Common Stock and Retained Earnings figures for 9/30/97 and
12/31/97 were restated due to two for one stock split in
1998. These figures should not have been restated, only
the per share data and shares outstanding information
needed to be restated.
CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Nine Months Ended September 30, 1998
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 September 30, 1998, there were 3,123,351 shares of the Corporation's
$2.50 par value common stock issued and 3,093,708 shares outstanding.
Total Pages - 22 Pages
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
COMMUNITY BANCORP. AND SUBSIDIARIES
Balance Sheet
( Unaudited ) September 30 December 31 September 30
1998 1997 1997
Assets
<S> <C> <C> <C>
Cash and due from banks,
non-interest bearing 4,862,928 10,657,610 4,049,679
Cash and due from banks, interest bearing 849,757 0 0
Federal funds sold 2,725,000 3,650,000 3,150,000
Total cash and cash equivalents 8,437,685 14,307,610 7,199,679
Securities held-to-maturity (market value
$38,708,948 at 9/30/98, $34,125,823 at
12/31/97, and $43,534,023 at 9/30/97) 38,465,409 34,125,802 43,533,982
Securities available-for-sale 20,714,375 8,039,063 8,024,375
Restricted equity securities 1,141,650 1,099,750 1,099,750
Loans 150,599,826 150,115,852 150,457,019
Allowance for loan losses (1,652,776) (1,502,202) (1,503,866)
Unearned net loan fees (856,840) (866,589) (868,862)
Net loans 148,090,210 147,747,061 148,084,291
Bank premises and equipment, net 3,064,566 3,285,661 3,299,792
Accrued interest receivable 1,730,111 1,460,298 1,624,601
Other real estate owned, net 592,114 1,088,867 1,534,781
Other assets 2,002,537 1,847,292 1,714,468
Total assets 224,238,657 213,001,404 216,115,719
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Demand, non-interest bearing 22,273,432 20,297,137 19,002,110
NOW and money market accounts 44,774,125 40,562,693 39,573,997
Savings 31,525,967 30,053,422 32,397,723
Time deposits, $100,000 and over 19,191,274 18,182,338 17,312,258
Other time deposits 79,709,528 78,484,811 78,886,185
Total deposits 197,474,326 187,580,401 187,172,273
Repurchase Agreements 78,320 0 0
Borrowed funds 4,060,000 4,060,000 8,065,000
Accrued interest and other liabilities 918,510 776,646 644,378
Subordinated convertible debentures 20,000 104,000 105,000
Total liabilities 202,551,156 192,521,047 195,986,651
Stockholders' Equity
Common stock - $2.50 par value;
6,000,000 shares authorized and 3,123,351 shares
issued at 9/30/98, 3,044,697 issued at 12/31/97,
and 3,022,809 issued at 9/30/97 7,808,378 3,842,907 3,815,546
Additional paid-in capital 8,584,444 7,978,435 7,803,294
Retained earnings 5,405,536 9,070,443 8,926,989
Unrealized gain on securities
available-for-sale, net of tax 334,477 33,709 28,339
Less: treasury stock, at cost;
29,643 shares at 9/30/98, 29,629 shares
at 12/31/97, and 29,627 shares at 9/30/97 (445,334) (445,137) (445,100)
Total stockholders' equity 21,687,501 20,480,357 20,129,068
Total liabilities and stockholders'
equity 224,238,657 213,001,404 216,115,719
</TABLE>
<TABLE>
<CAPTION>
COMMUNITY BANCORP. AND SUBSIDIARIES
Statements of Income
( Unaudited )
For The Third Quarter Ended September 30, 1998 1997 1996
<S> <C> <C> <C>
Interest income
Interest and fees on loans 3,483,609 3,504,235 3,387,327
Interest and dividends on investment securities
U.S. Treasury securities 537,196 509,578 469,933
U.S. Government agencies 42,301 21,192 25,443
States and political subdivisions 170,690 173,647 185,496
Dividends 18,162 17,921 17,308
Interest on Bank of Boston sweep account 23,767 0 0
Interest on federal funds sold 48,723 26,250 77,315
Total interest income 4,324,448 4,252,823 4,162,822
Interest expense
Interest on deposits 1,992,663 1,894,888 2,035,788
Interest on repurchase agreements 929 0 0
Interest on other borrowed funds 51,124 101,016 410
Interest on subordinated debentures 229 2,584 4,847
Total interest expense 2,044,945 1,998,488 2,041,045
Net interest income 2,279,503 2,254,335 2,121,777
Provision for loan losses (150,000) (215,000) (80,000)
Net interest income after provision 2,129,503 2,039,335 2,041,777
Other operating income
Trust department income 43,486 29,028 30,275
Service fees 170,762 181,434 163,138
Security gains (losses) 0 0 0
Other 167,946 141,124 131,951
Total other operating income 382,194 351,586 325,364
Other operating expenses
Salaries and wages 708,689 728,382 681,742
Pension and other employee benefits 192,326 203,274 181,774
Occupancy expenses, net 323,744 332,987 300,210
Trust department expenses 9,389 11,043 3,165
Other 533,566 539,341 478,931
Total other operating expenses 1,767,714 1,815,027 1,645,822
Income before income taxes 743,983 575,894 721,319
Applicable income taxes (credit) 181,844 124,725 181,834
Net Income 562,139 451,169 539,485
Earnings per common share on weighted average 0.18 0.15 0.19
Weighted average number of common shares
Used in computing earnings per share 3,092,750 2,991,744 2,874,725
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 Nine Months Ended September 30, 1998 1997 1996
<S> <C> <C> <C>
Interest income
Interest and fees on loans 10,352,917 10,283,050 9,951,961
Interest and dividends on investment securities
U.S. Treasury securities 1,525,088 1,568,142 1,477,896
U.S. Government agencies 83,380 62,758 56,926
States and political subdivisions 462,851 455,431 612,986
Dividends 55,566 52,724 51,723
Interest on Bank of Boston sweep account 144,424 0 0
Interest on federal funds sold 132,094 42,990 188,228
Total interest income 12,756,320 12,465,095 12,339,720
Interest expense
Interest on deposits 5,933,489 5,642,542 6,206,424
Interest on repurchase agreements 3,122 0 0
Interest on other borrowed funds 147,367 168,533 4,449
Interest on subordinated debentures 4,047 9,007 16,499
Total interest expense 6,088,025 5,820,082 6,227,372
Net interest income 6,668,295 6,645,013 6,112,348
Provision for loan losses (510,000) (525,000) (240,000)
Net interest income after provision 6,158,295 6,120,013 5,872,348
Other operating income
Trust department income 109,326 85,452 89,345
Service fees 503,305 519,993 437,602
Security gains (losses) 0 0 (1,928)
Other 580,099 659,266 423,170
Total other operating income 1,192,730 1,264,711 948,189
Other operating expenses
Salaries and wages 2,117,596 2,125,586 1,980,638
Pension and other employee benefits 544,062 519,764 502,550
Occupancy expenses, net 967,674 933,466 898,886
Trust department expenses 36,805 22,797 11,159
Other 1,672,431 1,680,679 1,437,095
Total other operating expenses 5,338,568 5,282,292 4,830,328
Income before income taxes 2,012,457 2,102,432 1,990,209
Applicable income taxes (credit) 484,698 519,536 470,651
Net Income 1,527,759 1,582,896 1,519,558
Earnings per common share on weighted average 0.50 0.53 0.53
Weighted average number of common shares
Used in computing earnings per share 3,064,136 2,963,525 2,849,521
Book value per share on shares outstanding $7.01 $6.79 $6.51
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>
COMMUNITY BANCORP. AND SUBSIDIARIES
Statement of Cash Flows
For the Nine Months Ended September 30, 1998 1997 1996
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net Income 1,527,759 1,582,896 1,519,558
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 303,012 299,171 287,860
Provisions for possible loan losses 510,000 525,000 240,000
Provisions for deferred taxes (70,245) 52,121 110,097
Securities (gains) losses 0 0 1,928
Loss (gain) on sales of OREO (2,712) (7,920) (96,888)
Subsequent writedowns on OREO 26,592 129,446 12,320
Amortization of bond premium 35,412 11,111 49,279
Increase (decrease) in taxes payable 15,944 (230,350) (46,446)
(Increase) decrease in interest receivable (269,813) (85,964) (45,508)
(Increase) decrease in other assets (190,168) (415,755) (162,524)
Increase (decrease) in unamortized loan fees (9,749) (35,441) (6,087)
Interest (decrease) in interest payable (9,725) 77,213 (33,387)
Increase (decrease) in accrued expenses 56,345 78,718 23,802
Increase (decrease) in other liabilities 148,160 (13,059) 53,814
Net cash provided by operating activities 2,070,812 1,967,187 1,907,818
Cash flows from investing activities:
Investments - held to maturity
Maturities and paydowns 12,861,980 8,675,068 14,137,829
Purchases (17,220,197)(14,271,814)(23,277,597)
Investments - available for sale
Sales and maturities 2,000,000 0 9,000,000
Purchases (14,236,406) 0 0
Purchase of restricted equity securities (41,900) (36,700) (23,300)
Investment in limited partnership (40,312) 282 (54,161)
Increase in loans, net of payments (1,067,622) (6,613,086) (7,576,927)
Capital expenditures (81,917) (177,604) (476,979)
Recoveries of loans charged off 165,911 108,837 73,484
Costs incurred in acquiring OREO 0 0 0
Proceeds from sales of OREO 531,184 234,873 387,271
Net cash used in investing activities (17,129,279)(12,080,144) (7,810,380)
Cash flows from financing activities:
Net increase in demand deposits,
NOW, Money Mkt. and savings 7,660,272 969,089 12,010,708
Net increase in certificates of deposit 2,233,653 2,348,708 (1,532,054)
Net increase (decrease) in other borrowed funds 0 6,400,000 0
Payments to acquire treasury stock (197) (4,888) (159)
Dividends paid (705,186) (645,671) (561,108)
Net cash provided by financing activities 9,188,542 9,067,238 9,917,387
Net increase in cash and cash equivalents (5,869,925) (1,045,719) 4,014,825
Cash and cash equivalents:
Beginning 14,307,610 8,245,398 8,893,955
Ending 8,437,685 7,199,679 12,908,780
Supplemental schedule of cash paid during the year
Interest paid 6,096,466 5,741,771 6,203,358
Income taxes paid 538,999 697,765 407,000
Supplemental schedule of noncash investing
and financing activities:
Net change in securities valuation $455,709 $30,873 ($75,485)
OREO acquired in settlements of loans $318,577 $1,438,812 $638,599
Debentures converted to common stock $84,000 $65,000 $64,000
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 $1,369,090 $1,233,310 $1,048,895
Dividends reinvested ($663,904) ($587,639) ($487,787)
$705,186 $645,671 $561,108
</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 Nine 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) 150,459,708 10,352,917 9.20% 147,412,851 10,283,050 9.33%
Taxable Investment
Securities 37,556,080 1,608,368 5.73% 36,611,742 1,630,900 5.96%
Tax Exempt Investment
Securities (1) 12,936,310 692,221 7.15% 11,785,508 680,453 7.72%
Federal Funds Sold 3,829,560 132,094 4.61% 984,487 42,990 5.84%
Bank of Boston
sweep account(2) 3,197,058 144,424 6.04% N/A N/A N/A
Other Securities (3) 1,268,761 61,550 6.49% 1,238,290 59,056 6.38%
TOTAL 209,247,477 12,991,574 8.29% 198,032,878 12,696,447 8.56%
INTEREST BEARING LIABILITIES
Savings Deposits 30,763,292 616,294 2.68% 32,215,343 662,346 2.75%
NOW & Money Market
Funds 43,275,589 1,161,619 3.59% 38,601,066 1,026,536 3.56%
Time Deposits 98,425,080 4,150,058 5.64% 94,355,372 3,953,659 5.60%
Other Borrowed Funds 4,060,000 147,367 4.85% 3,722,916 168,533 6.05%
Repurchase
Agreements(4) 39,939 1,324 4.43% N/A N/A N/A
Subordinated Debentures 50,000 4,047 10.82% 127,000 10,105 10.64%
TOTAL 176,613,900 6,080,709 4.60% 169,021,697 5,821,179 4.60%
Net Interest Income 6,910,865 6,875,270
Net Interest Spread(5) 3.69% 3.96%
Interest Differential(6) 4.42% 4.64%
<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> Bank of Boston 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 $5,985 for 1998 and $6,332 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 nine 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
EARNING ASSETS
<S> <C> <C> <C>
Loans (142,672) 212,539 69,867
Taxable Investment Securities (64,598) 42,066 (22,532)
Tax Exempt Investment Securities (2) (54,675) 66,443 11,768
Federal Funds Sold (35,133) 124,237 89,104
Bank of Boston sweep account N/A N/A N/A
Other Securities 1,041 1,453 2,494
Total Interest Earnings (296,037) 446,738 150,701
INTEREST BEARING LIABILITIES
Savings Deposits (16,962) (29,090) (46,052)
NOW & Money Market Funds 10,771 124,312 135,083
Time Deposits 25,871 170,528 196,399
Other Borrowed Funds (36,425) 15,259 (21,166)
Repurchase Agreements(3) N/A N/A N/A
Subordinated Debentures 174 (6,232) (6,058)
Total Interest Expense (16,571) 274,777 258,206
<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> Bank of Boston 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 Third Quarter Ended September 30 1998 1997 1996
<S> <C> <C> <C>
Net Income 562,139 451,169 539,485
Average Number of Common Shares Outstanding 3,092,750 2,991,744 2,874,725
Earnings Per Common Share 0.18 0.15 0.19
<CAPTION>
For The Nine Months Ended September 30 1998 1997 1996
<S> <C> <C> <C>
Net Income 1,527,759 1,582,896 1,519,558
Average Number of Common Shares Outstanding 3,064,136 2,963,525 2,849,521
Earnings Per Common Share 0.50 0.53 0.53
Per share data restated to reflect 100% stock dividend
paid on June 1, 1998.
GRAPHICS GRAPHICS
</TABLE>
PART I.
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
THE RESULTS OF OPERATIONS
For the Nine Months Ended September 30, 1998
Community Bancorp. is a bank holding company whose subsidiaries
include Community National Bank and Liberty Savings Bank. Community
Bancorp. acquired the assets and stock of Liberty Savings Bank on
December 31, 1997. Liberty Savings Bank was operating as a stand-alone
bank in the town of Salisbury, in the state of New Hampshire. The
building that housed this bank was not purchased, therefore, the address
for Liberty Savings Bank is currently C/O Community Bancorp., Derby,
Vermont. Future plans are to operate a facility somewhere in the northern
part of New Hampshire, initially as just a lending facility, with the
intent to expand to a full service facility sometime thereafter. This
endeavor will further extend the servicing area of Community Bancorp.
and subsidiaries, "the Company", to include two states and four counties.
Community National Bank's main office is located in Derby, with branch
offices in Newport, Troy, Derby Line, Barton, Island Pond, and St.
Johnsbury. All these offices are located in Orleans County with the
exception of the Island Pond and St. Johnsbury offices, which are in Essex
County and Caledonia County, respectively. The St. Johnsbury
office is the Bank's only branch office open seven days a week, all other
offices are open Monday through Saturday. Since this office is located
in the same building as a supermarket that is open 24 hours a day, seven
days a week, extended hours at this branch were deemed necessary to
accommodate shoppers.
The financial statements preceding this narrative are presented as
consolidated figures for the Company. The following discussion refers
primarily to Community National Bank's operations as most of the Bancorp's
business is conducted through the Bank, and income for Liberty Savings
Bank is limited to interest generated by the U.S. Treasury strip acquired
by the Company in the December '97 acquisition.
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 from $17.3 million for
the first nine months of 1997 to $19.2 million for the first nine months
of 1998, an increase of 10.9%. Other time deposits increased from $78.9
million at the end of the first nine months of 1997 to $79.7 million at the
end of the first nine months of 1998, an increase just over one percent.
A review of these deposits, primarily the time deposits over $100,000
indicates that any growth is notably generated locally and regionally,
and by established customers of the Company. The Company has no brokered
deposits. Now and money market accounts increased from $39.6 million for
the first nine months of 1997 to $44.8 million at the end of the first
nine months of 1998, an increase of $5.2 million or 13.14%. Savings
accounts decreased 2.7% to end the nine month comparison period at $31.5
million for 1998 compared to $32.4 million for 1997. Our gross loan
portfolio increased $143 thousand from $150.5 million at the end of the
first nine months of 1997 to $150.6 million for the same period in 1998.
Of this total portfolio of $150.6 million, $80.6 million are scheduled to
reprice or mature within one year compared to $81.3 million a year ago.
At the end of the first nine months of 1998, the Company reported
investments of "Available for Sale" securities at a market price of just
over $20.7 million, compared to $8 million for the same period in 1997.
The book value of securities classified as "Held to Maturity" decreased
to $38.5 million for the first nine months of 1998 from $43.5 million for
the same comparison period in 1997, a decrease of $5.1 million or 11.6%.
In addition to these investments, the Company held in its portfolio Equity
Securities with a book and market value of $1.14 million as of September
30, 1998 compared to $1.1 million for the prior year. Federal funds sold
were reported at $2.7 million for the first nine months of 1998 compared
to $3.2 million for the first nine months of 1997, a decrease of $425
thousand or 13.5%. Community National Bank set up a sweep account at the
Bank of Boston during the first part of 1998, and as of September 30, 1997
the balance was $849,727. Additionally, the Company has access to various
lines of credit totaling $102.5 million, of which $4.1 million is advanced
as of September 30, 1998.
RESULTS OF OPERATIONS
Net income for the third quarter ended September 30, 1998 was $562
thousand, representing an increase of 24.6% over net income of $451
thousand for the third quarter ended September 30, 1997, and an increase
of 4.2% compared to net income of $539 thousand for the third quarter
ended September 30, 1996, resulting in earnings per share of $0.18, $0.15,
and $0.19, respectively. Net income for the first nine months of 1998 was
$1.53 million compared to $1.58 million a year ago, and $1.52 million for
the same period in 1996, translating to a decrease of 3.3% for 1998 versus
1997, and an increase of just under one percent for 1998 versus 1996. As
a result, earnings per share of $0.50, $0.53, and $0.53 were reported for
the first nine months of 1998, 1997, and 1996, respectively.
A 5% stock dividend was declared on January 10, 1997, payable on
February 1, 1997 to shareholders of record on January 15, 1997. As a
result of this dividend, all per share data for 1996 has been restated.
In 1998, a 2-for-1 stock split was declared and accomplished through a
100% stock dividend. In order for this to occur, an increase in the
number of authorized shares was voted on and accepted by the shareholders
at the Annual Meeting held on May 5, 1998. The stock dividend was then
paid on June 1, 1998 to shareholders of record as of May 15, 1998. All
per share data for the current year to date and all quarterly data for
1997 and 1996 have been restated to reflect this stock dividend. A
cash dividend of $0.15 per share was declared in each of the first three
quarters of 1998, compared to cash dividends of $0.14 per share for the
first three quarters of 1997, and $0.13 per share for the same periods
in 1996.
Net interest income, the difference between interest income
and interest expense, represents the largest portion of the Company's
earnings, and is affected by the volume, mix and interest rate
sensitivity of earning assets versus interest bearing liabilities.
Net interest income for the third quarter of 1998 increased to
$2.28 million from $2.25 million in 1997, and $2.12 million in 1996,
resulting in increases of 1.12% for 1998 versus 1997, and 6.25% for 1997
versus 1996. Net interest income for the first nine months increased
from $6.1 million for 1996 to $6.65 million for 1997, and ended the
first nine months of 1998 at $6.67 million, tallying increases of 8.7%
and just under one half of one percent, respectively, for 1997 versus
1996, and 1998 versus 1997. Interest income increased by $90 thousand
or 2.2% for the third quarter of 1997 versus 1996, and by $72 thousand
or 1.7% for the third quarter of 1998 versus 1997, increasing from
$4.16 million in 1996, to $4.25 million in 1997, and ending the third
quarter of 1998 at $4.33 million. Interest income for the first nine
months of 1998 increased to $12.8 million compared to $12.5 million in
1997, and $12.3 million for the first nine months of 1996, an increase
of $291 thousand or 2.3% for 1998 versus 1997, and an increase of $125
thousand or just over one percent for 1997 versus 1996. Interest
expense increased $46 thousand or by 2.32% for the third quarter of
1998 versus 1997, while a decrease of $43 thousand or 2.09% was noted
for the third quarter of 1997 versus 1996. An increase is also noted
for the first nine months of 1998 versus 1997 amounting to $265 thousand
or 4.6%, while a decrease of $407 thousand or 6.5% is noted in the first
nine months of 1997 compared to the same period for the prior year. In
reviewing the third quarter figures, total interest expense increased
slightly while a decrease is noted in 1998 for interest and fees on loans,
the major source of interest income. This was offset by sizable increases
in interest on investments and federal funds sold. In 1997, the decrease
in total interest expense and the increase in interest and fees on loans
made up for the decreases in some of the components of interest income.
Both of these scenarios support the increase in net interest income in
the respective comparison periods. In reviewing the nine month figures,
the increase in interest expense was outweighed by the income generated
by the new Bank of Boston sweep account together with the increase in
interest and fees on loans and federal funds sold.
The following paragraphs are comparisons of average balances and
the respective yield for interest earning assets and interest bearing
liabilities. Figures for these comparisons were obtained from the table
labeled "Average Balances and Interest Rates", found in the financial
statements section.
Income on tax-exempt securities is stated on a fully tax equivalent
basis in this table, therefore, figures presented are higher than those
presented in the Statement of Income included with the financial
statements.
Income from loans for the first nine months of 1998 increased just
under one percent to $10.4 million compared to $10.3 million for the same
period in 1997. The average volume of loans increased 2.1% to end the
first nine months of 1998 at $150.5 million compared to $147.4 million
for the prior year, while the yield on these loans decreased 13 basis
points from 9.33% to 9.20%.
The average volume of taxable investments increased to $37.6 million
or by 2.6%, while the yield on these investments for the first nine
months of 1998 fell 23 basis points, from a yield of 5.96% to 5.73%.
Of the total taxable investments, approximately $18 million is classified
as available for sale, with the remaining $19.6 million classified as
held to maturity. Included in the held to maturity average volume is
the U.S. Treasury Strip with an average volume of $1.4 million that the
Company obtained in the acquisition of Liberty Savings Bank. An increase
of $1.2 million or 9.8% is noted in the average volume of tax-exempt
investments, with figures of $11.8 million for the first nine months of
1997 compared to $12.9 million for the same period in 1998. The tax
equivalent yield decreased 57 basis points from 7.72% for the first nine
months of 1997 to 7.15% for the first nine months of 1998. All of
these investments are classified as held to maturity.
Other securities ended the nine months period in 1998 at an average
volume of $1.27 million, resulting in an increase of 2.5% compared to the
same period last year. Income generated from these securities increased
4.2%, and the average yield increased 11 basis points from a yield of
6.38% for the first nine months of 1997 to 6.49% for the first nine
months of 1998. Of this total volume of $1.27 million, approximately
$1.12 million are equity securities, and under the guidelines, are
classified as available for sale, with the remaining $145 thousand
classified as held to maturity.
The Company currently has no investments classified as trading
securities, nor does it intend to carry any of these securities.
The average volume on federal funds sold increased from $984
thousand to $3.8 million for the first nine months of 1998 compared
to the same period in 1997. The income from these funds increased
accordingly by $89 thousand, with income reported at $132 thousand and
$43 thousand, respectively for the first nine months of 1998 and 1997.
The Bank of Boston sweep account reports an average volume for the
first nine months of 1998 of $3.2 million with income of $144 thousand,
resulting in an average yield of 6.04%.
In total, the volume of average earning assets increased to $209.3
million, or by 5.7% during the first nine months of 1998 compared to
the same period in 1997. Income generated on these earning assets
increased from $12.7 million to almost $13 million, while the average
yield on these assets decreased 27 basis points from 8.56% to 8.29%,
respectively, for the first nine months of 1997 and 1998.
Savings deposits decreased from an average volume of $32.2 million
for the first nine months of 1997 to $30.8 million for the same period
in 1998. Interest expense associated with these funds decreased from
$662 thousand to $616 thousand and the average yield decreased
accordingly, from 2.75% to 2.68%.
Now and money market funds increased to $43.3 million or by 12% in
volume in 1998 and interest expense increased as well by $135 thousand,
or by 13.2% to a nine month expense figure for 1998 of $1.2 million.
Both of these moderate increases resulted in a diminutive increase in
the average rate paid of 3 basis points to a rate of 3.59% compared to
3.56% a year ago.
An increase of 4.3% in average volume for time deposits was reported
at the end of the first nine months of 1998 compared to the same period
in 1997, ending the period at $98.4 million. Interest paid on time
deposits increased from $3.95 million in 1997 to $4.15 million in 1998,
resulting in an increase of 4 basis points in the average yield of 5.60%
for 1997 to 5.64% for 1998.
Other borrowed funds increased to an average volume of $4.1 million
with an average yield of 4.85% for the first nine months of 1998 from
$3.7 million in volume with an average yield of 6.05% for the same period
in 1997, an increase in volume of 9% with a decrease in yield of 120 basis
points.
Repurchase agreements were established during the second quarter of
1998 in an effort to attract new business customers, and keep those
currently with Community National Bank. As of the end of the first nine
months of 1998, these funds maintained an average volume of almost $40
thousand, with an average rate paid of 4.43%.
Subordinated debentures ends the list of interest bearing liabilities,
reporting the highest decrease in volume, comparatively. The average
volume decreased from $127 thousand for the first nine months of 1997 to
$50 thousand for the same period in 1998, resulting in a decrease in
interest expense of $6 thousand. The 9% debentures have reached maturity,
and as of September 30, 1998 report a zero balance. The 11% debentures
are, as of August '98, in the second phase of the redemption period, and
report an actual volume of $20 thousand. The maturity for the 11%
debentures is July 31, 2004, with the redemption price decreasing 1%
every two years beginning on July 31, 1998.
ALLOWANCE FOR POSSIBLE LOSSES ON LOANS
In the opinion of management, adequate loan loss coverage is
Considered to be one of the most crucial areas of financial safety and
profitability of the Company. As a result, larger and potential problem
loans are typically reviewed on a loan by loan basis. A review of the
overall level of risk within the portfolio helps to insure adequate
coverage in the event of future chargeoffs. Emphasis is placed on each
borrower's financial condition, the industry or sector for the economy
in which the borrower operates, and overall economic conditions. The
Executive Officers and Board of Directors review the loan portfolio on a
monthly basis noting existing and potential problems in the portfolio.
The Company also has a credit administration department whose duties
include, among others, an ongoing review of delinquent and non-performing
loans. The credit administration officer is responsible for reporting all
findings and recommendations to senior management for further assessment
and final judgement as to the appropriate action to follow.
Specific Allocations are made in situations management feels are at
a greater risk for loss. A quarterly review of the Qualitative Factors,
including but not limited to, "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 historical 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 $1.7 million as of
September 30, 1998 constitutes 1.1% of the total loan portfolio, compared
to $1.5 million or 1% for the same period in 1997. This allowance figure
is sufficient in light of the fact that of the total loan portfolio of
$150.6 million, $123.6 million or 82% are real estate mortgage loans; and
of this total, $98.6 million or 79.8% constitute one to four family
residential mortgage loans. Increases are noted in all volumes compared
to last years figures of $150.5 million in total loans, $121.9 million
in real estate mortgage loans, representing 81% of the total portfolio;
and a further breakdown reveals $98.2 million in one to four family
residential mortgage loans, accounting for 80.6% of the total real
estate loan portfolio. Historically, the Company has experienced
minimal loan loss with this particular portfolio of loans, further
supporting the basis for management's opinion of adequate loan loss
coverage. Furthermore, a loan portfolio consisting of 82% 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 SFAF No. 114, "Accounting by Creditors
for Impairment of a Loan". The company adopted this new rule as required
at the beginning of the 1995 calendar year. 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. Since it's adoption in
1995, the effect of this rule has been insignificant to the financial
position and 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". Comparisons of these non-performing
assets for 1998 and 1997 reveals a dramatic decrease in OREO amounting to
$943 thousand or 61.4%, while the other categories report increases
totaling almost $479 thousand or 24%. Non-accruing loans increased from
$1.8 million as of September 30, 1997 to just over $2 million as of
September 30, 1998, and loans 90 days or more past due reported $172
thousand for the first nine months of 1997 compared to $417 thousand
for the same period in 1998. In total, non-performing assets decreased
$464 thousand or by 13.2% to end the first nine months of 1998 at $3.1
million compared to $3.5 million for the prior year. Non-accruing loans
make up most of the non-performing portfolio at 67%, while OREO comprises
19%, and 90 days or more past due tally 14% of the total. In reviewing
the non-accrual portfolio, the composition of real estate secured loans
is 88.6%, thereby reducing the exposure for potential loss.
GRAPHICS GRAPHICS
<TABLE>
As of September 30, 1998, and 1997, the Non-Performing portfolios were as
follows:
<CAPTION>
1998 1997
<S> <C> <C>
Non-accruing loans $2,036,967 $1,803,008
Loans past due 90 days or more 416,666 171,977
Other real estate owned 592,114 1,534,781
Total $3,045,747 $3,509,766
</TABLE>
These totals of $3.1 million for 1998 and $3.5 million for 1997 equal
2.02% and 2.33%, respectively, of total gross loans, as well as 1.4% and
1.6%, respectively, of total assets. As of September 30, 1998, reserve
coverage of non-performing assets was 54.3% compared to 42.8% a year ago.
Management continues to maintain the reserve requirement at a level
sufficient to cover total eligible loans. Community National Bank employs
personnel to manage the non-performing portfolio. At this time, management
is satisfied with the efforts of this department to reduce and maintain a
manageable portfolio. The local economy continues to lag in the recovery
process of economic conditions. With this factor always present, the
Company continues to exercise caution in its efforts to maintain adequate
reserve coverage.
Other real estate owned (OREO) 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. Property in OREO is valued at the
appraised value or book value of the loan, whichever is less. Our policy
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 to the
appraised value prior to including the property in OREO. Appraisals are
then done periodically thereafter, charging any additional write downs to
the applicable expense account.
Our current portfolio of OREO totals $592,114, with $145,211 deeded in
lieu of foreclosure, and the remaining $446,903 obtained through the normal
foreclosure process. Currently, there are no properties classified as in-
substance foreclosure. All of the properties are located in Vermont and
consist of the following; commercial land in Jay, two condominiums in
Newport, one commercial building in Newport, an apartment building in
Orleans and one in Newport Center, a commercial building in Derby, two
single family residences in Newport, a single family home in Derby, land
in Island Pond, and a farm in Canaan. The farm carries a 90% FSA guarantee.
This property was sold during the month of September, however, the Company
is awaiting funds from the guarantee portion to pay off the balance. The
single family residence in Derby was sold during the first part of October,
and the commercial building in Derby is under contract with an estimated
closing date of late October.
OTHER OPERATING INCOME AND EXPENSE
Other operating income for the third quarter of 1998 was $382 thousand
compared to $352 thousand for 1997 and $325 thousand for the same period
in 1996. The results are increases of $31 thousand or 8.7% for 1998 versus
1997 and $26 thousand or 8.1% for 1997 versus 1996. Other income reports
the biggest increase for the comparison period of '98 versus '97 at $27
thousand or 19%, while in the comparison period of '97 versus '96, service
fees reported the biggest increase at $18 thousand, or 11.2%. Income from
sold loans, a component of other income, was a big contributor to the
increase for the third quarter of 1998. Other operating income for the
first nine months of 1998 was reported at $1.19 million compared to $1.26
million for the same period in 1997 and $948 thousand for the first nine
months in 1996. This translates to a decrease of $72 thousand or 5.7%
for 1998 versus 1997, while an increase of almost $317 thousand or 33.4%
is noted for 1997 versus 1996. Other income showed the biggest decrease
at $79 thousand, or 12% for the 1998 versus 1997 comparison period, and
the biggest increase at $236 thousand, or 56%, for the 1997 versus 1996
comparison period. A substantial gain was recognized during the first
nine months of 1997 through the sale of inventory associated with an OREO
property. This alone helped to boost the increase over the 1996 comparison
period as well as contribute to the decrease in other income for the 1998
comparison period.
In May 1995, the FASB issued SFAF No. 122 "Accounting for Mortgage
Servicing Rights, an Amendment of FASB Statement No. 65". This statement
requires Banks to recognize as separate assets the rights to service
mortgage loans for others however those rights are acquired. A Bank
allocates the total cost of the mortgage loans to the mortgage servicing
rights and the loans (without the mortgage loan servicing rights) based on
their relative fair value. This value is determined through use of market
prices under comparable servicing sales contracts. Income from this
statement is a component of other income and amounted to $62,840, $17,065
and $27,493, respectively, for the first nine months of 1998, 1997, and 1996.
Other operating expense for the third quarter of 1998 was $1.77
million compared to $1.82 million for the third quarter of 1997 and $1.65
million for the same quarter in 1996. The results are a decrease of $47
thousand or 2.6% for 1998 versus 1997 and an increase of $169 thousand or
10.3% for 1997 versus 1996. All components of other operating expense
showed decreases with salaries and wages reporting the biggest decrease
at almost $20 thousand or 2.7%, followed by pension and other employee
benefits with a decrease of $11 thousand or 5.4%, for the third quarter
of 1998 compared to 1997. In the third quarter comparison of 1997 versus
1996, all components of other operating expense reported increases with
other expense reporting the biggest increase at just over $60 thousand or
12.6% for 1997 compared to 1996, followed closely by salaries and wages at
$47 thousand or 6.8%. An increase in state deposit tax was a contributing
factor to the increase in other expense. Other operating expense of $5.34
million was reported for the first nine months of 1998, compared to $5.28
million for the 1997 comparison period, and $4.83 million for the same
period in 1996, an increase of $56 thousand or 1.07% for 1998 versus 1997
and an increase of $452 thousand or 9.36% for the 1997 versus 1996
comparison period. Occupancy expenses revealed the biggest increase for
1998 compared to 1997 with an increase of $34 thousand or 3.7% followed
by an increase of $24 thousand or 4.7% in pension and other employee
benefits. Salaries and wages decreased for the nine month comparison
periods for 1998 and 1997 in addition to the third quarter comparisons.
A decrease of full time equivalent employees between September 30, 1997
and September 30, 1998 forms the basis for the decrease in salaries and
wages. An increase of $244 thousand or 17% in other expense is noted
for the first nine months of 1997 compared to the same period in 1996.
An increase in expenses associated with OREO properties as well as the
installation of a new Automatic Teller Machine (ATM) in the Island Pond
office helped to contribute to the increase in other expense for this
comparison period. Salaries and wages increased $145 thousand or by 7.3%
during the comparison period of 1997 versus 1996.
All components of other operating expense are monitored by management,
however, a more diligent 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 started the third quarter comparison periods at $721
thousand for the third quarter of 1996, and then decreased $145 thousand or
20.2% to $576 thousand as of the end of the third quarter
of 1997, and ended the third quarter of 1998 with an
increase of $168 thousand or 29.2% at a figure of $744
thousand. As a result of these figures, provisions for
GRAPHICS income taxes were reported at $182 thousand for the third
quarter of 1996, then decreased by $57 thousand to a
figure for the same quarter in 1997 of $125 thousand, and
then increased $57 thousand back to a figure of $182
thousand for the third quarter of 1998. Income before
income taxes for the first nine months of 1996 was
reported at $2 million, compared $2.1 million for the
same period in 1997, and then ended at $2.02 million as
of September 30, 1998. These figures translated into an
increases of $112 thousand or 5.6% for 1997 versus 1996
and a decrease of $87 thousand or 4.1% for 1998 versus 1997. Following suit,
provisions for income taxes reported a first nine months figure of $471
thousand in 1996, a 10.4% increase to $520 thousand for 1997, and a 6.7%
decrease to $485 thousand for the first nine months of 1998.
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 decline. While high rates
of inflation have in the past strained the capital structure of financial
institutions, in recent months this trend has somewhat alleviated by
declining rates of inflation, with a resulting relaxation of the erosion
of the purchasing power of monetary assets.
The Company's ability to preserve its purchasing power depends primarily
on its ability to manage net interest income. Net interest income for the
third quarter of 1998 increased 1.12% over the third quarter of 1997, and
7.4% over the third quarter of 1996. Year to date net interest income is
reported at $6.67 million, increasing less than one half of one percent for
the first nine months of 1997 and 9.2% over the same period in 1996.
FINANCIAL CONDITION
Average earning assets grew 5.7% in the first nine months of 1998
compared to the same period in 1997 to an average volume of $209.3 million.
Loans totaled $150.5 million in 1998 and $147.4 million in 1997, comprising
71.9% and 74.4%, respectively, of total earning assets. On September 30,
1998, residential real estate mortgage loans made up 65% of the portfolio,
commercial loans made up 23%, and personal loans made up 12%, differing
slightly from the 1997 percentages of 65%, 22%, and 13%, respectively.
Taxable investments made up 18% of the average earning assets in the
first nine months of 1998, compared to 18.5% in 1997 to end the period at
an average volume of $37.6 million. Tax-exempt investments of $12.9
million accounted for 6.2% of the average earning assets in the first
nine months of 1998, compared to $11.8 million or 6% a year ago.
Federal Funds sold reports an average volume of $3.8 million making
up 1.8% of the earning assets portfolio at the end of the first nine
months of 1998, compared to $984 thousand or one half of one percent for
the same period ending in 1997. The new Bank of Boston sweep account
comprised 1.5% of total earning assets ending at an average volume of
$3.2 million. Ending the list of earning assets, other securities with
an average volume of $1.3 million accounted for .61% of earning assets
for the first nine months of 1998, compared to an average volume of
$1.24 million, accounting for .63% a year ago.
The St. Johnsbury office continues to report growth in both assets
and liabilities with total gross loans ending the first nine months of
1998 at an average volume of $12.2 million compared to $9.4 million for
the same period last year. Total deposits ended the same period at an
average volume of $11.1 million for 1998 versus $6.9 million for 1997.
Residential real estate loans continue to account for the greatest
portion of the loan portfolio with an average balance of $6.4 million
or 52.3% and money market accounts with an average volume of $4.6 million
accounts for 41.9% of total deposits.
Historically, the Company has funded its growth by steady increases
in its core deposits. The Company has no brokered deposits, 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
generally 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. Interest rates have
decreased on savings accounts as well as NOW and money market accounts
while the rate paid on certificates of deposit has increased. The average
volume of savings accounts decreased by 4.5%, while an increase of 12.1%
is noted in the average volume of NOW and money markets accounts, and an
increase of 4.3% is reported for certificates of deposit.
Savings deposits reported an average volume of $30.8 million, making
up 17.4% of total interest bearing liabilities for the first nine months
of 1998, compared to an average volume of $32.2 million accounting for
just over 19% for the same period a year ago.
For the first nine months of 1998, NOW and money market reported an
average volume of $43.3 million accounting for 24.5% of total interest
bearing liabilities, which is an increase over last years figures of
$38.6 million in average volume making up 22.8% of the interest bearing
liabilities portfolio.
Time deposits ended the first nine months of 1998 at an average volume
of $98.4 million compared to $94.4 million for the same period a year ago.
These figures translate into compositions of 55.7% and 55.8%, respectively,
of total interest bearing liabilities for the nine months ended 1998 and
1997.
Other borrowed funds, with an average volume of $4.1 million accounted
for 2.3% of the interest bearing liabilities portfolio for the first nine
months of 1998, compared to an average volume of $3.7 million making up
2.2% for the first nine months of 1997.
Repurchase agreements, which as mentioned earlier, was just established
this year, carried an average volume of $40 thousand making up .02% of
interest bearing liabilities. And ending the list of interest bearing
liabilities, subordinated debentures carried an average volume of $50
thousand and made up .03% to total interest bearing liabilities for the
first nine months of 1998, compared to a volume of $127 thousand making
up .08% for the same period in 1997.
CAPITAL RESOURCES
The Company's stockholders' equity started the year at $20,480,357,
was increased through earnings of $1,527,759, sales of common stock
through dividend reinvestment and debenture conversions of $747,904, and
adjustments of $300,768 for valuation of allowance for securities. It
was decreased by dividends of $1,369,090, and purchase of treasury stock
of $197 to end the first nine months of 1998 at $21,687,501 with a book
value of $7.01 per share. All stockholders' equity is unrestricted.
Additionally, it is noted that the unrealized gain on valuation
allowance for securities has increased starting at the September 30,
1997, balance of $28,339 to the December 31, 1997, balance of $33,709
to end the first nine months of 1998 at $334,477. 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 September 30, 1998 the Company continued to
maintain ratios far above the minimum requirements with reported
ratios of 19.31% for Tier I and 20.58% for Total Capital.
The Company continues its 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.
OTHER MATTERS
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 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. 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.
In an effort to correctly assess the effect of Y2K on the financial
position of the Company, a committee has been organized. This committee
meets on a regular basis to keep management and the Board of Directors
informed of any changes or problems encountered. The Y2K committee has
put together a list of the various software vendors that they felt need
further assessment for Y2K compliance, and one individual has been
assigned to work directly with each software vendor. This committee
has met twice to date, and has established a schedule for testing the
software for Y2K conformity. This first phase is expected to be completed
by the end of the 1998 calendar year. Preliminary procedures are also
in place in the event that the first phase of testing proves non compliant.
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. 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, and to that
end, has established a contingency in the amount of $50,000 for fiscal
year '99.
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 6
Exhibits and Reports on Form 8-K
Exhibits - None
Form 8-K was filed on September 8, 1998 relating to the amendment of Article
Five of the Corporation's Articles of Association to increase the number of
shares the Corporation may issue, and the approval by the Board of Directors
to restate the Articles of Association.
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: November 12, 1998 By: /S/ Richard C. White
Richard C. White, President
DATED: November 12, 1998 By: /s/ Stephen P. Marsh
Stephen P. Marsh,
Vice President & Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,863
<INT-BEARING-DEPOSITS> 850
<FED-FUNDS-SOLD> 2,725
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 21,856
<INVESTMENTS-CARRYING> 38,465
<INVESTMENTS-MARKET> 38,709
<LOANS> 150,600
<ALLOWANCE> 1,653
<TOTAL-ASSETS> 224,239
<DEPOSITS> 197,474
<SHORT-TERM> 78
<LIABILITIES-OTHER> 919
<LONG-TERM> 4,080
0
0
<COMMON> 7,808
<OTHER-SE> 13,879
<TOTAL-LIABILITIES-AND-EQUITY> 224,239
<INTEREST-LOAN> 10,353
<INTEREST-INVEST> 2,127
<INTEREST-OTHER> 276
<INTEREST-TOTAL> 12,756
<INTEREST-DEPOSIT> 5,933
<INTEREST-EXPENSE> 6,088
<INTEREST-INCOME-NET> 6,668
<LOAN-LOSSES> 510
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,339
<INCOME-PRETAX> 2,012
<INCOME-PRE-EXTRAORDINARY> 2,012
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,528
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
<YIELD-ACTUAL> 7.95
<LOANS-NON> 2,037
<LOANS-PAST> 417
<LOANS-TROUBLED> 129
<LOANS-PROBLEM> 2666
<ALLOWANCE-OPEN> 1,502
<CHARGE-OFFS> 525
<RECOVERIES> 166
<ALLOWANCE-CLOSE> 1,653
<ALLOWANCE-DOMESTIC> 1,653
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 155
</TABLE>
