Community Bancorp. 2014 Form 10-K Summary
Business Context and Reporting Period
Community Bancorp. is a Vermont bank holding company whose primary operating subsidiary is Community National Bank. The filing covers the fiscal year ended December 31, 2014, and was filed March 24, 2015. The Bank serves consumers, businesses, municipalities and nonprofit organizations through 14 Vermont banking offices and related electronic and ATM channels, primarily in northern and central Vermont.
- Key activities include commercial, commercial real estate, residential real estate and consumer lending; retail, business and municipal banking; and trust and investment management services through affiliated Community Financial Services Group, LLC.
- The Company had no holding-company employees at year-end; the Bank had 130 full-time and 14 part-time employees.
- Community Bancorp. qualified as a smaller reporting company and used the related disclosure accommodations.
Financial Metrics, Capital and Liquidity
The filing incorporates the audited consolidated financial statements and management’s discussion from the 2014 Annual Report to Shareholders. The supplied filing text does not provide clear values for revenue, net income, earnings per share, net interest margin, total assets, loans, deposits, cash flow, allowance for loan losses, debt balances, liquidity ratios or year-over-year income statement changes.
| Metric | Reported value |
|---|---|
| Company Tier 1 leverage ratio at December 31, 2014 | 8.62% |
| Company Tier 1 risk-based capital ratio | 12.31% |
| Company total risk-based capital ratio | 13.66% |
| Bank Tier 1 leverage ratio | 8.61% |
| Bank Tier 1 risk-based capital ratio | 12.30% |
| Bank total risk-based capital ratio | 13.54% |
| FDIC insurance assessment for 2014 | $374,703 |
| CDARS deposits at December 31, 2014 | $1,109,167 |
| FHLB of Boston stock at December 31, 2014 | Approximately $2.7 million |
Management stated that the Company and Bank exceeded applicable capital requirements. The Bank was classified as well capitalized under FDICIA. Management also stated that both entities would meet Basel III capital requirements on a fully phased-in basis based on December 31, 2014 data. The Company’s existing $12.5 million trust preferred securities were grandfathered as regulatory capital under applicable rules.
Material Changes Versus the Prior Comparable Period
- The filing provides comparative financial statements for 2014 and 2013, but the supplied text does not include the underlying financial amounts or a clear discussion of changes in results.
- Basel III capital standards became effective for community banking organizations on January 1, 2015, introducing new common equity Tier 1 requirements, higher Tier 1 requirements, capital conservation buffers and revised asset risk weights.
- The Bank’s last Community Reinvestment Act examination, completed during 2014, resulted in an “outstanding” rating.
- There were no Company or affiliated-purchaser repurchases of common stock during the fourth quarter of 2014.
- After year-end, the Bank purchased its Barton branch property on March 19, 2015; the property had been leased previously.
Guidance, Outlook, Risks and Unusual Items
No quantitative earnings or financial guidance is provided in the supplied filing text. Management emphasized local-market relationships, community ties and continued service to individuals and small-to-medium-sized businesses. The Company operates in a competitive market that includes banks, credit unions, nonbank lenders, nationwide institutions and technology-enabled financial providers.
- Interest rates, Federal Reserve monetary policy, local and general economic conditions and regulatory changes may materially affect earnings.
- Mortgage lending is subject to the ability-to-repay and qualified mortgage rules effective January 10, 2014. Management expects most mortgage originations to qualify as QMs, but noted potential litigation, compliance-cost and profitability risks.
- Commercial real estate, residential real estate and other lending expose the Bank to credit concentration, collateral valuation and economic-cycle risks.
- The Federal Home Loan Bank system may make future capital calls, and FHLB stock dividends and redemptions may be affected by the FHLB’s financial condition.
- CDARS deposits are treated as brokered deposits for certain purposes, although the Company reported that all of its CDARS deposits were exchanged deposits and that its policy limits brokered deposits to 5% of total assets.
- Potential changes in banking legislation and regulation could increase compliance requirements and operating costs.
- The Company reported no material pending legal proceedings other than routine litigation incidental to banking.
- Management concluded that disclosure controls and internal control over financial reporting were effective at December 31, 2014. No auditor attestation report was required because of the Company’s smaller reporting company status.
Important Facts for Investors to Verify
- Review Exhibit 13 and the incorporated Annual Report for 2014 revenue, net income, EPS, margins, balance-sheet growth, loan quality, provisions, cash flows, deposits, borrowings and liquidity.
- Compare 2014 and 2013 net interest income, noninterest income, operating expenses and credit costs to identify the principal drivers of performance.
- Assess loan concentrations, nonperforming assets, delinquencies, charge-offs and allowance coverage, particularly for commercial and real estate exposures.
- Confirm the effect of Basel III implementation beginning January 1, 2015 and the Company’s ability to maintain capital above distribution-related thresholds.
- Review dividend history and the Company’s ability to fund dividends from subsidiary-bank earnings while maintaining regulatory capital.
- Evaluate exposure to mortgage compliance, interest-rate changes, competition from credit unions and nonbank providers, FHLB capital calls and regulatory costs.