10-Q 1 r10q_033103.txt FORM 10-Q FOR MARCH 31, 2003 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, 2003 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 [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ] Common Stock $2.50 par value 5,829,780 shares outstanding as of March 31, 2003 PART I - FINANCIAL INFORMATION COMMUNITY BANCORP, INC. Item 1. CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except share data) March 31, December 31, 2003 2002 -------- -------- ASSETS Cash and cash equivalents $ 26,899 $ 22,308 Federal funds sold 19,816 19,557 Securities held to maturity, at amortized cost (fair value $130,600 in 2003 and $118,118 in 2002) 127,407 114,699 Securities available for sale, at fair value 52,241 64,765 Federal Home Loan Bank of Boston stock 1,547 1,442 Mortgage loans held for sale 1,087 2,531 Loans 213,615 201,389 Less allowance for loan losses 2,747 2,733 ------- ------- Loans, net 210,868 198,656 ------- ------- Bank premises and equipment, net 6,351 6,295 Other assets 5,704 5,522 ------- ------- Total assets $451,920 $435,775 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits: Noninterest bearing $ 78,293 $ 83,445 Interest bearing 274,428 270,837 ------- ------- Total deposits 352,721 354,282 ------- ------- Securities sold under repurchase agreements 27,523 24,969 Federal Home Loan Bank of Boston advances 28,690 14,395 Other liabilities 3,684 3,223 ------- ------- Total liabilities 412,618 396,869 ------- ------- Commitments and contingencies -- -- 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, 5,829,780 shares outstanding (5,829,630 shares outstanding at 12/31/2002) 15,996 15,996 Additional paid-in capital 362 360 Retained earnings 26,261 25,346 Treasury stock, at cost, 568,656 shares (568,806 shares at 12/31/2002) (4,006) (4,007) Accumulated other comprehensive income 689 1,211 ------- ------- Total stockholders' equity 39,302 38,906 ------- ------- Total liabilities and stockholders' equity $451,920 $435,775 ======= ======= The accompanying notes are an integral part of these unaudited, consolidated financial statements
-2- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended (Dollars in thousands, except share data) March 31, ------------------- 2003 2002 ---- ---- Interest and dividend income: Interest and fees on loans $ 3,376 $ 3,367 Interest and dividends on securities: Taxable interest 1,708 1,819 Nontaxable interest 249 240 Dividends 90 91 Interest on federal funds sold 42 79 ----- ----- Total interest and dividend income 5,465 5,596 Interest expense: Interest on deposits 1,011 1,289 Interest on securities sold under repurchase agreements 76 131 Interest on Federal Home Loan Bank of Boston advances 181 61 ----- ----- Total interest expense 1,268 1,481 ----- ----- Net interest income 4,197 4,115 Provision for loan losses 45 45 ----- ----- Net interest income after provision for loan losses 4,152 4,070 ----- ----- Noninterest income: Merchant credit card assessments 376 416 Service charges 372 332 Other charges, commissions and fees 353 365 Gains on sales of loans, net 141 64 Gains on sales of securities, net 118 59 Other 27 27 ----- ----- Total noninterest income 1,387 1,263 ----- ----- Noninterest expense: Salaries and employee benefits 1,801 1,713 Information technology and ATM network 314 296 Occupancy, net 270 259 Furniture and equipment 89 100 Credit card processing 325 339 Printing, stationery and supplies 71 61 Professional fees 149 119 Marketing and advertising 52 28 Other 359 348 Total noninterest expense 3,430 3,263 ----- ----- Income before income tax expense 2,109 2,070 Income tax expense 709 712 ----- ----- Net income $ 1,400 $ 1,358 ===== ===== -3- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (CONTINUED) (Unaudited) Three months ended March 31, ------------------ 2003 2002 ---- ---- Basic earnings per common share $ .24 $ .23 Diluted earnings per common share $ .24 $ .23 Dividends per share $ .08 $ .07 Basic weighted average number of shares 5,829,767 5,940,606 Diluted weighted average number of shares 5,865,404 5,956,950 The accompanying notes are an integral part of these unaudited, consolidated financial statements.
-4- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
Three months ended March 31, 2002 and 2003 ------------------------------------------ Accumulated Additional Other (Dollars in thousands, Common Paid-in Retained Treasury Comprehensive except share data) Stock Capital Earnings Stock Income Total ----- ------- -------- ----- ------ ----- Balance at December 31, 2001 $15,996 $ 219 $21,609 $(2,297) $ 784 $36,311 ------ Comprehensive income: Net income -- -- 1,358 -- -- 1,358 Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects -- -- -- -- (375) (375) ------ Total comprehensive income -- -- -- -- -- 983 ------ Cash dividends declared ($0.073 per share) -- -- (434) -- -- (434) ------ ------ ------ ------ ------ ------ Balance at March 31, 2002 $15,996 $ 219 $22,533 $(2,297) $ 409 $36,860 ====== ====== ====== ====== ====== ====== ---------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2002 $15,996 $ 360 $25,346 $(4,007) $ 1,211 $38,906 ------ Comprehensive income: Net income -- -- 1,400 -- -- 1,400 Change in net unrealized gain/loss on securities available for sale, net of reclassification adjustment and tax effects -- -- -- -- (522) (522) ------ Total comprehensive income -- -- -- -- -- 878 ------ Cash dividends declared ($0.083 per share) -- -- (485) -- -- (485) ------ Reissuance of 150 shares of treasury stock -- 2 -- 1 -- 3 ------ ------ ------ ------ ------ ------ Balance at March 31, 2003 $15,996 $ 362 $26,261 $(4,006) $ 689 $39,302 ====== ====== ====== ====== ====== ====== The accompanying notes are an integral part of these unaudited consolidated financial statements.
-5- COMMUNITY BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended (Dollars in thousands) March 31, ------------------- 2003 2002 ---- ---- Cash flows from operating activities: Net income $ 1,400 $ 1,358 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 247 241 Gains on sales of securities (118) (59) Amortization of securities premiums and (discounts), net 221 99 Provision for loan losses 45 45 Deferred tax benefit -- (489) Net change in: Mortgage loans held for sale 1,444 802 Other assets, net (182) 339 Other liabilities, net 812 (774) ------ ------ Total adjustments 2,469 204 ------ ------ Net cash provided by operating activities 3,869 1,562 ------ ------ Cash flows from investing activities: Net change in federal funds sold (259) (15,794) Purchases of securities held to maturity (21,276) (999) Purchases of securities available for sale and Federal Home Loan Bank stock (104) (4,258) Maturities, calls and principal repayments of securities held to maturity 8,409 4,966 Proceeds from sales of securities available for sale 7,113 59 Maturities and principal repayments of securities available for sale 4,581 1,929 Net change in loans (12,258) 233 Purchases of premises and equipment,net (303) (218) ------ ------ Net cash used in investing activities (14,097) (14,082) Cash flows from financing activities: Net change in deposits (1,561) 16,784 Net change in securities sold under repurchase agreements 2,554 (2,051) Proceeds from Federal Home Loan Bank of Boston advances 15,000 -- Payments on Federal Home Loan Bank of Boston advances (705) -- Reissuance of treasury stock 3 -- Dividends paid (472) (421) ------ ------ Net cash provided by financing activities 14,819 14,312 ------ ------ Net change in cash and cash equivalents 4,591 1,792 ------ ------ Cash and cash equivalents at beginning of period 22,308 19,877 ------ ------ Cash and cash equivalents at end of period $ 26,899 $ 21,669 ====== ====== The accompanying notes are an integral part of these unaudited, consolidated financial statements. -6- Supplemental cash flow information: Three months ended (Dollars in thousands) March 31, ------------------- 2003 2002 ---- ---- Interest paid on deposits and borrowed funds $ 1,366 $ 1,514 Income taxes paid 205 206
-7- COMMUNITY BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2003 _____________________________________________________________________________ 1. BASIS OF PRESENTATION --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States 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 accounting principles generally accepted 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 unaudited 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, 2002. 2. 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. 3. STOCK OPTIONS ------------- Statement of Financial Accounting Standards No. 123, "Accounting for Stock- Based Compensation", ("SFAS No. 123") requires stock-based compensation to be either recorded or disclosed at its fair value. As permitted by SFAS No. 123, the Company has elected to account for stock-based compensation under Accounting Principles Board Opinion No. 25. Had compensation cost for awards made in 2003 and 2002 under the Company's stock option plans been determined based on the fair value at the grant dates, consistent with the method set forth under SFAS No. 123, the Company's pro forma net income and earnings per share would have been adjusted to the pro forma amounts indicated below. Pro forma compensation expense for options granted is reflected over the vesting period. Therefore, future pro forma compensation expense may be greater as additional options are granted. The table below is for the quarters ending March 31, 2003 and March 31, 2002.
Three months ended (In thousands, except per share data) March 31, ------------------- 2003 2002 ---- ---- Net income: As reported $1,400 $1,358 Pro forma 1,367 1,335 Earnings per share - basic: As reported 0.24 0.23 Pro forma 0.23 0.23 Earnings per share - diluted: As reported 0.24 0.23 Pro forma 0.23 0.22
-8- 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 $1,400,000 for the three months ended March 31, 2003, representing an increase of $42,000 or 3.1% over net income of $1,358,000 reported for the same period in 2002. Basic earnings per share of $0.24 for the current period represented an increase of $0.01 from basic earnings per share of $0.23 reported for the three months ended March 31, 2002. Diluted earnings per share of $0.24 for the current period represented an increase of $0.01 from diluted earnings per share of $0.23 for the three months ended March 31, 2002. The improvement in net income resulted primarily from an increase in net interest income and noninterest income, partially offset by an increase in noninterest expense. Deposits of $352.7 million at March 31, 2003 decreased by $1.6 million or 0.5% from $354.3 million at December 31, 2002. The decrease in deposits occurred in the noninterest-bearing categories, partially offset by an increase in interest-bearing categories. Loans of $213.6 million at March 31, 2003 increased by $12.2 million or 6.1% from $201.4 million at December 31, 2002. This increase took place in the commercial loan and 1-4 family real estate loan categories. Noncurrent loans (nonaccrual loans and loans 90 days or more past due but still accruing) totaled $491,000 and $245,000 at March 31, 2003 and December 31, 2002, respectively. Assets of $451.9 million at March 31, 2003 represented a $16.1 million or 3.7% increase from $435.8 million at December 31, 2002. Three Months Ended March 31, 2003 As Compared To Three Months Ended March 31, 2002 --------------------------------- Interest and Dividend Income ---------------------------- Interest and dividend income for the three months ended March 31, 2003 was $5,465,000 representing a decrease of $131,000 or 2.3% from $5,596,000 for the three months ended March 31, 2002, primarily due to lower interest rates in 2003, partially offset by an increase in average loan and securities balances in 2003. Interest expense was $1,268,000, representing a decrease of $213,000 or 14.4% from $1,481,000 for the three months ended March 31, 2002, primarily due to lower interest rates in 2003, partially offset by higher average interest bearing deposit and borrowing balances in 2003. Net interest income for the three months ended March 31, 2003 was $4,197,000, representing an increase of $82,000 or 2.0% from $4,115,000 for the three months ended March 31, 2002. Noninterest Income and Expense ------------------------------ Noninterest income for the three months ended March 31, 2003 was $1,387,000 representing an increase of $124,000 or 9.8% from $1,263,000 for the three months ended March 31, 2002. This increase was primarily the result of an increase in service charges, gains on sales of loans and gains on sales of -9- securities, partially offset by a decrease in merchant credit card assessments. The increases in the three income categories were primarily the result of the low interest rate environment. Service charges increased due to the lower earnings credit applied to business DDA balances, gains on sale of loans increased due to increased residential mortgage originations, and the low interest rate environment enabled the bank to sell securities available for sale that matured within one year and invest the proceeds of those sales in longer-term securities at higher yields. The decrease in merchant credit card assessments resulted from lower merchant sales volumes attributable to the weaker economic environment. Noninterest expense for the three months ended March 31, 2003 of $3,430,000 was up $167,000 or 5.1% from $3,263,000 for the corresponding period in 2002 as the result of increases in salaries and benefits, and professional fees. The increase in salaries and benefits occurred due to merit salary increases, minor additions to staff and increases in employee benefit expense. Professional fees increased primarily due to legal fees associated with the administration of several employee benefit plans. Provision for Loan Losses ------------------------- The provision for loan losses was $45,000 for the three months ended March 31, 2003 and 2002. Management believes the allowance for loan losses is adequate and it will continue its on going assessment of the allowance and may adjust the provision if necessary. Income Taxes ------------ Income tax expense of $709,000 for the three months ended March 31, 2003 remained consistent with $712,000 of income tax expense recorded for the corresponding period in 2002, as the company's effective tax rate was approximately 34% for both periods. Allowance for Loan Losses ------------------------- The allowance for loan losses is based on management's estimate of the amount required to reflect the risks in the loan portfolio, based on circumstances and conditions known or anticipated at each reporting date. The methodology for assessing the appropriateness of the allowance consists of a review of the following three key elements: * The valuation allowance for loans specifically identified as impaired * The formula allowance for the various loan portfolio classifications * The imprecision allowance The valuation allowance reflects specific estimates of potential losses on individually impaired loans. When each impaired loan is evaluated, if the net present value of the expected cash flows (or fair value of the collateral if the loan is collateral-dependent) is lower than the recorded loan balance, the difference represents the valuation allowance for that loan. The formula allowance is a percentage-based estimate based on historical loss experience and assigns required allowance allocations by loan classification based on fixed percentages of all outstanding loan balances. The formula allowance employs a risk-rating model that grades loans based on their general characteristics of credit quality and relative risk. When a loan's credit quality becomes suspect, it 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 judgments -10- regarding the type of loan, economic conditions and trends, potential exposure to loss and other factors. Losses are charged against the allowance when management believes the collectibility of principal is doubtful. In addition to the valuation allowance and the formula allowance, there is an imprecision allowance that is determined based on the totals of the valuation and formula allowances. The imprecision allowance reflects the measurement imprecision inherent in determining the valuation allowance and the formula allowance. Per the Company's internal policy, the imprecision allowance should represent 15% - 25% of the valuation and formula allowances, depending on management's evaluation of various conditions, the effects of which are not directly measured in determining the valuation and formula allowances. The evaluation of the inherent loss resulting from these conditions involves a higher level of uncertainty because they are not identified with specific problem credits or portfolio segments. The conditions evaluated in connection with the imprecision allowance include the following: * Levels of and trends in delinquencies and impaired loans * Levels of and trends in charge-offs and recoveries * Trends in loan volume and terms * Effects of changes in credit concentrations * Effects of and changes in risk selection and underwriting standards, and other changes in lending policies, procedures and practices * National and local economic conditions * Trends and duration of the present business cycle * Findings of internal and external credit review examiners When an evaluation of these conditions signifies a change in the level of risk, the Company adjusts the formula allowance. Periodic credit reviews enable further adjustment to the formula allowance through the risk rating of loans and the identification of loans requiring a valuation allowance. In addition, the formula allowance model is designed to be self-correcting by taking into consideration recent actual loss experience. Securities ---------- The Company's securities portfolio consists of obligations of U.S. Government sponsored agencies, mortgage-backed securities, obligations of various municipalities, and corporate bonds. Those assets are used in part to secure public deposits and as collateral for repurchase agreements. Total securities were $181.2 million at March 31, 2003, representing an increase of $300,000 or 0.3% from $180.9 million at December 31, 2002. Securities classified as available for sale were $52.2 million and $64.8 million at March 31, 2003 and December 31, 2002, respectively. During the first quarter of 2003, the Company sold $7.0 million in short-term available for sale bonds. The sales took place in order to take advantage of current interest rate conditions and improve investment earnings. Liquidity and Capital Resources ------------------------------- The Company's primary sources of liquidity are customer deposits, amortization and pay-offs of loan principal and maturities of securities. These sources provide funds for loan originations, the purchase of securities and other activities. Deposits are considered a relatively stable source of funds. At March 31, 2003 and December 31, 2002, deposits were $352.7 million and $354.3 million, respectively. As a nationally chartered member of the Federal Reserve System, the Bank has -11- the ability to borrow funds from the Federal Reserve Bank of Boston by pledging certain of its 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, 2003, the Company's Tier 1 leverage capital ratio was 8.54%. 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, 2003 the Company's Tier 1 and total risk-based capital ratios were 15.27% and 16.36%, respectively. The Bank is categorized as "well capitalized" under the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). 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 March 31, 2003, representing the excess of repricing liabilities versus repricing assets within a one year time frame, was 0.2% 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, and adverse legislative or regulatory changes. Item 4. CONTROLS AND PROCEDURES ----------------------- Evaluation of Disclosure Controls and Procedures ------------------------------------------------ Within the 90 day period prior to the filing of this report, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure controls and -12- procedures. Based on that evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Subsequent to the date of their evaluation, there were no significant changes in the Company's internal controls or in other factors that could significantly affect the disclosure controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ----------------- Item 5. OTHER INFORMATION ----------------- On March 4, 2003, the Company's Board of Directors approved an amendment to the "2001 Directors Plan". Under this amendment, the Company may grant up to 54,000 options. As originally approved on February 22, 2001, the Plan allowed the Company to grant up to 30,000 options. On March 4, 2003, the Company's Board of Directors granted stock options under the "2001 Directors Plan" for the purchase of an aggregate of 18,000 shares of the Company's common stock at a price of $13.50 per share, the fair market value on the date of the grant. The options vest over a four year period. On March 4, 2003 the Company's Board of Directors granted stock options under the "2001 Incentive Stock Option Plan for Key Employees" for the purchase of an aggregate of 84,317 shares of the Company's common stock at a price of $13.50 per share, the fair value on the date of the grant. The granted options fully vest over a four year period. There is no established public trading market for the Company's common stock. Therefore, for purposes of the stock options granted on March 4, 2003 pursuant to the "2001 Director's Plan" and the "2001 Incentive Stock Option Plan for Key Employees", the fair value of the Company's stock on the date of grant was determined to be equal to the most recent trade price as of that date. On March 18, 2003, the Company's Board of Directors declared a first quarter 2003 cash dividend of $.083 per share of common stock to shareholders of record at March 1, 2003, payable on April 15, 2003. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 99.1 Certification of Financial Statements by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of Financial Statements by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K The Company did not file a Form 8-K during the quarter ended March 31, 2003. -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: May 12, 2003 By: /s/ James A. Langway -------------------- James A. Langway President & Chief Executive Officer Principal Executive Officer Date: May 12, 2003 By: /s/ Donald R. Hughes, Jr. ------------------------- Donald R. Hughes, Jr. Treasurer and Clerk, Principal Financial Officer and Principal Accounting Officer -14- CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, James A. Langway, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Community Bancorp, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. -15- DATE: May 12, 2003 /s/ James A. Langway -------------------- James A. Langway President and Chief Executive Officer CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Donald R. Hughes, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Community Bancorp, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and -16- 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. DATE: May 12, 2003 /s/Donald R. Hughes, Jr. ------------------------ Donald R. Hughes, Jr. Treasurer and Clerk and Chief Financial Officer -17- EXHIBIT INDEX ------------- EXHIBIT DESCRIPTION ------- ----------- 99.1 Certification of Financial Statements by Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of Financial Statements by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -18-