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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1995
Commission File No. 33-12756-B
COMMUNITY BANCORP, INC.
A Massachusetts Corporation
IRS Employer Identification No. 04-2841993
17 Pope Street, Hudson, Massachusetts 01749
Telephone - (508) 568-8321
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Common Stock
$2.50 par value
3,140,754 shares outstanding
as of March 31, 1995
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COMMUNITY BANCORP, INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5-6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBITS Financial Data Schedule (Article 9) 15
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<TABLE>
PART I - FINANCIAL INFORMATION
COMMUNITY BANCORP, INC.
Item 1. CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31,
1995 December 31,
(Unaudited) 1994
---------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 10,777,843 $ 11,600,385
Federal funds sold 2,500,000 6,100,000
Securities available for sale, at market 25,545,814 26,069,495
Securities held to maturity (market value
$44,631,945 at 3/31/95 and $43,296,728
at 12/31/94) 46,506,070 46,495,293
Mortgage loans held for sale 35,000 559,304
Loans 124,617,602 122,479,051
Less allowance for possible loan losses 3,737,520 3,703,470
----------- -----------
Total net loans 120,880,082 118,775,581
Premises and equipment, net 5,132,953 5,205,076
Other assets, net 4,683,182 5,045,633
----------- -----------
Total assets $216,060,944 $219,850,767
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest bearing $ 37,632,138 $ 42,074,618
Interest bearing 146,683,571 144,788,368
----------- -----------
Total deposits 184,315,709 186,862,986
----------- -----------
Federal funds purchased and securities
sold under repurchase agreements 12,671,868 14,940,801
Other liabilities 1,510,635 1,302,530
----------- -----------
Total liabilities 198,498,212 203,106,317
----------- -----------
Commitments
Stockholders' equity:
Preferred stock, $2.50 par value, 100,000
shares authorized, none issued or outstanding
Common stock, $2.50 par value, 4,000,000
shares authorized, 3,199,218 shares issued,
3,140,754 shares outstanding 7,998,045 7,998,045
Surplus 263,538 263,538
Undivided profits 10,029,130 9,556,768
Treasury stock (58,464 shares) (263,088) (263,088)
Unrealized losses on securities available
for sale, net (464,893) (810,813)
----------- -----------
Total stockholders' equity 17,562,732 16,744,450
----------- -----------
Total liabilities and
stockholders' equity $216,060,944 $219,850,767
=========== ===========
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three months ended
March 31,
-------------------------
1995 1994
--------- ---------
<S> <C> <C>
Interest income:
Interest and fees on loans $2,952,232 $2,496,227
Interest and dividends on securities:
Taxable interest 1,011,866 933,026
Nontaxable interest 23,365 13,122
Dividends 20,352 14,605
Interest on federal funds sold 2,350 14,250
--------- ---------
Total interest income 4,010,165 3,471,230
--------- ---------
Interest expense:
Interest on deposits 1,281,406 914,511
Interest on short term borrowings 148,525 93,028
--------- ---------
Total interest expense 1,429,931 1,007,539
--------- ---------
Net interest income 2,580,234 2,463,691
Provision for possible loan losses 30,000 75,000
--------- ---------
Net interest income after provision
for possible loan losses 2,550,234 2,388,691
--------- ---------
Noninterest income:
Merchant credit card assessments 170,693 153,055
Service charges 177,226 156,459
Other charges, commissions and fees 165,036 171,398
Gains (losses) on sales of loans, net (12,726) 12,154
Gains (losses) on sales of securities, net (23,923)
Other 21,766 41,444
--------- ---------
Total noninterest income 521,995 510,587
--------- ---------
Noninterest expense:
Salaries and employee benefits 1,006,997 1,029,630
Data processing 113,643 103,752
Occupancy, net 147,653 155,305
Furniture and equipment 82,871 67,738
Credit card processing 134,250 94,647
FDIC insurance premiums 101,969 100,549
Other 397,103 389,140
--------- ---------
Total noninterest expense 1,984,486 1,940,761
--------- ---------
Income before income taxes 1,087,743 958,517
Income taxes 436,359 382,141
--------- ---------
Net income $ 651,384 $ 576,376
========= =========
Earnings per share $ .207 $ .180
Dividends per share $ .057 $ .050
Weighted average number of shares 3,140,754 3,199,218
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three months ended
March 31,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Interest received $ 4,228,613 $ 3,247,301
Fees and commissions received 381,148 253,952
Proceeds from secondary market
mortgage sales 1,661,593 21,315,388
Origination of mortgage loans for
secondary market sales (1,046,141) (11,463,291)
Interest paid (1,562,164) (1,027,078)
Cash paid to suppliers & employees (1,465,161) (1,284,952)
Income taxes paid (29,275) (6,116)
---------- ----------
Net cash provided by operating activities 2,168,613 11,035,204
---------- ----------
Cash flows from investing activities:
Purchases of securities held to maturity (417,000) (9,708,014)
Proceeds from maturities of securities
held to maturity 383,200 2,000,000
Net change in securities available for sale 1,055,469 (1,472,779)
Net change in federal funds sold 3,600,000 1,100,000
Net change in loans and other real estate
owned (2,530,000) 2,217,993
Proceeds from sale of other real estate
owned 46,000
Acquisition of property, plant and equipment (91,573) (405,109)
---------- ----------
Net cash provided by (used in)
investing activities 2,000,096 (6,221,909)
---------- ----------
Cash flows from financing activities:
Net change in deposits (2,547,277) (10,169,939)
Net change in repurchase agreements and
short term borrowing (2,268,933) 1,750,694
Dividends paid (175,041) (153,562)
---------- ----------
Net cash used in financing activities (4,991,251) (8,572,807)
---------- ----------
Net decrease in cash and due from banks (822,542) (3,759,512)
Cash and due from banks at beginning
of period 11,600,385 12,402,450
---------- ----------
Cash and due from banks at end of period $10,777,843 $ 8,642,938
========== ==========
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Reconciliation of Net Income to Net Cash Provided by Operating Activities
(Unaudited)
<CAPTION>
Three months ended
March 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Net income $ 651,384 $ 576,376
Adjustments to reconcile net income
to net cash provided by operating
activities:
Decrease in mortgage loans held for sale 524,304 9,712,948
Premium on sale of mortgages 91,148 139,149
Depreciation and amortization 245,553 299,064
Provision for loan losses 30,000 75,000
Increase in other liabilities 273,771 176,520
Increase in taxes payable 407,084 376,022
(Decrease) in interest payable (132,233) (19,539)
(Increase) in other assets (140,847) (76,407)
Decrease (increase) in interest receivable 218,449 (223,929)
---------- ----------
Total adjustments 1,517,229 10,458,828
---------- ----------
Net cash provided by operating activities $ 2,168,613 $11,035,204
========== ==========
<FN>
See accompanying notes.
</TABLE>
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COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(Unaudited)
________________________________________________________________________
1. BASIS OF PRESENTATION
The interim consolidated financial statements contained herein are
unaudited but, in the opinion of management, reflect all adjustments
necessary for a fair presentation of results for such periods. All
adjustments are of a normal recurring nature. The results of
operations for any interim period are not necessarily indicative of
results for the full year. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto contained in the Company's Annual
Report to shareholders and Form 10-K for the year ended December 31,
1994.
2. EARNINGS PER SHARE
Earnings per share calculations are based on the weighted average
number of common shares outstanding during the period.
3. FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT NO. 114, "ACCOUNTING
BY CREDITORS FOR IMPAIRMENT OF A LOAN"
Beginning January 1, 1995, the Company adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for
Impairment of a Loan" (SFAS No. 114). Under the new standard, the
allowance for possible loan losses related to loans that are
identified as impaired in accordance with SFAS No. 114 is based on
discounted cash flows using the loan's effective interest rate or
the fair value of the collateral for certain collateral dependent
loans. For purposes of this Statement, a loan is considered
impaired when it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the
loan agreement. The Financial Accounting Standards Board also
issued SFAS No. 118, which amended SFAS No. 114, by allowing
creditors to use their existing methods of recognizing interest
income on impaired loans. Prior to 1995, the allowance for possible
loan losses related to these loans was based on undiscounted cash
flows or the fair value of the collateral for collateral dependent
loans.
The Company has determined after reviewing its Credit Quality
Monitoring policies and procedures, and an analysis of the loans
outstanding at March 31, 1995, that loans recognized by the Company
as nonaccrual and restructured are equivalent to "impaired loans" as
defined by SFAS No. 114. The Company has also determined that the
reserve for possible loan losses at March 31, 1995 did not require
an additional loan loss provision as a result of the adoption of
this statement.
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Total impaired loans at March 31, 1995 with required reserves were
$692,819, and the reserve for possible loan losses allocated to such
loans was $148,260. In addition, the Company had impaired loans of
$70,000 that did not require reserves. As of March 31, 1995, the
Company recognized interest income on impaired loans of $0, which
included $0 of interest recognized using the cash basis of income
recognition.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Summary
- - -------
The Company recorded net income of $651,384 for the three months
ended March 31, 1995, representing an increase of $75,008 or 13.0% over
$576,376 for the same period in 1994. Earnings per share increased to
$.207 for the current period compared to $.180 for the three months
ended March 31, 1994.
The improvement in net income for the current three month period
resulted from an increase in net interest and noninterest income and
reductions in the provision for loan losses, partially offset by a small
increase in noninterest expense.
Deposits of $184,315,709 at March 31, 1995 decreased by $2,547,277
or 1.4% from $186,862,986 at December 31, 1994. The decrease occurred
primarily in noninterest bearing categories. Interest bearing deposits
increased by $1,895,203, primarily in the areas of NOW and money market
deposit accounts, while noninterest bearing accounts decreased by
$4,442,480, primarily in the area of business demand deposit accounts.
Loans of $124,617,602 at March 31, 1995, excluding mortgage loans
held for sale, increased by $2,138,551 or 1.7% from $122,479,051 at
December 31, 1994. This increase occurred primarily in the areas of
commercial and adjustable rate residential mortgage loans. Noncurrent
loans (nonaccrual loans and loans 90 days or more past due but still
accruing) totaled $806,085 and $975,475 at March 31, 1995 and December
31, 1994, respectively. Accruing troubled debt restructurings totalled
$1,154,570 at both March 31, 1995 and December 31, 1994.
Other real estate owned of $479,136 at March 31, 1995, represented
an increase of $51,000 from $428,136 at December 31, 1994.
Assets of $216,060,944 at March 31, 1995 represented a $3,789,823 or
1.7% decrease from $219,850,767 at December 31, 1994.
Three Months ended March 31, 1995 as Compared To
Three Months ended March 31, 1994
------------------------------------------------
Net Interest Income
- - -------------------
Interest income for the three months ended March 31, 1995 was
$4,010,165, representing an increase of $538,935 or 15.5% from
$3,471,230 for the three months ended March 31, 1994, primarily due to
higher loan balances and higher interest rates in 1995. Interest
expense was $1,429,931, representing an increase of $422,392 or 41.9%
from $1,007,539 for the three months ended March 31, 1994, primarily due
to an increase in interest bearing deposits and higher interest rates in
1995. Net interest income for the three months ended March 31, 1995 was
$2,580,234, representing an increase of $116,543 or 4.7% over $2,463,691
for the same period in 1994.
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Noninterest Income and Expense
- - ------------------------------
Noninterest income for the three months ended March 31, 1995 was
$521,995, representing an increase of $11,408 or 2.2% from $510,587 for
the same period in 1994. This increase resulted primarily from
increases in merchant credit card assessments, service charges and
losses on sales of loans, partially offset by reductions in other
charges, commissions and fees, losses on sales of securities and other
income.
Noninterest expense for the three months ended March 31, 1995 of
$1,984,486 represented a decrease of $43,725 or 2.3% from $1,940,761
recorded during the same period in 1994. This decrease was primarily
the result of reductions in salaries and employee benefits and occupancy
expense, partially offset by increases in data processing, furniture and
equipment, credit card processing, FDIC insurance premiums and other
expense.
Provision for Possible Loan Losses
- - ----------------------------------
The provision for possible loan losses for the three months ended
March 31, 1995 was $30,000, representing a $45,000 or 60.0% decrease
from $75,000 for the same period in 1994. This decrease was the result
of management's continuing evaluation of the adequacy of the allowance
for possible loan losses and its belief that the allowance is adequate.
Management will continue its ongoing assessment of the regional economy,
the real estate market and the level of the Company's problem loans
during 1995 and make further adjustments in the allowance for possible
loan losses if necessary.
Income Taxes
- - ------------
Income tax expense of $436,359 for the three months ended March 31,
1995 compared to $382,141 for the same period in 1994, resulting from an
increase in taxable income during the current period.
Net Income
- - ----------
Net income of $651,384 for the three months ended March 31, 1995
represented an increase of $75,008 or 13.0% over $576,376 recorded
during the same period in 1994. The foregoing discussion summarized the
primary components of this increase in earnings.
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Allowance for Possible Loan Losses
- - ----------------------------------
The allowance for possible loan losses is maintained at a level
believed by management to be adequate to absorb potential losses in the
loan portfolio. Management's methodology in determining the adequacy of
the allowance considers specific credit reviews, past loan loss
experience, current economic conditions and trends, and the volume,
growth and composition of the loan portfolio. Each loan on the
Company's internal "Watch List" is evaluated periodically to estimate
potential loss. When estimated losses can be determined for Watch List
loans, specific amounts are set aside as allocated reserves. For the
remainder of the loan portfolio, unallocated reserve amounts are
determined based on judgements regarding the type of loan, economic
conditions and trends, potential exposure to loss and other factors.
The allowance for possible loan losses is charged when management
determines that the repayment of the principal on a loan is in doubt.
Subsequent recoveries, if any, are credited to the allowance.
At March 31, 1995 the allowance was $3,737,520, representing 3.0% of
total loans (excluding mortgage loans held for sale), compared to
$3,703,470, representing 3.0% of total loans December 31, 1994.
Securities
- - ----------
The Company's securities portfolio consists of obligations of the
U.S. Treasury, government sponsored agencies, mortgage backed securities
and obligations of municipalities in the Company's market area. These
assets are used in part to secure public deposits and as collateral for
repurchase agreements.
Total securities were $72,051,884 at March 31, 1995, representing a
decrease of $512,904 or .7% from $72,564,788 at December 31, 1994.
During the three months ended March 31, 1995, no securities were sold.
Liquidity and Capital Resources
- - -------------------------------
The Company's principle sources of liquidity are customer deposits,
amortization and pay-offs of loan principal and maturities of investment
securities. These sources provide funds for loan originations, the
purchase of investment securities and other activities. Deposits are
considered a relatively stable source of funds. At March 31, 1995, 1994
and 1993, deposits were $184.3 million, $175.3 million and $168.0
million, respectively. Management anticipates that deposits will
increase moderately during 1995.
As a nationally chartered member of the Federal Reserve System, the
Bank has the ability to borrow funds from the Federal Reserve Bank of
Boston by pledging certain of its investment securities as collateral.
Also, the Bank is a member of the Federal Home Loan Bank which provides
additional borrowing opportunities.
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<PAGE 12>
Bank regulatory authorities have established a capital measurement
tool called "Tier 1" leverage capital. A 3.00% ratio of Tier 1 leverage
capital to assets now constitutes the minimum capital standard for
banking organizations. At March 31, 1995, the Company's Tier 1 leverage
capital ratio was 8.27%. Regulatory authorities have also implemented
risk-based capital guidelines requiring a minimum ratio of Tier 1
capital to risk-weighted assets of 4.00% and a minimum ratio of total
capital to risk-weighted assets of 8.00%. At March 31, 1995 the
Company's Tier 1 and total risk-based capital ratios were 13.67% and
14.94%, respectively. Both the Company and the Bank are categorized as
"well capitalized" under the Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA).
The Board of Directors declared a first quarter 1995 dividend of
$.057 per share of common stock to shareholders of record at March 1,
1995, payable on April 14, 1995.
Asset/Liability Management
- - --------------------------
The Company has an asset/liability management committee which
oversees all asset/liability management activities. The committee
establishes general guidelines each year and meets regularly to review
the Company's operating results and to make strategic changes when
necessary.
It is the Company's general policy to reasonably match the rate
sensitivity of its assets and liabilities. A common benchmark of this
sensitivity is the one year gap position, which is a reflection of the
difference between the speed and magnitude of rate changes of interest
rate sensitive liabilities as compared with the Bank's ability to adjust
the rates of it's interest rate sensitive assets in response to such
changes. The Company's positive cumulative one year gap position at
March 31, 1995, representing the excess of repricing assets versus
repricing liabilities within a one year time frame, was 1.2% expressed
as a percentage of total assets.
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PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) The Registrant did not file a Form 8-K during the quarter ended
March 31, 1995.
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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, INC.
-----------------------
Date: May 3, 1995 By: /s/ James A. Langway
-------------------------
James A. Langway
President & Chief Executive Officer
Principal Executive Officer
Date: May 3, 1995 By: /s/ Donald R. Hughes, Jr.
--------------------------
Donald R. Hughes, Jr.
Treasurer and Clerk
Principal Financial Officer and
Principal Accounting Officer
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<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited March 31, 1995 financial statements of Community Bancorp, Inc.
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 10777843
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2500000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25545814
<INVESTMENTS-CARRYING> 46506070
<INVESTMENTS-MARKET> 44631945
<LOANS> 124617602
<ALLOWANCE> 3737520
<TOTAL-ASSETS> 216060944
<DEPOSITS> 184315709
<SHORT-TERM> 12671868
<LIABILITIES-OTHER> 1510635
<LONG-TERM> 0
<COMMON> 7998045
0
0
<OTHER-SE> 9564687
<TOTAL-LIABILITIES-AND-EQUITY> 216060944
<INTEREST-LOAN> 2952232
<INTEREST-INVEST> 1055583
<INTEREST-OTHER> 2350
<INTEREST-TOTAL> 4010165
<INTEREST-DEPOSIT> 1281406
<INTEREST-EXPENSE> 1429931
<INTEREST-INCOME-NET> 2580234
<LOAN-LOSSES> 30000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1984486
<INCOME-PRETAX> 1087743
<INCOME-PRE-EXTRAORDINARY> 1087743
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 651384
<EPS-PRIMARY> .207
<EPS-DILUTED> .207
<YIELD-ACTUAL> 5.44
<LOANS-NON> 762819
<LOANS-PAST> 43266
<LOANS-TROUBLED> 1154570
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3703470
<CHARGE-OFFS> 46167
<RECOVERIES> 50217
<ALLOWANCE-CLOSE> 3737520
<ALLOWANCE-DOMESTIC> 1910036
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1827484
</TABLE>
