UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 2000
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 - (978)568-8321
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---- ----
Common Stock
$2.50 par value
5,914,441 shares outstanding
as of July 31, 2000
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
------------------------------
COMMUNITY BANCORP, INC.
Item 1. CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 21,989,623 $ 21,010,959
Federal funds sold 29,890,590 6,924,026
Securities available for sale, at market 42,006,397 41,808,065
Securities held to maturity (market value
$82,673,777 at 6/30/00 and $84,164,551
at 12/31/99) 84,640,048 86,225,017
Mortgage loans held for sale 1,189,024 332,686
Loans 168,530,362 164,360,466
Less allowance for possible loan losses 2,851,310 3,041,873
----------- -----------
Total net loans 166,868,076 161,318,593
----------- -----------
Premises and equipment, net 6,412,214 6,342,891
Other assets, net 4,326,041 4,034,338
----------- -----------
Total assets $356,132,989 $327,996,575
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest bearing $ 68,482,933 $ 68,082,062
Interest bearing 222,023,100 208,340,246
----------- -----------
Total deposits 290,506,033 276,422,308
----------- -----------
Federal funds purchased and securities
sold under repurchase agreements 34,400,399 21,766,424
Other liabilities 1,687,963 1,496,572
----------- -----------
Total liabilities 326,594,395 299,685,304
----------- -----------
Stockholders' equity:
Preferred stock, $2.50 par value, 100,000
shares authorized, none issued or outstanding
Common stock, $2.50 par value, 12,000,000
shares authorized, 6,398,436 shares issued,
5,914,441 shares outstanding, (5,921,824
shares outstanding at 12/31/99) 15,996,090 15,996,090
Surplus 101,378 0
Undivided profits 16,341,396 14,757,255
Treasury stock, at cost, 483,995 shares,
(476,612 shares at 12/31/99) (2,414,762) (2,217,972)
Accumulated other comprehensive loss (485,508) (224,102)
----------- -----------
Total stockholders' equity 29,538,594 28,311,271
----------- -----------
Total liabilities and
stockholders' equity $356,132,989 $327,996,575
=========== ===========
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
2000 1999 2000 1999
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $3,745,465 $3,423,430 $7,370,918 $6,673,397
Interest and div. on securities:
Taxable interest 1,711,829 1,472,064 3,460,199 3,038,840
Nontaxable interest 147,132 137,148 293,972 272,645
Dividends 20,709 16,474 41,338 35,600
Interest on federal funds sold 377,443 186,277 548,741 300,990
--------- --------- ---------- ----------
Total interest income 6,002,578 5,235,393 11,715,168 10,321,472
--------- --------- ---------- ----------
Interest expense:
Deposits 1,772,705 1,640,318 3,535,924 3,214,380
Short term borrowings 433,289 216,185 734,493 444,940
--------- --------- --------- ---------
Total interest expense 2,205,994 1,856,503 4,270,417 3,659,320
--------- --------- --------- ---------
Net interest income 3,796,584 3,378,890 7,444,751 6,662,152
--------- --------- --------- ---------
Provision for loan losses 0 0 0 0
--------- --------- ---------- ---------
Net interest income after
provision for loan losses 3,796,584 3,378,890 7,444,751 6,662,152
--------- --------- --------- ---------
Noninterest income:
Merchant credit card assessments 370,766 301,141 752,794 613,883
Service charges 155,311 153,364 311,303 298,704
Other charges, commissions, fees 273,910 282,010 530,344 580,142
Gains on sales of loans, net 27,090 10,386 46,234 49,767
Gains on sales of securities, net 0 0 0 0
Other 22,516 27,172 45,874 49,014
--------- --------- ---------- ---------
Total noninterest income 849,593 774,073 1,686,549 1,591,510
--------- --------- ---------- ---------
Noninterest expense:
Salaries and benefits 1,474,647 1,305,659 2,902,243 2,619,047
Data processing ATM network 260,321 248,700 524,400 481,525
Occupancy, net 196,892 210,736 385,317 386,788
Furniture and equipment 87,049 92,278 174,827 153,387
Credit card processing 342,149 285,515 665,096 554,040
Professional fees 101,695 90,430 188,772 175,167
Printing, stationery & supplies 67,742 68,094 126,122 132,797
Marketing and advertising 87,777 87,158 155,585 173,078
Other 310,464 263,363 624,750 544,022
--------- --------- --------- ---------
Total noninterest expense 2,928,736 2,651,933 5,747,112 5,219,851
--------- --------- --------- ---------
Income before income taxes 1,717,440 1,501,030 3,384,188 3,033,811
Income taxes 606,291 539,207 1,208,241 1,090,334
--------- --------- ---------- ---------
Net income $1,111,150 $ 961,823 $2,175,947 $1,943,477
========= ========= ========== =========
Earnings per common share $ .188 $ .163 $ .368 $ .330
Dividends per share $ .051 $ .045 $ .100 $ .088
Weighted average number of shares 5,904,574 5,904,996 5,911,002 5,897,130
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- -----------------------
2000 1999 2000 1999
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $1,111,150 $ 961,823 $2,175,947 $1,943,477
Other comprehensive income:
Unrealized securities gains
(losses) arising during period (90,541) (182,023) (442,536) (200,262)
Income tax (expense) benefit on
securities gains (losses)
arising during period 37,058 74,501 181,130 81,966
-------- -------- -------- --------
Net unrealized securities gains
(losses) arising during period (53,483) (107,522) (261,406) (118,296)
Less: reclassification
adjustment for securities
(gains) losses included in
income 0 0 0 0
Income tax expense (benefit) on
securities (gains) losses
included in income 0 0 0 0
-------- --------- ---------- ----------
Net reclassification adjustments
for securities (gains) losses
included in net income 0 0 0 0
--------- --------- ---------- ----------
Other comprehensive loss (53,483) (107,522) (261,406) (118,296)
--------- -------- ---------- ----------
Comprehensive income $1,057,667 $ 854,301 $1,914,541 $1,825,181
========= ======== ========= =========
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six months ended
June 30,
------------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,175,947 $ 1,943,477
Adjustments to reconcile net income
to net cash provided by operating
activities:
(Increase) decrease in mortgage loans held (856,338) 855,578
for sale
Premium on sale of mortgages 0 54,318
Depreciation and amortization 454,774 446,568
Increase in other liabilities 210,824 273,594
(Decrease) increase in taxes payable (27,235) 45,763
(Decrease) increase in interest payable (46,023) 103,937
(Increase) in other assets (5,171) (263,736)
(Increase) in interest receivable (115,762) (142,611)
---------- ----------
Total adjustments (384,931) 1,373,411
---------- ----------
Net cash provided by operating activities 1,791,016 3,316,888
---------- ----------
Cash flows from investing activities:
Maturities and principal repayments of
securities available for sale 3,395,643 6,766,150
Maturities and principal repayments of
securities held to maturity 5,665,081 16,413,116
Purchases of securities available for sale (4,036,512) (5,150,150)
Purchases of securities held to maturity (4,080,113) (16,391,119)
Net change in federal funds sold (22,966,564) 1,689,596
Net change in loans and other real estate
owned (4,316,624) (14,728,939)
Acquisition of property, plant and equipment (524,095) (1,031,840)
----------- -----------
Net cash used in investing activities (26,863,184) (12,433,186)
----------- -----------
Cash flows from financing activities:
Net change in deposits 14,083,725 6,598,373
Net change in federal funds purchased 0 0
Net change in repurchase agreements 12,633,975 2,650,793
Purchase of treasury stock (327,132) 0
Sale of treasury stock 231,720 261,744
Dividends paid (571,456) (506,480)
---------- ----------
Net cash provided by financing activities 26,050,832 9,004,430
---------- ----------
Net increase(decrease) in cash and due from banks 978,664 (111,868)
---------- ----------
Cash and due from banks at beginning
of period 21,010,959 17,601,043
---------- ----------
Cash and due from banks at end of period $21,989,623 $17,489,175
========== ==========
<FN>
See accompanying notes.
</TABLE>
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<PAGE>
COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
_________________________________________________________________________
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. The results of operations for
any interim period are not necessarily indicative of results expected for
the full year. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report to shareholders and Form 10-K for
the year ended December 31, 1999.
2. EARNINGS PER SHARE
The Company adopted Financial Accounting Standards Board Statement No. 128,
"Earnings Per Share" (SFAS No. 128), effective December 31, 1997. This
Statement requires the presentation of "basic" earnings per share, which
excludes the effect of dilution, and "diluted" earnings per share, which
includes the effect of dilution. The Company's "basic" and "diluted"
earnings per share computations are identical in the periods presented, as
there is no dilution effect. Earnings per share is based on the weighted
average number of shares outstanding during the period.
3. STOCK SPLIT
Effective April 28, 2000, the Company's Board of Directors approved a 2-
for-1 stock split of the company's common stock, par value $2.50, effected
in the form of a stock dividend. The accompanying consolidated financial
statements have been retroactively restated for all periods presented to
reflect the stock split.
4. COMPREHENSIVE INCOME
The Company adopted Financial Accounting Standards Board Statement No. 130,
"Reporting Comprehensive Income" (SFAS No. 130), effective January 1,
1998. Components of comprehensive income are net income and all other non-
owner changes in equity. The Statement requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in
the equity section of a statement of financial position. Reclassification
of financial statements for earlier periods provided for comparative
purposes is required. The Company has chosen to disclose comprehensive
income in the Consolidated Statements of Comprehensive Income.
-6-
<PAGE>
5. OPERATING SEGMENTS
The Company adopted Financial Accounting Standards Board Statement No. 131,
"Disclosures About Segments of an Enterprise and Related Information" (SFAS
No. 131), during 1998. SFAS No. 131 established standards for reporting
information about operating segments in annual financial statements and
requires selected information about operating segments in interim financial
reports issued to the stockholders. It also established standards for
related disclosures about products and services, and geographic areas.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by
the chief operating decision-maker, or decision making group, in deciding
how to allocate resources and in assessing performance.
The Company has one reportable segment: community banking. At present, the
Company conducts no activities independent of the Bank. 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
consumer, commercial, real estate and other loans. The Bank also offers
official checks, traveler's checks, safe deposit boxes, Internet banking and
bill payment services and other customary banking services to its customers.
6. RECLASSIFICATIONS
Certain amounts in the prior period's financial statements have been
reclassified to be consistent with the current period's presentation. The
reclassifications have no effect on net income.
-7-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Summary
The Company recorded net income of $2,175,947 for the six months ended June 30,
2000, representing an increase of $232,470 or 12.0% over $1,943,477 for the
same period in 1999. Earnings per share of $.368 for the current period
represented an increase of $.038 from $.330 for the six months ended June 30,
1999.
The improvement in net income resulted primarily from an increase in net
interest income and noninterest income, partially offset by increases in
salaries and benefits, data processing and ATM network, credit card processing,
and other expense.
Deposits of $290,506,033 at June 30, 2000 increased by $14,083,725 or 5.1% from
$276,422,308 at December 31, 1999. The increase in deposits occurred primarily
in the interest-bearing categories.
Loans of $168,530,362 at June 30, 2000 increased by $4,169,896 or 2.5% from
$164,360,466 at December 31, 1999. This increase took place in the commercial,
residential real estate, and instalment loan categories. Noncurrent loans
(nonaccrual loans and loans 90 days or more past due but still accruing)
totaled $713,791 and $684,649 at June 30, 2000 and December 31, 1999,
respectively. There was one troubled debt restructuring at June 30, 2000,
totaling $97,611. There were no troubled debt restructurings at December 31,
1999.
Assets of $356,132,989 at June 30, 2000 represented a $28,136,414 or 8.6%
increase from $327,996,575 at December 31, 1999.
Six months ended June 30, 2000 as Compared To
Six months ended June 30, 1999
---------------------------------------------
Net Interest Income
Interest income for the six months ended June 30, 2000 was $11,715,168,
representing an increase of $1,393,696 or 13.5% from $10,321,472 for the six
months ended June 30, 1999, primarily due to higher average loan and securities
balances and higher average interest rates in 2000. Interest expense was
$4,270,417, representing an increase of $611,097 or 16.7% from $3,659,320 for
the six months ended June 30, 1999, primarily due to higher average interest
bearing deposit and repurchase agreement balances and higher average interest
rates in 2000. Net interest income for the six months ended June 30, 2000 was
$7,444,751, representing an increase of $782,599 or 11.7% from $6,662,152 for
the six months ended June 30, 1999.
Noninterest Income and Expense
Noninterest income for the six months ended June 30, 2000 was $1,686,549,
representing an increase of $95,039 or 6.0% from $1,591,510 for the six months
ended June 30, 1999. This increase was primarily the result of increases in
merchant credit card assessments and service charges, partially offset by a
reduction in other charges, commissions and fees.
-8-
<PAGE>
Noninterest expense for the six months ended June 30, 2000 of $5,747,112 was up
$527,261 or 10.1% from $5,219,851 for the same period in 1999. This increase
was primarily the result of increases in salaries and employee benefits, data
processing and ATM network, furniture and equipment, credit card processing and
other expense, partially offset by a reduction in printing, stationary and
supplies and marketing and advertising expense. Most of the non-inflationary
increases in noninterest expense were the result of costs associated with the
operation of two new Community National Bank offices opened during the second
quarter of 1999, the establishment by the Bank of an investment management and
trust department in the second quarter of 2000, and the Bank's continued
investment in technology to enhance customer service and product delivery
systems.
Provision for Loan Losses
There was no provision for loan losses for the six months ended June 30, 2000
or 1999, reflecting management's continuing evaluation of the adequacy of the
allowance for loan losses and its belief that the allowance is adequate.
Income Taxes
Income tax expense of $1,208,241 for the six months ended June 30, 2000
compared to $1,090,334 for the same period in 1999. The increase was the
result of an increase in taxable income during the current period.
Net Income
Net income of $2,175,947 for the first six months of 2000 represented an
increase of $232,470 or 12.0% from $1,943,477 recorded for the first six months
of 1999. Earnings per share of $.368 for the current period represented an
increase of $.038 from $.330 for the six months ended June 30, 1999.
Three months ended June 30, 2000 as Compared To
Three months ended June 30, 1999
-----------------------------------------------
Net Interest Income
Interest income for the three months ended June 30, 2000 was $6,002,578,
representing an increase of $767,185 or 14.7% from $5,235,393 for the three
months ended June 30 1999, primarily due to higher average loan and securities
balances and higher average interest rates in 2000. Interest expense was
$2,205,994, representing an increase of $349,491 or 18.8% from $1,856,503 for
the three months ended June 30, 1999, primarily due to higher average interest
bearing deposit and repurchase agreement balances and higher average interest
rates in 2000. Net interest income for the three months ended June 30, 2000 was
$3,796,584, representing an increase of $417,694 or 12.4% from $3,378,890 for
the three months ended June 30, 1999.
Noninterest Income and Expense
Noninterest income for the three months ended June 30, 2000 was $849,593,
representing an increase of $75,520 or 9.8% from $774,073 for the three months
ended June 30, 1999. This increase was primarily the result of an increase in
merchant credit card assessments, and gains on sales of loans.
Noninterest expense for the three months ended June 30, 2000 of $2,928,736 was
up $276,803 or 10.4% from $2,651,933 for the corresponding period in 1999.
This increase was primarily the result of increases in salaries and benefits,
data processing and ATM, credit card processing and other expense, partially
offset by a decrease in occupancy expense. Most of the non-inflationary
-9-
<PAGE>
increases in non-interest expense were the result of costs associated with the
Bank's new Sudbury branch office which was opened in June of 1999, the
establishment by the Bank of an investment management and trust department in
the second quarter of 2000, and the Bank's continued investment in technology to
to enhance customer service and product delivery systems.
Provision for Loan Losses
There was no provision for loan losses for the three months ended June 30,
2000 or 1999, reflecting management's continuing evaluation of the adequacy of
the allowance for loan losses and its belief that the allowance is adequate.
Income Taxes
Income tax expense of $606,291 for the three months ended June 30, 2000
compared to $539,207 for the corresponding period in 1999.
Net Income
Net income of $1,111,150 for the three months ended June 30, 2000 represented
an increase of $149,327 or 15.5% from $961,823 recorded for the corresponding
period in 1999. Earnings per share of $.188 for the current period represented
an increase of $.025 from $.163 for the three months ended September 30, 1999.
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at a level believed by
management to be adequate to absorb inherent losses in the loan portfolio,
including commitments to extend credit (i.e. lines of credit). The allowance is
charged when management determines that the repayment of the principle on a
loan is in doubt. Subsequent recoveries, if any, are credited to the
allowance. The allowance is maintained at an adequate level through the
provision for possible loan losses, which is a charge to operating income. At
June 30, 2000 the allowance was $2,851,310 representing 1.7% of total loans,
compared to $3,041,873, representing 1.9% of total loans at December 31, 1999.
The potential for loss in the loan portfolio reflects the risks and
uncertainties inherent in the extension of credit. The determination of the
adequacy of the allowance for possible loan losses is based upon management's
assessment of risk elements in the portfolio, factors affecting loan quality
and assumptions about the economic environment in which the Company operates.
Included in this assessment are 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 and risk
characteristics of the loan portfolio. The assessment process includes the
identification and analysis of loss potential in various portfolio segments
utilizing a credit risk-rating system and specific reviews and evaluations of
significant problem credits. In addition, management reviews overall portfolio
quality through an analysis of current levels and trends in charge-off,
delinquency and non-accrual loan data, economic forecasts and the overall
prevailing banking environment. These reviews are of necessity dependent upon
estimates, appraisals and judgements which may change quickly due to changes in
economic conditions and the Company's perception of how these factors may
affect the financial condition of it's borrowers.
-10-
<PAGE>
The methodology for assessing the adequacy of the overall allowance consists of
an evaluation of its three key components:
* The general allowance for the various loan portfolio classifications
* The valuation allowance for loans specifically identified as impaired
* The unallocated allowance
The general allowance is a percentage-based reflection of historical loss
experience and estimates inherent future losses within the loan portfolio. The
general allowance employs a risk-rating model that grades loans based on their
general characteristics of credit quality and relative risk. It is calculated
by applying various fixed percentages against the total of all commitments to
extend credit. Under this formula, the risk rating of a loan demonstrating
deteriorating credit quality is downgraded, the loan is placed on the Company's
internal "Watch List" and its allowance allocation is increased. For the
remainder of the loan portfolio, appropriate allowance levels are estimated
based on judgements regarding the type of loan, economic conditions and trends,
potential exposure to loss and other factors.
The valuation allowance reflects specific estimates of potential losses on
individual impaired loans. Such loans are evaluated for potential loss by
calculating the net present value of the expected future cash flows using the
loan's original effective interest rate, or estimating the fair value of the
collateral if the loan is collateral-dependent. When the difference between the
net present value of a loan (or the fair value of the collateral) is lower than
the recorded loan balance, the difference represents the valuation allowance
for that loan.
In addition to the general allowance and the valuation allowance, there is an
unallocated allowance that recognizes the estimation risks associated with the
general and the valuation allowance calculations, and that reflects
management's evaluation of various conditions, the effect of which are not
directly measurable in determining the general and valuation allowances. The
estimation of the inherent losses resulting from these conditions involves a
higher degree of uncertainty because they are not identified with any specific
loans or portfolio segments. The conditions evaluated in connection with
determining the unallocated allowance include the following:
* Current general economic and business conditions affecting the
Company's lending area
* Recent trends in collateral values
* Loan portfolio growth
* Changes in loan portfolio concentrations
* General seasoning of the loan portfolio
* Changes in specific industry conditions within the portfolio segments
* Recent loss experience in particular segments of the portfolio
* Duration of the current business cycle
* Results of the Company's independent credit reviews
* Results of regulatory examinations
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<PAGE>
When an evaluation of these conditions signifies a change in the level of
inherent portfolio risk, the Company may adjust the unallocated allowance to
reflect that change.
Periodic credit reviews are conducted to enable the Company to adjust the
general allowance through the loan risk-rating process, and to identify loans
requiring a specific valuation allowance. During the second quarter of 2000
there were no significant changes in loan concentrations, loan quality or loan
terms. Estimation methods and assumptions affecting the allowance remained
unchanged from those used in prior years. There was no significant reallocation
of the allowance among the various segments of the portfolio.
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 various municipalities. Those assets are used in part to
secure public deposits and as collateral for repurchase agreements. Total
secuities were $126,646,445 at June 30, 2000, representing a decrease of
$1,386,637 or 1.08% from $128,033,082 at December 31, 1999. Securities
classified as available for sale were $42,006,397 and $41,808,065 at June 30,
2000 and December 31, 1999 respectively. There were no sales of securities
during the six months ended June 30, 2000.
Liquidity and Capital Resources
The Company's primary sources of liquidity are customer deposits, amortization
and pay-offs of loan principal and maturities of investment securities. These
sources provide funds for loan originations, the purchase of investment
securities and other activities. Deposits are considered a relatively stable
source of funds. At June 30, 2000 and 1999, deposits were $290.5 and $261.0
million, respectively. Management anticipates that deposits will grow
moderately during the remainder of 2000.
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 4.00% ratio of Tier 1 capital to assets now
constitutes the minimum capital standard for most banking organizations. At
June 30, 2000, the Company's Tier 1 leverage capital ratio was 8.43%.
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
June 30, 2000 the Company's Tier 1 and total risk-based capital ratios were
15.61% and 16.86%, respectively. The Bank is categorized as "well
capitalized" under the Federal Deposit Insurance Corporation Improvement Act
of 1991 (F.D.I.C.I.A.).
Effective April 28, 2000, the Company's Board of Directors approved a 2-for-1
stock split of the company's common stock, par value $2.50, effected in the
form of a stock dividend. The accompanying consolidated financial statements
have been retroactively restated for all periods presented to reflect the
stock split.
-12-
<PAGE>
On June 20, 2000, the Company's Board of Directors declared a second quarter
2000 cash dividend of $.051 per share of common stock to shareholders of record
at June 1, 2000, payable on July 14, 2000.
Asset/Liability Management
The Company has an asset/liability management committee which oversees all
asset/liability activities of the Company. The committee establishes general
guidelines each year and meets regularly to review the Company's operating
results and to make strategic changes when necessary.
It is the Company's general policy to reasonably match the rate sensitivity of
its assets and liabilities. A common benchmark of this sensitivity is the one
year gap position, which is a reflection of the difference between the speed
and magnitude of rate changes of interest rate sensitive liabilities as
compared with the Bank's ability to adjust the rates of it's interest rate
sensitive assets in response to such changes. The Company's negative one-year
cumulative gap position at June 30, 2000, representing the excess of repricing
liabilities versus repricing assets within a one year time frame, was 7.2%
expressed as a percentage of total assets.
Cautionary Statement Regarding Forward-Looking Information
This Quarterly Report on Form 10-Q, including Management's Discussion and
Analysis of Financial Condition and Results of Operations, contains, in
addition to historical information, "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995. When used in this
and other Reports filed by the Company, the words "anticipate", "estimate",
"expect", "objective", and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are subject to
a variety of risks and uncertainties. In addition to any assumptions and other
factors referred to specifically in connection with such forward-looking
statements, risk factors that could cause the Company's actual results to
differ materially from those contemplated in any forward-looking statement
include, but are not limited to, changes in political and economic
conditions, interest rate fluctuations, competitive product and pricing
pressures, adverse changes in asset quality, increased inflation, risks
related to Year 2000 issues (particularly with respect to compliance by third
parties on which the Company relies), and adverse legislative or regulatory
changes.
Year 2000
The following Year 2000 statements constitute a Year 2000 Readiness Disclosure
within the meaning of the Year 2000 Information and Readiness Disclosure Act of
1998.
As of June 30, 2000, the Company has experienced no Year 2000 related problems.
All mission-critical and non-mission critical systems are performing correctly.
The Company is aware of no credit problems on the part of its borrowers, no
deposit balance reductions, and no disruptions of utility or other third-party
services related to the Year 2000 issue, and the Company has experienced no
Year 2000 related loss of revenue.
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<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders was held on April 11, 2000. At
that meeting, two (2) matters were put before the shareholders for
vote. Proxies for the meeting were solicited, and a copy of the Proxy
Statement dated March 21, 2000 is incorporated herein by reference and
attached hereto as an exhibit. Such Proxy Statement provides a
description of the matters put before the shareholders for vote and
provides other information required under this Item 4.
The results of the voting were as follows:
1. To fix the number of Directors who shall constitute the full Board
of Directors at eleven.
Votes for: 2,339,501
Votes against: 7,294
2. To elect as Directors the three individuals listed as nominees in
the Proxy Statement, who, together with the seven Directors whose
terms of office did not expire at this meeting, constitute the full
Board of Directors.
Director Votes For Votes Against
-------- --------- -------------
Alfred A. Cardoza 2,335,263 11,532
Jennie Lee Colosi 2,335,263 11,532
Antonio Frias 2,335,263 11,532
Dennis F. Murphy, Jr. 2,335,263 11,532
Item 5. OTHER INFORMATION
Effective April 28, 2000, the Company's Board of Directors approved a for-1
stock split of the Company's common stock, par value $2.50, effected in the
form of a stock dividend.
On June 20, 2000, the Company's Board of Directors declared a second quarter
2000 cash dividend of $.051 per share of common stock to shareholders of record
at June 1, 2000, payable on July 14, 2000.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Article 9 - Financial Data Schedule for the six months
ended June 30, 2000
99 Proxy Statement dated March 21, 2000
(b) The Company did not file a Form 8-K during the quarter ended June
30, 2000.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY BANCORP, INC.
-----------------------
Date: July 31, 2000 By: /s/ James A. Langway
--------------------------
James A. Langway
President & Chief Executive Officer
Principal Executive Officer
Date: July 31, 2000 By: /s/ Donald R. Hughes, Jr.
--------------------------
Donald R. Hughes, Jr.
Treasurer and Clerk,
Principal Financial Officer and
Principal Accounting Officer
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<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
27 Article 9 - Financial Data Schedule for the six months
ended June 30, 2000
99 Proxy Statement dated March 21, 2000
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<PAGE>
