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 SEPTEMBER 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 October 31, 2000
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
------------------------------
COMMUNITY BANCORP, INC.
Item 1. CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, December 31,
2000 1999
------------ -----------
<S> <C> <C>
ASSETS
Cash and due from banks $ 13,973,265 $ 21,010,959
Federal funds sold 43,648,334 6,924,026
Securities available for sale, at market 50,052,557 41,808,065
Securities held to maturity (market value
$80,051,955 at 9/30/00 and $84,164,551
at 12/31/99) 81,303,607 86,225,017
Mortgage loans held for sale 542,585 332,686
Loans 174,611,096 164,360,466
Less allowance for possible loan losses 2,921,459 3,041,873
----------- -----------
Total net loans 171,689,637 161,318,593
----------- -----------
Premises and equipment, net 6,269,151 6,342,891
Other assets, net 5,015,959 4,034,338
----------- -----------
Total assets $372,495,095 $327,996,575
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest bearing $ 69,984,367 $ 68,082,062
Interest bearing 239,519,249 208,340,246
----------- -----------
Total deposits 309,503,616 276,422,308
----------- -----------
Federal funds purchased and securities
sold under repurchase agreements 30,199,671 21,766,424
Other liabilities 2,251,275 1,496,572
----------- -----------
Total liabilities 341,954,562 299,685,304
----------- -----------
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 17,215,152 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 (357,325) (224,102)
----------- -----------
Total stockholders' equity 30,540,533 28,311,271
Total liabilities and ----------- -----------
stockholders' equity $372,495,095 $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 Nine months ended
September 30, September 30,
-------------------- ---------------------
2000 1999 2000 1999
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $4,006,894 $3,534,547 $11,377,812$10,207,944
Interest and div. on securities:
Taxable interest 1,769,880 1,650,568 5,230,079 4,689,408
Nontaxable interest 148,701 141,779 442,673 414,424
Dividends 22,741 19,489 64,079 55,089
Interest on federal funds sold 538,837 227,696 1,087,578 528,686
--------- --------- ---------- ----------
Total interest income 6,487,053 5,574,079 18,202,221 15,895,551
--------- --------- ---------- ----------
Interest expense:
Deposits 1,994,128 1,772,584 5,530,052 4,986,964
Short term borrowings 465,709 237,514 1,200,202 682,454
--------- --------- --------- ---------
Total interest expense 2,459,837 2,010,098 6,730,254 5,669,418
--------- --------- --------- ---------
Net interest income 4,027,216 3,563,981 11,471,967 10,226,133
--------- --------- ---------- ----------
Provision for loan losses 0 0 0 0
Net interest income after --------- --------- ---------- ----------
provision for loan losses 4,027,216 3,563,981 11,471,967 10,226,133
--------- --------- ---------- ----------
Noninterest income:
Merchant credit card assessments 381,757 310,905 1,134,551 924,788
Service charges 167,858 143,684 479,161 442,388
Other charges, commissions, fees 263,392 300,782 793,736 880,924
Gains on sales of loans, net 19,962 5,938 66,196 55,705
Gains on sales of securities, net 0 0 0 0
Other 22,978 17,394 68,852 66,408
--------- --------- ---------- ----------
Total noninterest income 855,947 778,703 2,542,496 2,370,213
--------- --------- ---------- ----------
Noninterest expense:
Salaries and benefits 1,556,912 1,410,644 4,459,155 4,029,691
Data processing and ATM network 287,446 253,085 811,846 734,610
Occupancy, net 215,405 179,039 600,722 565,827
Furniture and equipment 96,431 101,703 295,247 275,306
Credit card processing 340,904 330,735 1,006,000 884,775
Professional fees 108,020 104,730 296,792 279,897
Printing, stationery & supplies 54,695 71,026 180,817 203,823
Marketing and advertising 56,537 57,974 212,122 231,052
Other 316,642 265,091 917,403 788,897
--------- --------- ---------- ----------
Total noninterest expense 3,032,992 2,774,027 8,780,104 7,993,878
--------- --------- ---------- ----------
Income before income taxes 1,850,171 1,568,657 5,234,359 4,602,468
Income taxes 662,949 552,598 1,871,190 1,642,932
--------- --------- ---------- ----------
Net income $1,187,222 $1,016,059 $3,363,169 $2,959,536
========= ========= ========== ==========
Earnings per common share $ .201 $ .172 $ .569 $ .501
Dividends per share $ .053 $ .046 $ .153 $ .134
Weighted average number of shares 5,914,441 5,921,894 5,912,157 5,905,476
<FN>
See accompanying notes.
</TABLE>
-3-
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<TABLE>
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- ----------------------
2000 1999 2000 1999
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net income $1,187,222 $1,016,05 $3,363,169 $2,959,536
Other comprehensive income:
Unrealized securities gains
(losses) arising during period 217,003 31,029 (225,234) (169,235)
Income tax (expense) benefit on
securities gains (losses)
arising during period (88,820) (12,700) 92,011 69,268
---------- --------- ---------- ---------
Net unrealized securities gains
(losses) arising during period 128,183 18,329 (133,223) (99,967)
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 income (loss) 128,183 18,329 (133,223) (99,967)
--------- --------- --------- ---------
Comprehensive income $1,315,405 $1,034,388 $3,229,946 $2,859,569
========= ========= ========= =========
<FN>
See accompanying notes.
</TABLE>
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<TABLE>
COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine months ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,363,169 $ 2,959,536
Adjustments to reconcile net income
to net cash provided by operating
activities:
(Increase) decrease in mortgage loans held (209,899) 1,225,023
for sale
Premium on sale of mortgages 0 59,938
Depreciation and amortization 700,471 677,075
Increase in other liabilities 585,962 302,478
Increase in taxes payable 92,707 121,373
Increase in interest payable 14,023 95,112
(Increase) in other assets (731,952) (129,783)
(Increase) in interest receivable (167,717) (279,359)
---------- ----------
Total adjustments 283,595 2,071,857
---------- ----------
Net cash provided by operating activities 3,646,764 5,031,393
---------- ----------
Cash flows from investing activities:
Maturities and principal repayments of
securities available for sale 4,689,753 9,652,800
Maturities and principal repayments of
securities held to maturity 10,285,874 19,708,408
Purchases of securities available for sale (13,160,212) (14,035,128)
Purchases of securities held to maturity (5,364,030) (21,391,119)
Net change in federal funds sold (36,724,309) 6,223,377
Net change in loans and other real estate
owned (10,330,854) (20,399,259)
Acquisition of property, plant and equipment (626,731) (1,189,916)
---------- -----------
Net cash used in investing activities (51,230,509) (21,430,837)
---------- -----------
Cash flows from financing activities:
Net change in deposits 33,081,308 22,946,641
Net change in federal funds purchased 0 0
Net change in repurchase agreements 8,433,247 3,894,236
Purchase of treasury stock (327,132) 0
Sale of treasury stock 231,720 261,744
Dividends paid (873,092) (770,004)
---------- ----------
Net cash provided by financing activities 40,546,051 18,544,145
---------- ----------
Net (decrease)increase in cash and due from banks(7,037,694) 2,144,701
---------- ----------
Cash and due from banks at beginning
of period 21,010,959 17,601,043
---------- ----------
Cash and due from banks at end of period $13,973,265 $19,745,744
---------- ----------
<FN>
See accompanying notes.
</TABLE>
-5-
<PAGE>
COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 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 $3,363,169 for the nine months ended
September 30,2000, representing an increase of $403,633 or 13.6% over
$2,959,536 for the same period in 1999. Earnings per share of $.569 for the
current period represented an increase of $.068 from $.501 for the nine months
ended September 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, occupancy, credit card
processing, and other expense.
Deposits of $309,503,616 at September 30, 2000 increased by $33,081,308 or
12.0% from $276,422,308 at December 31, 1999. The increase in deposits
occurred primarily in the interest-bearing categories.
Loans of $174,611,096 at September 30, 2000 increased by $10,250,630 or 6.2%
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, troubled debt restructurings and loans 90
days or more past due but still accruing) totaled $711,269 and $684,649 at
September 30, 2000 and December 31, 1999, respectively.
Assets of $372,495,095 at September 30, 2000 represented a $44,498,520 or
13.6% increase from $327,996,575 at December 31, 1999.
Nine months ended September 30, 2000 as Compared To
Nine months ended September 30, 1999
------------------------------------
Net Interest Income
-------------------
Interest income for the nine months ended September 30, 2000 was $18,202,221,
representing an increase of $2,306,670 or 14.5% from $15,895,551 for the nine
months ended September 30, 1999, primarily due to higher average loan, federal
funds sold, and securities balances and higher average interest rates in 2000.
Interest expense was $6,730,254 representing an increase of $1,060,836 or
18.7% from $5,669,418 for the nine months ended September 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 nine months ended September 30, 2000 was $11,471,967 representing an
increase of $1,245,834 or 12.2% from $10,226,133 for the nine months ended
September 30, 1999.
Noninterest Income and Expense
------------------------------
Noninterest income for the nine months ended September 30, 2000 was $2,542,496
representing an increase of $172,283 or 7.3% from $2,370,213 for the nine
months ended September 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 nine months ended September 30, 2000 of $8,780,104
was up $786,226 or 9.8% from $7,993,878 for the same period in 1999. This
increase was primarily the result of increases in salaries and employee
benefits, data processing and ATM network, occupancy, 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 nine months ended September 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 $1,871,190 for the nine months ended September 30, 2000
compared to $1,642,932 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 $3,363,169 for the first nine months of 2000 represented an
increase of $403,633 or 13.6% from $2,959,536 recorded for the first nine
months of 1999. Earnings per share of $.569 for the current period
represented an increase of $.068 from $.501 for the nine months ended
September 30, 1999.
Three months ended September 30, 2000 as Compared To
Three months ended September 30, 1999
-------------------------------------
Net Interest Income
-------------------
Interest income for the three months ended September 30, 2000 was $6,487,053,
representing an increase of $912,974 or 16.4% from $5,574,079 for the three
months ended September 30, 1999, primarily due to higher average loan, federal
funds sold and securities balances and higher average interest rates in 2000.
Interest expense was $2,459,837, representing an increase of $449,739 or 22.4%
from $2,010,098 for the three months ended September 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 September 30, 2000 was $4,027,216, representing an increase of
$463,235 or 13.0% from $3,563,981 for the three months ended September 30,
1999.
Noninterest Income and Expense
------------------------------
Noninterest income for the three months ended September 30, 2000 was $855,947,
representing an increase of $77,244 or 9.9% from $778,703 for the three months
ended September 30, 1999. This increase was primarily the result of an
increase in merchant credit card assessments, service charges and gains on
sales of loans, partially offset by a decrease in other charges, commissions
and fees.
Noninterest expense for the three months ended September 30, 2000 of
$3,032,992 was up $258,965 or 9.3% from $2,774,027 for the corresponding
-9-
<PAGE>
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 furniture and equipment and
printing, stationary and supplies expense. Most of the non-inflationary
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 enhance customer service and product delivery systems.
Provision for Loan Losses
-------------------------
There was no provision for loan losses for the three months ended September 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 $662,949 for the three months ended September 30, 2000
compared to $552,598 for the corresponding period in 1999.The increase was the
result of an increase in taxable income during the current period.
Net Income
----------
Net income of $1,187,222 for the three months ended September 30, 2000
represented an increase of $171,163 or 16.8% from $1,016,059 recorded for the
corresponding period in 1999. Earnings per share of $.201 for the current
period represented an increase of $.029 from $.172 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 September 30,
2000 the allowance was $2,921,459 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
-10-
<PAGE>
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.
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
-11-
<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
securities were $131,356,164 at September 30, 2000, representing an increase
of $3,323,082 or 2.6% from $128,033,082 at December 31, 1999. Securities
classified as available for sale were $50,052,557 and $41,808,065 at September
30, 2000 and December 31, 1999 respectively. There were no sales of securities
during the nine months ended September 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 September 30, 2000 and 1999, deposits were $309.5 and
$277.4 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
September 30, 2000, the Company's Tier 1 leverage capital ratio was 8.29%.
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
September 30, 2000 the Company's Tier 1 and total risk-based capital ratios
were 15.58% and 16.83%, 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 September 20, 2000, the Company's Board of Directors declared a third
quarter 2000 cash dividend of $.053 per share of common stock to shareholders
of record at September 1, 2000, payable on October 13, 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 September 30, 2000, representing the excess of
repricing liabilities versus repricing assets within a one year time frame,
was 2.7% 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 September 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 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 September 20, 2000, the Company's Board of Directors declared a second
quarter 2000 cash dividend of $.053 per share of common stock to shareholders
of record at September 1, 2000, payable on October 13, 2000.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Article 9 - Financial Data Schedule for the nine months
ended September 30, 2000
(b) The Company did not file a Form 8-K during the quarter ended September
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: October 31, 2000 By: /s/ James A. Langway
---------------------
James A. Langway
President & Chief Executive Officer
Principal Executive Officer
Date: October 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 nine months
ended September 30, 2000
-16-
<PAGE>
