COMMUNITY BANCORP annual report, FY2012

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Community Bancorp. — FY2012 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 retail, commercial, municipal, mortgage and consumer banking services across northern and central Vermont, supported by a core deposit base and local customer relationships. The filing covers the fiscal year ended December 31, 2012, and was filed March 28, 2013.

The Company had no holding-company employees at year-end; the Bank employed 130 full-time and 24 part-time employees. The Company had 4,810,735 common shares outstanding as of March 14, 2013 and qualified as a smaller reporting company.

Financial Metrics, Capital and Liquidity

  • The filing text provided does not include clear values for consolidated revenue, net income, net interest income, earnings per share, total assets, loans, deposits, cash flow, margins, total debt or liquidity balances. These statements are incorporated by reference to the 2012 Annual Report to Shareholders, which is not included in the supplied text.
  • At December 31, 2012, consolidated total capital to risk-weighted assets was 12.57%, Tier 1 capital to risk-weighted assets was 10.80%, and the leverage ratio was 7.27%.
  • Management stated that Community Bancorp. had sufficient regulatory capital to be considered well capitalized. Community National Bank was also considered well capitalized under FDICIA.
  • The Bank’s 2012 FDIC insurance assessment was $389,909.
  • At December 31, 2012, CDARS deposits were $1.03 million and Insured Cash Sweep deposits were $13.53 million. The Company’s policy limited brokered deposits to 5% of total assets.
  • The Bank held approximately $3.4 million of Federal Home Loan Bank of Boston stock and remained subject to potential future capital calls by the FHLBB.

Material Changes Versus the Prior Comparable Period

  • The supplied filing does not provide sufficient income-statement, balance-sheet or cash-flow data to quantify changes from 2011.
  • Management reported no changes during the fourth quarter that materially affected, or were reasonably likely to materially affect, internal control over financial reporting.
  • No Company or affiliated purchaser repurchased common stock during the fourth quarter of 2012.
  • Temporary unlimited FDIC coverage for non-interest-bearing transaction accounts expired on December 31, 2012.

Outlook, Risks, Contingencies and Unusual Items

  • The Company operates in a highly competitive market involving banks, credit unions, national lenders, nonbank financial firms and remote-service providers. Credit unions’ tax advantages and broader fields of membership were identified as competitive pressures.
  • Results are sensitive to economic conditions, interest rates, Federal Reserve monetary policy, credit quality, deposit pricing, regulatory requirements and the Company’s ability to maintain its capital position.
  • Proposed Basel III rules could increase capital, liquidity and risk-weighting requirements and could affect the treatment of unrealized securities gains and losses and trust preferred securities. The ultimate impact was not determinable at filing.
  • Existing $12.5 million of trust preferred securities were described as grandfathered for Tier 1 capital purposes because the Company had less than $15 billion in consolidated assets; the Company could not rely on new trust preferred securities for future Tier 1 capital.
  • The Bank’s FDIC insurance assessment formula is based on assets less tangible equity, and assessment rates may change.
  • There were no material pending legal proceedings other than routine litigation incidental to banking operations.
  • No specific earnings, balance-sheet or operating guidance was provided in the supplied filing text.
  • Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2012. The external auditor was not required to provide an internal-control attestation because of the Company’s smaller reporting company status.

Key Facts Investors Should Verify

  • Obtain the incorporated 2012 Annual Report to Shareholders for consolidated revenue, net income, earnings per share, assets, loans, deposits, allowance for loan losses, cash flows, margins, debt and liquidity measures.
  • Compare 2012 net interest income, provision for loan losses, noninterest income, operating expenses and net income with 2011.
  • Review loan portfolio composition, delinquency and nonperforming-asset trends, charge-offs and reserve coverage.
  • Assess the sustainability of the 12.57% total risk-based capital ratio and the effect of Basel III and other regulatory changes.
  • Review maturity, pricing and funding risks associated with deposits, FHLBB borrowings, trust preferred securities and brokered or exchanged deposits.
  • Verify dividend history, payout capacity and any regulatory limitations on future dividends.