <C> <C> <C>
Interest income
Interest and fees on loans 3,177,402 3,478,386 3,324,518
Interest and dividends on investment securities
U.S. Treasury securities 545,279 457,196 534,499
U.S. Government agencies 128,299 20,419 20,727
States and political subdivisions 113,531 143,183 138,605
Dividends 19,722 18,564 17,178
Interest on federal funds sold
and overnight deposits 66,147 106,702 4,942
Total interest income $4,050,380 $4,224,450 $4,040,469
Interest expense
Interest on deposits 1,819,944 1,941,022 1,881,874
Interest on borrowed funds 48,900 46,800 12,680
Interest on repurchase agreements 2,634 0 0
Interest on subordinated debentures 550 2,227 3,282
Total interest expense $1,872,028 $1,990,049 $1,897,836
Net interest income 2,178,352 2,234,401 2,142,633
Provision for loan losses (150,000) (200,000) (205,000)
Net interest income after provision $2,028,352 $2,034,401 $1,937,633
Other operating income
Trust department income 49,479 30,699 27,897
Service fees 164,750 161,511 162,386
Security gains (losses) 0 0 0
Other 159,243 104,553 96,237
Total other operating income $373,472 $296,763 $286,520
Other operating expenses
Salaries and wages 715,459 707,951 628,928
Pension and other employee benefits 177,052 174,314 133,331
Occupancy expenses, net 338,719 321,633 290,569
Trust Department Expenses 11,289 8,017 5,848
Other 604,956 597,697 470,561
Total other operating expenses $1,847,475 $1,809,612 $1,529,237
Income before income taxes 554,349 521,552 694,916
Applicable income taxes (credit) 143,552 113,873 174,828
Net Income $410,797 $407,679 $520,088
Earnings per share on weighted average $0.13 $0.13 $0.17
Weighted average number of common shares
Used in computing earnings per share 3,235,785 3,189,686 3,080,655
Dividends per share $0.16 $0.15 $0.14
Book value per share on shares outstanding $6.70 $6.47 $6.29
Per share data for 1998 and 1997 restated to reflect a 100% stock dividend
Paid on June 1, 1998, and a 5% stock dividend paid on February 1, 1999.
</TABLE>
<TABLE>
COMMUNITY BANCORP. AND SUBSIDIARIES
Statement of Cash Flows
<CAPTION>
For the First Three Months Ended March 31, 1999 1998 1997
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net Income 410,797 407,679 520,088
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 114,864 101,258 87,352
Provisions for possible loan losses 150,000 200,000 205,000
Provisions for deferred income taxes (25,191) (22,606) (3,162)
(Gain)loss on sale of loans (23,692) 12,490 (8,054)
Securities losses 0 0 0
Loss (gain) on sales of OREO 0 8,293 (7,729)
OREO writedowns 0 6,300 0
Amortization of bond premium, net 75,592 (37,498) 6,463
Proceeds from sales of loans held for sale 4,699,807 3,358,192 660,944
Originations of loans held for sale (4,523,200) (4,545,913) (667,336)
Increase(decrease) in taxes payable 169,765 136,478 183,225
(Increase) decrease in interest receivable (355,240) (116,724) (55,803)
Increase in mortgage service rights (24,179) (2,636) (13,977)
Decrease(increase) in other assets 203,593 (19,930) (263,476)
(Decrease)increase in unamortized loan fees (14,647) (2,531) (21,148)
(Decrease)increase in interest payable (317) (9,839) 340
(Decrease)increase in accrued expenses (31,794) (58,372) 4,264
Increase (decrease) in other liabilities 55,178 (18,265) (12,516)
Net cash provided by operating activities 881,336 (603,624) 614,475
Cash Flows from investing activities:
Investments - held to maturity
Sales and maturities 4,986,510 3,474,110 918,463
Purchases (11,899,683) (3,759,745) (3,776,728)
Investments - available for sale
Sales and maturities 0 0 0
Purchases (6,225,586) (7,000,000) 0
Purchase of restricted equity securities 0 0 (36,700)
Investment in limited partnership 0 21,688 0
Increase in Loans, Net of Payments 1,575,016 1,671,558 (312,233)
Capital Expenditures (1,298,523) (36,124) (45,136)
Recoveries of loans charged off 20,730 29,143 36,274
Proceeds from sales of other real estate owned 0 370,939 106,332
Net Cash Used in Investing Activities (12,841,536) (5,228,431) (3,109,728)
Cash Flows from Financing Activities:
Net increase in demand deposits,
NOW, Money Mkt and savings 1,302,281 1,551,563 (566,240)
Net increase in certificates of deposit 341,101 2,073,152 617,741
Net increase (decrease) in short-term
Borrowings and repurchase agreements 172,383 0 0
Net increase in borrowed funds 0 0 (1,600,000)
Payments to acquire treasury stock (2,642) (28) (4,792)
Dividends paid (266,945) (235,478) (210,340)
Net cash provided by financing activities 1,546,178 3,389,209 (1,763,631)
Net increase in cash and cash equivalents (10,414,022) (2,442,846) (4,258,884)
Cash and cash equivalents:
Beginning 20,424,088 14,307,610 8,245,398
Ending 10,010,066 11,864,764 3,986,514
Supplemental Schedule of Cash Paid During the Year
Interest paid 1,871,611 1,997,504 1,897,496
Income Taxes Paid (1,020) 0 (5,235)
Supplemental schedule of noncash investing and financing activities:
Net change in securities valuation ($176,067) ($24,908) ($86,409)
OREO acquired in settlements of loans $230,931 $84,466 $188,091
Debentures converted to common stock $0 $11,000 $35,000
Stock dividends $1,851,338 $0 $1,294,006
Dividends paid
Dividends payable $497,754 $452,382 $406,598
Dividends reinvested ($230,809) ($216,904) ($196,258)
$266,945 $235,478 $210,340
</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 Three Months Ended:
1999 1998
Average Income/ Rate/ Average Income/ Rate/
Balance Expense Yield Balance Expense Yield
EARNING ASSETS
<S> <C> <C> <C> <C> <C> <C>
Loans(gross) 146,829,523 3,177,402 8.78% 149,575,993 3,478,386 9.43%
Taxable Investment
Securities 49,890,646 673,578 5.48% 33,362,113 477,615 5.81%
Tax-exempt Investment
Securities(1) 9,888,906 169,824 6.96% 11,701,072 213,821 7.41%
Federal Funds Sold 3,473,056 32,248 3.77% 3,488,766 45,014 5.23%
Bank of Boston
sweep account 2,732,079 33,899 5.03% 4,774,313 61,688 5.24%
Other Securities(2) 1,265,027 21,169 6.79% 1,249,985 20,625 6.69%
TOTAL 214,079,237 4,108,120 7.72% 204,152,242 4,297,149 8.47%
INTEREST BEARING LIABILITIES
Savings Deposits 30,795,370 178,421 2.35% 30,006,784 203,227 2.75%
NOW & Money
Market Funds 48,159,789 378,694 3.19% 41,925,226 373,573 3.61%
Time Deposits 96,031,253 1,262,830 5.33% 98,202,744 1,364,222 5.63%
Other Borrowed Funds 4,060,000 48,900 4.88% 3,526,667 46,800 5.38%
Repurchase
Agreements(3) 264,485 2,634 4.04% 0 0 0.00%
Subordinated Debentures 20,000 550 11.15% 95,000 2,228 9.51%
TOTAL 179,330,897 1,872,029 4.20% 173,756,421 1,990,050 4.61%
Net Interest Income 2,236,091 2,307,099
Net Interest Spread(4) 3.52% 3.86%
Interest Differential(5) 4.24% 4.58%
<FN>
<F01> Income on investment securities of state and political subdivisions is
stated on a tax equivalent basis (assuming a 34% tax rate).
<F02> Included in other securities are taxable industrial development bonds
(VIDA), with income for the first three months of approximately $1,500
for 1999 and $2,100 for 1998.
<F03> Repurchase agreements were introduced during the second part of 1998 in
an effort to attract new business customers.
<F04> Net interest spread is the difference between the yield on earning
assets and the rate paid on interest bearing liabilities.
<F05> 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 three months of 1999 and 1998 resulting from
volume changes in assets and liabilities and fluctuations
in rates earned and paid.
<CAPTION>
RATE VOLUME Variance Variance
Due to Due to Total
Rate(1) Volume(1) Variance
EARNING ASSETS
<S> <C> <C> <C>
Loans (gross) (241,550) (59,434) (300,984)
Taxable Investment Securities (40,661) 236,624 195,963
Tax-Exempt Investment Securities(2) (12,876) (31,121) (43,997)
Federal Funds Sold (12,620) (146) (12,766)
Bank of Boston sweep account (2,449) (25,340) (27,789)
Other Securities 296 248 544
Total Interest Earnings (309,860) 120,831 (189,029)
INTEREST BEARING LIABILITIES
Savings Deposits (30,147) 5,341 (24,806)
NOW & Money Market Funds (50,432) 55,553 5,121
Time Deposits (72,836) (28,556) (101,392)
Other Borrowed Funds (4,977) 7,077 2,100
Repurchase Agreements 0 2,634 2,634
Subordinated Debentures 385 (2,063) (1,678)
Total Interest Expense (158,007) 39,986 (118,021)
<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 tax equivalent basis.
The assumed rate is 34%.
</TABLE>
<TABLE>
COMMUNITY BANCORP.
PRIMARY EARNINGS PER SHARE
<CAPTION>
For The First Quarter Ended March 1999 1998 1997
<S> <C> <C> <C>
Net Income $410,797 $407,679 $520,088
Average Number of Common Shares Outstanding. 3,235,785 3,189,686 3,080,655
Earnings Per Common Share $0.13 $0.13 $0.17
FULLY DILUTED EARNINGS PER SHARE
<CAPTION>
For The First Quarter Ended March 1999 1998 1997
<S> <C> <C> <C>
Net Income $410,797 $407,679 $520,088
Adjustments to Net Income (Assuming Conversion
of Subordinated Convertible Debentures). 363 1,470 2,166
Adjusted Net Income $411,160 $409,149 $522,254
Average Number of Common Shares Outstanding. 3,235,785 3,189,686 3,080,655
Increase in Shares (Assuming Conversion of
Subordinated Convertible Debentures). 8,557 26,386 43,070
Average Number of Common Shares Outstanding
(Fully Diluted) 3,244,342 3,216,072 3,123,725
Earnings Per Common Share Assuming Full Dilution. $0.13 $0.13 $0.17
All 1998 and 1997 per share data restated to reflect 100% stock dividend
Paid on June 1, 1998, and a 5% stock dividend paid on February 1, 1999.
</TABLE>
PART I.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE RESULTS OF OPERATIONS
Quarter Ended March 31, 1999
Community Bancorp. is a bank holding company whose subsidiaries include
Community National Bank and Liberty Savings Bank. Community National Bank
("the Bank") is a full service institution operating in the state of Vermont,
with five offices located in Orleans County, one office in Essex County, and
one office in Caledonia County. Liberty Savings Bank ("Liberty") is a New
Hampshire guaranty bank acquired by Community Bancorp. on December 31, 1997.
Currently this bank does not have any offices or deposit taking authority,
and shares the mailing address of Community Bancorp. Future intentions of
the Company are to initially operate this bank as a lending facility in
the northern part of New Hampshire, and then expanding to operate as a full
service bank sometime in the future. This endeavor, once achieved, will
broaden the customer service base of the Company to include a portion of New
Hampshire. 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
("the 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 decreased $111 thousand or .62% for the first
quarter of 1999 compared to year end 1998, and decreased almost $700 thousand
or 3.8% compared to the first quarter of 1998. Other time deposits decreased
from $80.3 million at the end of the first quarter of 1998 to $77.7 million at
the end of the 1998 calendar year, and then increased to $78.2 million as of
the end of the first quarter of 1999, an increase of $451,600 or .58% compared
to year end 1998, and a decrease of $2.1 million or 2.6% compared to the first
quarter of 1998. A review of these deposits, primarily the time deposits over
$100,000 indicates that they are primarily generated locally and regionally by
established customers of the Company. The Company has no brokered deposits.
All other interest bearing deposit accounts in total increased 21% to end the
three month comparison period at $81.7 million for 1999 compared to $73.3
million for 1998. Our gross loan portfolio decreased from $149.4 million for
the first quarter of 1998 to $146.3 million for the first quarter of 1999 or
2.1%. Of this total portfolio of $146.3 million, $76.7 million are scheduled
to reprice or mature within one year compared to almost $81.7 million a year
ago. Federal funds sold and overnight deposits includes a sweep account
established during the first quarter of 1998. This account reported a balance
of $3.4 million as of the end of the first quarter of 1999, compared to $3.2
million for the same period in 1998. Federal funds sold decreased from $3.5
million for the first quarter of 1998 to $2 million for the same period in
1999. At the end of the first quarter of 1999, the Company held in it's
investment portfolio treasuries classified as "Available-for-Sale" at an
estimated fair value of $26.6 million, compared to just over $15 million for
the same period in 1998. In terms of liquidity, these securities are
considered short term, thereby increasing the portfolio of liquid
assets. The Company is required to maintain equity securities in the form
of bank stock at two separate institutions. Combined totals of $1.14 million
and almost $1.1 million were reported for the first quarter of 1999 and 1998,
respectively. 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.
Currently, $4.1 million is advanced on these borrowings. Additionally, the
Company has in it's investment portfolio securities classified as "Held-to-
Maturity" with a book value of $36.7 million, of which $5 million are
pledged, netting a balance of $31.7 million, with a net fair value of $31.6
million as of March 31, 1999 compared to a book value of $34.4 million, less
$4 million pledged, netting a balance of $30.4 million with a net fair value
of $30.5 million a year ago.
RESULTS OF OPERATIONS
Net Income for the first quarter ended March 31, 1999 was $410,797
representing an increase of .76% and a decrease of 21% respectively, over
the net income figures of $407,679 for the first quarter ended March 31,
1998, and $520,088 for the same period ended in 1997. The results of this
are earnings per share of $0.13 for the first quarter of 1999 versus $0.13
for the first quarter of 1998 and $0.17 for the first quarter of 1997. The
first quarter of 1999 reported only a slight increase over the first quarter
of 1998 due in part to less income generated by the Bank's loan portfolio,
resulting in a decrease in net interest income for the quarter. Additionally,
an increase in other operating income was only slightly higher than the
combined increase in other operating expenses and income taxes. The first
quarter of 1998 was not as profitable compared to the same period in 1997 due
in part to three considerable increases. State deposit tax almost tripled
for the first quarter of 1998 with a reported figure of $52,352 compared to
$19,905 for the first quarter of 1997. Expense associated with OREO
properties went from $10,714 for the first quarter of 1997 to just under
$40,000 for the same period in 1998, resulting in almost a quadruple
increase. Loss on limited partnerships of $26,988 was reported for the
first quarter of 1998, with no reported loss for the same period a year ago.
A cash dividend of $0.16 per share was declared payable on February 1,
1999, to shareholders of record as of January 15, 1999, an increase of 6%
over last year's dividend of $0.15 per share for the same quarter. A 5%
Stock dividend was declared payable February 1, 1999 to shareholders of
record as of that date. In a press release dated March 13, 1998, a two for
one stock split was announced to be accomplished by a 100% stock dividend,
to shareholders of record as of May 15, 1998, payable June 1, 1998. This
stock split 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 contained in an amendment to the Company's Articles of
Association, and was be voted on and approved at the annual shareholder's
meeting to be held on May 5, 1998.
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 first quarter comparison periods started at
$2.14 million for 1997 and increased to $2.23 million for 1998, and then
decreased to $2.18 million for 1999, resulting in a decrease of 2.5% for 1999
versus 1998, and 4.3% for 1998 versus 1997. Total interest income for the
first quarter comparison period reported a decrease for 1999 compared to 1998,
with a decrease of $174,070 or 4.12%, while a favorable increase of $183,981
or 4.6% was reported for the first quarter of 1998 compared to 1997. Interest
expense decreased for the first quarter of 1999 compared to the first quarter
of 1998 with a decrease of $118,021 or 5.93% while an increase of $92,213 or
4.86% was reported for 1998 versus 1997. A review of the interest earned on
loans, the major source of interest income, reveals a decrease of $300,984 or
8.7% compared to an increase of $153,868 or 4.6% for 1998 compared to 1997.
Interest paid on deposits, the major source of interest expense, shows a
decrease of 6.24% and an increase of 3.14%, respectively.
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. Keeping in
mind that income on tax exempt securities is stated at the tax equivalent
yield, the interest figures presented for these securities on these two
tables are higher than those presented on the consolidated statement of
income.
The average volume of loans decreased just over $2.7 million or by
1.8%, and the yield on these loans decreased from 9.43% for the first
three months of 1998 to 8.78% for the first three months of 1999, a
decrease of 65 basis points. Relevantly, income from loans for the first
quarter of 1999 decreased to $3.2 million or by 8.7% compared to $3.5
million for the same period in 1998.
The average volume of taxable investments increased to almost $50 million
or by 49.5%, while the yield on these investments for the first three months
of 1999 fell by 33 basis points to end the three month comparison period at
5.48% versus 5.81% a year ago. Of this average volume of taxable investments
of almost $50 million, approximately $23.7 million are investments classified
as available-for-sale, with the remaining $26.3 million classified as held-to-
maturity. Income for the first three months increased in 1999 by $195,963 to
a reported income figure of $673,578 versus $477,615 a year ago. Included in
these figures is the treasury strip for Liberty Savings Bank with an average
balance of $1,5 million for the first three months of 1999 and $1.4 million
for the same period in 1998, and income of $22,107 for both comparison periods.
A decrease is noted in the average volume of tax-exempt investments
reported at $11.7 million for the first three months of 1998 versus $9.9
million for the same period in 1999, resulting in a decrease of 15.5%. All
of these investments are classified as held-to-maturity. Income on these
investments followed the average volume pattern decreasing to $169,824 from
$213,821 for the first three months of 1999 and 1998, respectively. The tax
equivalent yield for the first three months of 1999 decreased 45 basis points
to a reported 6.96% compared to 7.41% for the same period in 1998.
Other securities ended the first quarter in 1999 at an average volume of
$1.27 million, resulting in a 1.2% increase compared to the same quarter last
year. Of this total almost $1.14 million are equity securities and, under
the guidelines, are classified as available-for-sale with the remaining $123
thousand of industrial development bonds classified as held-to-maturity.
Income increased slightly for 1999 compared to 1998, with reported figures of
$21,169 and $20,625, 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 decreased from $3.49 million to
$3.47 million for the comparison periods. Interest income on federal funds
sold decreased to $32,248, with an average yield of 3.77% for the first
quarter of 1999, compared to income of $45,014, with an average yield of 5.23%
for the first quarter of 1998, a decrease in income of $12,766, and a decrease
in yield of 146 basis points.
The Bank of Boston sweep account reported an average volume of $2.7
million for the first three months of 1999, compared to $4.8 million a year
ago. The average yield decreased from 5.24% on March 31, 1998 to 5.03% on
March 31, 1999.
In total, our average earning assets increased to just under $214 million
or by 4.9% during the first three months of 1999, compared to the same period
in 1998, while the average yield on those earning assets decreased from 8.47%
to 7.72%, respectively.
An increase of $788,586 is noted in the average volume of savings deposits
with reported first quarter ending figures of $30 million for 1998 versus
$30.8 million for 1999. Interest expense associated with savings accounts
decreased from $203,227 for the first three months of 1998 to $178,421 for the
same period in 1999, a decrease of $24,806 or 12.2%.
An increase of $6.23 million is reported in the average volume of NOW &
money market funds, which ended the first three months of 1998 at an average
volume of $41.9 million compared to an average volume as of March 31, 1999 of
$48.2 million. Included in this volume is community money market accounts,
carrying a more favorable rate than other deposit accounts, thereby, either
attracting new deposit customers, or causing current customers to switch, and
contributing to the increase in average volume by almost $6 million. Interest
expense on NOW & money market funds increased to $378,694 with an average
yield of 3.19% for the first three months of 1999 compared to $373,573 with
an average yield of 3.61% for the first three months of 1998.
The average volume of time deposits decreased from $98.2 million for the
first three months of 1998 to $96 million for the same time period in 1999, a
decrease of $2.2 million or 2.2%. Interest expense on time deposits decreased
to $1.3 million with an average yield of 5.33% for the first three months of
1999, compared to $1.4 million with an average yield of 5.63% for the same
time period in 1998.
Other borrowed funds increased to an average volume of $4.1 million with an
average yield of 4.88%. An increase in volume of $533,333, and a decrease in
yield of 50 basis points.
Repurchase agreements were established during the second half of 1998
in an effort to attract new business customers. As of March 31, 1999 these
accounts reported an average volume of $264,485 with an average yield of 4.04%.
Subordinated debentures continued to decrease in the first quarter of 1999
to end the three month period at an average volume of $20,000 with a yield of
11.15%. As of March 31, 1999, all 9% debentures had been redeemed, and the
11% debentures reported an actual balance of $20,000. The redemption period
for the 11% debentures is in the second phase, therefore, redemption activity
should start increasing within the next few years. The redemption period
refers to the period of time prior to maturity in which the redemption price
is greater. The redemption prices and time periods for the 11% debentures are
as follows:
<TABLE>
<CAPTION>
11% Debentures
<S> <C>
August 1, 1998 - July 31, 2000 103%
August 1, 2000 - July 31, 2002 102%
August 1, 2002 - July 31, 2004 101%
</TABLE>
In summary, the tax equivalent net interest income decreased from $2.3
million for the first three months of 1998 to $2.24 million for the first
three months of 1999, a decrease of just over 3%. The net interest spread as
defined on the "Average Balances and Interest Rates" report, was 3.52% for
the first three months of 1999, compared to 3.86% for the same period in 1998.
The yield on total interest earning assets decreased 75 basis points, while
the yield on interest bearing liabilities decreased 41 basis points from 1998
to 1999 creating a decrease of 34 basis points in the net interest spread
reported at 3.86% as of March 31, 1998 and 3.52% for March 31, 1999.
ALLOWANCE FOR POSSIBLE LOSSES ON LOANS
Management not only follows very structured underwriting guidelines, but
also has in place a very thorough 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,
who meet 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.
The Company also employs a Loan Review Officer whose duties include, among
others, a review of the loan portfolio including delinquent and non-performing
loans. 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.
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 helping to alleviate the overall risk.
The valuation allowance for loan losses of $1.7 million as of March 31,
1999 constitutes 1.17% of the total gross loan portfolio, compared to $1.55
million or 1.04% for the same period in 1998. In management's opinion, this
is adequate and reasonable, particularly in view of the fact that as of March
31, 1999, $121 million of the total loan portfolio, or 82.7% consists of real
estate mortgage loans. Included in this total of $121 million are $96.4
million, or 66%, of one to four family residential mortgage loans. Figures
for the same period a year ago are $122.3 million in real estate mortgage
loans, or 81.9%, with a one to four family mortgage loan portfolio of $98.9
million or 66.2%. This large loan volume, together with the low historical
loan loss experience helps 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 $1.7 million would constitute 3.4% of the
eligible loans, compared to 3.1% a year ago. In management's opinion, a
loan portfolio consisting of 82.7% 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
significant effect on the financial position or results of operation of the
Company.
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 1999
and 1998 reveals an increase in all three non-performing portfolios. Non-
accruing loans increased $207,194 or by 10.7%, loans 90 days or more past due
increased $209,639 or by 78%, and OREO increased $25,899, or by 3.5%. The
portfolio of non-accruing loans make up the biggest portion of the non-
performing assets, and consists of $1.9 million or 89.2% of real estate secured
mortgage loans for the first three months of 1999 compared to $1.7 million or
87.2% for the same period last year. Included in the 1999 total for loans past
due 90 days or more is a loan carrying a 90% FSA guarantee. This results in a
decrease of $106,991, or 22.4% in the total balance of $478,476.
<TABLE>
Non-performing assets as of March 31, 1999 and 1998 were made up of the
following:
<CAPTION>
1999 1998
<S> <C> <C>
Non-Accruing loans $2,138,757 $1,931,563
Loans past due 90 day or more and still accruing 478,476 268,837
Other real estate owned 772,834 746,935
Total $3,390,067 $2,947,335
</TABLE>
These totals of $3.39 million for 1999 and $2.95 million for 1998 equal
2.32% and 1.97% respectively, of total gross loans, as well as 1.5% and 1.4%,
respectively of total assets. As of March 31, 1999, our reserve coverage of
non-performance loans was 51% versus 53% 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. It is the policy of the Company to value property
in other real estate owned at the appraised value or book value of the loan,
whichever is less. Our procedure is to appraise the property to determine
the value as well as to determine if a write-down is necessary to bring the
book value of the loan equal to the appraised value, prior to including the
property in other real estate owned. Appraisals are then done periodically
thereafter charging any additional write-downs to an expense account for
subsequent write-downs.
Our current portfolio of other real estate owned equals $772,834. Ten
properties were obtained through the normal foreclosure process, and five
properties were deeded "In lieu of foreclosure". All of our properties are
located in Vermont and consist of the following; land in Jay; two commercial
condominium units and two commercial buildings in Newport; two single family
residences in Newport; an apartment building in Orleans and one in Newport
Center; land and a commercial building in Island Pond; a single family home
in Averill, Glover and Barton, and a vacation home in Barton. The Company
is actively attempting to sell all of the other real estate owned, and expects
no material loss on any of these properties. 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
Other operating income for the first quarter of 1999 was $373,472,
compared to $296,763 for the first quarter of 1998, and $286,520 for the
first quarter of 1997, an increase of $76,709 or 25.9% for 1999 versus 1998,
and $10,243 or 3.6% for 1998 versus 1997. Other income reports the biggest
increase for both comparison periods, reporting for 1999 versus 1998 an
increase of $54,690 or 52.3%, and reporting a moderate $8,316 increase or
8.6% for 1998 versus 1997. Income from sold loans, a component of other
income ended the first three months of 1999 at a figure of $23,692 compared
to a deficit of $12,490, supporting part of the increase in other income for
1999 versus 1998. Exchange income for the first three months of 1998 was
reported at $20,000 compared to $15,000 for the same period in 1997, helping
to support that modest increase. Trust department income increased $18,780
or by 61.2% for the first quarter of 1999 versus 1998, with another moderate
increase of $2,802 or 10% for 1998 versus 1997. An increase in the trust
account portfolio provided healthy income for the first three months of 1999.
Other operating expenses for the first quarter of 1999 was $1.85 million
compared to $1.81 million for 1998, and $1.53 million for 1997 resulting in
an increase of 2.1% for 1999 versus 1998, and 18.3% for 1998 versus 1997.
Occupancy expense reported the biggest increase of $17,086 or 5.3% for 1999
versus 1998, while other expenses tallied the biggest increase of $127,136
or 27% for the first quarter of 1998 versus 1997. Furniture and equipment
depreciation makes up most of the increase in occupancy expense for the first
quarter comparisons of 1999 versus 1998. State deposit tax, a component of
other expense, has increased substantially over the last two years due to an
increase in the percentage base, thereby contributing $32,447 to the overall
increase for the first quarter of 1998 versus 1997. Salaries, the largest
portion of other operating expenses, reported the next biggest increase of
$7,508 or 1.1% for 1999 versus 1998 and $79,023 or 12.6% for the first quarter
of 1998 versus 1997.
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. The 1999 accruals are a little under, as the result
of timing difference, but 1998 accruals are in line with actual expenses. A
review during the first quarter of 1997 revealed over-accruals in various
expense accounts. Reversals to a few select accounts helped to decrease the
overall operating expenses and increase net income.
APPLICABLE INCOME TAXES
Income before taxes decreased from $694,916 for the first quarter of 1997
to $521,552 for the first quarter of 1998, and then increased to $554,349 for
the first quarter of 1999, a decrease of $173,364 or 25% for 1998 versus 1997,
and an increase of $32,797 or 6.3% for 1999 versus 1998. As a result,
provisions for income taxes for the first quarter of 1998 decreased $60,955
compared to the same period for 1997, and increased $29,679 for the first
quarter of 1999 compared to the first quarter of 1998, ending the first three
months of 1999 at $143,552.
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 Company depends
primarily on a strong net interest income to enable its purchasing power
to remain aggressive.
FINANCIAL CONDITION
The Financial Condition of the Company 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 4.9% in the first three months of 1999 as
compared to the same period in 1998 to an average volume of $214.1 million.
Loans, which totaled $146.8 million in 1999 and $149.6 million in 1998,
comprised 68.6% and 73.3% respectively, of our earning assets with the average
volume of loans decreasing $2.7 million or 1.8% in the first three months of
1999, compared to the same period in 1998. On March 31, 1999, residential
real estate mortgages made up 66% of our portfolio, commercial loans made up
23% and personal loans made up 11%, compared to 66%, 22%, and 12%,
respectively in 1998.
Taxable investments made up 23.3% of our average earning assets in the
first three months of 1999 compared to 16.3% in 1998 to end the period at an
average volume of almost $50 million.
Tax-exempt investments of just under $10 million made up 4.6% of our
average earning assets in the first three months of 1999, compared to $11.7
million or 5.7% in 1998.
Federal funds sold, which had an average volume of $3.47 million, made up
1.6% of our earning assets in the first three months of 1999 and $3.49 million
or 1.7% in 1998. The Bank of Boston sweep account ended the three months
comparison period at an average volume of $2.7 million for 1999 compared to
$4.8 million for 1998, accounting for 1.3% and 2.3%, respectively, of earning
assets. And ending the list of earning assets, other securities increased
1.2% making up .59% for the first quarter of 1999 and .61% for the first
quarter of 1998.
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 reinvest 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 lower than they were last year
at this time, therefore, the anticipated shift to savings and money market
accounts is taking place, creating more of an increase in volume in these
accounts. Time deposits decreased approximately 2.2% to an average volume of
$96 million, accounting for 53.6% of the total interest bearing accounts for
the first quarter of 1999, compared to $98.2 million in average volume and
56.5% of total interest bearing accounts for the first quarter of 1998.
Savings accounts increased 2.6% to an average volume of almost $31 million
accounting for 17.2% of the total interest bearing accounts for the first
quarter of 1999, compared to an average volume of $30 million and 17.3% of
total interest bearing accounts for the first quarter of 1998.
An increase of 14.9% is noted in NOW and money market funds with an
average volume of $48.2 million reported at the end of the first quarter
of 1999 compared to approximately $42 million at the end of the first quarter
of 1998. These volumes account for 27% and 24% respectively, of the total
interest bearing liability accounts.
Other borrowed funds with an average volume of $4.1 million accounts for
2.3% of total interest bearing liabilities for the first three months of
1999, and $3.5 million or 2%, respectively, for the first three months of
1998. The average volume of repurchase agreements of $264,485 accounts for
.15% for the first three months of 1999. Subordinated debentures ends the
list and makes the least contribution with an average volume of $20,000
comprising .01% of total interest bearing liabilities.
CAPITAL RESOURCES
The Corporation's stockholders' equity, which started the year at
$22,002,059, was increased through earnings of $410,797 and sale of common
stock of $230,809 through dividend reinvestment and debenture conversions.
It was decreased by dividends of $497,754, purchase of treasury stock of
$2,642 and an adjustment of $116,204 for valuation of allowance for
securities, to end the first quarter of 1999 at $22,027,065 with a book
value of $6.70 per share. All stockholders' equity is unrestricted.
Additionally, it is noted that the net unrealized gain on valuation
allowance for securities has decreased. 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 March 31, 1999, the Company continued to maintain ratios far above the
minimum requirements with reported ratios of approximately 20% for Tier I
and 22% for Total Capital.
The Corporation intends to continue the Company's 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 Company'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 capital of either Community
National Bank or Liberty Savings Bank.
YEAR 2000
The Company is currently working to resolve the potential impact of the
year 2000 (Y2K) on the processing of date-sensitive information by the
Company's computerized information systems. The Y2K 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 systems that have date-
sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000 which could result in miscalculations or systems failures.
The Federal Reserve Board and other federal banking regulators (together
known as the Federal Financial Institutions Examination Council, or "FFEIC")
have developed joint guidelines and benchmarks for assessing Y2K risk,
remediation of non-compliant systems and components and post-remediation
testing and implementation.
In an effort to correctly assess the effect of Y2K on the financial
position of the Company and assess our readiness for Y2K, a Y2K committee
was organized which meets on a regular basis to keep executive management
and the Board of Directors informed of our progress towards Y2K compliance.
The committee has developed strategic, customer awareness, customer risk
assessment, test and contingency plans. In accordance with FFEIC guidelines,
the Y2K committee has defined five phases in the Y2K project management:
Phase I - Awareness Phase
In this phase we defined the problem and gained executive level commitment.
The Y2K committee developed an overall strategy.
This phase has been completed.
Phase II - Assessment Phase
During this phase, we assessed the size and complexity of the Y2K issues and
identified both information technology (IT) and non-IT systems that could be
affected by the change. At this time, we also identified mission-critical
and non-mission-critical systems.
We define mission-critical systems as vital to the successful continuation
of our core business activities. Our core business activities include
servicing deposits, servicing loans, item processing and accounting,
originating deposits, originating loans, investments, and trust. The mission-
critical systems that support our core business activities include our AS/400
(mainframe computer) and operating system; check processing software; check
sorters; loan, deposit and account origination software; Fedline (interface to
the Federal Reserve Bank); and trust accounting software. Other systems not
deemed mission-critical, but important, include human resources; payroll; ATM
networks; voice banking system; heating and faxes.
We also evaluated the Y2K effect on strategic business initiatives. We
assessed the risk exposure of our customers as funds providers, funds takers,
and capital market/asset counter-parties.
This phase has been completed, however, we continue to monitor our
exposure on an on-going basis.
Phase III - Renovation Phase
This phase includes hardware and software upgrades or replacements and other
changes.
No mission-critical hardware or software needed to be replaced. All our
software applications are provided by vendors and these applications were
already Y2K compliant when we began the renovation phase. We are however
replacing several PCs supporting non-mission critical applications. This
will be complete by 6/30/99.
Phase IV - Validation Phase
This is the testing phase. During this phase, the systems identified in Phase
II (Assessment) are tested for Y2K compliance. Systems that were deemed
mission-critical were tested first. We have now started testing the remaining
systems.
All mission-critical systems were tested by 12/31/98 and were in
compliance. Non-mission-critical systems will be tested by 6/30/99.
Phase V - Implementation Phase
January 1, 2000 will be a processing day. If we detect any failures of our
mission-critical systems, we will implement our contingency plans as
appropriate.
The Company does not write any source programming code and is therefore
dependent upon external vendors and service providers to alter their programs
to become Y2K compliant. We have received certification from our vendors as
to their product compliance, however, we tested all mission-critical and non-
mission-critical systems identified in Phase II.
<TABLE>
We have identified the following timetable for the testing phase:
<C> <S>
12/31/98 testing of internal mission-critical systems was completed
03/31/99 testing with service providers for mission-critical systems
should be complete
06/30/99 testing of non-mission-critical systems should be complete.
</TABLE>
As of 12/31/98, we had completed the testing of all mission-critical
systems and noted only a few minor date formatting errors in loan
documentation for which we will receive corrections and will be installed
during the second quarter of 1999. These minor errors do not affect any
calculations and do not affect our ability to process loans. We began
testing of the non-mission-critical systems during the first quarter of 1999
and testing was substantially completed by 3/31/99. At this time, we expect
to have all our mission-critical and non-mission-critical systems Y2K
compliant by 6/30/99. We do not anticipate any major upgrades to existing
systems before year 2000.
The costs involved in addressing potential problems are not currently
expected to have a material impact on the Company's financial position,
results of operations, or cash flows in future periods. During 1998, we
budgeted $63,750 and actually spent $67,000 for Y2K testing and upgrades.
The costs included testing of our contingency site, replacement of 10
PCs not Y2K compliant, and proxy testing of some of our mission-critical
systems. We have not calculated the personnel costs relating to Y2K,
however, we did not have to hire additional personnel in our Y2K efforts.
For 1999, we have budgeted $77,000. As of the end of the first quarter,
total expenses of $26,810 were reported. Projected expenses include the
replacement of additional PCs, PC software upgrades, consulting services,
testing, travel and education. Y2K costs are expensed from current earnings.
No new projects have been deferred due to the Y2K effort. The yearly
software update to our core system provided by one of our vendors has been
postponed by the vendor until 2000 in an effort to minimize changes to an
already compliant system. This will not have an effect on our operations.
We have reviewed the credit risk our commercial borrowers may pose to us
if they are not Y2K compliant. At this time, we have identified only a small
number of customers deemed as high risk customers, and their inability or
failure to repay their loans as scheduled would not have a material impact
on the Company.
The worst case scenario relating to Y2K is that we would not have electrical
power. If this were the case, our contingency plan is to operate in a manual
mode. We have plans for hiring temporary help in this situation.
The next worst case scenario is that telephones would be unavailable. If
this were the case, the Derby branch could be fully operational. Other
branches would need to service deposits in an off-line mode. Requests for
account and loan origination could be directed to the Derby branch.
Assuming we have electricity and telephones, we anticipate our core systems
to be functional.
Our Y2K contingency plan is based on our disaster recovery plan written to
respond to a complete core system outage. Our contingency plan also outlines
manual processes in the event of individual component failures.
During the second quarter of 1999, outside consultants will review the
feasibility of our contingency plans.
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.
Other than the lawsuit above, 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 6
Exhibits and Reports on Form 8-K
Exhibits - None
Reports on Form 8-K - None
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: May 13, 1999 By: /s/ Richard C. White
Richard C. White, President
DATED: May 13, 1999 By: /s/ Stephen P. Marsh
Stephen P. Marsh,
Vice President & Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,594
<INT-BEARING-DEPOSITS> 3,416
<FED-FUNDS-SOLD> 2,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 26,606
<INVESTMENTS-CARRYING> 36,749
<INVESTMENTS-MARKET> 36,731
<LOANS> 146,260
<ALLOWANCE> 1,713
<TOTAL-ASSETS> 227,068
<DEPOSITS> 199,441
<SHORT-TERM> 461
<LIABILITIES-OTHER> 1,059
<LONG-TERM> 4,080
0
0
<COMMON> 8,297
<OTHER-SE> 13,730
<TOTAL-LIABILITIES-AND-EQUITY> 227,068
<INTEREST-LOAN> 3,177
<INTEREST-INVEST> 807
<INTEREST-OTHER> 66
<INTEREST-TOTAL> 4,050
<INTEREST-DEPOSIT> 1,820
<INTEREST-EXPENSE> 1,872
<INTEREST-INCOME-NET> 2,178
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,847
<INCOME-PRETAX> 554
<INCOME-PRE-EXTRAORDINARY> 554
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 411
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
<YIELD-ACTUAL> 7.60
<LOANS-NON> 2,139
<LOANS-PAST> 478
<LOANS-TROUBLED> 123
<LOANS-PROBLEM> 1,615
<ALLOWANCE-OPEN> 1,659
<CHARGE-OFFS> 117
<RECOVERIES> 21
<ALLOWANCE-CLOSE> 1,713
<ALLOWANCE-DOMESTIC> 1,713
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 233
</TABLE>
