UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
form 10-K or any amendment to this form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 20, 1996 was $14,074,942.
The total number of shares of common stock outstanding at March 20, 1996
was 3,158,946.
Documents Incorporated By Reference
Parts II, III and IV incorporate information by reference from the
Annual Report to shareholders for the year ended December 31, 1995.
<PAGE>
PART I
------
ITEM 1. BUSINESS
Community Bancorp, Inc., a Massachusetts corporation ("Company"),
is a registered bank holding company under the Bank Holding Company Act
of 1956, as amended. The Holding Company has one subsidiary, Hudson
National Bank, a national banking association ("Bank"). The Holding
Company owns all the outstanding shares of the Bank. At present, the
Holding Company conducts no activities independent of the Bank. During
1992, the Company formed Community Securities Corporation, a wholly
owned subsidiary of the Bank. The activities of the subsidiary consist
of buying, selling, dealing in or holding securities in its own behalf
and not as a broker.
The Bank is engaged in substantially all of the business operations
customarily conducted by an independent commercial bank in
Massachusetts. Banking services offered include acceptance of checking,
savings and time deposits, and the making of commercial, real estate,
installment and other loans. The Bank also offers official checks,
traveler's checks, safe deposit boxes and other customary bank services
to its customers. In 1994 the Bank introduced a telephone banking
service allowing customers to perform account inquiries and other
functions using a Touch Tone telephone. In 1995 the Bank introduced a
PC-based office banking system for businesses that allows business
customers to access their accounts and perform a number of functions
directly through an office PC. In March of 1996 the Bank introduced a
PC-based home banking system for consumers.
The business of the Bank is not significantly affected by seasonal
factors.
In the last five years the Bank derived its operating income from the
following sources:
<TABLE>
<CAPTION>
% of Operating Income
--------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest and fees on loans 65 64 67 69 71
Interest and dividends on
securities 24 24 21 16 13
Charges, fees and other sources 11 12 12 15 16
--- --- --- --- ---
100% 100% 100% 100% 100%
</TABLE>
Competition
- -----------
The Bank generally concentrates its activities within a 20 mile
radius of Hudson, Massachusetts and currently operates full service
branch offices in Hudson, Acton, Boxboro, Concord, Marlboro and Stow,
Massachusetts. These communities are generally characterized by a
growing residential population and moderate to high household income.
In addition to its main office, the Bank also operates a full service
branch office in the Town of Hudson.
-1-
<PAGE>
The banking business in the Bank's market area is highly
competitive. The Bank competes actively with other banks, as well as
with other financial institutions engaged in the business of accepting
deposits or making loans, such as savings and loan associations, savings
banks and finance companies. In the Bank's general area, there are
approximately 3 national banks, 3 Massachusetts trust companies, 6
savings banks, 2 cooperative banks and 4 credit unions. Since several
of the competing institutions are significantly larger than the Bank in
assets and deposits, the Bank strongly emphasizes a personal approach to
service in order to meet and surpass the vigorous competition.
Regulation of the Company
- -------------------------
The Company is a registered bank holding company under the Bank
Holding Company Act of 1956, as amended. It is subject to the
supervision and examination of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") and files with the Federal
Reserve Board the reports as required under the Bank Holding Company Act.
The Bank Holding Company Act requires prior approval by the Federal
Reserve Board of the acquisition by the Company of substantially all the
assets or more than five percent of the voting stock of any bank. The
Bank Holding Company Act also allows the Federal Reserve Board to
determine (by order or by regulation) what activities are so closely
related to banking as to be a proper incident of banking, and thus,
whether the Company can engage in such activities or transactions
between the affiliated banks and the Company or other affiliates. The
Bank Holding Company Act prohibits the Company and the Bank from
engaging in certain tie-in arrangements in connection with any extension
of credit, sale of property or furnishing of services.
Regulation of the Bank
- ----------------------
The Bank is a national banking association chartered under the
National Bank Act. As such, it is subject to the supervision of the
Comptroller of the Currency and is examined by his office. In addition,
it is subject to examination by the Federal Reserve Board by reason of
its membership in the Federal Reserve System and by the Federal Deposit
Insurance Corporation by reason of the insurance of its deposits by such
corporation. Areas in which the Bank is subject to regulation by
federal authorities include reserves, loans, investments, issuances of
various types of securities, participation in mergers and
consolidations, and certain transactions with or in the stock of the
Company.
Employees
- ---------
The Company and the Bank employ 131 full-time and part-time
officers and employees.
-2-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity; Interest
- ----------------------------------------------------------------------
Rates and Interest Differential
- -------------------------------
The following tables present the condensed average balance sheets
and the components of net interest differential for the three years
ended December 31, 1995, 1994 and 1993. The total dollar amount of
interest income from earning assets and the resultant yields are
calculated on a taxable equivalent basis.
<TABLE>
<CAPTION>
1995
-----------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
----------- ---------- ------
<S> <C> <C> <C>
Federal funds sold $ 7,115,616 $ 406,977 5.72%
Securities:
Taxable 69,470,273 4,055,415 5.84%
Non-taxable (1) 1,879,882 146,427 7.79%
Total loans and leases (1)(2) 127,033,820 12,450,001 9.80%
----------- ---------- ----
Total earning assets 205,499,591 17,058,820 8.30%
----------
Reserve for loan losses (3,779,610)
Other non interest-
bearing assets 20,993,896
-----------
Total average assets $222,713,877
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $ 89,849,771 $ 2,417,573 2.69%
Time deposits 61,842,194 3,317,979 5.37%
Federal funds purchased and
repurchase agreements 11,453,322 549,198 4.80%
----------- ---------- ----
Total interest-bearing
liabilities $163,145,287 $ 6,284,750 3.85%
----------
Non interest-bearing deposits 39,366,065
Other non interest-bearing
liabilities 1,853,949
Stockholders' equity 18,348,576
-----------
Total average liabilities
and stockholders' equity $222,713,877
===========
Net interest income $10,774,070
==========
Net yield on interest
earning assets 5.24%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $141,197. A federal tax
rate of 34% was used in performing this calculation.
(2) The average balances of non-accruing loans and loans held for sale
are included in the loan balance.
</TABLE>
-3-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential (Continued)
<TABLE>
<CAPTION>
1994
-----------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
----------- ---------- ------
<S> <C> <C> <C>
Federal funds sold $ 1,527,940 $ 61,642 4.03%
Securities:
Taxable 69,513,479 3,871,111 5.57%
Non-taxable (1) 1,072,378 92,522 8.63%
Total loans and leases (1)(2) 120,017,690 10,524,329 8.77%
----------- ---------- ----
Total earning assets 192,131,487 14,549,604 7.57%
----------
Reserve for loan losses (3,860,367)
Other non interest-
bearing assets 21,227,612
-----------
Total average assets $209,498,732
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $ 88,782,185 $ 1,854,068 2.09%
Time deposits 53,789,007 2,288,637 4.25%
Federal funds purchased and
repurchase agreements 11,971,422 379,483 3.17%
Short term debt 41,968 3,370 8.03%
----------- ---------- ----
Total interest-bearing
liabilities $154,584,582 $ 4,525,558 2.93%
----------
Non interest-bearing deposits 37,001,536
Other non interest-bearing
liabilities 1,392,148
Stockholders' equity 16,520,466
-----------
Total average liabilities
and stockholders' equity $209,498,732
===========
Net interest income $10,024,046
==========
Net yield on interest
earning assets 5.22%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $119,672. A federal tax
rate of 34% was used in performing this calculation.
(2) The average balances of non-accruing loans and loans held for sale
are included in the loan balance.
</TABLE>
-4-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential (Continued)
<TABLE>
<CAPTION>
1993
-----------------------------------
Average Interest Yield/
ASSETS Balance Inc./Exp. Rate
----------- ---------- ------
<S> <C> <C> <C>
Federal funds sold $ 7,202,134 $ 212,159 2.95%
Securities:
Taxable 57,320,210 3,264,003 5.69%
Non-taxable (1) 941,222 99,664 10.59%
Total loans and leases (1)(2) 122,410,863 10,569,755 8.63%
----------- ---------- -----
Total earning assets 187,874,439 14,145,581 7.53%
----------
Reserve for loan losses (4,284,600)
Other non interest-
bearing assets 21,964,558
-----------
Total average assets $205,554,397
===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing deposits:
Savings, money market and NOW $ 84,931,434 $ 1,803,486 2.12%
Time deposits 56,477,215 2,316,614 4.10%
Federal funds purchased and
repurchase agreements 13,185,487 317,572 2.41%
Short term debt 390,411 27,707 7.10%
----------- ---------- ----
Total interest-bearing
liabilities $154,984,547 $ 4,465,379 2.88%
---------- ----
Non interest-bearing deposits 33,041,837
Other non interest-bearing
liabilities 2,203,930
Stockholders' equity 15,324,083
-----------
Total average liabilities
and stockholders' equity $205,554,397
===========
Net interest income $ 9,680,202
==========
Net yield on interest
earning assets 5.15%
====
<FN>
(1) Interest income and yield are stated on a fully taxable-equivalent
basis. The total amount of adjustment is $113,075. A federal tax
rate of 34% was used in performing this calculation.
(2) The average balances of non-accruing loans and loans held for sale
are included in the loan balance.
</TABLE>
-5-
<PAGE>
Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential (Continued)
The following table shows, for the periods indicated, the dollar
amount of changes in interest income and interest expense resulting from
changes in volume and interest rates. The total dollar amount of interest
income from earning assets is calculated on a taxable equivalent basis.
<TABLE>
<CAPTION>
1995 as compared to 1994
--------------------------------------
Due to a change in:
-------------------
Volume Rate Total
--------- ---------- ----------
<S> <C> <C> <C>
Interest income from:
Federal funds sold $ 319,513 $ 25,822 $ 345,335
Securities:
Taxable (3,382) 187,686 184,304
Non-taxable 62,913 (9,008) 53,905
Loans & leases 689,490 1,236,182 1,925,672
--------- --------- ---------
Total $1,068,533 $1,440,683 $2,509,216
--------- --------- ---------
Interest expense on:
Interest-bearing deposits:
Savings, money market and NOW $ 30,812 $ 532,693 $ 563,505
Time deposits 426,905 602,437 1,029,342
Federal funds purchased and
repurchase agreements (25,419) 195,134 169,715
Short term debt (3,370) (3,370)
--------- --------- ---------
Total $ 428,928 $1,330,264 $1,759,192
--------- --------- ---------
Net interest income $ 639,605 $ 110,419 $ 750,024
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1994 as compared to 1993
--------------------------------------
Due to a change in:
-------------------
Volume Rate Total
---------- ---------- ----------
<S> <C> <C> <C>
Interest income from:
Federal funds sold $ (228,300) $ 77,783 $ (150,517)
Securities:
Taxable 675,892 (68,784) 607,108
Non-taxable 11,306 (18,448) (7,142)
Loans & leases (216,801) 171,375 (45,426)
--------- --------- ---------
Total $ 242,097 $ 161,926 $ 404,023
--------- --------- ---------
Interest expense on:
Interest-bearing deposits:
Savings, money market and NOW $ 76,061 $ (25,479) $ 50,582
Time deposits (112,693) 84,716 (27,977)
Federal funds purchased and
repurchase agreements (38,299) 100,210 61,911
Short term debt (27,968) 3,631 (24,337)
--------- --------- ---------
Total $ (102,898) $ 163,077 $ 60,179
--------- --------- ---------
Net interest income $ 344,995 $ (1,151) $ 343,844
========= ========= =========
<FN>
Note: The change due to the volume/rate variance has been allocated to
volume.
</TABLE>
-6-
<PAGE>
Securities Portfolio
- --------------------
The following table indicates the carrying value of the Company's
consolidated securities portfolio at December 31, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
(in $000) 1995 1994 1993
- --------- ------ ------ ------
<S> <C> <C> <C>
U.S. Government obligations $17,160 $12,881 $11,431
U.S. Government agencies and corp. 54,627 56,990 50,560
Obligations of states and political
subdivisions 1,941 1,569 891
Other securities 888 1,125 781
------ ------ ------
Total $74,616 $72,565 $63,663
====== ====== ======
</TABLE>
The following table shows the maturities, carrying value and weighted
average yields of the Company's consolidated securities portfolio at
December 31, 1995. The yields are calculated by dividing the annual
interest, net of amortization of premiums and accretion of discounts, by
the amortized cost of the securities at the dates indicated. The yields
on state and municipal securities are presented on a taxable equivalent
basis.
<TABLE>
<CAPTION>
After one After five
Maturing: Within but within but within After
-------- one year five years ten years ten years
------------ ------------ ------------ ------------
(in $000) Amount Yield Amount Yield Amount Yield Amount Yield
--------- ------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Govt. obli-
gations held to
maturity $2,004 5.70% $7,101 5.25% $ 0 0% $ 0 0%
U.S. Govt. obli-
gations avail-
able for sale 4,031 5.22% 4,024 5.22% 0 3 0 0%
U.S. Govt. agencies
& corps. held to
maturity 0 0% 9,545 6.03% 3,000 6.03 0 0%
U.S. Govt. agencies
& corps. available
for sale 0 0% 2,016 5.27% 0 0% 0 0%
State and political
subdivisions
held to maturity 501 7.00% 1,440 7.00% 0 0% 0 0%
Mortgage-backed
securities avail-
able for sale 0 0% 0 0% 6,444 5.16% 7,276 6.33%
Mortgage-backed
securities held to
maturity 0 0% 5,849 5.51% 14,004 6.02% 6,493 6.20%
Other securities 0 0% 0 0% 0 0% 888 6.15%
</TABLE>
Current estimated prepayment speed assumptions were used in estimating
the maturities of mortgage-backed securities in the above table. At
December 31, 1995, the Company did not own securities of any issuer where
the aggregate book value of such securities exceeded ten percent of the
Company's stockholders' equity.
-7-
<PAGE>
Loan Portfolio
- --------------
The following table summarizes the distribution of the Bank's loan
portfolio as of December 31 for each of the years indicated:
<TABLE>
<CAPTION>
(in $000) 1995 1994 1993 1992 1991
- --------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Commercial and industrial $ 13,784 $ 13,685 $ 11,108 $ 10,218 $ 10,414
Real estate - commercial 44,983 50,195 45,488 45,882 50,900
Real estate - residential 50,979 44,246 43,167 46,370 45,487
Real estate - construction 3,903 3,330 4,586 3,168 1,764
Mortgage loans held for sale 1,057 559 14,172 11,273 7,318
Loans to individuals 13,178 10,850 10,311 9,223 10,066
Other 188 173 514 113 35
------- ------- ------- ------- -------
Total loans $128,072 $123,038 $129,346 $126,247 $125,984
======= ======= ======= ======= =======
</TABLE>
Loan maturities for commercial and real estate (construction) loans
at December 31, 1995 were as follows: $10,651,655 due in one year or
less; $5,912,540 due after one year through five years; $1,121,384 due
after five years. Of the Bank's commercial and real estate
(construction) loans due after one year, $2,578,505 have floating or
adjustable rates and $5,912,540 have fixed rates.
Nonaccrual, Past Due and Restructured Loans
- -------------------------------------------
It is the policy of the Bank to discontinue the accrual of interest
on loans when, in management's judgement, the collection of the full
amount of interest is considered doubtful. This will generally occur
once a loan has become 90 days past due, unless the loan is well secured
and in the process of collection. The following table sets forth
information on nonaccrual, past due loans and restructured loans as of
December 31 for each of the years indicated:
<TABLE>
<CAPTION>
(in $000) 1995 1994 1993 1992 1991
- --------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $1,650 $ 909 $1,681 $2,028 $1,630
Accruing loans past due 90
days or more 160 66 346 232 584
Restructured loans 0 1,155 1,357 1,735 0
----- ----- ----- ----- -----
Total $1,810 $2,130 $3,384 $3,995 $2,214
===== ===== ===== ===== =====
</TABLE>
The entire "restructured loans" balance at December 31, 1994 in the
above table was comprised of a single loan. That loan was placed on
nonaccrual status in September of 1995.
For the period ended December 31, 1995, the reduction of interest
income associated with nonaccrual and restructured loans was $108,279.
The interest on these loans that was included in interest income for 1995
was $103,069.
Potential Problem Loans
- -----------------------
As of December 31, 1995, other than the above, there were no loans
where management had serious doubts as to the ability of the borrowers to
comply with the present loan repayment terms.
Concentrations of Credit
- ------------------------
As of December 31, 1995, except as disclosed in the above table, there
were no concentrations of loans exceeding 10% of total loans.
-8-
<PAGE>
Summary of Loan Loss Experience
- -------------------------------
The following table summarizes historical data with respect to loans
outstanding, loan losses and recoveries, and the allowance for possible
loan losses at December 31 for each of the years indicated:
<TABLE>
<CAPTION>
(in $000) 1995 1994 1993 1992 1991
- --------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Average outstanding loans (1) $127,034 $120,018 $122,411 $124,741 $125,190
======= ======= ======= ======= =======
</TABLE>
Allowance for possible loan losses
- ----------------------------------
<TABLE>
<CAPTION>
(in $000) 1995 1994 1993 1992 1991
- --------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $ 3,703 $ 3,910 $ 4,178 $ 3,968 $ 2,366
Charge-offs:
Commercial and industrial (31) (506) (305) (318) (451)
Real estate - residential (70) (221) (169) (390) (564)
Real estate - commercial (415) (455) (505) (811)
Real estate - construction (416)
Loans to individuals (113) (112) (87) (217) (236)
----- ----- ----- ----- -----
(629) (839) (1,016) (1,430) (2,478)
Recoveries:
Commercial and industrial 105 174 60 54 171
Real estate - residential 100 128 11 11 53
Real estate - commercial 18 3 44 32 15
Real estate - construction 60
Loans to individuals 38 27 33 118 61
----- ----- ----- ----- -----
261 332 148 215 360
Net charge-offs (368) (507) (868) (1,215) (2,118)
Provision for possible
loan losses 120 300 600 1,425 3,720
----- ----- ----- ----- -----
Balance at end of period $ 3,455 $ 3,703 $ 3,910 $ 4,178 $ 3,968
===== ===== ===== ===== =====
Ratio of net charge-offs to
average loans .29% .42% .71% .97% 1.69%
===== ===== ===== ===== =====
<FN>
(1) Includes the aggregate average balance of loans held for sale.
</TABLE>
The provision for possible loan losses is based upon management's
estimation of the amount necessary to maintain the allowance at an
adequate level to absorb inherent possible losses in the loan portfolio,
as determined by current and anticipated economic conditions and other
pertinent factors. Significant credits classified as "substandard" and
"doubtful", in accordance with applicable bank regulatory guidelines, are
individually analyzed to estimate inherent possible losses associated with
each such credit. A portion of the allowance for possible loan losses is
set aside or "allocated" against such estimated inherent losses, without
regard to if or when those estimated losses will actually be realized.
Additional "unallocated" reserves are provided for estimated inherent losses
in pools of loans. Such allocated and unallocated reserves are established
to absorb potential future losses and may or may not reflect the Company's
actual loss history for any specific category of loans.
-9-
<PAGE>
Summary of Loan Loss Experience (Continued)
- -------------------------------------------
The following table reflects the allocation of the allowance for
loan losses and the percent of loans in each category to total
outstanding loans as of December 31 for each of the years indicated:
<TABLE>
<CAPTION>
1995 1994 1993
------------------- ------------------- ------------------
Percent of Percent of Percent of
loans in loans in loans in
category to category to category
(in $000) Amount total loans Amount total loans Amount total loans
- --------- ------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Commercial &
industrial $ 165 10.9% $ 165 11.2% $ 157 8.6%
Real estate -
commercial 746 35.1% 1,440 40.9% 1,986 35.2%
Real estate -
residential 174 40.7% 222 36.1% 217 44.6%
Real estate -
construction 96 3.0% 45 2.8% 32 3.6%
Loans to
individuals 100 10.3% 87 9.0% 126 8.0%
Unallocated 2,174 N/A 1,744 N/A 1,392 N/A
----- ----- ----- ----- ----- -----
Total $3,455 100.0% $3,703 100.0% $3,910 100.0%
===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
1992 1991
------------------- -------------------
Percent of Percent of
loans in loans in
category to category to
(in $000) Amount total loans Amount total loans
- --------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Commercial &
industrial $ 360 8.1% $ 471 8.3%
Real estate -
commercial 1,615 36.7% 2,061 36.1%
Real estate -
residential 210 45.3% 154 46.2%
Real estate -
construction 87 2.5% 43 1.4%
Loans to
individuals 207 7.4% 362 8.0%
Unallocated 1,699 N/A 877 N/A
----- ----- ----- -----
Total $4,178 100.0% $3,968 100.0%
===== ===== ===== =====
</TABLE>
The allocation of the allowance for possible loan losses to the
categories of loans shown above includes both specific potential loss
estimates for individual loans and general allocations deemed to be
reasonable to provide for additional potential losses within the
categories of loans set forth.
-10-
<PAGE>
Deposits
- --------
The following table shows the average deposits and average interest
rate paid for each of the last three years:
<TABLE>
<CAPTION>
1995 1994 1993
---------------- ---------------- ----------------
Average Average Average Average Average Average
(in $000) Balance Rate Balance Rate Balance Rate
- --------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Demand deposits $ 39,366 0.00% $ 37,001 0.00% $ 33,042 0.00%
NOW deposits 21,621 1.78% 21,025 1.95% 19,305 1.79%
Money market
deposits 26,812 2.91% 27,047 2.34% 27,528 2.42%
Savings deposits 41,417 3.02% 40,711 2.58% 38,098 2.53%
Time deposits 61,842 5.37% 53,789 3.81% 56,477 3.79%
------- ---- ------- ---- ------- ----
Total $191,058 3.00% $179,573 2.31% $174,450 2.36%
======= ==== ======= ==== ======= ====
</TABLE>
As of December 31, 1995, the Bank had certificates of deposit in
amounts of $100,000 or more aggregating $19.1 million. These
certificates of deposit matured as follows:
<TABLE>
<CAPTION>
Maturity Amount (in $000)
-------- ----------------
<S> <C>
3 months or less $ 9,179
Over 3 months through 6 months 3,456
Over 6 months through 12 months 5,151
Over 12 months 1 275
------
Total $19,061
======
</TABLE>
-11-
<PAGE>
Return on Equity and Assets
- ---------------------------
The following table summarizes various financial ratios of the
Company for each of the last three years:
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Return on average total
assets (net income divided
by average total assets) 1.19% 1.00% .73%
Return on average
stockholders' equity
(net income divided by
average stockholders'
equity) 14.41% 12.74% 9.82%
Dividend payout ratio
(total declared dividends
per share divided by net
income per share) 27.86% 31.91% 35.39%
Equity to assets (average
stockholders' equity as
a percentage of average
total assets) 8.24% 7.89% 7.46%
</TABLE>
-12-
<PAGE>
Short-Term Borrowings
- ---------------------
The Bank engages in certain borrowing agreements throughout the
year. These are in the ordinary course of the Bank's business. Such
short-term borrowings consisted of securities sold under repurchase
agreements, which are short-term borrowings from customers, and federal
funds purchased. The following table summarizes such short-term
borrowings at December 31 for each of the years indicated:
<TABLE>
<CAPTION>
Weighted Max. Weighted
average amount average
interest out- Average interest
Year Balance, rate at standing amount rate
ended end of end of at any out- during
12/31/95 period period month-end standing period
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federal
Funds
Purchased $ 1,000,000 6.40% $ 6,200,000 $ 1,536,438 6.12%
Repurchase
Agreements 8,289,963 4.38% 14,374,499 9,916,887 4.56%
</TABLE>
<TABLE>
<CAPTION>
Weighted Max. Weighted
average amount average
interest out- Average interest
Year Balance, rate at standing amount rate
ended end of end of at any out- during
12/31/94 period period month-end standing period
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federal
Funds
Purchased $10,900,000 6.65% $10,900,000 $ 1,446,000 4.64%
Repurchase
Agreements 4,040,801 3.67% 15,752,377 10,526,000 2.95%
</TABLE>
<TABLE>
<CAPTION>
Weighted Max. Weighted
average amount average
interest out- Average interest
Year Balance, rate at standing amount rate
ended end of end of at any out- during
12/31/93 period period month-end standing period
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Federal
Funds
Purchased $ 0 0% $ 0 $ 32,000 3.14%
Repurchase
Agreements 11,518,659 2.61% 16,431,328 13,154,287 2.39%
</TABLE>
-13-
<PAGE>
ITEM 2. PROPERTIES
The Bank's Main Office (approximately 32,000 square feet) at 17 Pope
Street, Hudson, Massachusetts, the former Mortgage Production Office
(2,623 square feet) at 12 Pope Street, Hudson, Massachusetts, the Hudson
South Office (1,040 square feet) at 177 Broad Street, Hudson,
Massachusetts and the Marlboro Center Office (1,800 square feet) at 96
Bolton Street, Marlboro, MA, are owned by the Bank.
The Bank's Stow Office (1,228 square feet) at 159 Great Road, Stow,
Massachusetts, Concord office (1,200 square feet) at 1134 Main Street,
Concord, Massachusetts, Marlboro office (1,110 square feet) at 500
Boston Post Road, Marlboro, Massachusetts and Boxboro office (679 square
feet) at 629 Mass Avenue, Boxboro, Massachusetts are leased by the Bank
from third parties.
The Bank's Acton office (2,100 square feet) at 274 Great Road,
Acton, Massachusetts, is leased from I. George Gould, a Director of the
Company and Bank, and his wife, as trustees of Nagog Knoll Realty Trust
under a lease dated January 1, 1993, which expires on December 31, 1997.
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
All properties occupied by the Bank are in good condition, and are
adequate at present and for the foreseeable future for the purposes for
which they are being used.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any legal proceeding. The Bank is
involved in various routine legal actions arising in the normal course
of business. Based on its knowledge of the pertinent facts and the
opinions of legal counsel, management believes the aggregate liability,
if any, resulting from the ultimate resolution of these actions will not
have a material effect on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the quarter ended December 31, 1995.
-14-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is no established public trading market for the Company's
common stock.
The record number of holders of the Company's common stock was 456
as of March 20, 1996.
The Company customarily declares quarterly cash dividends on its
outstanding common stock. The following table sets forth the cash
dividends per share declared for the years 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
First quarter $ .057 $ .050
Second quarter .058 .053
Third quarter .059 .055
Fourth quarter .060 .058
------ ------
Total $ .234 $ .214
====== ======
</TABLE>
For a discussion of restrictions on the ability of the Bank to pay
dividends to the Company, see footnote 12 on page 18 of the Annual
Report to Shareholders for the year ended December 31, 1995, which is
hereby incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
A five year summary of selected consolidated financial data for the
Company is presented on page 1 of the Annual Report to Shareholders for
the year ended December 31, 1995 and is hereby incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and
results of operations is contained on pages 22 through 26 of the Annual
Report to Shareholders for the year ended December 31, 1995 and is
hereby incorporated by reference.
For a discussion of restrictions on the ability of the Bank to pay
dividends to the Company, see footnote 12 on page 18 of the Annual
Report to shareholders for the year ended December 31, 1995, which is
hereby incorporated by reference.
-15-
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements are included on page
1 and pages 8 through 20 of the Annual Report to shareholders for the
year ended December 31, 1995 and are hereby incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in the Company's independent public
accountants or disagreements with the Company's accountants on
accounting or financial disclosure during the 24 months ended December
31, 1995 or in any period subsequent to the most recent financial
statements.
-16-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as to each of the Directors and
Executive Officers of the Company and the Bank, such person's age,
position, term of office, and all business experience during the past
five years. All Directors and Executive Officers of the Company have
served since 1984, except Mr. Frias who has been a Director of the
Company since 1985, Mr. D. Parker who has been a Director of the Company
since 1986, and Messrs. Hughes and Webster who have been Directors of
the Company since 1995. Each Director of the Company is also a Director
of the Bank. Each executive officer holds office until the first
Director's meeting following the annual meeting of stockholders and
thereafter until his or her successor is elected and qualified.
<TABLE>
<CAPTION>
Business Experience
Term of During Past
Name Age Position Office Five Years
- ---------- --- ----------- ------- --------------------
<S> <C> <C> <C> <C>
Richard K. 43 Senior Vice Senior Vice President,
Bennett President Vice President,
of Bank Hudson National Bank
Grace L. Blunt 41 Senior Vice Senior Vice President,
President Vice President,
of Bank Hudson National Bank
Alfred A. 78 Director of 1997 Retired
Cardoza Company and
Bank
Argeo R. 72 Director of 1997 Retired; formerly
Cellucci Company and President and Treasurer,
Bank Washington Street Motors,
Inc.; President, Cellucci
Hudson Corp.
Antonio Frias 56 Director of 1997 President and Treasurer,
Company and S & F Concrete
Bank Contractors, Inc.;
Secretary/Clerk, Frias
Bros. Service Station
John P. Galvani 39 Senior Vice Senior Vice President,
President Vice President,
of Bank Hudson National Bank
I. George 79 Director of 1996 Chairman, Gould's, Inc.
Gould (1) Company and
Bank
Horst Huehmer 68 Director of 1998 Retired; formerly
Company and Manager, Hudson Light
Bank and Power Department
-17-
<PAGE>
Donald R. 46 Treasurer and 1996 Executive Vice
Hughes, Jr. (2) Clerk of President, Hudson
Company; Exec. National Bank;
Vice President Treasurer and Clerk,
of Bank; Director Community Bancorp, Inc.
of Company and
Bank
James A. 56 President & 1996 President and CEO,
Langway (1) CEO of Company Hudson National Bank
and Bank; and Community
Director of Bancorp, Inc.
Company and
Bank
Robert E. Leist 42 Senior Vice Senior Vice President,
President Vice President,
of Bank Hudson National Bank
Janet A. Lyman 49 Senior Vice Senior Vice President,
President Vice President,
of Bank Hudson National Bank
Dennis F. 58 Chairman of 1997 President and
Murphy, Jr. the Board, Treasurer, D. F.
Company and Murphy Insurance
Bank Agency, Inc.;
Treasurer, Village
Real Estate
David L. 67 Director of 1996 Treasurer, Larkin
Parker (1, 3) Company and Lumber Co.
Bank
Mark Poplin 72 Director of 1998 President and
Company and Treasurer, Poplin
Bank Supply Co.;
Secretary, Poplin
Furniture Co.
David W. 54 Director of 1996 President & Treasurer,
Webster (2, 3) Company and A. T. Knight Fuel Co.,
Bank Inc.
<FN>
(1) Messrs. Gould, Langway and Parker have been nominated for
election at the 1996 Annual Meeting to serve until 1999.
(2) Messrs. Hughes and Webster have been nominated for election at
the 1996 Annual Meeting to serve until 1998
(3) Mr. Parker and Mr. Webster's wife are cousins.
No Director holds a directorship in any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of such Act
or any company registered as an investment company under the Investment
Company Act of 1940.
</TABLE>
-18-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all plan and non-plan compensation
awarded to, earned by or paid to the CEO and other executive officers
whose aggregate compensation exceeded $100,000 by the Company and the
Bank for 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Compensation
-------------------
(a) (b) (c) (d) (i) (1)
Name and All Other
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
James A. Langway 1995 $186,261 $55,000 $ 2,982
President and CEO 1994 177,392 44,348 2,924
of the Company and 1993 170,570 30,703 2,827
the Bank
Donald R. Hughes, Jr. 1995 105,902 26,740 2,062
Treasurer and Clerk of 1994 100,859 20,172 1,936
Company; Executive Vice 1993 96,980 15,032 1,808
President of the Bank
<FN>
Notes:
- -----
1. The Company maintains an Employee Stock Ownership Plan (ESOP) for
employees age 21 or older who are participants in the Company's
Retirement Plan and who meet other requirements. The Company also
maintains a 401(k) Savings Plan (401(k) Plan) for employees age 21
or over and who meet other requirements. Messrs. Langway and
Hughes are participants in the Company's ESOP and 401(k) Plans.
Of the $2,982 reported above for 1995 in column (i) for James A.
Langway, $0 represented Company ESOP contributions, $2,310
represented Company 401(k) Plan contributions and $672 represented
group life insurance premiums paid by the Company. Of the $2,062
reported above for 1995 in column (i) for Donald R. Hughes, Jr.,
$0 represented Company ESOP contributions, $1,589 represented
Company 401(k) Plan contributions and $473 represented group life
insurance premiums paid by the Company.
</TABLE>
Compensation of Directors
- -------------------------
The Company pays no compensation to its Directors for their services
as a Director. Directors of the Bank were each paid an annual fee of
$8,579 in 1995. The Chairman of the Board was paid $14,299 in 1995.
Director fees are paid on a monthly basis.
-19-
<PAGE>
Employment Contracts and Termination of Employment and Change-in-Control
- ------------------------------------------------------------------------
Arrangements
- ------------
The Company has entered into five-year Employment Agreements with
James A. Langway, President and Chief Executive Officer of the Company,
and with Donald R. Hughes, Jr., Treasurer and Clerk of the Company,
which commenced August 1, 1986 and which specify the employee's duties
and minimum compensation during the period of the Employment Agreement.
Each Employment Agreement is extended for one additional year, on the
anniversary of the commencement date, unless prior notice is given by
either party. Employment by the Company shall terminate upon the
employee's resignation, death, disability, or for "cause" as defined in
the Employment Agreement. If employment is involuntarily terminated by
the Company for any reason except for cause, or if the Employment
Agreement is not renewed at its expiration, the Company is required to
make additional payments to the employees. During the term of the
Employment Agreement and for one year afterwards, the employee cannot
compete with the Company within its market area.
The Company has also entered into Severance Agreements with Mr.
Langway and Mr. Hughes regarding termination of employment by the
Company or Bank subsequent to a "change in control" of the Company, as
defined in the Severance Agreement. Following the occurrence of a
change in control, if the employee's employment is terminated (except
because of gross dereliction of duty, death, retirement, disability or
conviction for criminal misconduct) or is involuntarily terminated for
"good reason" as defined in the Severance Agreement, then the employee
shall be entitled to a lump sum payment from the Company approximately
equal to three times his average annual compensation for the previous
five years, plus accrued vacation pay and bonus awards. If Mr. Langway
or Mr. Hughes is entitled to receive benefits under both his Employment
Agreement and his Severance Agreement, he must choose the agreement
under which he will claim benefits.
The Company has entered into an Executive Supplemental Income
Agreement with James A. Langway, President and Chief Executive Officer
of the Company, which commenced July 12, 1988 and which specifies
benefits payable to Mr. Langway for a ten (10) year period following the
date on which he ceases to be employed by the Company. The Agreement
provides that the Company will pay Mr. Langway $40,774 each year,
increased by increases in the Consumer Price Index, for a ten (10) year
period following the date he ceases to be employed by the Company for
any cause whatsoever after attaining age 55. The Agreement was amended
on January 26, 1990, increasing the annual base retirement benefit to be
paid to Mr. Langway from $40,774 to $60,774 each year, increased by
increases in the Consumer Price Index in the same manner as the original
Agreement. Mr. Langway attained age 55 during 1994. The Company
records annual expense in anticipation of future payments expected to be
made under this Agreement. The annual expense amount recorded is
determined by an independent actuary based on Mr. Langway's life
expectency at the time he begins receiving payments. During 1995, the
Company recorded $56,484 in such expense.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and related notes set forth information regarding
stock owned by each of the Directors of the Company and Bank and by all
officers and Directors of the Company and Bank as a group at March 20,
1996.
<TABLE>
<CAPTION>
Amount and
Title Nature of Percent
of Name of Beneficial of
Class Beneficial Owner Ownership (1,2) Class
----- ---------------- --------------- -------
<S> <C> <C> <C>
Common Stock Alfred A. Cardoza 22,486 shares 0.7%
($2.50 par)
Argeo R. Cellucci 6,728 shares 0.2%
Antonio Frias 101,938 shares 3.2%
I. George Gould 117,499 shares (3) 3.7%
Horst Huehmer 22,632 shares 0.7%
Donald R. Hughes, Jr. 94,886 shares (3 & 5) 3.0%
James A. Langway 196,099 shares (3,4 & 6) 6.2%
Dennis F. Murphy, Jr. 442,640 shares 14.0%
David L. Parker 22,274 shares 0.7%
Mark Poplin 170,174 shares 5.4%
David W. Webster 78,560 shares (4) 2.5%
All directors and
officers of the
Company and Bank
as a group
(22 persons) 1,148,240 shares (3,4 & 7) 36.3%
<FN>
(1) Based upon information provided to the Company by the indicated
persons.
(2) Unless indicated in another footnote to this tabulation, a person
has sole voting and investment power with respect to the shares set
forth opposite his or her name.
(3) Includes 56,853 shares held by the Company's ESOP for which Messrs.
Gould, Hughes and Langway are co-trustees.
(4) Includes 47,700 shares held by the R. A. Knight Special Trust for
which Mr. Webster's wife and Mr. Langway are co-trustees.
(5) Includes 6,033 shares held by the Company's 401(k) plan for which
Mr. Hughes has voting power in certain circumstances.
-21-
<PAGE>
(6) Includes 11,339 shares held by the Company's 401(k) plan for which
Mr. Langway has voting power in certain circumstances.
(7) Includes 35,102 shares held by the Company's 401(k) plan for which
Grace L. Blunt, Senior Vice President, and Robert E. Leist, Senior
Vice President, are co-trustees.
</TABLE>
The following persons own beneficially more than five percent of
the outstanding stock of the Company as of March 20, 1996:
<TABLE>
<CAPTION>
Amount and
Title Name and Address Nature of Percent
of of Beneficial Beneficial of
Class Owner Ownership Class
----- ---------------- ----------- -------
<S> <C> <C> <C>
Common Stock Dennis F. Murphy, Jr. 442,640 shares 14.0%
($2.50 par) 44 Wilder Road
Bolton, MA 01740
James A. Langway 196,099 shares (1 & 2) 6.2%
1143 Grove Street
Framingham, MA 01701
Mark Poplin 170,174 shares 5.4%
108 Barretts Mill Road
Concord, MA 01742
<FN>
(1) Includes 56,853 shares held by the Company's ESOP for which Mr.
Langway co-trustee, and 47,700 shares held by the R. A. Knight
Special Trust for which Mr. Langway is co-trustee.
(2) Includes 11,339 shares held by the Company's 401(k) plan for which
Mr. Langway has voting power in certain circumstances.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, through its wholly-owned bank subsidiary, has had,
currently has, and expects to continue to have in the future, banking
(including loans and extensions of credit) transactions in the ordinary
course of its business with its Directors, Executive Officers, members
of their families and associates. Such banking transactions have been
and are on substantially the same terms, including interest rates,
collateral and repayment conditions, as those prevailing at the same
time for comparable transactions with others and did not involve more
than the normal risk of collectibility or present other unfavorable
features.
I. George Gould and his wife, as trustees of Nagog Knoll Realty
Trust, own the premises at 274 Great Road, Acton, Massachusetts which
are leased to the Bank for use as a full service branch office. The
lease for that office, dated January 1, 1993, expires December 31, 1997
and carries a five year renewal option. In 1995 and 1994, the Bank made
payments aggregating $29,400 and $28,686, respectively, for rental of
such premises.
-22
<PAGE>
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENTS
(a) 1. & 2. Index to Consolidated Financial Statement Schedules
---------------------------------------------------
The following consolidated financial statements, which are included
in the Annual Report to Shareholders of Community Bancorp, Inc. for the
year ended December 31, 1995, are hereby incorporated by reference:
Annual Report to
Shareholders
Description page reference
----------- ----------------
Consolidated balance sheets at
December 31, 1995 and 1994 8
Consolidated statements of income for
the years ended December 31, 1995,
1994 and 1993 9
Consolidated statements of stockholders'
equity for the years ended December 31, 1995,
1994 and 1993 10
Consolidated statements of cash flows
for the years ended December 31, 1995,
1994 and 1993 11 - 12
Notes to consolidated financial statements 13 - 20
With the exception of the aforementioned information, and
information incorporated by reference in Items 5, 6, 7, and 8, the
Annual Report to Shareholders for the year ended December 31, 1995 is
not deemed to be filed as part of this Form 10-K. Certain schedules
required by Regulation S-X have been omitted as the items are either not
applicable or are presented in the notes to the financial statements
contained in the Annual Report to Shareholders for the year ended
December 31, 1995.
3. Exhibits
--------
See accompanying Exhibit Index.
(b) The Company did not file a Form 8-K during the quarter ended
December 31, 1995.
-23-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
<C> <S> <C>
3.1 Articles of Organization of Company
Amendments to Articles of Organization,
(dated prior to April 12, 1988) (a)
3.1.i Amendment to Articles of Organization,
dated April 12, 1988
3.2 By-Laws of Company (a)
10.1 Community Bancorp, Inc. Employee Stock
Ownership Plan (as amended and restated
effective January 1, 1985) (b)
10.2 Employment Agreement dated August 19, 1986
between Community Bancorp, Inc. and
James A. Langway (c)
10.3 Severance Agreement dated June 10, 1986
between Community Bancorp, Inc. and
James A. Langway (d)
10.4 Employment Agreement dated August 19, 1986
between Community Bancorp, Inc. and
Donald R. Hughes, Jr. (c)
10.5 Severance Agreement dated June 10, 1986
between Community Bancorp, Inc. and
Donald R. Hughes, Jr. (d)
10.6 Executive Supplemental Income Agreement
dated July 12, 1988 between Community
Bancorp, Inc. and James A. Langway (e)
10.7 Amendment to Executive Supplemental
Income Agreement dated January 26, 1990
between Community Bancorp, Inc. and
James A. Langway. (f)
10.8 Stock Purchase Agreement dated March 29, 1993
by and among Community Bancorp, Inc. and
certain specific persons. (g)
13. 1995 Annual Report to shareholders
21. Subsidiaries of Company Page 26
27. Financial Data Schedule
<FN>
(a) Incorporated herein by reference to Exhibits 3.1, and 3.2 and filed
as part of Company's Amendment No. 1 to the Registration Statement
on Form S-18 (File No. 33-12756-B) filed with Commission on April
16, 1987.
-24-
<PAGE>
(b) Incorporated herein by reference to Exhibit 10.1 as part of
Company's Registration Statement on Form S-18 (File No. 33-12756-B)
filed with the Commission on March 19, 1987.
(c) Incorporated herein by reference to Exhibits 5.8 and 5.9 filed as
part of Company's Amendment No. 2 to the Offering Statement on Form
1-A (File No. 24B-2076) filed with the Commission on August 14,
1986.
(d) Incorporated herein by reference to Exhibits 5.2 and 5.4 filed as
part of Company's Offering Statement on Form 1-A (File No.
24B-2076) filed with the Commission on June 24, 1986.
(e) Incorporated herein by reference as filed as part of the Company's
December 31, 1988 Form 10-K (File No. 33-12756-B), filed with the
Commission on March 30, 1989.
(f) Incorporated herein by reference as filed as part of the Company's
December 31, 1989 Form 10-K (File No. 33-12756-B), filed with the
Commission on March 29, 1990.
(g) Incorporated herein by reference as filed as part of the Company's
December 31, 1992 Form 10-K (File No. 33-12756-B), filed with the
Commission on March 30, 1993.
</TABLE>
-25-
<PAGE>
SUBSIDIARIES OF COMPANY
-----------------------
1. Hudson National Bank, a national banking association.
-26-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COMMUNITY BANCORP, INC.
Date: March 20, 1996 By: /s/ Donald R. Hughes, Jr.
--------------------------
Donald R. Hughes, Jr.
Treasurer and Clerk
- -------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Date Name and Capacity
---- -----------------
March 20, 1996 /s/ James A. Langway
---------------------------------
James A. Langway, President & CEO
Principal Executive Officer
March 20, 1996 /s/ Donald R. Hughes, Jr.
----------------------------------
Donald R. Hughes, Jr., Treasurer &
Clerk, Principal Financial Officer
and Principal Accounting Officer
March 20, 1996 /s/ James A. Langway
----------------------------------
James A. Langway, Director
March 20, 1996 /s/ Donald R. Hughes, Jr.
----------------------------------
Donald R. Hughes, Jr., Director
March 21, 1996 /s/ I. George Gould
----------------------------------
I. George Gould, Director
March 21, 1996 /s/ Mark Poplin
----------------------------------
Mark Poplin, Director
March 22, 1996 /s/ Alfred A. Cardoza
----------------------------------
Alfred A. Cardoza, Director
March 22, 1996 /s/ David L. Parker
----------------------------------
David L. Parker, Director
-27-
<PAGE>
SUPPLEMENTAL INFORMATION
------------------------
The Notice of Annual Meeting of Shareholders, Proxy Statement and Proxy
For Annual Meeting of Shareholders for the Registrant's 1996 annual meeting
of shareholders, to be held on April 9, 1996, are being submitted separately
as an EDGAR Submission Type DEF 14A. Such material is not deemed to be
filed with the Commission or otherwise subject to the liabilities of
Section 18 of the Securities Exchange Act.
-28-
[The annual report front cover is a color photograph of a fall foliage scene
with the following text.]
Community Bancorp, Inc.
Annual Report 1995
Discover a new kind of bank.
<PAGE>
[The following text appears on the inside front cover.]
Discover a new kind of bank.
Unlike any you have ever known.
Hudson National Bank is a local community bank that delivers all the modern
services of a large metropolitan or regional bank. From telephone banking
and ATMs to drive-up service and direct deposit to PC banking and a home
page on the Internet, HNB offers customers convenience, choices and
professionalism.
While keeping pace with the changing times and changing technology, we've
worked hard to maintain one benefit that few, if any, larger banks can
match: the personal touch.
<PAGE>
<TABLE>
Selected Consolidated Financial Data
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total assets $237,580,796 $219,850,767 $214,682,682 $199,455,534 $197,585,866
Total deposits 207,039,865 186,862,986 185,499,065 174,348,956 172,908,131
Total net loans 124,616,963 119,334,885 125,435,415 122,144,150 122,015,828
Allowance for possible loan losses 3,455,098 3,703,470 3,910,195 4,178,343 3,968,096
Total interest income 16,917,624 14,429,932 14,032,506 15,027,657 17,035,958
Total interest expense 6,284,750 4,525,558 4,465,379 5,969,474 9,251,249
Net interest income 10,632,874 9,904,374 9,567,127 9,058,183 7,784,709
Gains (losses) on sales of securities (29,828) 69,600 371,436 324,879
Provision for possible loan losses 120,000 300,000 600,000 1,425,000 3,720,000
Net income (loss) 2,643,877 2,105,433 1,505,158 1,021,986 (997,902)
Earnings (loss) per share 0.84 0.67 0.49 0.32 (0.32)
Dividends per share 0.234 0.214 0.173 0.075
</TABLE>
[Five-year bar graphs for the following categories appear in this space.
Data for the graphs was obtained from the above table.]
Total Assets (in millions)
Net Income (in millions)
Earnings Per Share (in dollars)
Total Deposits (in millions)
Total Net Loans (in millions)
Net Interest Income (in millions)
<PAGE>
Table of Contents
3. Message to Stockholders and Friends
5. A New Kind of Community Bank
8. Consolidated Balance Sheets
9. Consolidated Statements of Income
10. Consolidated Statements of Stockholders' Equity
11. Consolidated Statements of Cash Flows
13. Notes to Consolidated Financial Statements
21. Report of Independent Auditors
22. Management's Discussion and Analysis of
Financial Condition and Results of Operations
28. Directors & Officers
-2-
<PAGE>
To Our Stockholders and Friends
We are very pleased to report that Community Bancorp, Inc.
and its subsidiary, Hudson National Bank, achieved another
record-breaking year in 1995. The Company recorded net income
of $2,643,877 for the year, compared to $2,105,433 recorded in
1994. Earnings per share of common stock was $.84, representing
a 25.3% increase over $.67 per share in the previous year. This
improvement was the combined result of increases in net interest
income and noninterest income, and reductions in the provision
for possible loan losses and noninterest expense.
During 1995, we endeavored to achieve several important objectives.
One of those objectives was to continue to enhance asset quality.
Ongoing, independent reviews of our loan portfolio confirm that the
Company's assets are of high quality. Another objective was to
continue to improve the Company's return on average assets (ROA).
We achieved an ROA of 1.19% in 1995, up from 1.00% in 1994.
Yet another objective was to introduce innovative electronic banking
services that would provide added convenience to the growing
percentage of customers who prefer to do their banking by utilizing
technology. In March of 1995, we introduced ExecuBanc, a PC-based
electronic banking system for businesses. This service provides
businesses with an efficient means to manage their accounts
electronically.
In March of 1996, we introduced HomeBanc, an easy to use PC-based
electronic banking system for personal account customers that
allows them to obtain complete account information, transfer funds
and pay bills electronically in the privacy of their own homes,
using their personal computers. We anticipate that electronic
banking delivery systems such as ExecuBanc and HomeBanc will
continue to evolve in the future, providing additional convenience
for our customers.
[A photograph of Hudson National Bank's main office appears here.]
-3-
<PAGE>
Two new Directors were added to the Board during 1995. David W.
Webster, President and Treasurer of Knight Fuel Company, Inc. in
Hudson, and Donald R. Hughes, Jr., Executive Vice President of
Hudson National Bank and Treasurer of Community Bancorp, Inc.,
were elected to the Board in June. Both individuals will contribute
significantly to the Company's ongoing success.
We note with sadness the passing of Lloyd L. Parker in January
1996. Mr. Parker served as a Director of Hudson National Bank
for thirty-three years, and as a Director of Community Bancorp,
Inc. since its inception in 1984. He had retired from both Boards
in September of 1995. We miss the wisdom and guidance he provided
during his many years of dedicated service.
Each year, the Company's activities are designed with one overall
purpose in mind - to enhance shareholder value through earnings.
That purpose continually guides us in all we do. We sincerely
appreciate the support the shareholders have provided to the
Board of Directors, management and staff.
Sincerely,
/s/ James A. Langway /s/ Dennis F. Murphy, Jr.
- -------------------- -------------------------
James A. Langway Dennis F. Murphy, Jr.
President and Chief Executive Officer Chairman of the Board
-4-
<PAGE>
A New Kind of Community Bank
At Hudson National Bank, we have worked hard to create a unique
kind of bank. One that is highly responsive to customer needs
and provides more convenient ways for families and businesses to
do their banking. We are a community bank that can deliver all
the modern services of a large metropolitan or regional bank.
But, we offer one benefit that few, if any, larger banks can
match: the personal touch.
Responding to the Changing Needs of Customers
Retail Banking - Technology continues to be a driving force in
providing alternative methods of banking access to customers.
TeleBanc, our 24 hour touch-tone banking service, has been well
received by customers and the volume of inquiries and
transactions performed over the telephone continues to grow.
During 1995, several additional milestones were reached in our
quest to provide customers with options that let them bank the
way they want to bank.
During the year, the bank introduced a special package of
services for college students named the College Care Package.
This package gives full-time students a no minimum balance
checking account during their college years, which allows them
to remain tied to their hometown even when they are away at
school. With access to ATMs and additional services like
TeleBanc, the HNB FlexCard and mail deposits, an actual branch
office is no longer necessary to perform day to day banking.
At mid-year, Hudson National Bank created its own Internet World
Wide Web site. It can be found at http://www.hnbank.com.
Hudson National was one of the first banks in the state to begin
utilizing the Internet. Our web site presents a variety of
information about the bank's various accounts and services, and
additional features are planned to make it interactive and even
more useful to our customers and to the general public.
[A photograph of a bank officer and a customer appears here.]
-5-
<PAGE>
In the fourth quarter, the bank introduced the Hudson National
Bank FlexCard, a MasterMoney debit card that provides account
access at ATMs and can also be used to pay for purchases
wherever MasterCard is accepted. HNB is one of the first
community banks in the area to offer a full-fledged debit card,
demonstrating our ability to offer a competitive array of
services.
Finally, during 1995 the ground work was laid for a
state-of-the-art PC-based home banking service named HomeBanc
for introduction in March of 1996. Using their home PC or
laptop, customers are able to access their account information,
transfer funds, and pay their bills 24 hours a day, 365 days a
year. Hudson National Bank is the first community bank in the
area to offer this type of service to its customers.
[A photograph of a bank officer sitting at a computer terminal
appears here.]
Commercial Banking - Our reputation among small and medium
sized businesses has grown through our continued emphasis on
personal service and attention, which we believe is the
cornerstone of community banking. One indication of this is the
fact that the bank's commercial loan portfolio grew by over 10%
during 1995. As a result of the continuing mergers of large
regional banks in New England, we are one of the few commercial
community banks in our area. This presents us with a unique
opportunity to provide local businesses a level of personal
service that is hard to find at large financial institutions.
During 1995, we introduced a newsletter, "Business Insights",
designed especially for our business customers. It is our goal
to use this forum to provide timely information to business
owners on issues relevant to the business community, as well as
inform them about our services. The newsletter has been well
received and additional issues are planned.
[A photograph of the bank's receptionist appears here.]
-6-
<PAGE>
On the technological side, the bank introduced ExecuBanc, a
PC-based computer banking service for businesses, which allows
companies to obtain real time information about their accounts
and better manage their funds. Customers can transfer funds
between accounts, print interim statements, communicate with the
bank via email and more. In many ways, it is like having a
branch right at the business customer's office.
The Personal Touch
In any service industry, the importance of having competent,
knowledgeable and friendly staff is key. We strongly believe
that our employees provide customers with outstanding service
and continually make people feel welcome. In fact, many of our
customers and staff know one another by name, many on a
first-name basis. We know our customers and they know us.
Community Involvement
As we embrace the technology that has allowed us to provide
customers with increased banking convenience and flexibility,
one of our greatest challenges is to remain true to our
community banking roots. One of the best ways to do this and
learn about the needs of customers is to go out into the
community and talk to people. As a result, many members of our
staff are involved in a number of community groups. In
addition, we support a variety of organizations and community
programs through charitable donations.
Opportunities for Growth
The ongoing mergers, especially those between the large regional
banks, present many opportunities for Hudson National Bank to
deliver its special kind of banking to the communities we serve.
We offer residents and businesses the stability, experience and
hometown touch of a community bank as well as a full array of
financial products and services that more than hold their own in
the marketplace. Our ability to utilize state-of-the art
banking technology, while maintaining a commitment to
personalized service, will remain an important factor as we
position ourselves for the future.
[A photograph of one of the bank's tellers appears here.]
-7-
<PAGE>
<TABLE>
Consolidated Balance Sheets
December 31, 1995 and 1994
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 12,668,446 $ 11,600,385
Federal funds sold 16,700,000 6,100,000
Securities available for sale at market value (Note 2) 23,790,470 26,069,495
Securities held to maturity (market value $50,633,376
in 1995 and $43,296,728 in 1994) (Note 2) 50,825,359 46,495,293
Loans (Notes 3 and 10) 128,072,061 123,038,355
Less allowance for possible loan losses
(Notes 4 and 13) 3,455,098 3,703,470
----------- -----------
Total net loans 124,616,963 119,334,885
Premises and equipment, net (Note 5) 5,126,083 5,205,076
Other assets, net (Note 14) 3,853,475 5,045,633
----------- -----------
Total assets $237,580,796 $219,850,767
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (Note 11):
Noninterest bearing $ 45,383,886 $ 42,074,618
Interest bearing 161,655,979 144,788,368
----------- -----------
Total deposits 207,039,865 186,862,986
----------- -----------
Securities sold under repurchase agreements 9,289,963 14,940,801
Other liabilities (Note 8) 1,710,295 1,302,530
----------- -----------
Total liabilities 218,040,123 203,106,317
----------- -----------
Commitments (Notes 9 and 13)
Stockholders' equity (Note 6):
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, 3,158,946
shares outstanding, (3,140,754 shares outstanding
at December 31, 1994) 7,998,045 7,998,045
Surplus 290,253 263,538
Undivided profits 11,463,544 9,556,768
Treasury stock, 40,272 shares, (58,464 at December
31, 1994) (181,224) (263,088)
Unrealized losses on securities available for sale,
net of taxes (Note 2) (29,945) (810,813)
----------- ---------
Total stockholders' equity 19,540,673 16,744,450
----------- ----------
Total liabilities and stockholders'
equity $237,580,796 $219,850,767
=========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-8-
<PAGE>
<TABLE>
Consolidated Statements of Income
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 12,363,714 $10,439,354 $10,494,056
Interest and dividends on securities:
Taxable interest 4,003,765 3,791,167 3,204,028
Nontaxable interest 91,517 57,826 62,291
Dividends 51,651 79,943 59,972
Interest on federal funds sold 406,977 61,642 212,159
---------- ---------- ----------
Total interest income 16,917,624 14,429,932 14,032,506
---------- ---------- ----------
Interest expense:
Interest on deposits 5,735,554 4,142,705 4,120,100
Interest on federal funds purchased and
securities sold under repurchase
agreements 549,196 382,853 345,279
---------- ---------- ----------
Total interest expense 6,284,750 4,525,558 4,465,379
---------- ---------- ----------
Net interest income 10,632,874 9,904,374 9,567,127
---------- ---------- ----------
Provision for possible loan losses
(Note 4) 120,000 300,000 600,000
---------- ---------- ----------
Net interest income after provision
for possible loan losses 10,512,874 9,604,374 8,967,127
---------- ---------- ----------
Noninterest income:
Merchant credit card processing
assessments 690,024 599,513 519,205
Service charges 701,824 679,818 669,683
Other charges, commissions and fees 663,827 683,590 664,625
Gains (losses) on sales of loans, net (31,776) (1,698) (262,352)
Gains (losses) on sales of securities, net (29,828) 69,600
Other 60,065 96,534 91,357
---------- ---------- ----------
Total noninterest income 2,083,964 2,027,929 1,752,118
---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits (Note 8) 4,362,821 4,289,900 4,248,223
Data processing 478,064 380,596 283,108
Occupancy 610,737 601,235 598,110
Furniture and equipment 325,662 310,987 242,377
Credit card processing 621,695 500,094 507,310
OREO carrying costs (income), net (4,413) 170,143 203,454
FDIC insurance premiums 209,906 394,696 432,078
Other 1,668,940 1,672,118 1,816,194
---------- ---------- ----------
Total noninterest expense 8,273,412 8,319,769 8,330,854
---------- ---------- ----------
Income before income tax expense and
cumulative effect of change in accounting
principle 4,323,426 3,312,534 2,388,391
Income tax expense 1,679,549 1,207,101 938,233
---------- ---------- ----------
Income before cumulative effect of change
in accounting principle 2,643,877 2,105,433 1,450,158
Cumulative effect of change in accounting
principle 55,000
---------- ---------- ----------
Net income $ 2,643,877 $ 2,105,433 $ 1,505,158
========= ========== ==========
Earnings per share $ 0.84 $ 0.67 $ 0.49
Weighted average number of shares
outstanding 3,148,306 3,138,998 3,079,487
========== ========= =========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-9-
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
Common Undivided Treasury
Stock Surplus Profits Stock Other
----- ------- ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $7,953,538 $ $ 7,132,599 $ $
Net income 1,505,158
Cash dividends declared
($.173 per share) (520,232)
Purchase of 379,810 shares of
treasury stock (Note 6) (1,671,164)
Reissuance of 379,810 shares of
treasury stock (Note 6) 37,981 1,671,164
Sale of 35,606 shares of
common stock, net of
expenses (Note 6) 44,507 64,157
Unrealized gain on
securities available
for sale, net of taxes 200,158
- -------------------------- --------- ------- --------- --------- -------
Balance, December 31, 1993 7,998,045 102,138 8,117,525 200,158
Net income 2,105,433
Cash dividends declared
($.214 per share) (666,190)
Purchase of 220,628 shares of
treasury stock (Note 6) (992,826)
Reissuance of 162,164 shares of
treasury stock (Note 6) 161,400 729,738
Change in unrealized loss
on securities available
for sale, net of taxes (1,010,971)
- -------------------------- --------- ------- --------- --------- ---------
Balance, December 31, 1994 7,998,045 263,538 9,556,768 (263,088) (810,813)
Net income 2,643,877
Cash dividends declared
($.234 per share) (737,101)
Purchase of 382 shares of
treasury stock (2,865)
Reissuance of 18,574 shares of
treasury stock 26,715 84,729
Change in unrealized loss
on securities available
for sale, net of taxes 780,868
- -------------------------- --------- ------- ---------- ------- -------
Balance, December 31, 1995 $ 7,998,045 $ 290,253 $11,463,544 $ (181,224) $ (29,945)
========= ======= ========== ======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-10-
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 16,739,141 $ 14,155,067 $ 14,254,077
Fees and commissions received 2,068,486 2,109,853 2,015,817
Proceeds from secondary market mortgage sales 8,899,808 31,829,089 67,610,529
Origination of mortgage loans held for sale (9,320,396) (17,847,022) (70,078,501)
Interest paid (6,308,750) (4,341,747) (4,617,683)
Cash paid to suppliers and employees (7,084,208) (7,732,757) (7,699,331)
Income taxes paid (1,404,520) (1,201,342) (1,014,697)
----------- ----------- ----------
Net cash provided by operating activities 3,589,561 16,971,141 470,211
----------- ---------- -------
Cash flows used in investing activities:
Purchases of securities held to maturity (17,362,828) (28,049,573) (28,824,793)
Proceeds from sales of securities held to
maturity 3,258,278
Proceeds from maturities of securities
held to maturity 13,194,982 4,004,738 9,574,699
Purchase of securities held for sale (12,824,946)
Proceeds from sales of securities held for
sale 13,047,576
Proceeds from maturities of securities held
for sale 3,434,457 13,219,324 343,332
Net change in federal funds sold (10,600,000) (3,000,000) 3,800,000
Net change in loans and other real estate
owned (4,689,293) (7,769,209) (959,605)
Proceeds from sales of other real estate
owned 178,700 316,350 270,005
Acquisition of property, plant and equipment (589,533) (754,005) (680,610)
----------- ---------- ---------
Net cash used in investing activities (16,433,515) (21,809,745) (13,218,694)
---------- ---------- ----------
Cash flows from financing activities:
Net change in deposits 20,176,879 1,363,921 11,150,109
Net change in securities sold under
repurchase agreements 4,249,163 3,422,141 3,326,504
Net change in federal funds purchased (9,900,000)
Purchase of treasury stock (2,865) (992,826) (1,671,164)
Reissuance of treasury stock 111,444 891,138 1,709,145
Proceeds from sale of common stock 108,664
Dividends paid (722,606) (647,835) (603,941)
----------- -------- -------
Net cash provided by financing activities 13,912,015 4,036,539 14,019,317
----------- --------- ----------
Net increase (decrease) in cash and due from banks 1,068,061 (802,065) 1,270,834
Cash and due from banks at beginning of year 11,600,385 12,402,450 11,131,616
----------- ---------- ----------
Cash and due from banks at end of year $12,668,446 $11,600,385 $12,402,450
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-11-
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993 (Continued)
Reconciliation of Net Income to Net Cash Provided by Operating Activities
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net income $ 2,643,877 $ 2,105,433 $ 1,505,158
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
(Increase) decrease in mortgage loans held
for sale (787,488) 13,612,894 (2,899,910)
Premium on sale of mortgages 366,900 369,172 431,938
Depreciation and amortization 747,822 818,632 559,612
Provision for possible loan losses 120,000 300,000 600,000
Write-down of OREO properties 21,870 78,999
Deferred (prepaid) income taxes 139,324 180,230
Increase (decrease) in other liabilities 441,387 (253,490) (187,315)
Increase (decrease) in taxes payable 275,029 5,759 (131,464)
Increase (decrease) in interest payable (24,000) 183,811 (152,304)
(Increase) decrease in other assets, net (15,478) (57,400) 263,696
(Increase) decrease in interest receivable (178,488) (274,864) 221,571
------------ ----------- -----------
Total adjustments 945,684 14,865,708 (1,034,947)
------------ ----------- -----------
Net cash provided by operating activities $ 3,589,561 $ 16,971,141 $ 470,211
=========== =========== ===========
Supplemental Disclosure:
Loans transferred to OREO totalled $182,958, $742,136 and $472,405 for the years ended
December 31, 1995, 1994 and 1993, respectively.
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-12-
<PAGE>
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Basis of consolidation
The accompanying consolidated financial statements include the accounts of
Community Bancorp, Inc. (the "Company"), a Massachusetts corporation
registered as a bank holding company under the Bank Holding Company Act of
1956, as amended, and its wholly-owned subsidiary, Hudson National Bank (the
"Bank"), a national banking association. All intercompany balances and
transactions have been eliminated in consolidation.
At present, the Company conducts no activities independent of the Bank. The
Bank currently has eight offices and is engaged in substantially all of the
business operations normally conducted by an independent commercial bank in
Massachusetts. Banking services offered include the acceptance of checking,
savings, and time deposits, and the making of commercial, real estate,
installment and other loans. The Bank also offers official checks, safe
deposit boxes, and other customary banking services to its customers.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Securities
Debt securities that the Company has the positive intent and ability to hold to
maturity are reported at amortized cost. Securities purchased to be held for
indefinite periods of time and not intended to be held until maturity are
classified as "available for sale" securities. Securities classified as
available for sale are reported at fair value with unrealized gains and losses
excluded from earnings and reported net of taxes in a separate component of
stockholders' equity. Securities held for indefinite periods of time include
securities that management may use in conjunction with the Company's
asset/liability in management program and that may be sold in response to
changes in interest rates, prepayment risks or other economic factors. When
securities classified as available for sale are sold, the adjusted cost of each
specific security sold is used to calculate gains or losses on sale, which are
included in earnings.
Premises and equipment
Premises and equipment are stated at cost, less accumulated depreciation and
amortization, which is accumulated depreciation and amortization, which is
computed by using both the straight-line and accelerated methods. Estimated
useful lives are as follows:
Buildings................30 to 40 years
Buildings and leasehold
improvements.............5 to 25 years
Furniture and equipment...3 to 10 years
Cash and due from banks
Included in cash and due from banks as of December 31, 1995 and 1994 is
approximately $3,313,000 and $2,423,000, respectively, which is subject to
Federal Reserve withdrawal restrictions.
Allowance for possible loan losses
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for possible loan
losses. The allowance for possible loan losses is increased through a
provision for possible loan losses charged to expense and decreased by
charge-offs, net of recoveries. The provision is based on management's
estimation of the amount necessary to maintain the allowance at an adequate
level. Management's periodic evaluation of the adequacy of the allowance is
based on specific credit reviews, past loan loss experience, current economic
conditions and trends known and inherent risks in the loan portfolio, adverse
situations that may affect the borrower's ability to repay, the estimated value
of any underlying collateral and the volume, growth and composition of the loan
portfolio. While management uses available information to recognize losses on
loans, future additions to the allowance may be necessary.
Effective 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 standard, the allowance for possible loan losses
-13-
<PAGE>
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.
Prior to 1995, the allowance for possible loan losses related to these loans
was based on undiscounted cash flows or the fair market value of the collateral
for collateral dependent loans.
For purposes of this Statement, a loan is considered to be 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.
The Company has determined after reviewing its credit quality monitoring
policies and procedures, and an analysis of the loan portfolio, that loans
recognized by the Company as nonaccrual and restructured troubled debt are
equivalent to impaired loans as defined by SFAS No. 114. The Company has also
determined that the allowance for possible loan losses did not require an
additional loan loss provision as a result of the adoption of this Statement.
Total impaired loans at December 31, 1995 with a related allowance were
$214,131 and the allowance allocated to such loans was $35,000. In addition,
the Company had impaired loans of $1,436,214 that did not require a related
allowance. Loan payments on impaired loans are recorded as principal
reductions if the remaining loan balance is not expected to be repaid in full.
If full collection of the remaining loan balance is expected, payments are
recognized as interest income on a cash basis. During 1995 the Company
recorded interest income on impaired loans of $108,279. Impaired loans
averaged $1,010,296 during 1995.
Securities sold under repurchase agreements
The Company sells securities under open-ended repurchase agreements with
certain customers. The principal balance of the repurchase agreements changes
daily. Specific securities are not sold and securities are not transferred to
the name of the customers. Instead, the customer has an interest in a portion
of the U.S. Government securities held in the Company's investment portfolio.
Earnings per share
Earnings per share is based on the weighted average number of shares
outstanding during the year.
Loan sales and loans held for sale
Gains and losses on sales of mortgage loans are recognized at the time of sale
based on the difference between the selling price and the carrying value of the
related loans sold. The gains and losses are increased or decreased by the
present value of the difference (generally referred to as excess servicing)
between the interest rate on the loans sold, adjusted for a normal servicing
fee and, in the case of mortgage-backed securities, a guaranty fee, and the
agreed-upon yield to the buyer. The present value is computed over the
estimated life of the loans sold, taking into account scheduled payments and
estimated prepayments.
In May 1995, the FASB issued Statement of Financial Accounting Standards No.
122, Accounting for Mortgage Servicing Rights (SFAS No. 122), which requires
the capitalization of the cost of originating the rights to service mortgage
loans for others. In addition, capitalized mortgage servicing rights are
required to be assessed for impairment based on the fair value of those rights.
The Company must adopt this statement prospectively effective January 1, 1996.
The Company does not anticipate that this accounting change will have a
material effect on its financial position.
Revenue recognition
Interest on loans, securities and other earning assets is accrued and credited
to operations based on contractual rates and principal amounts outstanding.
Nonrefundable loan fees are deferred and recognized as income over the life of
the loan as an adjustment of the yield.
It is the policy of the Company to discontinue the accrual of interest on loans
when, in the judgement of management, the ultimate collectibility of principal
or interest becomes doubtful. The accrual of interest income generally is
discontinued when a loan becomes 90 days past due as to principal or interest.
When interest accruals are discontinued, unpaid interest credited to income in
the current year is reversed, and interest accrued in prior years is charged to
the allowance for possible loan losses. Management may elect to continue the
accrual of interest when the estimated net realizable value of collateral is
sufficient to cover the principal balance and accrued interest. Income taxes
-14-
<PAGE>
In February 1992, the FASB issued Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes (SFAS No. 109). SFAS No. 109 revised the
computation of deferred taxes so that the amount of deferred taxes recorded on
the balance sheet is adjusted whenever tax rates or other provisions of the
income tax law are changed. The Company adopted SFAS No. 109 on January 1,
1993, which resulted in an increase in earnings through a cumulative adjustment
of $55,000.
2. Securities
The book and estimated market values of securities at December 31, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1995
--------------------------------------------------------------
Gross Gross
Securities Held Amortized Unrealized Unrealized Fair
to Maturity Cost Gains Losses Value
--------------- --------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Government obligations $ 9,104,865 $ 16,179 $ 20,366 $ 9,100,678
U.S. Government agencies
and corporations 12,545,065 23,350 12,521,715
Obligations of states and
political subdivisions 1,940,710 1,940,710
Mortgage-backed securities 26,346,565 96,131 260,577 26,182,119
Other securities 888,154 888,154
---------- ---------- ---------- ------------
$ 50,825,359 $ 112,310 $ 304,293 $ 50,633,376
============ ========== ========== ============
<CAPTION>
Gross Gross
Securities Held Amortized Unrealized Unrealized Fair
Available for Sale Cost Gains Losses Value
--------------- --------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Government obligations $ 8,056,639 $ 20,172 $ 21,501 $ 8,055,310
U.S. Government agencies and
corporations 2,021,784 5,676 2,016,108
Mortgage-backed securities 13,761,475 61,673 104,096 13,719,052
------------ ---------- ---------- ------------
$ 23,839,898 $ 81,845 $ 131,273 $ 23,790,470
============ ========== ========== ============
<CAPTION>
1994
--------------------------------------------------------------
Gross Gross
Securities Held Amortized Unrealized Unrealized Fair
to Maturity Cost Gains Losses Value
--------------- --------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Government obligations $ 2,080,116 $ $ 159,931 $ 1,920,185
U.S. Government agencies and
corporations 13,290,077 681,835 12,608,242
Mortgage-backed securities 28,431,038 2,359,285 26,071,753
Other securities 1,125,356 1,125,356
------------ --------- --------- ------------
$ 46,495,293 $ 2,486 $3,201,051 $ 43,296,728
============ =========== ========= ============
<CAPTION>
Gross Gross
Securities Held Amortized Unrealized Unrealized Fair
Available for Sale Cost Gains Losses Value
--------------- --------- ---------- ---------- -----
<S> <C> <C> <C> <C>
U.S. Government obligations $ 11,184,608 $ $ 383,398 $ 10,801,210
U.S. Government agencies and
corporations 2,038,284 136,305 1,901,979
Mortgage-backed securities 14,213,686 847,380 13,366,306
------------ ---------- ---------- ------------
$ 27,436,578 $ 0 $ 1,367,083 $ 26,069,495
============ ========== ========== ============
</TABLE>
The book and estimated market value of securities at December 31, 1995 by
contractual maturity are shown in the following table. Actual maturities may
differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Securities Held to Maturity Securities Available for Sale
--------------------------- -----------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Within one year $ 2,504,776 $ 2,507,585 $ 4,042,232 $ 4,031,620
One to five years 21,085,864 21,055,518 6,036,191 6,039,798
Five to ten years
Mortgage-backed securities 26,346,565 26,182,119 13,761,475 13,719,052
Other securities 888,154 888,154
----------- ---------- ----------- ----------
$ 50,825,359 $50,633,376 $23,839,898 $23,790,470
============ ========== ========== ==========
</TABLE>
Securities with a book value of $22,085,000 and $23,307,000 at December 31,
1995 and 1994, respectively, were pledged to secure public funds on deposit and
for other purposes.
No securities available for sale were purchased or sold in 1995. Proceeds from
maturities of securities available for sale totalled $3,434,457 in 1995.
3. Loans
The composition of the loan portfolio at December 31, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commercial and industrial $ 13,783,644 $ 13,684,637
Real estate - residential 52,036,183 50,753,606
Real estate - commercial 44,983,032 44,246,387
Real estate - residential
construction 3,903,267 3,330,373
Loans to individuals for
personal expenditures 13,177,862 10,850,275
Other 188,073 173,077
----------- -----------
Total loans $128,072,061 $123,038,355
============ ===========
</TABLE>
Substantially all of the Company's loan portfolio is collateralized by assets
in the New England region, especially central Massachusetts. The Company
generally requires collateral when extending credit and, with respect to loans
secured by real estate, Company policy requires appropriate appraisals and
repayment sources.
At December 31, 1995 and 1994, accruing loans 90 days or more past due totalled
$159,922 and $66,211, respectively, and nonaccruing loans totalled $1,650,345
and $909,264, respectively. Accruing troubled debt restructurings at December
31, 1995 and 1994 were $0 and $1,154,570, respectively. The reduction of
interest income associated with nonaccrual and restructured loans for the years
ended December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income per original
terms $ 211,348 $ 357,774 $ 296,121
Income recognized 103,069 216,280 133,394
----------- ---------- ---------
Foregone interest income $ 108,279 $ 141,494 $ 162,727
=========== ========== ==========
</TABLE>
-15-
<PAGE>
4. Allowance for Possible Loan Losses
Activity in the allowance for possible loan losses for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<S> <C>
Balance, December 31, 1992 $ 4,178,343
Provision for possible losses 600,000
Charge-offs (1,016,459)
Recoveries 148,311
---------
Balance, December 31, 1993 3,910,195
Provision for possible losses 300,000
Charge-offs (838,955)
Recoveries 332,230
---------
Balance, December 31, 1994 3,703,470
Provision for possible losses 120,000
Charge-offs (629,306)
Recoveries 260,934
---------
Balance, December 31, 1995 $ 3,455,098
==========
</TABLE>
5. Premises and Equipment
The composition of premises and equipment at December 31, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Premises $ 5,023,261 $ 4,980,754
Equipment 2,861,731 2,410,962
---------- -----------
7,884,992 7,391,716
Less accumulated depreciation and
amortization 2,758,909 2,186,640
---------- -----------
$ 5,126,083 $ 5,205,076
========== ===========
</TABLE>
Total depreciation and amortization expense for the years ended December 31,
1995, 1994 and 1993 was $668,526, $598,018 and $506,570, respectively, and is
included in data processing, occupancy and furniture and equipment expense.
6. Stockholders' Equity
Pursuant to a Stock Purchase Agreement dated March 29, 1993, the Company and
certain individuals agreed to purchase a total of 766,924 shares of common
stock from existing stockholders of the Company in two separate transactions.
The initial transaction was consummated on April 30, 1993 and involved a total
of 546,296 shares. Of these, 379,810 shares were acquired by the Company. The
remaining 166,486 shares were acquired by various individuals.
The purchase price in the initial transaction was $4.40 per share. The Company
received a fairness opinion indicating that such purchase price was fair to the
Company from a financial point of view. The total purchase price paid by the
Company in the initial transaction was $1,671,164. Shares acquired by the
Company in the initial transaction were accounted for as treasury stock under
the cost method. During 1993, the Company completed a stock offering to
reissue the 379,810 shares of treasury stock and sell 35,606 additional shares
of common stock. Net proceeds from the stock offering were $1,817,809 after
deducting applicable offering expenses.
Pursuant to the second transaction, which was consummated on May 6, 1994, the
Company purchased 220,628 additional shares of common stock from certain
existing stockholders at a price of $4.50 per share. The Company received a
fairness opinion indicating that such purchase price was fair to the Company
from a financial point of view. The total purchase price paid by the Company
in the second transaction was $992,826. Shares acquired by the Company in the
second transaction were accounted for as treasury stock under the cost method.
During 1994, the Company re-issued 162,164 shares of acquired stock, providing
net proceeds of $891,138 after deducting applicable expenses.
7. Income Taxes
As discussed in Note 1, the Company adopted SFAS No. 109 effective January 1,
1993.
The components of income tax expense for the years ended December 31, 1995,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 1,160,210 $ 817,474 $ 573,082
State 343,296 250,303 184,921
----------- ---------- ----------
Total current 1,503,506 1,067,777 758,003
----------- ---------- ----------
(Prepaid)/Deferred:
Federal 114,195 194,508 118,027
State 61,848 (55,184) 62,203
----------- ---------- ----------
Total (prepaid)/deferred 176,043 139,324 180,230
----------- ---------- ----------
Total $ 1,679,549 $ 1,207,101 $ 938,233
========== ========== ==========
</TABLE>
The difference between the income tax provision computed by applying the
statutory federal income tax rate of 34% to income before income taxes and the
cumulative effect of a change in accounting principle and the actual income tax
provision is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income tax expense (benefit)
at statutory rates $ 1,469,965 $ 1,126,262 $ 812,053
State income taxes, net of
federal income tax benefit 267,395 207,978 163,102
Tax-exempt interest (71,828) (62,953) (56,898)
Reversal of valuation allowance (80,000)
Other, net 14,017 15,814 19,976
----------- ---------- -----------
$ 1,679,549 $ 1,207,101 $ 938,233
========== ========== ==========
</TABLE>
-16-
<PAGE>
The Company has recorded a net deferred tax asset of $794,854. Realization is
dependent on the generation of sufficient taxable income in future years.
Although realization is not assured, management believes it is more likely than
not that the full amount of the net deferred tax asset will be realized.
However, the amount realizable could be reduced if estimates of future taxable
income are reduced.
At December 31, 1995 and 1994, the Company's net deferred tax asset, as
presented in the accompanying consolidated balance sheets, consisted of the
following components:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Gross deferred tax asset:
Provision for possible loan losses $ 921,209 $ 1,068,915
Employee benefits and other
compensation arrangements 325,975 328,121
OREO write-downs 21,000 54,959
Other 29,066 556,270
---------- -----------
1,297,250 2,008,265
Gross deferred tax liability:
Amortization of intangible assets (30,529) (64,253)
Accelerated tax depreciation (350,807) (314,353)
Securities marked-to-market
Other (121,060) (124,703)
---------- -----------
(502,396) (503,309)
Net deferred tax asset $ 794,854 $ 1,504,956
========== ===========
</TABLE>
8. Employee Benefits
The Company has a defined benefit pension plan covering all eligible employees.
The benefits are based on years of service and the employees' compensation as
defined in the Plan agreement. The Company's funding policy is to make annual
contributions to the Plan equal to at least the minimum amount required for
actuarial purposes. Contributions are intended to provide not only for benefits
attributed to service to date, but also for those to be earned in the future.
The following table sets forth the Plan's funded status and amounts recognized
in the Company's consolidated balance sheets at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation, including
vested benefits of $1,422,106 ($1,146,477
in 1994) $(1,497,943) $ (1,228,890)
========== ==========
Projected benefit obligation for service
rendered to date $(2,443,171) $ (2,051,114)
Plan assets at fair value (funds held in a
mutual fund and deposit accounts
at Hudson National Bank) 1,514,977 1,364,012
---------- -----------
Plan assets less than projected benefit
obligation (928,194) (687,102)
Prior service cost not yet recognized
in net periodic pension cost 15,176 16,556
Unrecognized net asset at transition
being recognized over 17 years (71,629) (80,583)
Unrecognized net loss from past experience
different from that assumed 547,906 533,452
---------- -----------
Accrued pension liability $ (436,741) $ (217,677)
========= ============
</TABLE>
Net periodic pension cost for the years ended December 31, 1995, 1994 and 1993
included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 174,826 $ 208,151 $ 162,690
Interest cost on projected
benefit obligation 149,673 149,088 124,092
Actual return on plan assets (209,069) 98,961 (58,432)
Adjustment to reflect amount
expensed by plan sponsor (1,000)
Net amortization and deferral 103,634 (204,260) (43,006)
---------- ---------- -----------
Net periodic pension cost $ 219,064 $ 250,940 $ 185,344
========== ========== ===========
</TABLE>
The weighted-average discount rate and annual rate of increase in the future
compensation levels used in determining the actuarial present value of the
projected benefit obligation at December 31, 1995 were 7.5% and 5.5%,
respectively. The rates as of December 31, 1994 were 8.0% and 5.5%,
respectively. The expected annual long-term rate of return on assets was 8.0%
for the years ended December 31, 1995 and 1994.
The Company has an Employee Stock Ownership Plan (ESOP) that enables eligible
employees to own common stock. No cash contributions were made to the ESOP in
1995, 1994 or 1993.
The Company implemented a 401(k) plan in 1989, covering all eligible employees.
Compensation expense recorded in 1995, 1994 and 1993 related to this plan was
approximately $22,800, $26,900 and $27,400, respectively.
9. Commitments
The Company leases branch offices and equipment under noncancelable agreements
expiring at various dates through 2001 which require various minimum annual
rentals. The total approximate future minimum rental commitments at December
31, 1995 aggregate approximately $522,000. Rental commitments for each of the
next five fiscal years and thereafter are as follows:
1996 144,732
1997 131,933
1998 73,674
1999 47,039
2000 41,712
Thereafter 83,424
Rental expense amounted to approximately $146,000, $146,000 and $132,000, for
1995, 1994 and 1993, respectively.
-17-
<PAGE>
10. Loans to Related Parties
The schedule below discloses indebtedness of certain parties related to the
Company:
<TABLE>
<CAPTION>
Balance Balance
January 1 New Loans Repayments December 31
---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
1994 $ 7,057,216 $ 333,000 $1,705,762 $ 5,684,454
1995 $ 5,684,454 $1,707,252 $2,479,504 $ 4,912,202
</TABLE>
These loans were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions
with unrelated persons and do not involve more than normal risk of
collectibility.
11. Deposits
Deposits consisted of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Demand deposits $ 45,383,886 $ 42,074,618
Money-market and Super NOW deposits 30,459,376 26,791,018
NOW deposits 22,996,087 20,977,338
Cash management investment deposits 9,161,809 5,773,655
Savings deposit 30,682,590 33,180,044
Time certificates of deposit in
denominations of $100,000 or more 19,060,700 14,360,287
Other time deposits 49,295,417 43,706,026
----------- -----------
$207,039,865 $186,862,986
=========== ============
</TABLE>
12. Condensed Financial Information of Community Bancorp, Inc.
The following discloses certain parent company only financial information at
December 31, 1995 and 1994, and for each of the three years in the period
ended December 31, 1995:
<TABLE>
Balance Sheets
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assets:
Cash and cash equivalents $ 594,056 $ 480,697
Investment in subsidiary, at equity 18,929,479 16,250,977
Other assets 189,536 187,818
---------- ----------
Total assets $ 19,713,071 $ 16,919,492
=========== ==========
Liabilities and stockholders' equity:
Other liabilities $ 172,398 $ 175,042
---------- ----------
Total liabilities 172,398 175,042
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, (3,199,218 shares
outstanding at December 31, 1993) 7,998,045 7,998,045
Surplus 290,253 263,538
Undivided profits 11,463,544 9,556,768
Treasury stock (181,224) (263,088)
Unrealized (losses) gains on securities
available for sale, net of taxes (29,945) (810,813)
---------- ----------
Total stockholders' equity 19,540,673 16,744,450
---------- ----------
Total liabilities and stockholders'
equity $19,713,071 $16,919,492
=========== ==========
</TABLE>
<TABLE>
Statements of Income
<CAPTION>
Years ended December 31,
------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income:
Dividends from subsidiary
bank $ 737,101 $ 666,190 $ 520,231
Other income 307,939 288,806 279,575
----------- ----------- -----------
Total income 1,045,040 954,996 799,806
Expenses:
Other 299,756 285,821 314,965
----------- ----------- -----------
Total expenses 299,756 285,821 314,965
Income before undistributed net
income of subsidiary bank 745,284 669,175 484,841
Equity in undistributed net
income of subsidiary bank 1,898,593 1,436,258 1,020,317
----------- ----------- -----------
Net income $ 2,643,877 $ 2,105,433 $ 1,505,158
=========== =========== ===========
</TABLE>
<TABLE>
Statements of Cash Flows
<CAPTION>
Years ended December 31,
-----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 2,643,877 $ 2,105,433 $ 1,505,158
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Equity in undistributed
net income of subsidiary
bank (1,898,593) (1,436,258) (1,020,318)
(Increase) decrease in
other assets (1,718) (22,289) 77,714
Increase (decrease) in
other liabilities (1,685) 21,273 (83,709)
Total adjustments (1,901,996) (1,437,274) (1,026,313)
Net cash provided by
operating activities 741,881 668,159 478,845
----------- ----------- -----------
Cash flows from financing
activities:
Purchase of treasury stock (2,865) (992,826) (1,671,164)
Reissuance of treasury stock 111,444 891,138 1,709,145
Proceeds from sale of
common stock 108,664
Dividends declared (737,101) (666,190) (520,232)
Net cash used in
financing activities (628,522) (767,878) (373,587)
------------ ------------ -----------
Net increase (decrease)
in cash
and cash equivalents 113,359 (99,719) 105,258
Cash and cash equivalents
at beginning of year 480,697 580,416 475,158
------------ ------------ -----------
Cash and cash equivalents
at end of year $ 594,056 $ 480,697 $ 580,416
=========== =========== ===========
</TABLE>
Cash and cash equivalents consist of a money market demand deposit account on
deposit with the subsidiary bank.
The approval of the Comptroller of the Currency is required for a national bank
to pay dividends if the total of all dividends declared in any calendar year
exceeds the bank's net profits (as defined) for that year combined with its
retained net profits for the preceding two calendar years. During 1996, Hudson
National Bank can, under this formula, declare dividends to Community Bancorp,
Inc. of approximately $3,334,000, plus an additional amount equal to the Bank's
net profit for 1996 up to the date of any such dividend declaration, without
the approval of the Comptroller of the Currency.
-18-
<PAGE>
13. Financial Instruments With Off-Balance-Sheet Risk
The Company is party to financial instruments with off-balance-sheet risk in
the normal course of business. These financial instruments primarily consist
of commitments to extend credit and standby letters of credit. Loan
commitments are made to accommodate the financial needs of the Company's
customers. Standby letters of credit commit the Company to make payments on
behalf of customers when certain specified future events occur. They are
primarily issued to guarantee other customer obligations.
Both arrangements have credit risk essentially the same as that involved in
extending loans to customers and are subject to the Company's normal credit
policies. Collateral typically is obtained based on management's credit
assessment of the customer. Loan commitments and standby letters of credit
usually have fixed expiration dates or other termination clauses. Some
commitments and letters of credit expire without being drawn upon. Accordingly,
the total commitment amounts do not necessarily represent future cash
requirements of the Company.
The Company's maximum exposure to credit loss for loan commitments (unfunded
loans and unused lines of credit) and standby letters of credit outstanding at
December 31, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Commitments to extend credit:
Fixed-rate (6.99% to 12.00%) $ 465,582 $ 1,680,688
Adjustable rate 28,212,387 22,560,728
Standby letters of credit $ 704,368 $ 530,986
=========== ============
</TABLE>
Commitments to extend credit on a fixed-rate basis expose the Company to a
certain amount of interest rate risk if market rates of interest substantially
increase during the commitment period.
The Company has also sold mortgage loans with recourse in the event of the
default of the borrower. Loans sold with recourse are accounted for as sales in
the accompanying financial statements, with provisions made for anticipated
losses under the recourse provisions. At December 31, 1995, the outstanding
balance of such mortgages was approximately $434,000.
Fees associated with the Company's off-balance-sheet financial instruments are
minimal; therefore, the fair value of off-balance-sheet financial instruments
is not material.
14. Excess Servicing Asset
The excess servicing asset, included in other assets, represents the estimated
present value of the interest rate differential resulting from the sale of
loans with servicing rights retained. This amount is amortized over the
estimated lives of the underlying loans sold. The excess servicing asset is
also reduced by a charge to earnings if actual prepayments exceed estimated
prepayments.
The activity in the excess servicing asset is summarized as follows:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1995 1994
---- ----
<S> <C> <C>
Balance, beginning of period $ 1,205,742 $ 1,574,914
Additions, related to current
year loan sales 125,292
Amortization (366,901) (494,464)
------------ -----------
Balance, end of period $ 838,841 $ 1,205,742
============ ===========
</TABLE>
At December 31, 1995, the Company was servicing mortgage loans for others of
approximately $135,518,000 (approximately $144,680,000 at December 31, 1994).
15. Disclosures about Fair Value of Financial Instruments
In December 1991, the FASB issued Statement of Financial Accounting Standards
No. 107, Disclosures About Fair Value of Financial Instruments (SFAS No. 107).
This statement requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices are
not available, fair values are based on estimates using present value or other
valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument. SFAS No. 107
excludes certain financial instruments and all nonfinancial instruments from
its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company. The following
methods and assumptions were used by the Company in estimating its fair value
disclosures for financial instruments:
-19-
<PAGE>
Cash and due from banks and federal funds sold: The carrying amounts reported
in the balance sheet for cash and due from banks and federal funds sold
approximate those assets' fair values.
Securities (including mortgage-backed securities, securities held to maturity
and securities available for sale): Fair values for securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans: For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair
values for certain one-to-four family residential mortgages are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. The fair
values for credit card loans and other consumer loans are based on carrying
values, as the loans reprice frequently at current market rates. The fair
values for other loans (e.g., commercial real estate and rental property
mortgage loans, and commercial and industrial loans) are estimated using
discounted cash flow analysis, using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality. The
carrying amount of accrued interest receivable approximates its fair value.
Off-balance-sheet instruments: The fair value of lending commitments discussed
in Note 13 is not considered material nor has it been reflected in the
estimation of the fair value of the related loans.
Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
interest and noninterest checking, passbook savings and certain types of money
market accounts) are, by definition, equal to the amount payable on demand at
the reporting date (i.e., their carrying amounts). The carrying amounts for
variable-rate, fixed-term money market accounts and certificates of deposit
approximate their fair values at the reporting date. Fair values for
fixed-rate certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on certificates
to a schedule of aggregated expected monthly maturities on time deposits.
Short-term borrowings: The carrying amounts of federal funds purchased,
borrowings under repurchase agreements and other short-term borrowings
approximate their fair values.
Commitments to extend credit/sell loans: The fair value of commitments is
estimated using the fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the present
creditworthiness of customers. For fixed-rate loan commitments and obligations
to deliver fixed-rate loans, fair value also considers the difference between
committed rates and current levels of interest rates.
Values not determined: SFAS No. 107 excludes certain financial instruments
from its disclosure requirements including real estate included in banking
premises and equipment, the intangible value of the Bank's portfolio of loans
serviced (both for itself and for others) and related servicing network and the
intangible value inherent in the Bank's deposit relationships (i.e. core
deposits) among others. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Bank.
The carrying amount and estimated fair values of the Bank's financial
instruments at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995
-----------------------------
Carrying Estimated
Amount Fair Value
------------ -----------
<S> <C> <C>
Financial instrument assets:
Cash and cash equivalents $ 29,368,446 $ 29,368,446
Securities 74,615,829 74,423,848
Loans, including held for sale, net 124,616,962 128,494,633
Financial instrument liabilities:
Deposits 207,039,865 206,194,823
Short-term borrowings 9,289,963 9,289,963
<CAPTION>
1994
------------------------------
Carrying Estimated
Amount Fair Value
------------ -----------
<S> <C> <C>
Financial instrument assets:
Cash and cash equivalents $ 17,700,385 $ 17,700,385
Securities 72,564,788 69,366,223
Loans, including held for sale, net 119,334,885 121,481,398
Financial instrument liabilities:
Deposits 186,862,986 184,213,993
Short-term borrowings 14,940,801 14,940,801
</TABLE>
-20-
Report of Independent Public Accountants
- ----------------------------------------
To the Board of Directors and Stockholders of Community Bancorp, Inc.:
We have audited the accompanying consolidated balance sheets of Community
Bancorp, Inc. (a Massachusetts corporation) and subsidiary as of December 31,
1995 and 1994, and the related consolidated statements of income, stockholders'
equity and cash flows for the three years ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Community Bancorp, Inc. and
subsidiary as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the three years ended December 31, 1995, in
conformity with generally accepted accounting principles.
As discussed in Notes 1 and 7 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's (FASB) Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes.
/s/ Arthur Andersen LLP
January 26, 1996
Boston, Massachusetts
-21-
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Summary
The Company recorded net income of $2,643,877 for the year ended December 31,
1995, representing an increase of $538,444 over $2,105,433 recorded in 1994.
Earnings per share of $.84 for the current period compared to $.67 for the year
ended December 31, 1994. The improvement in net income resulted primarily from
an increase in net interest income and reductions in the provision for possible
loan losses and FDIC insurance premiums during 1995.
Deposits of $207,039,865 at December 31, 1995 increased by $20,176,879 or 10.8%
from $186,862,986 at December 31, 1994. The increase occurred primarily in
interest bearing categories and secondarily in noninterest bearing categories.
Loans of $128,072,061 at December 31, 1995 increased by $5,033,706 or 4.1% from
$123,038,355 at December 31, 1994. The increase occurred in the commercial,
residential mortgage and consumer loan categories. Noncurrent loans
(nonaccrual loans and loans 90 days or more past due but still accruing)
totaled $1,810,267 and $975,475 at December 31, 1995 and 1994, respectively.
Accruing troubled debt restructurings at December 31, 1995 and 1994 were $0 and
$1,154,570, respectively. The entire troubled debt restructuring balance at
December 31, 1994 was comprised of one loan which, although current in its
payments, was placed on nonaccrual status in September of 1995 due to potential
weaknesses in the credit. That loan is included in total noncurrent loans as
of December 31, 1995.
Other real estate owned of $25,000 at December 31, 1995, represented a
reduction of $403,136 or 94.2% from $428,136 at December 31, 1994.
Assets of $237,580,796 at December 31, 1995 represented a $17,730,029 or 8.1%
increase over $219,850,767 at December 31, 1994.
1995 Compared to 1994
Interest income for the year ended December 31, 1995 was $16,917,624,
representing an increase of $2,487,692 or 17.2% over $14,429,932 for the year
ended December 31, 1994, primarily due to a $13,368,104 or 7.0% increase in
average earning assets and higher average interest rates in 1995 as compared to
1994. The weighted average taxable equivalent yield on net earning assets was
8.30% and 7.57% in 1995 and 1994, respectively. Interest expense of $6,284,750
in 1995 represented an increase of $1,759,192 or 38.9% from $4,525,558 in 1994,
primarily due to an $8,560,705 or 5.5% increase in interest bearing liabilities
and higher average interest rates in 1995. The weighted average cost of
interest bearing liabilities was 3.85% in 1995 and 2.93% in 1994. Net interest
income for 1995 was $10,632,874, representing an increase of $728,500 or 7.4%
compared to $9,904,374 recorded in 1994.
Noninterest income for the year ended December 31, 1995 was $2,083,964,
representing an increase of $56,035 or 2.8% from $2,027,929 in 1994. This
increase resulted primarily from increases in merchant credit card processing
and service charge income, partially offset by reductions in other charges,
commissions and fees and other income and by losses on sales of residential
real estate loans sold in the secondary mortgage market, resulting from the
refinancing of a number of mortgages originated in prior periods and the
associated write-down of unamortized excess servicing fee income on those loans.
-22-
<PAGE>
Noninterest expense for the year ended December 31, 1995 of $8,273,412
represented a decrease of $46,357 or .6% from $8,319,769 recorded during 1994.
This decrease was primarily the result of reductions in FDIC insurance premiums
and OREO carrying costs, partially offset by increases in salaries and employee
benefits, data processing, occupancy, furniture and equipment, and credit card
processing.
As a result of the recapitalization of the FDIC's Bank Insurance Fund (BIF)
during the second quarter of 1995, a significant reduction in FDIC deposit
insurance premiums was announced in September, retroactive to June 1, 1995. As
a result, Hudson National Bank received a refund of approximately $113,000 from
the FDIC during September, representing the return of previously assessed
insurance premiums plus interest. That refund was recorded as a reduction of
previously expensed premiums. FDIC deposit insurance expense during the fourth
quarter of the year was based on an assessment of $.04 per $100 of insured
deposits, compared to $.23 per $100 of insured deposits during 1994 and the
first five months of 1995. During the fourth quarter of 1995 the FDIC
announced that the Bank's deposit insurance premium would be a flat $1,000 for
the first six months of 1996. The FDIC premium for the second six months of
1996 has not yet been announced.
The provision for possible loan losses for 1995 was $120,000, representing a
$180,000 or 60.0% decrease from $300,000 for 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 adequacy of the
allowance for possible loan losses during 1996 and make further adjustments in
the provision for possible loan losses if necessary.
Income tax expense of $1,679,549 for the year ended December 31, 1995 compared
to $1,207,101 for 1994, the result of an increase in taxable income during the
current period.
Net income of $2,643,877 for the year ended December 31, 1995 represented an
increase of $538,444 or 25.6% over $2,105,433 recorded in 1994. The foregoing
discussion summarized the primary components of this increase in earnings.
1994 Compared to 1993
Interest income for the year ended December 31, 1994 was $14,429,932,
representing an increase of $397,426 or 2.8% over $14,032,506 for the year
ended December 31, 1993. The weighted average taxable equivalent yield on net
earning assets was 7.57% and 7.53% in 1994 and 1993, respectively. Interest
expense of $4,525,558 in 1994 represented an increase of $60,179 or 1.3% from
$4,465,370 in 1993, primarily due to a small increase in average interest
bearing deposits and slightly higher average interest rates in 1994. The
weighted average cost of interest bearing liabilities was 2.93% in 1994
compared to 2.88% in 1993. Net interest income for 1994 was $9,904,374,
representing an increase of $337,247 or 3.5% compared to $9,567,127 recorded in
1993.
Noninterest income for the year ended December 31, 1994 was $2,027,929,
representing an increase of $275,811 or 15.7% over $1,752,118 in 1993. This
resulted primarily from increases in most noninterest income categories in
1994, partially offset by net losses on sales of securities in 1994 compared to
net gains on sales of securities in 1993. Net losses on sales of loans were
substantially lower in 1994 than in 1993 due to a significant reduction in
residential mortgage loan refinancings and the associated write-down of
unamortized excess servicing fee income on those loans in 1994.
Noninterest expense for the year ended December 31, 1994 of $8,319,769
represented a decrease of $11,085 or .1% from $8,330,854 recorded during 1993.
This decrease was primarily the result of decreases in OREO carrying costs,
FDIC insurance premiums and other expense, partially offset by increases in
salaries and employee benefits, data processing, occupancy and furniture and
equipment expense.
-23-
<PAGE>
The provision for possible loan losses for 1994 was $300,000, representing a
$300,000 or 50.0% decrease from $600,000 for 1993. 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.
Income tax expense of $1,207,101 for the year ended December 31, 1994 compared
to $938,233 for 1993, the result of an increase in taxable income during the
current period.
Net income of $2,105,433 for the year ended December 31, 1994 represented an
increase of $600,275 or 40.0% over $1,505,158 recorded in 1993. The foregoing
discussion summarized the primary components of this increase in earnings.
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, known and inherent risks in the loan portfolio, adverse situations
that may affect a borrower's ability to repay, the estimated value of any
underlying collateral 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. For loans with potential losses, the
bank sets aside or allocates a portion of the allowance against such potential
losses. For the remainder of the loan portfolio, unallocated allowance amounts
are determined based on judgements regarding the type of loan, economic
conditions and trends, potential exposure to loss and other factors. When
specific loans, or portions thereof, are deemed to be uncollectible, those
amounts are charged off against the allowance. Subsequent recoveries, if any,
are credited to the allowance. At December 31, 1995 the allowance was
$3,455,098, representing 2.7% of total loans, compared to $3,703,470,
representing 3.0% of total loans at December 31, 1994.
Securities
The Company's securities portfolio consists of obligations of the U.S.
Treasury, U.S. 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. Securities for 1995 averaged $71.4 million, an increase of $.8
million or 1.1% over $70.6 million for 1994. During 1995 no securities were
sold. All mortgage-backed securities in the securities portfolio have been
issued by U.S. Government sponsored agencies. Management believes no
other-than-temporary impairment has occurred with regard to any security in the
securities portfolio. The Company's adequate liquidity position provides the
ability to hold all currently owned securities to maturity.
Liquidity and Capital Resources
The Company's principal sources of liquidity are customer deposits,
amortization and pay-offs of loan principal and amortization and maturities of
securities. These sources provide funds for loan originations, the purchase of
securities and other activities. Deposits are considered a relatively stable
source of funds. At December 31, 1995, 1994 and 1993, deposits were $207.0
million, $186.9 million and $185.5 million, respectively. Management
anticipates that deposits will increase moderately during 1996.
-24-
<PAGE>
Of the Company's $74.6 million in securities at December 31,1995, $15.5 million
or 20.8% mature within one year. 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.
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
December 31, 1995, the Company's Tier 1 leverage capital ratio was 8.23%.
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
December 31, 1995 the Company's Tier 1 and total risk-based capital ratios were
14.30% and 15.57%, respectively. Both the Company and the Bank are categorized
as well capitalized under the Federal Deposit Insurance Corporation Improvement
Act of 1991 (F.D.I.C.I.A.).
Asset/Liability Management and Interest Rate Risk
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, to measure and monitor interest rate risk 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 in an effort to prudently manage interest rate risk.
A common benchmark of this sensitivity is the one year gap position, which is a
reflection of the difference between the speed and magnitude of rate changes of
interest rate sensitive liabilities as compared with the Bank's ability to
adjust the rates of it's interest rate sensitive assets in response to such
changes. The Company's positive one-year cumulative gap position at December
31, 1995, which represents the excess of repricing assets versus repricing
liabilities, was 1.4% expressed as a percentage of total assets.
-25-
<PAGE>
The following table presents rate-sensitive assets and rate-sensitive
liabilities as of December 31, 1995:
<TABLE>
<CAPTION>
(Dollars in thousands) December 31, 1995
--------------------------------------------------------------------------
1 to 6 7 to 12 1 to 2 2 to 5 Over 5
Months Months Years Years Years Total
---------- --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
RATE-SENSITIVE ASSETS
Federal funds sold $ 16,700 $ $ $ $ $ 16,700
Securities 7,073 8,447 16,295 37,682 5,120 74,617
Adjustable-rate loans 56,424 19,785 14,179 11,594 112 102,094
Fixed-rate loans 8,750 2,469 3,546 6,241 3,134 24,140
--------- --------- ---------- ---------- -------- ---------
Total $ 88,947 $ 30,701 $ 34,020 $ 55,517 $ 8,366 $ 217,551
--------- -------- ---------- -------- -------- ---------
RATE-SENSITIVE LIABILITIES
Demand deposits $ $ $ $ $ 45,384 $ 45,384
NOW accounts* 23,965 23,965
Money market accounts 30,438 30,438
Savings accounts 11,000 19,774 30,774
Cash management accounts 9,161 9,161
Certificates of deposit 39,592 16,815 5,262 5,610 39 67,318
Repurchase agreements 9,290 9,290
Total $ 99,481 $ 16,815 $ 5,262 $ 5,610 $ 89,162 $ 216,330
--------- -------- ---------- -------- -------- ---------
Gap $ (10,534) $ 13,886 $ 28,758 $ 49,907 $ (80,796) $ 1,221
========== ========= ========= ========= ========= =========
Cumulative Gap $ (10,534) $ 3,352 $ 32,110 $ 82,017 $ 1,221
========== ========= ========= ========= =========
Gap as a percent of
total assets (4.43%) 5.84% 12.10% 21.01% (34.01%)
Cumulative gap as a
percent of total assets (4.43%) 1.41% 13.52% 34.52% 0.51%
* Cumulative gap as a
percent of total
assets if NOW accounts
are considered
immediately
withdrawable (15.47%) (9.62%) 2.48% 23.49% 0.51%
<FN>
Whenever possible, maturity dates or contractual repricing dates were used in
preparation of the above table. In addition to these factors, certain
assumptions were utilized in two of the balance categories based on the current
interest rate environment. In the savings account category, $11.0 million is
considered rate sensitive. This represents the approximate drop in certificate
of deposit balances and the concurrent growth in savings balances that took
place between June 1991, when interest rates began to fall significantly, and
December 1995. It is assumed that these funds will be immediately rate
sensitive if rates begin to rise. The remaining savings, demand deposit and
NOW account balances are considered rate insensitive.
</TABLE>
-26-
<PAGE>
[Photographs of the following Directors appear on this page:]
Dennis F. Murphy, Jr.
Alfred A. Cardoza
Argeo R. Cellucci
Antonio Frias
I. George Gould
Horst Huehmer
Donald R. Hughes, Jr.
James A. Langway
David L. Parker
Mark Poplin
David W. Webster
-27-
<PAGE>
Directors & Officers
- --------------------
COMMUNITY BANCORP, INC. AND HUDSON NATIONAL BANK
- -------------------------------------------------
Chairman of the Board
- ---------------------
Dennis F. Murphy, Jr.
President and Treasurer of D. Francis Murphy Insurance Agency, Inc.
Directors:
- ---------
Alfred A. Cardoza
Retired
Argeo R. Cellucci
President of Cellucci Hudson Corp.
Antonio Frias
President and Treasurer of S & F Concrete Contractors, Inc.
I. George Gould
Chairman of the Board of Gould's, Inc.
Horst Huehmer
Retired
Donald R. Hughes, Jr.
Treasurer and Clerk of Community Bancorp, Inc.,
Executive Vice President of Hudson National Bank
James A. Langway
President and Chief Executive Officer
of Community Bancorp, Inc. and Hudson National Bank
David L. Parker
Treasurer of Larkin Lumber Company
Mark Poplin
President and Treasurer of Poplin Supply Company
David W. Webster
President and Treasurer of Knight Fuel Company
Officers:
- --------
James A. Langway
President and Chief Executive Officer
Donald R. Hughes, Jr.
Treasurer and Clerk
HUDSON NATIONAL BANK
- --------------------
Officers
- --------
James A. Langway
President and Chief Executive Officer
Donald R. Hughes, Jr.
Executive Vice President
Robert P. Converse
Auditor
Compliance/Personnel
- --------------------
Grace L. Blunt, Esq.
Senior Vice President
Retail Banking/Mortgage Division
- --------------------------------
Richard K. Bennett
Senior Vice President
Nanci J. Pisani
Vice President
Ana M. Czapkowski
Assistant Vice President
Jane B. Karlson
Assistant Vice President
Elizabeth M. Brooks
Branch Officer
Kristen A. Cappello
Branch Officer
Lynda L. D'Orlando
Mortgage Officer
Clark Hooper
Security Officer
M. Jean Mickle
Branch Officer
Peter Shinas
Branch Officer
Kathleen E. Texeira
Merchant Plan Officer
Wayne J. Texeira
Marketing Officer
Financial Control
- -----------------
Robert E. Leist
Senior Vice President
Commercial Banking
- ------------------
John P. Galvani
Senior View President
Christal M. Davis
Vice President
Gregory Adams
Assistant Vice President
Brian M. McCann
Commercial Asset Officer
Operations/Data Processing and Electronic Banking
- -------------------------------------------------
Janet A. Lyman
Senior Vice President
Margaret M. Vasquezi
Assisant Vice President
James P. Vasquezi
Electronic Banking Officer
The Company's Securities and Exchange Commission filing on Form 10-K is
available to our stockholders upon request.
-28-
<PAGE>
[A photograph of former director Lloyd L. Parker appears on this inside
back cover with the following text.]
In Memory of
Lloyd L. Parker
1901 - 1996
<PAGE>
[The following text appears on the back cover.]
Community Bancorp, Inc.
Parent company of Hudson National Bank
17 Pope Street
Hudson, Massachusetts 01749
Telephone (508) 568-8321
Hudson National Bank - Branch Offices
- -------------------------------------
Hudson Main Office
17 Pope Street
Phone: (508) 568-8321
Fax: (508) 562-7129
Hudson South
177 Broad Street
Phone: (508) 568-8813
Fax: (508) 568-2610
Acton
270 Great Road
Phone: (508) 263-8376
Fax: (508) 266-2610
Concord
1134 Main Street
Phone: (508) 369-5421
Fax: (508) 371-6600
Shaw's Supermarket
Washington Street, Hudson
(Network 24 ATM only)
Marlborough Center
96 Bolton Street
Phone: (508) 485-5003
Fax: (508) 229-4602
Marlborough East
500 Boston Post Road
Phone: (508) 485-3599
Fax: (508) 229-4601
Boxborough
629 Massachusetts Avenue
Phone: (508) 264-9092
Fax: (508) 266-2600
Stow
159 Great Road
Phone: (508) 461-1600
Fax: (508) 461-1610
Internet web site:
http://www.hnbank.com
E-mail address:
[email protected]
Member FDIC
Equal Opportunity Lender
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
December 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> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 12668446
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 16700000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23790470
<INVESTMENTS-CARRYING> 50825359
<INVESTMENTS-MARKET> 50633376
<LOANS> 128072061
<ALLOWANCE> 3455098
<TOTAL-ASSETS> 237580796
<DEPOSITS> 207039865
<SHORT-TERM> 9289963
<LIABILITIES-OTHER> 1710295
<LONG-TERM> 0
0
0
<COMMON> 7998045
<OTHER-SE> 11542628
<TOTAL-LIABILITIES-AND-EQUITY> 237580796
<INTEREST-LOAN> 12363714
<INTEREST-INVEST> 4146933
<INTEREST-OTHER> 406977
<INTEREST-TOTAL> 16917624
<INTEREST-DEPOSIT> 5735554
<INTEREST-EXPENSE> 6284750
<INTEREST-INCOME-NET> 10632874
<LOAN-LOSSES> 120000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8273412
<INCOME-PRETAX> 4323426
<INCOME-PRE-EXTRAORDINARY> 4323426
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2643877
<EPS-PRIMARY> .840
<EPS-DILUTED> .840
<YIELD-ACTUAL> 5.24
<LOANS-NON> 1650345
<LOANS-PAST> 159922
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3703470
<CHARGE-OFFS> 629306
<RECOVERIES> 260934
<ALLOWANCE-CLOSE> 3455098
<ALLOWANCE-DOMESTIC> 1280824
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2174274
</TABLE>
