Business Context and Reporting Period
Company: Community Bancorp. (Vermont)
Reporting Period: Fiscal year ended December 31, 2009
Business Overview: Community Bancorp. is a bank holding company operating primarily through its wholly-owned subsidiary, Community National Bank. The Bank provides retail banking services, including deposits, loans, and trust services, to residents and businesses in northeastern and central Vermont. The Company completed the acquisition of LyndonBank in December 2007. As of December 31, 2009, the Company employed 161 full-time and 20 part-time employees at the Bank level, with no employees at the holding company level.
Regulatory Status: The Company is classified as a "smaller reporting company." Both the Company and the Bank were considered "well capitalized" under applicable regulatory guidelines as of December 31, 2009.
Key Financial Metrics
Note: Specific revenue, profit, and cash flow figures are incorporated by reference to the Annual Report to Shareholders (Exhibit 13) and are not explicitly detailed in the provided text. The following metrics are available from the filing text:
- Consolidated Assets: Exceeded $500 million for the first time as of December 31, 2009.
- Regulatory Capital Ratios (Dec 31, 2009):
- Total Capital to Risk-Weighted Assets: 11.57%
- Tier 1 Capital to Risk-Weighted Assets: 10.58%
- Leverage Ratio: 7.50%
- Stock Information:
- Shares Outstanding (as of March 23, 2010): 4,550,745
- Market Value of Voting Stock (as of June 30, 2009): $32,687,728
- Share Price (June 30, 2009): $8.00
- FDIC Assessments: The Company prepaid approximately $2.4 million in FDIC assessments in 2009, with approximately $286,596 expensed in the fourth quarter.
- Brokered Deposits: Approximately $17.2 million in CDARS deposits as of December 31, 2009.
Material Changes and Operational Updates
- Dividend Policy Adjustment: In response to Federal Reserve guidance and economic conditions, the Company reduced its dividend payout ratio to 60.76% in 2009, down from 147.83% in 2008. Management does not expect dividend rates to return to 2008 levels.
- Asset Growth: Gross assets exceeded the $500 million threshold for the first time in 2009, triggering potential changes in reporting frequency (though quarterly reporting was not yet required at the time of filing).
- Capital Structure: In 2007, the Company formed CMTV Statutory Trust I to issue $12.5 million of trust preferred securities to fund the LyndonBank acquisition and provide regulatory capital.
- Real Estate: The Company owns a vacant building in Derby (formerly a LyndonBank branch) that is being marketed for sale.
Guidance, Outlook, and Risks
Management Commentary and Outlook:
- Management emphasizes community orientation and personal relationships as competitive advantages against larger regional and national banks.
- The Company declined to participate in the Treasury Department's Capital Purchase Program (CPP) due to its sound capital position and concerns regarding regulatory conditions.
- Management expects to continue incurring costs related to Sarbanes-Oxley Section 404 compliance.
Risks and Contingencies:
- Competition: Intense competition from large banks (e.g., TD Bank, Chittenden Bank) and credit unions that have expanded their fields of membership and product offerings.
- Regulatory Changes: Potential new legislation could increase reporting requirements, compliance costs, and create a new consumer financial protection agency.
- FDIC Assessments: The FDIC has increased assessment rates and imposed emergency special assessments. Future increases or additional special assessments are possible.
- Monetary Policy: Earnings are sensitive to Federal Reserve monetary policies affecting interest rates and credit conditions.
- Executive Compensation: New Federal Reserve guidance requires a review of incentive compensation to ensure it does not encourage excessive risk-taking.
Investor Verification Checklist
- Verify the specific revenue, net income, and cash flow figures in the Annual Report to Shareholders (Exhibit 13), as these are not detailed in the 10-K text.
- Confirm the impact of the $2.4 million FDIC prepayment on 2009 liquidity and future cash flow projections.
- Review the "Risk Management" section in the Annual Report to Shareholders for details on interest rate risk and market risk.
- Monitor the status of the vacant Derby property sale and its potential impact on asset quality or capital.
- Assess the long-term implications of the reduced dividend payout ratio on shareholder returns versus capital preservation.