Community Bancorp. 2013 Form 10-K Summary
Business Context and Reporting Period
Community Bancorp. is a Vermont bank holding company whose principal operating subsidiary is Community National Bank. The Bank provides commercial, municipal, residential real estate, consumer and retail banking services across northern and central Vermont through 14 banking offices and related ATM locations. The filing covers the fiscal year ended December 31, 2013; the source text also includes fourth-quarter 2013 share-purchase activity.
- The Company had no holding-company employees; the Bank employed 131 full-time and 20 part-time employees at year-end.
- Community Financial Services Group, LLC provides trust and investment-management services through an affiliated structure.
- The Company remains a smaller reporting company and its common stock trades on the OTC Link ATS system.
Financial Metrics and Capital
The provided filing text incorporates the audited financial statements and management’s discussion from the 2013 Annual Report to Shareholders by reference, but does not reproduce the underlying income statement, balance sheet or cash-flow amounts. Consequently, the filing text provided here does not supply clear values for revenue, net income, earnings per share, total assets, loans, deposits, net interest margin, allowance for loan losses, operating cash flow or liquidity balances.
- Company regulatory capital ratios at December 31, 2013: Tier 1 leverage 8.04%, Tier 1 risk-based 11.48% and total risk-based 13.09%.
- Bank regulatory capital ratios: Tier 1 leverage 8.20%, Tier 1 risk-based 11.72% and total risk-based 12.97%.
- The Bank was classified as well capitalized under applicable FDICIA requirements.
- The Bank’s 2013 FDIC insurance assessment was $376,022.
- CDARS deposits were $1.103 million at December 31, 2013, all exchanged deposits.
- The Bank held approximately $3 million of Federal Home Loan Bank of Boston stock.
- The Company’s statutory business trust issued $12.5 million of trust preferred securities in 2007; the securities were described as grandfathered for Tier 1 capital purposes under applicable rules.
- During December 2013, 2,500 shares were purchased for retirement-plan participants at an average price of $13.50 per share. No shares were purchased in October or November.
Material Changes Versus the Prior Comparable Period
The provided text does not contain the comparative 2012 financial statements or sufficient operating data to quantify changes in revenue, profitability, margins, assets, loans, deposits, cash flow or credit quality. It states that audited statements for 2013 and 2012 are incorporated by reference.
- Management stated that it reviewed and reclassified deposits during both 2013 and 2012, reducing required reserves.
- Regulatory capital rules scheduled to become effective January 1, 2015 will introduce Common Equity Tier 1 requirements, higher Tier 1 thresholds, expanded deductions and a capital-conservation buffer.
- Management believed the Company and Bank would satisfy fully phased-in Basel III capital requirements based on their December 31, 2013 positions.
Outlook, Risks, Contingencies and Unusual Items
- Key business risks include intense competition from banks, credit unions and nonbank financial firms, interest-rate and monetary-policy changes, local economic conditions, credit risk and regulatory developments.
- The Company faces increased compliance requirements under the Dodd-Frank Act, consumer-protection rules, privacy and anti-money-laundering laws, and future capital regulations.
- Qualified Mortgage and ability-to-repay rules became effective January 10, 2014. Management expected most mortgage originations to qualify, but noted potential compliance costs, profitability pressure and litigation or foreclosure-enforcement risks for non-qualified mortgages.
- The Bank may face future capital calls from the Federal Home Loan Bank of Boston.
- Dividend capacity depends primarily on dividends from the Bank and is subject to statutory limits, capital requirements and possible regulatory restrictions.
- No material pending legal proceedings were reported beyond routine litigation incidental to banking operations.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2013. No material changes in internal control were reported during the fourth quarter.
- The filing text does not provide specific earnings guidance or a quantified operating outlook.
Important Facts for Investors to Verify
- Obtain Exhibit 13, the 2013 Annual Report to Shareholders, to verify annual and quarterly revenue, net income, EPS, cash flow, assets, deposits, loans, margins, credit quality and liquidity.
- Review the 2013-to-2012 changes in net interest income, provision for loan losses, noninterest income, operating expenses and net income.
- Assess loan concentrations, nonperforming assets, charge-offs, reserve coverage and exposure to commercial real estate.
- Confirm dividend amounts, payout ratios and any restrictions imposed by bank regulators.
- Evaluate the effect of Basel III implementation and Qualified Mortgage compliance on capital, lending volume, costs and profitability.
- Review the trust-preferred securities, FHLB obligations and any other borrowing or off-balance-sheet commitments.
- Confirm the terms and market liquidity of the OTC-traded common stock.