COMMUNITY BANCORP /VT - Annual Report: 2008 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-K
[ X ] ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
fiscal year ended December 31, 2008
OR
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from
to
Commission
File No. 000-16435
COMMUNITY
BANCORP.
|
Vermont
|
03-0284070
|
|
(State
of Incorporation)
|
(IRS
Employer Identification Number)
|
|
Address
of Principal Executive Offices: 4811 US Route 5, Derby,
Vermont 05829
|
|
Registrant's
telephone number, including area code: (802) 334-7915
Securities
registered pursuant to Section 12(b) of the Act:
|
Title
of Each Class
|
Name
of each exchange on which registered
|
|
NONE
|
NONE
|
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock - $2.50 par value per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YES
( ) NO (X)
Indicated
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the
Act. YES( ) NO
(X)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES
(X) NO ( )
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of "large accelerated filer”, “accelerated
filer" and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer ( )
|
Accelerated
filer ( )
|
|
|
Non-accelerated
filer ( )
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company (X)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
YES
( ) NO(X)
As of
June 30, 2008, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $52,726,298, based on a per share trade
price of $13.27, as reported on the OTC Bulleting Board® on June 30,
2008. For purposes of the calculation, all directors and executive
officers were deemed to be affiliates of the registrant. However,
such assumption is not intended as an admission of affiliate status as to any
such individual.
There
were 4,473,041 shares outstanding of the issuer's class of common stock as of
the close of business on March 26, 2009.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Annual Report to Shareholders for the year ended December 31, 2008 are
incorporated by reference to Part II.
Portions
of the Proxy Statement for the Annual Meeting of Shareholders to be held May 12,
2009 are incorporated by reference to Part III.
|
FORM
10-K ANNUAL REPORT
|
||
|
PART I
|
Page
|
|
|
Item
1
|
4
|
|
|
Item
1A
|
12
|
|
|
Item
1B
|
12
|
|
|
Item
2
|
13
|
|
|
Item
3
|
14
|
|
|
Item
4
|
14
|
|
|
PART II
|
||
|
Item
5
|
||
|
15
|
||
|
Item
6
|
15
|
|
|
Item
7
|
15
|
|
|
Item
7A
|
16
|
|
|
Item
8
|
16
|
|
|
Item
9
|
16
|
|
|
Item
9A(T)
|
16
|
|
|
Item
9B
|
17
|
|
|
PART III
|
||
|
Item
10
|
17
|
|
|
Item
11
|
17
|
|
|
Item
12
|
||
|
Matters
|
17
|
|
|
Item
13
|
18
|
|
|
Item
14
|
18
|
|
|
PART IV
|
||
|
Item
15
|
18
|
|
|
20
|
||
PART I
Organization and
Operation
Community
Bancorp. (the "Company") was organized under the laws of the State of Vermont in
1982 and became a registered bank holding company under the Bank Holding Company
Act of 1956, as amended, in October 1983 when it acquired all of the voting
shares of Community National Bank (the "Bank"). The Bank is the only
subsidiary of the Company and principally all of the Company's business
operations are presently conducted through it. Therefore, the following
narrative and the other information contained in this report are based primarily
on the Bank's operations.
Community
National Bank was organized in 1851 as the Peoples Bank, and was subsequently
reorganized as the National Bank of Derby Line in 1865. In 1975,
after 110 continuous years of operation as the National Bank of Derby Line, the
Bank acquired the Island Pond National Bank and changed its name to "Community
National Bank." On December 31, 2007, the Company completed its
acquisition of LyndonBank, a Vermont bank headquartered in Lyndonville, Vermont,
in a cash merger transaction. The total merger consideration was
approximately $26.7 million, which was financed in part through the issuance to
third party investors of $12.9 million in trust preferred securities and $2.5
million in Series A Fixed-to-Floating Rate Non Cumulative Perpetual Preferred
Stock. Immediately following completion of the merger, the Company
sold LyndonBank’s Vergennes, Vermont branch to the National Bank of Middlebury
in a transaction involving the transfer of approximately $8.9 million in
deposits, together with associated branch assets. Net of the
Vergennes branch sale, the Company added approximately $128 million in assets,
$111 million in deposits and five banking offices upon completion of the
merger.
Community
National Bank provides a broad range of retail banking services to the residents
and businesses in northeastern and central Vermont. These services
include checking, savings and time deposit accounts, mortgage, consumer,
municipal and commercial loans, safe deposit and night deposit services, wire
transfer services, automatic teller machine (ATM) facilities, credit card
services, 24 hour telephone banking, and internet
banking. Additionally, the Bank maintains cash machines at 11 third
party business locations in the counties of Orleans, Washington, Caledonia and
Franklin. The Company focuses on establishing and maintaining
long-term relationships with customers and is committed to providing for the
financial services needs of the communities it serves. In particular,
the Company continues to emphasize its relationships with individual customers
and small-to-medium-sized businesses. The Company actively evaluates
the banking needs of its markets, including low- and moderate-income areas, and
offers products that are responsive to the needs of its customer
base. The markets served by the Company provide a mix of real estate,
commercial and industrial, municipal and consumer lending opportunities, as well
as a stable core deposit base.
In 2002,
the Bank transferred its trust operations to a newly formed Vermont-chartered
nondepository trust and investment management affiliate, Community Financial
Services Group, LLC, based in Newport, Vermont ("CFSG"). The Bank's
ownership interest in CFSG is held indirectly, through Community Financial
Services Partners, LLC, a Vermont limited liability company ("CFSP"), which owns
100% of the limited liability company equity interests of
CFSG. Immediately following transfer of its trust operations to CFSG,
the Bank sold a two-thirds interest in CFSP, equally to the National Bank of
Middlebury, headquartered in Middlebury, Vermont and Guaranty Bancorp Inc., the
bank holding company parent of Woodsville Guaranty Savings Bank, headquartered
in Woodsville, New Hampshire. CFSG offers personal fiduciary services
throughout the market areas of the three owner financial
institutions.
Competition
The
Bank’s main office is located in Derby, in Orleans County. In
addition to its main office, the Bank has four other banking offices in Orleans
County, one office in Essex County, four offices in Caledonia County (including
three former LyndonBank offices), two offices in Washington County, one office
each in Franklin and Lamoille Counties (both former LyndonBank
offices). Its primary service area is in the Town of Derby and City
of Newport, Vermont in Orleans County, with approximately 45% of its total
deposits derived from the Company's Derby, Derby Line and Newport offices as of
December 31, 2008.
The Bank
competes in all aspects of its business with other banks and credit unions in
northern and central Vermont, including two of the largest banks in the state,
which maintain branch offices throughout the Bank's service
area. Historically, competition in Orleans and Essex Counties has
come primarily from two of the largest banks in the state, Chittenden Bank, a
division of People's United Bank, FSB based in Bridgeport, Connecticut and TD
Banknorth, N.A. based in Portland, Maine. The Chittenden Bank
maintains a branch office in Newport, and TD Banknorth, N.A. maintains branch
offices in Barton, Orleans, and St. Johnsbury. The Bank also competes
in Orleans County with one local bank, Passumpsic Savings Bank, based in St.
Johnsbury, and with three local credit unions, Orlex Credit Union and Border
Lodge Credit Union, both based in Newport, and North Country Federal Credit
Union, based in South Burlington. The Bank's primary competitors in
Caledonia County are Passumpsic Savings Bank and Union Bank based in
Morrisville, TD Banknorth, N.A., Northern Lights Federal Credit Union, based in
St. Johnsbury, Vermont State Employees Credit Union, based in Montpelier,
Merchants Bank, based in Burlington and North Country Federal Credit
Union. In Washington County, the Bank competes with Merchants Bank,
Chittenden Bank and TD Banknorth, N.A, as well as Northfield Savings Bank based
in Northfield, Key Bank based in Ohio, Citizens Bank Vermont, based in Rhode
Island, Vermont State Employees Credit Union, North Country Federal Credit
Union, and Granite Hills Credit Union, based in Barre. In Franklin
County, the Bank competes with Peoples Trust Company based in St. Albans, TD
Banknorth, N.A., Chittenden Bank, Citizens Bank Vermont, Key Bank, Merchants
Bank, and Union Bank. In Lamoille County the Bank’s competitors are
Union Bank, TD Banknorth, Chittenden Bank and Merchants Bank.
Changes
in the regulatory framework of the banking industry during the past decade have
broadened the competition for commercial bank products, such as deposits and
loans, to include not only traditional rivals such as the mutual savings banks,
stock savings banks, and credit unions, but also many non-traditional rivals
such as insurance companies, brokerage firms, mutual funds and consumer and
commercial finance and leasing companies. In addition, many out-of-market
nationwide banks, nonbank lenders and other financial service firms operate in
the Company’s market areas through mass marketing solicitations by mail, radio,
television and email. At the same time, technological changes have facilitated
remote delivery of financial services by bank and nonbank competitors outside
the context of a traditional branch bank network. Three of the Bank’s
credit union competitors, including the largest state-chartered
Vermont credit union, Vermont State Employees Credit Union, have converted in
recent years from an employment based common bond to a community common bond,
thereby significantly increasing their fields of membership in the Bank’s market
areas. Similarly, another of the Bank's credit union competitors,
which previously had an employment based common bond, merged last year into a
much larger credit union which has a community common bond. At the
same time, regulatory changes in the credit union industry, including passage in
2005 of a comprehensive Vermont credit union modernization statute, have
steadily increased the financial services and products that credit unions are
authorized to offer, such as small business lending and products for non-profit
organizations, resulting in increased competition for the Bank from this tax
exempt sector of the financial services industry.
Employees
As of
December 31, 2008, the Company did not have any employees at the holding company
level. However, as of such date, the Bank employed 142 full-time
employees and 22 part-time employees. These staffing levels reflect
30 full-time and 3 part-time positions added in 2008 as a result of the
LyndonBank acquisition. Management of the Bank considers its employee
relations to be good.
Regulation and
Supervision
Holding Company
Regulation. As a registered bank holding company, the Company is subject
to on-going regulation, supervision and examination by the Board of Governors of
the Federal Reserve System (“Federal Reserve Board”), under the Bank Holding
Company Act of 1956, as amended (the "Act"). A bank holding company
for example, must generally obtain the prior approval of the Federal Reserve
Board before it acquires all or substantially all of the assets of any bank, or
acquires ownership or control of more than 5% of the voting shares of a bank.
Federal Reserve Board approval is also generally required before a bank holding
company may acquire more than 5% of any outstanding class of voting securities
of a company other than a bank or a more than 5% interest in its
property.
The Act
generally limits the activity in which the Company and its subsidiaries may
engage to certain specified activities, including those activities which the
Federal Reserve Board may find, by order or regulation, to be so closely related
to banking or managing or controlling banks as to be a proper incident
thereto. Some of the activities that the Federal Reserve Board has
determined to be closely related to banking are: (1) making and
servicing loans that could be made by mortgage, finance, credit card or
factoring companies; (2) performing the functions of a trust company; (3)
certain leasing of real or personal property; (4) providing certain financial,
banking or economic data processing services; (5) except as otherwise prohibited
by law, acting as an insurance agent or broker with respect to insurance that is
directly related to the extension of credit or the provision of other financial
services or, under certain circumstances, with respect to insurance that is sold
in certain small communities in which the bank holding company system maintains
banking offices; (6) acting as an underwriter for credit life insurance and
credit health and accident insurance directly related to extensions of credit by
the holding company system; (7) providing certain kinds of management consulting
advice to unaffiliated banks and non-bank depository institutions; (8)
performing real estate appraisals; (9) issuing and selling money order and
similar instruments and travelers checks and selling U.S. Savings Bonds; (10)
providing certain securities brokerage and related services for the account of
bank customers; (11) underwriting and dealing in certain government obligations
and other obligations such as bankers' acceptances and certificates of deposit;
(12) providing consumer financial counseling; (13) providing tax planning and
preparation services; (14) providing check guarantee services to merchants; (15)
operating a collection agency; and (16) operating a credit bureau.
Except
for trust and investment management operations conducted by its affiliate, CFSG,
the Company does not presently engage, directly or indirectly, in any
non-banking activities.
A bank
holding company must also obtain prior Federal Reserve Board approval in order
to purchase or redeem its own stock if the gross consideration to be paid, when
added to the net consideration paid by the company for all purchases or
redemptions by the company of its equity securities within the preceding 12
months, will equal 10% or more of the company's consolidated net
worth.
The
Company is required to file with the Federal Reserve Board annual and
semi-annual reports and such additional information as the Board may require
pursuant to the Act. The Board may also make examinations of the
Company and any direct or indirect subsidiary of the Company.
Community
Bancorp. and its wholly-owned subsidiary, Community National Bank, as well as
its non-subsidiary affiliates, CFSP and CFSG, are all considered "affiliates" of
each other for the purposes of Section 18(j) of the Federal Deposit Insurance
Act, as amended, and Sections 23A and 23B of the Federal Reserve Act, as
amended. In particular, section 23A limits loans or other extensions
of credit to, asset purchases with and investments in affiliates of the Bank to
10% of the Bank’s capital and surplus. In addition, such loans and
extensions of credit and certain other transactions must be collateralized in
specified amounts. Section 23B requires, among other things, that
certain transactions between the Bank and its affiliates must be on terms
substantially the same, or at least as favorable to the Bank, as those
prevailing at the time for comparable transactions with or involving
non-affiliated persons. Further, the Company is prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit or lease or sale of any property or the furnishing of
services.
Bank Holding Company Capital
Requirements. Under Federal Reserve policy a bank holding
company is expected to act as a source of financial strength to its subsidiary
banks and to commit resources to support them. In implementing this
policy, the Federal Reserve could require the Company to provide such support
when the Company otherwise would not consider it advisable to do
so.
The
Federal Reserve has adopted risk-based capital requirements for assessing bank
holding company capital adequacy. These standards define regulatory capital and
establish minimum ratios in relation to assets, both on an aggregate basis and
as adjusted for credit risks and off-balance sheet exposures. The Federal
Reserve’s risk-based guidelines apply on a consolidated basis to any bank
holding company with consolidated assets of $500 million or more. The risk-based
guidelines also apply on a consolidated basis to certain bank holding companies
with consolidated assets of less than $500 million, including those like the
Company, that have a material amount of debt or equity securities outstanding
(other than trust preferred securities) that are registered with the Securities
and Exchange Commission.
Under the
Federal Reserve’s consolidated capital guidelines, bank holding companies are
required to maintain a minimum ratio of qualifying total capital to
risk-weighted assets of 8%, of which 4% must be in the form of Tier 1
capital. The Federal Reserve also requires a minimum leverage ratio of Tier 1
capital to total average assets of 3% for strong bank holding companies, defined
as those bank holding companies rated a composite “1” under the rating system
used by the Federal Reserve. For all other bank holding companies, the minimum
ratio of Tier 1 capital to total assets is 4.0 percent. Bank holding companies
with supervisory, financial, operational, or managerial weaknesses, as well as
those that are anticipating or experiencing significant growth, are expected to
maintain capital ratios well above the minimum levels.
The
Federal Reserve’s capital guidelines classify bank holding company capital into
two categories. Tier 1 or “core capital” generally is defined as the sum of
eligible core capital elements, less any amounts of goodwill and other items
that are required to be deducted in accordance with the Federal Reserve capital
guidelines. Eligible Tier 1 or core capital elements consist of qualifying
common stockholders’ equity, qualifying noncumulative perpetual preferred stock
(such as the Company’s Series A preferred stock), senior perpetual preferred
stock issued to the U.S. Treasury under the TARP (including related surplus),
minority interests related to qualifying common or noncumulative perpetual
preferred stock directly issued by a consolidated U.S. depository institution or
foreign bank subsidiary, and restricted core capital elements. Tier 1
capital must represent at least 50% of a bank holding company’s qualifying total
capital.
For
purposes of determining bank holding company Tier 1 capital, restricted core
capital elements include cumulative perpetual preferred stock, minority
interests related to qualified perpetual preferred stock directly issued by a
consolidated U.S. depository institution or foreign bank subsidiary,
minority interests related to qualifying common stockholders equity or perpetual
preferred stock issued by a consolidated subsidiary that is neither a US
depository of a foreign bank, and qualifying trust preferred securities (such as
the Company’s trust preferred securities).
Eligible
Tier 2, or “supplementary capital” includes allowance for loan and lease losses
(subject to limitations), perpetual preferred stock and related surplus, hybrid
capital instruments, perpetual debt and mandatory convertible debt securities,
term subordinated debt and intermediate-term preferred stock, including related
surplus (subject to limits) and unrealized holding gains on equity securities
(subject to limitations). The maximum amount of Tier 2 capital that may be
included in a bank holding company’s total capital is limited to 100% of Tier 1
capital, net of goodwill, other intangible assets, interest only strips
receivables and non financial equity investments that are required to be
deducted under the Federal Reserve capital guidelines.
The
Federal Reserve capital guidelines limit the amount of restricted core elements
that a bank holding company may include in Tier 1 capital. Until March 31,
2009, the aggregate amount of restricted core elements consisting of cumulative
perpetual preferred stock and qualifying trust preferred securities that a BHC
may include in Tier 1 capital is limited to 25% of the sum of (i) qualifying
common stockholder equity, (ii) qualifying noncumulative and cumulative
perpetual preferred stock (such as the Company’s Series A preferred shares),
(iii) qualifying minority interest in the equity accounts of consolidated
subsidiaries and (iv) qualifying trust preferred securities.
Effective
March 31, 2011, these Tier 1 restricted core capital element limitations will
change. After that date, the aggregate amount of all restricted core capital
elements that may be included by a bank holding company as Tier 1 capital
may not exceed 25% of the sum of all core capital elements, including restricted
core capital elements, net of goodwill less any associated deferred tax
liability.
The
excess of restricted core capital not included in Tier 1 may generally be
included in the Tier 2 capital calculation. However, after March 31, 2011, the
aggregate of excess qualifying trust preferred securities and other excess
restricted core capital elements that may be treated as Tier 2 capital is
limited to 50% of Tier 1 capital. Amounts of these instruments in excess of this
limit, although not included in Tier 2 capital, will be taken into account by
the Federal Reserve in its overall assessment of a bank holding company’s
funding and financial condition.
As of
December 31, 2008, the Company had regulatory capital at the level required to
be considered well capitalized. As of such date, the Company had a
total capital to risk-weighted assets ratio of 11.04%, a Tier 1 capital to
risk-weighted assets ratio of 10.07%, and a leverage ratio of
7.08%.
Financial
Modernization. In 1999 Congress enacted the federal
Gramm-Leach-Bliley financial modernization act ("Gramm-Leach-Bliley"), which
repealed provisions of the Glass-Steagall Act of 1933 that required separation
of banking and commercial entities. Under Gramm-Leach-Bliley,
eligible bank holding companies may elect to become financial holding companies
and thereby affiliate with securities firms and insurance companies and engage
in a broader range of activities than is otherwise permissible for bank holding
companies. A bank holding company is eligible to elect to become a
"financial holding company" and to engage in activities that are "financial in
nature" if each of its subsidiary banks is well capitalized for regulatory
capital purposes, is well managed and has at least a satisfactory rating under
the Community Reinvestment Act ("CRA"). Activities which are deemed
"financial in nature" under Gramm-Leach-Bliley would include activities
generally permitted to bank holding companies as described above, and in
addition securities underwriting, dealing and market making; sponsoring mutual
funds and investment companies; insurance underwriting and agency; and merchant
banking. Gramm-Leach-Bliley also contains similar provisions
authorizing eligible national banks to engage indirectly through a "financial
subsidiary" in activities that are financial in nature, other than insurance
underwriting, insurance company portfolio investment, real estate development
and real estate investment. In order to be considered eligible for
these expanded activities, the bank must be well capitalized, well managed and
have at least a satisfactory CRA rating. A national bank’s investment
in financial subsidiaries is subject to certain limitations under
Gramm-Leach-Bliley.
As of the
date of filing this report with the Securities and Exchange Commission (SEC),
the Company had not elected to become a financial holding company, nor had the
Bank created any financial subsidiaries.
Implementation
of Graham-Leach-Bliley has resulted in an increase in the number and type of
institutions engaging in the same or similar financial activities as those of
the Company and the Bank, thereby creating a more competitive financial services
environment generally. However, management of the Company believes
that Gramm-Leach-Bliley has thus far had a more significant competitive impact
on larger institutions, such as regional and national holding companies and
banks, than on community-based institutions serving largely rural populations,
such as the Company and the Bank, which are engaged primarily in traditional
banking activities and have a stronger local marketing focus.
USA Patriot
Act. In response to the terrorist events of September 11,
2001, Congress enacted the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the
“USA Patriot Act” or the “Act”). The USA Patriot Act is intended to strengthen
the ability of U.S. law enforcement and the intelligence community to work
cooperatively to combat terrorism on a variety of fronts. The impact of the USA
Patriot Act on financial institutions is significant and wide ranging. The Act
contains sweeping anti-money laundering and financial transparency laws and
imposes various regulations, including standards for verifying client
identification at account opening, and rules to promote cooperation among
financial institutions, regulators and law enforcement entities in identifying
parties that may be involved in terrorism or money laundering. The
Secretary of the Treasury and banking regulators have adopted several
regulations to implement these provisions. The Act also amended the federal Bank
Holding Company Act and the Bank Merger Act to require the federal banking
regulatory authorities to consider the effectiveness of a bank holding company
or a financial institution’s anti-money laundering activities when reviewing an
application to expand operations. As required by law, Community
National Bank has in place a Bank Secrecy Act and Anti-Money Laundering
compliance program, as well as a customer identification program.
Sarbanes-Oxley
Act. The Sarbanes-Oxley Act of 2002 (the “Act”) was enacted to
increase corporate responsibility, to provide for enhanced penalties for
accounting and auditing improprieties at publicly traded companies and to
protect investors by improving the accuracy and reliability of corporate
disclosures pursuant to the securities laws. The Act is the most
far-reaching U.S. securities legislation enacted in decades, and generally
applies to companies that file or are required to file periodic reports with the
SEC under the Securities Exchange Act of 1934 ("Exchange Act"). The SEC has
engaged in extensive rulemaking to implement the Act's provisions.
The Act
includes provisions addressing, among other matters, the duties, functions and
qualifications of audit committees for all public companies; certification of
financial statements by the chief executive officer and the chief financial
officer; the forfeiture of bonuses or other incentive-based compensation and
profits from the sale of an issuer’s securities by directors and senior officers
in the twelve month period following initial publication of any financial
statements that later require restatement; disclosure of off-balance sheet
transactions; a prohibition on personal loans to directors and officers, except
(in the case of banking companies) loans in the normal course of business;
expedited filing requirements for reports of beneficial ownership of company
stock by insiders; disclosure of a code of ethics for senior officers, and of
any change or waiver of such code; the formation of a public accounting
oversight board; auditor independence; disclosure of fees paid to the company's
auditors for non-audit services and limitations on the provision of such
services; attestation requirements for company management and external auditors,
relating to internal controls and procedures; and various increased criminal
penalties for violations of federal securities laws.
In
response to Sarbanes-Oxley, the Board of Directors of the Company approved a
series of actions to strengthen and improve its already strong corporate
governance practices. Among other measures, the Board adopted a Code
of Ethics for Senior Financial Officers and the Principal Executive Officer,
adopted an Insider Trading Policy, adopted amendments to the Audit Committee
Charter, appointed a Compensation Committee and a Corporate
Governance/Nominating Committee and adopted charters for those
committees.
Effective
in 2007 for the Company, Section 404 of Sarbanes Oxley requires management to
undertake an assessment of the adequacy and effectiveness of the Company’s
internal controls over financial reporting. In 2007, the Company
performed an entity-level control assessment that identified and documented the
Company’s key controls. Bank-wide testing of key controls was
performed based on the assessment and remediation was implemented where weakness
was noted. The results of testing of these key controls in 2008 were
used by management to assess the adequacy and effectiveness of the Company’s
internal controls over financial reporting. Beginning with annual
financial statements for 2009, the Company’s external auditors will be required
to attest to, and report on, management’s assessment of the Company’s internal
controls and the operating effectiveness of these
controls. Management's report on internal control over financial
reporting is contained in Item 9A(T) of this Report. The Company has
incurred, and expects to continue to incur, costs in connection with its
on-going compliance with Section 404.
More
information on the Company’s corporate governance practices, including committee
charters, is available on the Company’s website at www.communitybancorpvt.com.
SEC Regulatory Relief for
Smaller Reporting Companies. In December 2007, the SEC adopted
amendments to its disclosure and reporting rules to extend to more public
companies the benefits of the simplified and less rigorous disclosure
requirements previously applicable only to “small business
issuers.” The amendments establish a new category of “smaller
reporting companies” with a public float of less than $75
million. The Company qualifies as a smaller reporting company as of
its last measurement date (June 30, 2008). Under the amendments,
smaller reporting companies are able to elect whether to comply with specified
financial and nonfinancial disclosure requirements on an item by item
basis. The amendments were effective February 4, 2008 and the Company
has elected to avail itself of some of the relief provided in the amendments in
connection with preparation of the Company’s annual meeting proxy statement and
its periodic reports, including this annual report on Form 10-K.
Interstate Banking and
Branching. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 permits a bank holding company to acquire banks in states
other than its home state, without regard to the permissibility of such
acquisitions under state law, but subject to any state requirement that the bank
has been organized and operating for a minimum period of time, not to exceed
five years, and the requirement that the bank holding company, prior to or
following the proposed acquisition, controls no more than 10% of the total
amount of deposits of insured depository institutions in the United States and
less than 30% of such deposits in that state (or such lesser or greater amount
set by state law).
The
Interstate Banking and Branching Act also authorizes banks to merge across state
lines, subject to certain restrictions a state may choose to impose, thereby
creating interstate branches, and to open new branches in a state in which it
does not already have banking operations if the state enacts a law permitting
such de novo branching. Vermont and states contiguous to it, all permit
interstate branching without substantial restrictions. Interstate branching
generally heightens the competitive environment for financial services and,
although it is difficult to predict with any certainty, it is likely that the
trend toward increasing competition will continue in the future.
Prompt Corrective
Action. Community National Bank is subject to regulatory
capital requirements established under the Federal Deposit Insurance Company
Improvement Act of 1991 ("FDICIA"). Among other things, FDICIA
identifies five capital categories for insured depository institutions (well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized) and requires the respective
U.S. federal regulatory agencies to implement systems for "prompt corrective
action" for insured depository institutions that do not meet minimum capital
requirements within such categories. FDICIA imposes progressively more
restrictive constraints on operations, management and capital distributions,
depending on the category in which an institution is classified. Failure to meet
the capital guidelines could also subject a banking institution to capital
raising requirements. An "undercapitalized" bank must develop a capital
restoration plan and its parent holding company must guarantee that bank's
compliance with the plan. The liability of the parent holding company under any
such guarantee is limited to the lesser of 5% of the bank's assets at the time
it became undercapitalized or the amount needed to comply with the plan.
Furthermore, in the event of the bankruptcy of the parent holding company, such
guarantee would take priority over the parent's general unsecured creditors. In
addition, FDICIA requires the various regulatory agencies to prescribe certain
non-capital standards for safety and soundness related generally to operations
and management, asset quality and executive compensation and permits regulatory
action against a financial institution that does not meet such
standards.
The
various federal bank regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 capital ratio to risk weighted assets of at least 6%, a total
capital ratio to risk weighted assets of at least 10% and a leverage ratio of at
least 5% and not be subject to a capital directive order. An "adequately
capitalized" institution must have a Tier 1 capital ratio to risk weighted
assets of at least 4%, a total capital ratio to risk weighted assets of at least
8% and a leverage ratio of at least 4%, or 3% in some cases.
As of
December 31, 2008, Community National Bank was considered "well capitalized"
under FDICIA’s regulatory capital requirements.
Dividends. The
Company derives funds for payment of dividends to its shareholders primarily
from dividends received from its subsidiary, Community National Bank. The Bank
is subject to various general regulatory policies and requirements relating to
the payment of dividends, including requirements to maintain capital above
regulatory minimums. Prior approval from the Office of the
Comptroller of the Currency (OCC) is required if the total of all dividends
declared by a national bank in any calendar year will exceed the sum of such
bank's net profits for that last year and its retained net profits for the
preceding two calendar years, less any required transfers to
surplus. Federal law also prohibits national banks from paying
dividends greater than the bank's undivided profits after deducting statutory
bad debt in excess of the bank's allowance for loan losses.
In
addition, the Company and the Bank are subject to various general regulatory
policies and requirements relating to the payment of dividends, including
requirements to maintain adequate capital above regulatory
minimums. The appropriate federal or state banking agency is
authorized to determine under certain circumstances relating to the financial
condition of a bank or bank holding company that the payment of dividends would
be an unsafe or unsound practice and to prohibit such payment. On
February 24, 2009, the Board of Governors of the Federal Reserve System issued
supervisory guidance in connection with the payment of dividends and redemption
and repurchases of stock by bank holding companies. The guidance
heightened expectations that a bank holding company will inform and consult with
Federal Reserve supervisory staff in advance of declaring and paying any
dividend that could raise safety and soundness concerns, such as a dividend
exceeding current period earnings; redeeming or repurchasing regulatory capital
instruments when the bank holding company is experiencing financial weaknesses;
or redeeming or repurchasing common stock or perpetual preferred stock that
would result in a net reduction in the amount of such equity instruments
outstanding compared with the beginning of the quarter in which the redemption
or repurchase occurred. The guidance provides that a bank holding
company should eliminate, defer or severely limit dividends if net income for
the past four quarters is not sufficient to fully fund dividends; the
prospective rate of earnings retention is not consistent with the holding
company’s capital needs and overall current and prospective financial condition;
or the holding company will not meet, or is in danger of not meeting, its
minimum regulatory capital ratios. The Company has historically
maintained a high dividend to earnings payout ratio and in 2008 it significantly
exceeded 100% (151% in 2008). The Company would be required in future
periods to consult with, and obtain the approval of, Federal Reserve staff for
payment of any dividends, including regular quarterly cash dividends, that are
in excess of earnings for the applicable quarterly period.
OCC Supervision. The
Bank is a national banking association and subject to the provisions of the
National Bank Act and federal and state statutes and rules and regulations
applicable to national banks. The primary supervisory authority for
the Bank is the OCC. The OCC's examinations are designed for the
protection of the Bank's depositors and not its shareholders. The
Bank is subject to periodic examination by the OCC and must file periodic
reports with the OCC containing a full and accurate statement of its
affairs.
Deposit
Insurance. The Federal Deposit Insurance Reform Act of 2005,
which was signed into law on February 8, 2006, gave the Federal Deposit
Insurance Corporation (FDIC) increased flexibility in assessing premiums on
depository institutions, including Community National Bank, to pay for deposit
insurance and to manage its deposit insurance reserves. In 2006, the FDIC
adopted rules to implement its new authority to set deposit insurance premiums.
Under these regulations, all insured depository institutions pay a base rate,
which may be adjusted annually up to 3 basis points by the FDIC, and an
additional assessment based on the risk of loss to the Deposit Insurance Fund
posed by that institution.
Assessment
rates set by the FDIC effective January 1, 2009, range from 12 to 50 basis
points for the first quarter of 2009. The first quarter of 2009 assessment rates
reflect a 7 basis point increase across all assessment rates from 2008. On
February 27, 2009, the FDIC issued new rules to take effect April 1, 2009 to
change the way the FDIC differentiates risk and appropriate assessment rates.
Under the new rules, base assessment rates set to take effect on April 1, 2009
will range from 12 to 45 basis points, but giving effect to certain risk
adjustments in the rule issued by the FDIC on February 27, 2009, assessments may
range from 7 to 77.5 basis points. In addition, the FDIC also issued an interim
rule on February 27, 2009 that will impose an emergency special assessment of 20
basis points in addition to its risk-based assessment. This assessment will be
imposed on June 30, 2009 and collected on September 30, 2009. Subsequently, the
FDIC has indicated that it may reduce the special assessment to 10 basis points
provided that Congress increases its permanent borrowing authority with the
Treasury Department from $30 billion to $100 billion and provides temporary
borrowing authority of $500 billion. A proposal to increase the
FDIC’s borrowing authority is pending in Congress, but no prediction can be made
as to whether it will be enacted and signed into law.
In
addition, all FDIC insured institutions are required to pay assessments to the
FDIC at an annual rate of approximately 1.14 basis points to fund interest
payments on bonds issued by the Financing Corporation, an agency of the federal
government established to recapitalize the predecessor to the Savings
Association Insurance Fund. These assessments will continue until the Financing
Corporation bonds mature in 2017 through 2019.
Under the
Federal Deposit Insurance Act, the FDIC may terminate the insurance of an
institution’s deposits upon a finding that the institution has engaged in unsafe
or unsound practices, rule, order or condition imposed by the FDIC. The
Company’s management does not know of any practice, condition or violation that
might lead to termination of deposit insurance.
Brokered Deposits.
Under FDICIA, an FDIC-insured bank is prohibited from accepting brokered
deposits unless it is well capitalized under the FDICIA's prompt corrective
actions guidelines. In January of 2003, the Company entered into an agreement
with Promontory Interfinancial Network making it possible to offer our customers
insurance protection for their deposits in excess of $250,000. This
Certificate of Deposit Account Registry Service (CDARS) uses a deposit-matching
engine to match CDARS deposits in other participating banks, dollar-
for-dollar. This product is designed to enhance customer attraction
and retention, build deposits and improve net interest margins, while providing
additional FDIC coverage to customers. Promontory now offers member
banks an opportunity to participate with one-way orders. Banks can
either accept deposits as a surplus bank or place deposits in CDARS offered by
banks seeking funding without matching funds. The Promontory
Interfinancial Network provides the Company an alternative source of funding or
investment opportunities, while at the same time increasing the level of FDIC
insurance available to deposit customers. The Company’s Asset,
Liability and Funds Management Policy limits the use of brokered deposits to 5%
of total assets.
Under a
rule change adopted by the FDIC in 2008, CDARS are considered brokered deposits,
except that CDARS made on a matching funds basis by well capitalized, well
managed depository institutions are not considered brokered deposits for
purposes of establishing a depository institution’s risk-adjusted deposit
assessment rate.
Consumer Protection and
Community Reinvestment Laws. The Bank is subject to a variety of federal
and state laws intended to protect borrowers, depositors and other Bank
customers and to promote lending to various sectors of the economy and
population. These laws include, but are not limited to, the Federal
Real Estate Settlement Procedures Act, the Federal Truth In Lending Act, the
Federal and Vermont Equal Credit Opportunity Acts, the Federal and Vermont Fair
Credit Reporting Acts, the Vermont Financial Privacy Act, the Federal Right to
Financial Privacy Act, the Federal Truth in Savings Act, the Federal Electronic
Funds Transfer Act, and the Federal Community Reinvestment Act
("CRA").
The CRA
requires banks to define the communities they serve, identify the credit needs
of those communities, collect and maintain data for each small business or small
farm loan originated or purchased by the Bank, and maintain a Public File at
each location. The federal banking regulators examine the institutions they
regulate for compliance with the CRA and assign one of the following four
ratings: “outstanding,” “satisfactory,” “needs to improve” or “substantial
noncompliance”. The rating assigned reflects the bank’s record of helping to
meet the credit needs of its entire community, including low- and
moderate-income neighborhoods, consistent with the safe and sound operation of
the bank. As of the Bank’s last CRA examination, completed during 2008, it
received a rating of “outstanding”.
Home Mortgage Disclosure
Act. The federal Home Mortgage Disclosure Act (“HMDA”), which
is implemented by Federal Reserve Board Regulation C, requires mortgage lenders
that maintain offices within Metropolitan Statistical Areas (MSAs) to report and
make available to the public specified information regarding their residential
mortgage lending activities, such as the pricing of home mortgage loans,
including the “rate spread” between the interest rate on loans and certain
treasury securities and other benchmarks. Community National Bank
became subject to HMDA reporting requirements as a result of its merger with
LyndonBank in 2007, as the former LyndonBank branch in Enosburg Falls in
Franklin County is included within the Burlington, Vermont MSA.
Reserve Requirements.
Federal Reserve Board Regulation D requires all depository institutions to
maintain reserves against their transaction accounts (generally, demand
deposits, NOW accounts and certain other types of accounts that permit payments
or transfers to third parties) or non-personal time deposits (generally, money
market deposit accounts or other savings deposits held by corporations or other
depositors that are not natural persons, and certain other types of time
deposits), subject to certain exemptions. Because required reserves
must be maintained in the form of either vault cash, a non-interest bearing
account at the Federal Reserve Bank of Boston or a pass through account (as
defined by the Federal Reserve Board), the effect of these reserve requirements
is to reduce the amount of the Company's interest-bearing assets.
Management
reviewed and reclassified the Company’s deposits during 2008, to the extent
permissible under Regulation D, resulting in a reduction in required
reserves.
Federal Home Loan Bank
System. Community National Bank is a member of the Federal
Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks.
The Federal Home Loan Bank provides a central credit facility primarily for
member institutions. Member institutions are required to purchase and hold
shares of capital stock in the applicable regional Federal Home Loan Bank (the
Federal Home Loan Bank of Boston, in the case of Community National Bank), in an
amount at least equal to the sum of 0.35% of the aggregate principal amount of
its unpaid residential mortgage loans and similar obligations at the beginning
of each year and 4.5% of its advances (borrowings) from the Federal Home Loan
Bank. Community National Bank was in compliance with this requirement with an
investment in Federal Home Loan Bank of Boston (FHLBB) stock at December 31,
2008 of approximately $3.3 million.
On
January 28, 2009, the FHLBB notified its members of its financial results for
2008 which included a net loss of $73.2 million due primarily to write-down of
mortgage-backed securities and of the actions it intends to take to strengthen
its financial position. These actions include a moratorium on excess
stock repurchases, an increased retained earnings target, and likely suspension
of quarterly dividends during 2009. During 2008, the Company received $121,267
in dividends from the FHLBB.
Effects of Government
Monetary Policy
The
earnings of the Company are affected by general and local economic conditions
and by the policies of various governmental regulatory
authorities. In particular, the Federal Reserve Board regulates money
and credit conditions and interest rates in order to influence general economic
conditions, primarily through open market operations in United States Government
Securities, varying the discount rate on member bank borrowings, setting reserve
requirements against member and nonmember bank deposits, and regulating interest
rates payable by member banks on time and savings deposits. Federal
Reserve Board monetary policies have had a significant effect on the operating
results of commercial banks, including the Company, in the past and are expected
to continue to do so in the future.
Other Available
Information
This
annual report on Form 10-K is on file with SEC. The Company also
files with the SEC quarterly reports on Form 10-Q and current reports on Form
8-K, as well as proxy materials for its annual meeting of
shareholders. You may obtain copies of these documents by visiting
the SEC’s Public Reference Room at 100F Street, NE, Washington,
DC 20549-0213, by calling the SEC at 1-800-SEC-0330 or by accessing
the SEC’s website at http://www.sec.gov.
The Company's SEC-filed reports and proxy statements are also available on the
Company's website at www.communitybancorpvt.com. The
Company has also posted on its website the Company’s Code of Ethics for Senior
Financial Officers and the Principal Executive Officer; the Insider Trading
Policy and the charters of the Audit, Compensation, and Nominating
Committees. The information and documents contained on the Company's
website do not constitute part of this report. Copies of the
Company's reports filed with the SEC (other than exhibits) can also be obtained
by contacting Chris Bumps, Corporate Secretary, at our principal offices, which
are located at 4811 U.S. Route 5, Derby, Vermont 05829 or by calling
(802) 334-7915.
Omitted,
in accordance with the regulatory relief available to smaller reporting
companies in SEC Release Nos. 33-8876 and 34-56994 (effective February 4,
2008).
Not
Applicable
Item
2. Properties
Although
Community Bancorp. does not itself own or lease real property, the Bank owns and
leases various properties for its banking operations. The Company's
administrative offices are located at the main offices of the
Bank. All of the Bank’s offices are located in Vermont. In
addition to the main office in Derby, the Bank maintains facilities in the
Cities of Newport, Montpelier and Barre; the Towns of Barton, Lyndon, Enosburg,
Morristown and St. Johnsbury, and the Villages of Island Pond, Troy, Derby Line,
and Lyndonville.
The
Bank's main offices are located on U.S. Route 5 in Derby, Vermont, in a
renovated 15,000 square foot two-story brick building with a 19,000 square foot
state of the art addition which was completed in 2006. The addition
houses an operations center as well as a community room used by the Bank for
meetings and various functions. This community room has a secure
outside access making it possible for the Bank to offer it to non-profit
organizations after banking hours free of charge. This office is
equipped with a remote drive-up facility and an additional ATM featuring
drive-up access.
The Bank
owns the Derby Line office located on Main Street in a renovated bank
building. The facility consists of a small banking lobby of
approximately 200 square feet with additional office space on the first and
second floor. This office is also equipped with a walk-up
ATM.
The
Bank's Island Pond office is located in the renovated "Railroad Station"
acquired by the town of Brighton in 1993. The Bank leases approximately
two-thirds of the downstairs including a banking lobby, a drive-up window, and
an ATM. The other portion of the downstairs is occupied by an
information center, and the upstairs section houses the Island Pond Historical
Society.
The
Bank's Barton office is located on Church Street, in a renovated
facility. This office is equipped with a banking lobby, a drive-up
window, and an ATM. The lease was entered into in 1985 with an
initial fifteen-year term, and was most recently renewed in 2000 for an
additional 15 years.
The Bank
owns condominium space in the state office building on Main Street in Newport to
house its Newport office. The Bank occupies approximately 3,084
square feet on the first floor of the building for a full service banking
facility equipped with an ATM and a remote drive-up facility. In
addition, the Bank owns approximately 4,400 square feet on the second floor, a
portion of which is leased to the Company’s Trust Company affiliate, CFSG, with
another portion leased to a law firm.
The Bank
owns the Troy office located in the village of Troy. This building
was built in 1986 and acquired by the Bank in 1992. This office is
also equipped with an ATM to provide the same type of limited 24-hour
accessibility as all of the other offices. The marketing department
is also located at this facility.
One of
the Company’s two St. Johnsbury offices is located at the corner of the I-91
Access Road and Route 5 in the town of St. Johnsbury. The Bank
occupies approximately 2,250 square feet in the front of the Price Chopper
building. Fully equipped with an ATM and a drive-up window, this office operates
as a full service banking facility. This space is leased from St.
Johnsbury Properties, Inc., a wholly owned subsidiary of Murphy Realty Co. Inc.
of St. Johnsbury. Peter Murphy, President of Murphy Realty, is a
director of the Company.
The
second St. Johnsbury office is a former LyndonBank office located on the
southern end of Railroad Street, which consists of approximately 1,600 square
feet. The Company leases the building that houses one office,
customer service areas and a small meeting room. This is a full
service facility consisting of a walk-up ATM in the front vestibule and a
two-lane drive-up window.
The Bank
leases approximately 1,500 square feet of office space for the Montpelier office
located at 95 State Street in Montpelier. This office opened at the
end of May, 2001, operating as a full service banking
facility. Additional space is leased nearby at 99 State Street to
accommodate a stand-alone drive-up ATM in a Kiosk building.
The Barre
office is a two-story, 8,000 square foot building located at 316 North Main
Street. This office was built on leased land in 2003. In
2007 the Company exercised an option to buy on the land, and now owns both the
building and the land. This building houses a full-service branch, a
two-lane drive-up window, including a drive-up ATM, as well as an inside lobby
ATM. The branch also includes a Community Room that is made available
as a public service to outside non-profit groups to be used for meetings and
gatherings at no charge.
The Bank
owns an office located on Broad Street in Lyndonville, which was formerly the
main office of LyndonBank. A portion of the building is one story
with a two-story addition on the back. The building is approximately
6,200 square feet. The first floor is used for customer services
while the second floor has clerical offices and a meeting room. The
building is primarily constructed of brick with a front exterior of polished red
granite. A walk-up ATM is located in the front entry
vestibule.
The
Memorial Drive office in the town of Lyndon, which is a former LyndonBank
branch, is a full service banking facility consisting of approximately 2,600
square feet with a 3-lane drive-up, one of which is exclusively for night drops
and ATM usage. This facility is leased from a neighboring business,
48 Broad Street, LLC, owned by David Stahler who is a former director of
LyndonBank and is now a member of Community National Bank’s Caledonia County
advisory board.
The Bank
owns a full service banking office in Enosburg, which is a former LyndonBank
office, consisting of approximately 3,056 square feet and houses offices and
customer service areas. The office has a drive-up ATM plus two
additional drive-through banking lanes.
The Bank
leases approximately 2,688 square feet of space for the Morrisville office,
which is a former LyndonBank office, located on Route 15 West in
Morristown. It is a one story building with a walk-up ATM in the
front vestibule and a two-lane drive-up window.
The Bank
owns an additional building on U.S. Route 5 in Derby, which is a former
LyndonBank office. This office was consolidated with the Bank’s main
office, also located on U.S. Route 5, on March 24, 2008 and is now
vacant.
The Bank
owned a two-story brick building and vacant lot on Elm Street in Lyndonville
which housed the deposit and loan operations of the former
LyndonBank. This building and lot were sold during the third quarter
of 2008 to a local non-profit organization.
The
Company’s subsidiary, Community National Bank, as successor by merger to
LyndonBank, is a party to a contract dispute with a service provider involving
disputed charges of approximately $72,000. The dispute is currently
in mediation and may proceed to binding arbitration if the parties are unable to
settle the matter. On December 31, 2008, the Company accrued a
contingent liability of $50,000 for this matter.
Except
for the foregoing, there are no pending legal proceedings to which the Company
or the Bank is a party or of which any of its property is the subject, other
than routine litigation incidental to its banking business none of which is
material to the Company's consolidated operations or financial
condition.
Item
4. Submission of Matters to a Vote of Security
Holders
None
PART II.
Information
on the trading market in, market price of, and dividends paid on, the Company's
common stock is incorporated by reference to the Annual Report to Shareholders
for 2008 in the section immediately following the “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” under the caption
"Common Stock Performance by Quarter". The balance of the information
required by item 201 of Regulation S-K is omitted in accordance with the
regulatory relief available to smaller reporting companies in SEC Release Nos.
33-8876 and 34-56994 (effective February 4, 2008).
The
following table provides information as to purchases of the Company’s common
stock during the fourth quarter ended December 31, 2008, by the Company and by
any affiliated purchaser (as defined in SEC Rule 10b-18):
|
Maximum
|
||||||||||||||||
|
Number
of Shares
|
||||||||||||||||
|
Total
Number of
|
That
May Yet Be
|
|||||||||||||||
|
Total
Number
|
Shares
Purchased
|
Purchased
Under
|
||||||||||||||
|
of
Shares
|
Average
Price
|
as
Part of Publicly
|
the
Plan at the
|
|||||||||||||
|
For the month ended:
|
Purchased(1)(2)
|
Paid Per Share
|
Announced Plan(3)
|
End of the Period(3)
|
||||||||||||
|
October
1 - October 31
|
0 | $ | 0 | N/A | N/A | |||||||||||
|
November
1 - November 30
|
13,400 | $ | 10.50 | N/A | N/A | |||||||||||
|
December
1 - December 31
|
0 | $ | 0 | N/A | N/A | |||||||||||
|
Total
|
13,400 | $ | 10.50 | N/A | N/A | |||||||||||
(1) All
13,400 shares were purchased for the account of participants invested in the
Company Stock Fund under the Company’s Retirement Savings Plan by or on behalf
of the Plan Trustee, the Human Resources Committee of Community National
Bank. Such share purchases were facilitated through Community
Financial Services Group, LLC (“CFSG”), which provides certain investment
advisory services to the Plan. Both the Plan Trustee and CFSG may be
considered affiliates of the Company under Rule 10b-18.
(2) Shares
purchased during the period do not include fractional shares repurchased from
time to time in connection with the participant's election to discontinue
participation in the Company's Dividend Reinvestment Plan.
(3)
In August, 2008, the Board of Directors terminated the buyback program that had
been in effect since April, 2000.
Omitted,
in accordance with the regulatory relief available to smaller reporting
companies in SEC Release Nos. 33-8876 and 34-56994 (effective Feb. 4,
2008).
Incorporated
by reference to the section immediately following the “Notes to Consolidated
Financial Statements” of the Annual Report to Shareholders for 2008, filed as
Exhibit 13 to this report.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
Incorporated
by reference to the section labeled "Risk Management", of Management's
Discussion and Analysis of Financial Condition and Results of Operation in the
Annual Report to Shareholders for 2008, filed as Exhibit 13 to this
report.
The
audited consolidated financial statements and related notes of Community
Bancorp. and Subsidiary and the report thereon of the independent registered
accounting firm of Berry, Dunn, McNeil & Parker, are incorporated herein by
reference from the Annual Report to Shareholders for 2008, filed as Exhibit 13
to this report.
In
accordance with the regulatory relief available to smaller reporting companies
in SEC Release Nos. 33-8876 and 34-56994 (effective Feb. 4, 2008), the Company
has elected to present audited statements of income, cash flows and changes in
shareholders’ equity for each of the preceding two, rather than three, fiscal
years.
None
Disclosure
Controls and Procedures
Management
is responsible for establishing and maintaining effective disclosure controls
and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934 (the “Exchange Act”). As of December 31, 2008, an evaluation
was performed under the supervision and with the participation of management,
including the principal executive officer and principal financial officer, of
the effectiveness of the design and operation of the Company’s disclosure
controls and procedures. Based on that evaluation, management
concluded that its disclosure controls and procedures as of December 31, 2008
were effective in ensuring that material information required to be disclosed in
the reports it files with the Commission under the Exchange Act was recorded,
processed, summarized, and reported on a timely basis.
Management’s
Report on Internal Control Over Financial Reporting
Management
is responsible for establishing and maintaining effective internal controls over
financial reporting, as defined in Rule 13a-15(f) under the Exchange
Act. As of December 31, 2008, an evaluation was performed under the
supervision and with the participation of management, including the principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of the Company’s internal controls over financial
reporting. Management assessed the Company’s system of internal
control over financial reporting as of December 31, 2008, in relation to
criteria for effective internal control over financial reporting as described in
“Internal Control – Integrated Framework,” issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment,
management believes that, as of December 31, 2008, its system of internal
control over financial reporting met those criteria and is
effective.
Management’s
report on internal control over financial reporting does not cover the internal
controls and procedures of LyndonBank, which was merged into the Company’s
subsidiary, Community National Bank, effective December 31, 2007. The
LyndonBank acquisition met the test for significance under section
3-05(b)(2)(iii) of SEC Regulation S-X.
This
Annual Report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to
attestation by the Company’s independent registered public accounting firm
pursuant to temporary rules of the Commission that permit the Company to provide
only management’s report in this Annual Report.
Changes
in Internal Control Over Financial Reporting
There
were no changes in the Company’s internal control over financial reporting that
occurred during the quarter ended December 31, 2008 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.
Not
Applicable
PART
III.
The
following is incorporated by reference to the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 12, 2009.
Listing
of the names, ages, principal occupations and business experience of the
incumbent directors and nominees under the caption "ARTICLE I - ELECTION OF
DIRECTORS."
Listing
of the names, ages, titles and business experience of the executive officers
under the caption EXECUTIVE OFFICERS."
Information
regarding compliance with Section 16(a) of the Securities Exchange Act of 1934
under the caption "SHARE OWNERSHIP INFORMATION -Section 16(a) Beneficial
Ownership Reporting Compliance."
Information
regarding changes in the Company’s procedures for submission of director
nominations by shareholders under the caption “SHAREHOLDER NOMINATIONS AND
PROPOSALS.”
Information
regarding whether a member of the Audit Committee qualifies as an audit
committee financial expert under applicable SEC rules, under the caption
"Corporate Governance - Board Committees."
The Code
of Ethics for Senior Financial Officers and the Principal Executive Officer is
available on the Company's website at www.communitybancorpvt.com. The
Code is also listed as Exhibit 14 to this report and incorporated by reference
to a prior filing with the SEC.
The
following is incorporated by reference to the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 12, 2009:
Information
regarding compensation of directors under the captions "ARTICLE I - ELECTION OF
DIRECTORS - Directors' Fees and Other Compensation" and "-Directors' Deferred
Compensation Plan."
Information
regarding executive compensation and benefit plans under the caption "EXECUTIVE
COMPENSATION."
The
report of the Compensation Committee under the caption “COMPENSATION COMMITTEE
REPORT.”
Information
regarding management interlocks and certain transactions under the caption
"CORPORATE GOVERNANCE - Compensation Committee Interlocks and Insider
Participation."
The
following is incorporated by reference to the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 12, 2009:
Information
regarding the share ownership of management and principal shareholders under the
caption "SHARE OWNERSHIP INFORMATION."
The
Company does not maintain any equity compensation plans for which disclosure is
required under Item 201(d) of SEC Regulation S-K.
The
following is incorporated by reference to the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 12, 2009:
Information
regarding transactions with management under the caption "CORPORATE GOVERNANCE
-Transactions with Management."
Information
regarding the independence of directors under the caption “CORPORATE GOVERNANCE
– Director Independence.”
Item
14. Principal Accounting Fees and Services
The
following is incorporated by reference to the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 12, 2009 under the caption
"ARTICLE 2- RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS - Fees Paid to
Independent Auditors":
Fees paid
to the principal accountant for various audit functions including, but not
limited to, the audit of the annual financial statements in the Company's Form
10-K Report and review of the financial statements in the Company's Form 10-Q
Reports.
Description
of the audit committee's pre-approval policies and procedures required by
paragraph (c) (7)(I) of rule 2-01of Regulation S-X.
PART IV.
(a) Financial
Statements
The
Company's audited consolidated financial statements and notes thereto and the
report of Berry, Dunn, McNeil & Parker thereon, are incorporated by
reference to the Annual Report to Shareholders for the years ended December 31,
2008 and 2007, filed as Exhibit 13 to this report.
(b) Exhibits
The
following exhibits, previously filed with the Commission, are incorporated by
reference:
Exhibit 3(i) - Amended and
Restated Articles of Association, filed as Exhibit 3.1 to the Company's Form
10-Q Report filed on August 13, 2008.
Exhibit 3(ii) – Certificate of
Creation, Designation, Powers, Preferences, Rights, Privileges, Qualifications,
Limitations, Restrictions, Terms and Conditions of the Series A
Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, filed as Exhibit
3(i) to the Company’s Form 8-K Report filed on December 31, 2007.
Exhibit 3(iii) - Amended and
Restated By-laws of Community Bancorp. as amended through October 7, 2008, filed
as Exhibit 3.1 to the Company’s Form 10-Q Report filed on November 13,
2008.
Exhibit 4(i) – Indenture dated
as of October 31, 2007 between Community Bancorp., as issuer and Wilmington
Trust Company, as indenture trustee, filed as Exhibit 4.1 to the Company’s Form
8-K Report filed on November 2, 2007.
Exhibit 4(ii) – Amended and
Restated Declaration of Trust dated as of October 31, 2007 among Community
Bancorp., as sponsor, Wilmington Trust Company, as Delaware and institutional
Trustee, and the administrators named therein, filed as Exhibit 4.2 to the
Company’s Form 8-K Report filed on November 2, 2007.
Exhibit 10(i) - Amended and
Restated Deferred Compensation Plan for Directors,* filed as Exhibit 10.2 to the
Company’s Form 8-K Report filed on December 15, 2008.
Exhibit 10(ii) - Amended and
Restated Supplemental Retirement Plan,* filed as Exhibit 10.1 to the Company’s
Form 8-K Report filed on December 15, 2008.
Exhibit 10(iii) - Officer
Incentive Plan,* filed as Exhibit 10.3 to the Company’s Form 8-K Report filed on
December 15, 2008.
Exhibit 10(iv) - Description
of the Directors Retirement Plan,* filed as Exhibit 10(iv) to the Company's Form
10-K Report filed on March 30, 2005; plan terminated in 2005 with respect to
future accruals, as disclosed in the Company's Form 8-K Report filed on December
19, 2005.
Exhibit 10(v) – Guarantee
Agreement dated as of October 31, 2007 between Community Bancorp., as guarantor
and Wilmington Trust Company, as guarantee trustee, filed as Exhibit 10.1 to the
Company’s Form 8-K Report filed on November 2, 2007.
Exhibit 10(vi) – Placement
Agreement dated October 30, 2007 among Community Bancorp., CMTV Statutory Trust
I, FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc., filed as
Exhibit 10.2 to the Company’s Form 8-K Report filed on November 2,
2007.
Exhibit 14 - Code of Ethics
for Senior Financial Officers and the Principal Executive Officer, filed as
Exhibit 14 to the Company’s Form 10-K Report on March 30, 2004.
The
following exhibits are filed as part of this report:**
Exhibit 13 - Portions of the
Annual Report to Shareholders of Community Bancorp. for 2008, specifically
incorporated by reference into this report.
Exhibit 21 - Subsidiaries of
Community Bancorp.
Exhibit 23 - Consent of Berry,
Dunn, McNeil & Parker
Exhibit 31.1 - Certification
from the Chief Executive Officer of the Company pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 31.2 - Certification
from the Chief Financial Officer of the Company pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.1 - Certification
from the Chief Executive Officer of the Company pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.2 - Certification
from the Chief Financial Officer of the Company pursuant to section 906 of the
Sarbanes-Oxley Act of 2002
* Denotes
compensatory plan or arrangement.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
COMMUNITY
BANCORP.
|
|
BY: /s/ Stephen P.
Marsh
|
Date: March
26, 2009
|
|
|
Stephen
P. Marsh, President
|
||
|
and
Chief Executive Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
BY: /s/ Stephen P. Marsh
|
Date: March
26, 2009
|
|
|
Stephen
P. Marsh, President and CEO
|
||
|
COMMUNITY
BANCORP. DIRECTORS
|
||
|
/s/ Thomas E. Adams
|
Date: March
26, 2009
|
|
|
Thomas
E. Adams
|
||
|
/s/ Charles W. Bucknam,
Jr.
|
Date: March
26, 2009
|
|
|
Charles
W. Buckman, Jr.
|
||
|
/s/ Aminta K. Conant
|
Date: March
26, 2009
|
|
|
Aminta
K. Conant
|
||
|
/s/ Jacques R. Couture
|
Date: March
26, 2009
|
|
|
Jacques
R. Couture
|
||
|
/s/ Elwood G.
Duckless
|
Date: March
26, 2009
|
|
|
Elwood
G. Duckless
|
||
|
/s/ Rosemary M.
Lalime
|
Date: March
26, 2009
|
|
|
Rosemary
M. Lalime
|
||
|
/s/ Marcel Locke
|
Date: March
26, 2009
|
|
|
Marcel
Locke
|
||
|
/s/ Stephen P. Marsh
|
Date: March
26, 2009
|
|
|
Stephen
P. Marsh
|
||
|
/s/ Dorothy R.
Mitchell
|
Date: March
26, 2009
|
|
|
Dorothy
R. Mitchell
|
||
|
/s/ Anne T. Moore
|
Date: March
26, 2009
|
|
|
Anne
T. Moore
|
||
|
/s/ Peter J. Murphy
|
Date: March
26, 2009
|
|
|
Peter
J. Murphy
|
||
|
/s/Richard C. White
|
Date: March
26, 2009
|
|
|
Richard
C. White
|
||