-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S7XQCKhx9zwIbXaMOo4fccqFWiC/DdiQbWXCEqCGihPuJCxCZy7LUkyM1WsKj97f EzaKZcQvO2PLthPLfsMlJg== 0000742170-98-000012.txt : 19980430 0000742170-98-000012.hdr.sgml : 19980430 ACCESSION NUMBER: 0000742170-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980429 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNITY BANCORP INC /MA/ CENTRAL INDEX KEY: 0000742170 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 042841993 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-12756-B FILM NUMBER: 98603928 BUSINESS ADDRESS: STREET 1: 17 POPE ST CITY: HUDSON STATE: MA ZIP: 01749 BUSINESS PHONE: 5085688321 MAIL ADDRESS: STREET 1: 17 POPE STREET CITY: HUDSON STATE: MA ZIP: 01749 10-Q 1 FORM 10-Q FOR 03-31-98 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED MARCH 31, 1998 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 2,926,257 shares outstanding as of April 20, 1998 PART I - FINANCIAL INFORMATION COMMUNITY BANCORP, INC. Item 1. CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1998 1997 ------------ ------------ ASSETS Cash and due from banks $ 19,249,253 $ 16,704,667 Federal funds sold 15,600,000 14,600,000 Securities available for sale, at market 36,778,085 38,880,166 Securities held to maturity (market value $61,189,616 at 3/31/98 and $56,404,323 at 12/31/97) 60,971,501 56,304,224 Mortgage loans held for sale 2,520,950 2,173,322 Loans 139,780,721 139,839,853 Less allowance for possible loan losses 3,125,737 3,215,559 ----------- ----------- Total net loans 136,654,984 136,624,294 Premises and equipment, net 4,792,811 4,637,965 Other assets, net 3,568,148 3,625,889 ----------- ----------- Total assets $280,135,732 $273,550,527 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits Noninterest bearing $ 55,347,512 $ 55,678,794 Interest bearing 181,060,875 177,109,740 ----------- ----------- Total deposits 236,408,387 232,788,534 Federal funds purchased and securities sold under repurchase agreements 18,644,939 16,637,064 Other liabilities 1,945,621 1,688,830 ----------- ----------- Total liabilities 256,998,947 251,114,428 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, 3,199,218 shares issued, 2,926,257 shares outstanding 7,998,045 7,998,045 Surplus 414,120 414,120 Undivided profits 17,114,064 16,418,790 Treasury stock, at cost, 272,961 shares (2,529,552) (2,529,552) Accumulated other comprehensive income 140,108 134,696 ----------- ----------- Total stockholders' equity 23,136,785 22,436,099 ----------- ----------- Total liabilities and stockholders' equity $280,135,732 $273,550,527 =========== =========== See accompanying notes.
-2- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, -------------------------- 1998 1997 ---------- ---------- Interest income: Interest and fees on loans $3,346,892 $3,095,446 Interest and dividends on securities: Taxable interest 1,277,759 1,299,399 Nontaxable interest 94,967 62,999 Dividends 16,670 15,077 Interest on federal funds sold 184,891 86,512 --------- --------- Total interest income 4,921,179 4,559,433 --------- --------- Interest expense: Interest on deposits 1,609,620 1,473,902 Interest on short term borrowings 196,154 165,332 --------- --------- Total interest expense 1,805,774 1,639,234 --------- --------- Net interest income 3,115,405 2,920,199 --------- --------- Provision for possible loan losses 0 0 --------- --------- Net interest income after provision for possible loan losses 3,115,405 2,920,199 --------- --------- Noninterest income: Merchant credit card assessments 304,205 248,786 Service charges 148,178 154,029 Other charges, commissions and fees 267,187 192,499 Gains on sales of loans, net 42,728 2,585 Losses on sales of securities 0 (12,876) Other 20,303 33,557 --------- --------- Total noninterest income 782,601 618,580 --------- --------- Noninterest expense: Salaries and employee benefits 1,261,079 1,189,385 Data processing 148,657 143,779 Occupancy, net 144,565 132,748 Furniture and equipment 116,987 100,371 Credit card processing 242,906 200,558 Other 522,935 515,630 --------- --------- Total noninterest expense 2,437,129 2,282,471 --------- --------- Income before income taxes 1,460,877 1,256,308 Income taxes 540,281 480,493 --------- --------- Net income $ 920,596 $ 775,815 ========= ========= Earnings per common share $ .315 $ .264 Dividends per share $ .077 $ .068 Weighted average number of shares 2,926,257 2,935,012 See accompanying notes.
-3- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended March 31, ------------------------- 1998 1997 ---------- ---------- Net income $ 920,596 $ 775,815 Other comprehensive income, net of tax: Unrealized holding gains (losses) arising during period 5,412 (40,036) Less: reclassification adjustment for (gains) losses included in net income 0 12,876 ------- ------- Other comprehensive income 5,412 (27,160) ------- ------- Comprehensive income $ 926,008 $ 748,655 ======= ======= See accompanying notes.
-4- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, -------------------------- 1998 1997 ----------- ----------- Cash flows from operating activities: Interest received $ 4,896,060 $ 4,433,932 Fees and commissions received 799,578 489,461 Proceeds from secondary market mortgage sales 8,396,452 1,812,922 Origination of mortgage loans for secondary market sales (11,616,847) (1,678,195) Interest paid (1,817,377) (1,694,698) Cash paid to suppliers & employees (2,268,613) (1,926,262) Income taxes paid (253,979) (239,090) ---------- ---------- Net cash (used in) provided by operating activities (1,864,726) 1,198,070 ---------- ---------- Cash flows from investing activities: Maturities and principal repayments of securities available for sale 2,196,057 1,590,025 Maturities and principal repayments of securities held to maturity 9,163,728 2,204,368 Sales of securities available for sale 0 2,004,596 Purchases of securities available for sale (84,600) (9,079,375) Purchases of securities held to maturity (13,831,005) (2,913,032) Net change in federal funds sold (1,000,000) 6,800,000 Net change in loans and other real estate owned 2,917,016 (305,683) Acquisition of property, plant and equipment (360,142) (245,425) ---------- ---------- Net cash (used in) provided by investing activities (998,946) 55,474 ---------- ---------- Cash flows from financing activities: Net change in deposits 3,619,853 (1,503,084) Net change in federal funds purchased (3,000,000) 0 Net change in repurchase agreements 5,007,874 1,618,146 Dividends paid (219,469) (193,710) ---------- ---------- Net cash provided by (used in) financing activities 5,408,258 (78,648) ---------- ---------- Net increase in cash and due from banks 2,544,586 1,174,896 Cash and due from banks at beginning of period 16,704,667 14,391,567 ---------- ---------- Cash and due from banks at end of period $19,249,253 $15,566,463 ========== ========== See accompanying notes.
-5- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Reconciliation of Net Income to Net Cash Provided by Operating Activities
Three months ended March 31, -------------------------- 1998 1997 ----------- ----------- Net income $ 920,596 $ 755,815 Adjustments to reconcile net income to net cash provided by operating activities: (Increase) decrease in mortgage loans held for sale (3,286,282) 98,303 Premium on sale of mortgages 65,887 36,424 Depreciation and amortization 205,297 197,140 (Decrease) increase in other liabilities (36,776) 159,073 Increase in taxes payable 286,302 241,403 (Decrease) in interest payable (11,603) (55,464) Decrease (increase) in other assets 16,973 (129,122) (Increase) in interest receivable (25,120) (125,502) --------- --------- Total adjustments (2,785,322) 422,255 --------- --------- Net cash (used in) provided by operating activities $(1,864,726) $ 1,198,070 ========= ========= See accompanying notes.
-6- COMMUNITY BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 __________________________________________________________________________ 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, 1997. 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. COMPREHENSIVE INCOME The Company adopted Financial Accounting Standards Board Statement No. 130, "Reporting Comprehensive Income" (SFAS No. 130), effective January 1, 1998. SFAS No. 130 establishes standards for reporting comprehensive income and its components (revenues, expenses, gains and losses). 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 a separate income statement, in which the components of comprehensive income are -7- displayed net of income taxes. The following table sets forth the related tax effects allocated to each element of comprehensive income for the three months ended March 31, 1998 and 1997:
Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during period $ 9,379 $ (3,967) $ 5,412 Less: reclassification adjustment for (gains) losses realized in net income 0 0 0 ------ ------ ------ Net unrealized gains (losses) 9,379 (3,967) 5,412 ------ ------ ------ Other comprehensive income $ 9,379 $ (3,967) $ 5,412 ====== ====== ======
Three months ended March 31, 1997 --------------------------------------- Tax Before-Tax (Expense) Net-of-Tax Amount or Benefit Amount ----------- ----------- ---------- Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during period $ (59,948) $ 25,358 $ (34,590) Less: reclassification adjustment for (gains) losses realized in net income 12,876 (5,446) 7,430 ------ ------ ------ Net unrealized gains (losses) (47,072) 19,912 (27,160) ------ ------ ------ Other comprehensive income $ (47,072) $ 19,912 $ (27,160) ====== ====== ======
The following table sets forth the components of accumulated other comprehensive income for the three months ended March 31, 1998 and 1997:
Three months ended March 31, -------------------------- 1998 1997 ---------- ---------- Beginning balance $ 134,696 $ (10,030) Unrealized gains (losses) on securities, net 5,412 (27,160) ------- ------- Ending balance $ 140,108 $ (37,190) ======= =======
4. OPERATING SEGMENTS The Company adopted Financial Accounting Standards Board Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information", (SFAS No. 131), effective January 1, 1998. This Statement establishes standards for reporting information about -8- segments in annual and interim financial statements. SFAS No. 131 introduces a new model for segment reporting called the "management approach". The management approach is based on the way the chief operating decision-maker organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure and any other in which management disaggregates a company. Based on the "management approach" model, the Company has determined that its business is comprised of a single operating segment and that SFAS No. 131 therefore has no impact on its financial statements. 5. 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. -9- 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 $920,596 for the three months ended March 31, 1998, representing an increase of $144,781 or 18.7% over $775,815 for the same period in 1997. Earnings per share of $.315 for the current period represented an increase of $.051 from $.264 for the three months ended March 31, 1997. 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, occupancy, furniture and equipment and credit card processing. Deposits of $236,408,387 at March 31, 1998 increased by $3,619,853 or 1.6% from $232,788,534 at December 31, 1997. The increase in deposits occurred in the interest bearing categories of money market deposit accounts, NOW accounts, savings accounts and certificates of deposit. Loans of $139,780,721 at March 31, 1998 did not change significantly from $139,839,853 at December 31, 1997. A slight increase was realized in home equity loans while slight decreases were experienced in commercial loans, residential real estate mortgages and installment loans. Noncurrent loans (nonaccrual loans and loans 90 days or more past due but still accruing) totaled $906,332 and $871,619 at March 31, 1998 and December 31, 1997, respectively. There were no accruing troubled debt restructurings at March 31, 1998 or December 31, 1997. Assets of $280,135,732 at March 31, 1998 represented a $6,585,205 or 2.4% increase from $273,550,527 at December 31, 1997. Three months ended March 31, 1998 as Compared To Three months ended March 31, 1997 ------------------------------------------------ NET INTEREST INCOME Interest income for the three months ended March 31, 1998 was $4,921,179, representing an increase of $361,746 or 7.9% from $4,559,433 for the three months ended March 31, 1997, primarily due to higher loan and securities balances in 1998. Interest expense was $1,805,774, representing an increase of $166,540 or 10.2% from $1,639,234 for the three months ended March 31, 1997, primarily due to higher average interest bearing deposit and repurchase agreement balances in 1998. Net interest income for the three months ended March 31, 1998 was $3,115,405, representing an increase of $195,206 or 6.7% from $2,920,199 for the three months ended March 31, 1997. NONINTEREST INCOME AND EXPENSE Noninterest income for the three months ended March 31, 1998 was $782,601, representing an increase of $164,021 or 26.5% from $618,580 for the three months ended March 31, 1997. This increase was primarily the result of increases in merchant credit card assessments, gains on sales of loans and other charges, commissions and fees, partially offset by a reduction in service charges and other income. -10- Noninterest expense for the three months ended March 31, 1998 of $2,437,129 was up $154,658 or 6.8% from $2,282,471 for the same period in 1997. This increase was primarily the result of increases in salaries and employee benefits, occupancy, furniture and equipment, credit card processing and other expense. PROVISION FOR LOAN LOSSES There was no provision for loan losses for the three months ended March 31, 1998 or 1997, 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 $540,281 for the three months ended March 31, 1998 compared to $480,493 for the same period in 1993, the result of an increase in taxable income during the current period. NET INCOME Net income of $920,596 for the first three months of 1998 represented an increase of $144,781 or 18.7% from $775,815 recorded for the first three months of 1997. Earnings per share of $.315 for the current period represented an increase of $.051 from $.264 for the three months ended March 31, 1997. ALLOWANCE FOR POSSIBLE LOAN LOSSES The allowance for possible loan losses is maintained at a level believed by management to be adequate to absorb potential losses in the loan portfolio. Management's methodology in determining the adequacy of the allowance considers specific credit reviews, past loan loss experience, current economic conditions and trends and the volume, growth and composition of the loan portfolio. Each loan on the Company's internal Watch List is evaluated periodically to estimate potential losses. For loans with potential losses, the bank sets aside or "allocates" a portion of the ALLL against such potential losses. For the remainder of the portfolio, "unallocated" reserve amounts are determined based on judgments regarding the type of loan, economic conditions and trends, potential exposure to loss and other factors. The allowance for possible loan losses is charged when management determines that the repayment of the principal on a loan is in doubt. Subsequent recoveries, if any, are credited to the allowance. At March 31, 1998, the balance in the allowance was $3,125,737 representing 345% of noncurrent loans, compared to $3,215,559 or 369% of noncurrent loans at December 31, 1997. 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 $97,749,586 at March 31, 1998, representing an increase of $2,565,196 or 2.7% from $95,184,390 at December 31, 1997. At March 31, 1998, $36,778,085 in securities were classified as "available for sale". There were no sales of securities during the three months ended March 31, 1998. -11- 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 March 31, 1998 and 1997, deposits were $236.4 and $215.7 million, respectively. Management anticipates that deposits will remain relatively stable or grow moderately during the remainder of 1998. 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 March 31, 1998, the Company's Tier 1 leverage capital ratio was 8.21%. Regulatory authorities have also implemented risk-based capital guidelines requiring a minimum ratio of Tier 1 capital to risk weighted assets of 4.00% and a minimum ratio of total capital to risk- weighted assets of 8.00%. At March 31, 1998 the Company's Tier 1 and total risk-based capital ratios were 14.82% and 16.08%, respectively. The Bank is categorized as "well capitalized" under the Federal Deposit Insurance Corporation Improvement Act of 1991 (F.D.I.C.I.A.). On March 17, 1998, the Company's Board of Directors declared a first quarter 1998 cash dividend of $.077 per share of common stock to shareholders of record at March 1, 1998, payable on April 15, 1998. 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 positive cumulative one year gap position at March 31, 1998, representing the excess of repricing assets versus repricing liabilities within a one year time frame, was 4.5% of total assets. -12- PART II - OTHER INFORMATION Item 5. OTHER INFORMATION On March 17, 1998, the Company's Board of Directors declared a first quarter 1998 cash dividend of $.077 per share of common stock to shareholders of record at March 1, 1998, payable on April 15, 1998. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (b ) The Company did not file a Form 8-K during the quarter ended March 31, 1998. -13- 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: April 27, 1998 By: /s/ James A. Langway -------------------- James A. Langway President & Chief Executive Officer Principal Executive Officer Date: April 27, 1998 By: /s/ Donald R. Hughes, Jr. ------------------------- Donald R. Hughes, Jr. Treasurer and Clerk, Principal Financial Officer and Principal Accounting Officer -14- EX-27 2 FINANCIAL DATA SCHEDULE FOR 03-31-98
9 This schedule contains summary financial information extracted from the unaudited March 31, 1998 financial statements of Community Bancorp, Inc. and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1998 MAR-31-1998 19249253 0 15600000 0 36778085 60971501 61189616 142301671 3125737 280135732 236408387 18644939 1945621 0 0 0 7998045 15138740 280135732 3346892 1389396 184891 4921179 1609620 1805774 3115405 0 0 2437129 1460877 1460877 0 0 920596 .315 .315 5.08 879949 26383 0 0 3215559 98385 8563 3125737 1635277 0 1490460
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