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, 2006
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
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Vermont
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03-0284070
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(State
of Incorporation)
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(IRS
Employer Identification Number)
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Address
of Principal Executive Offices: 4811 US Route 5, Derby,
Vermont 05829
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Registrant's
telephone number, including area code: (802) 334-7915
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of Each Class
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Name
of each exchange on which registered
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NONE
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NONE
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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, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer ( )
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Accelerated
filer ( )
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Non-accelerated
filer (X)
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES
( ) NO(X)
As
of
June 30, 2006, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $47,068,007, based on a per share trade
price of $13.00, as reported on the OTC Bulleting Board® on June 28, 2006 (the
date of the last reported sale prior to July 1, 2006). 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 4,145,436 shares outstanding of the issuer's class of common stock as
of
the close of business on March 16, 2007.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Annual Report to Shareholders for the year ended December 31, 2006
are
incorporated by reference to Part II.
Portions
of the Proxy Statement for the Annual Meeting of Shareholders to be held
May 15,
2007
are
incorporated by reference to Part III.
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FORM
10-K ANNUAL REPORT
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PART
I
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Page
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Item
1
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4
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Item
1A
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10
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Item
1B
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13
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Item
2
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13
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Item
3
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14
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Item
4
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14
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PART
II
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Item
5
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15
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Item
6
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15
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Item
7
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Item
7A
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15
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Item
8
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15
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Item
9
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16
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Item
9A
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16
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Item
9B
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16
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PART
III
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Item
10
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16
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Item
11
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17
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Item
12
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Matters
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Item
13
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Item
14
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PART
IV
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Item
15
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18
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19
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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."
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 eight third party business locations in the counties of
Orleans, Washington and Caledonia.
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 area of the three owner
financial institutions.
Competition
The
Bank
has five banking offices located in Orleans County, one office in Essex County,
one office in Caledonia County, and two offices in Washington County. Its
primary service area is in the Town of Derby and City of Newport, Vermont
in
Orleans County, with approximately 50% of its total deposits derived from
the
Company's Derby, Derby Line and Newport offices as of December 31,
2006.
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, the Chittenden Bank based in Burlington, Vermont
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 two local banks, Lyndonville Savings Bank and Trust Company, based in
Lyndonville and 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.,
Lyndonville Savings Bank and Trust Company, 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.
Changes
in the regulatory framework of the banking industry during the past decade
or so
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. 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, 2006, the Company did not have any employees at the holding
company
level. However, as of such date, the Bank employed 119 full-time employees
and
16 part-time employees. 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.
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”). 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. The American Bankers
Association has been active in efforts to bring relief to smaller public
companies by supporting the scaling of regulatory treatment based on size.
Last
year a special Advisory Committee on Smaller Public Companies appointed by
the
SEC recommended that smaller public companies, such as the Company, be granted
relief from the burdensome internal control and related external audit
attestation requirements of Section 404 of Sarbanes-Oxley (“SOX 404”). However,
at this time it is unclear whether, and to what extent, the SEC will accept
and
implement the Advisory Committee's recommendations.
Management
is in the process of preparing for the internal control reporting requirements
of SOX 404.
Unless
further relief is granted to smaller public companies during 2007, the Company
will be required to comply with certain portions of Section 404 of
Sarbanes-Oxley for its 2007 year-end financial statements, with full compliance
required in 2008. Section 404 requires management to undertake an assessment
of
the adequacy and effectiveness of the Company’s internal controls over financial
reporting and requires the Company’s auditors to attest to, and report on,
management’s assessment and the operating effectiveness of these controls. The
Company has incurred, and expects to continue to incur, costs in connection
with
its compliance with Section 404.
More
information on the Company’s corporate governance practices is available on the
Company’s website at www.communitybancorpvt.com.
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.
Capital
and Operational Requirements.
The
Federal Reserve Board, the Office of the Comptroller of the Currency (the
"OCC")
and other banking regulators have issued substantially similar risk-based
and
leverage capital guidelines applicable to U.S. banking organizations. In
addition, those regulatory agencies may from time to time require that a
banking
organization maintain capital above the minimum levels, whether because of
its
financial condition or actual or anticipated growth. The Federal Reserve
Board
risk-based guidelines define a three-tier capital framework. "Tier 1 capital"
generally consists of common and qualifying preferred shareholders' equity,
less
certain intangibles and other adjustments. "Tier 2 capital" and "Tier 3 capital"
generally consist of subordinated and other qualifying debt, preferred stock
that does not qualify as Tier 1 capital and the allowance for credit losses
up
to 1.25% of risk-weighted assets.
The
sum
of Tier 1, Tier 2 and Tier 3 capital, less investments in unconsolidated
subsidiaries, represents qualifying "total capital," at least 50% of which
must
consist of Tier 1 capital. Risk-based capital ratios are calculated by dividing
Tier 1 capital and total capital by risk-weighted assets. Assets and off-balance
sheet exposures are assigned to one of four categories of risk weights, based
primarily on relative credit risk. The minimum Tier 1 capital ratio is 4%
and
the minimum total capital ratio is 8%. The "leverage ratio" requirement is
determined by dividing Tier 1 capital by adjusted average total assets. Although
the stated minimum ratio is 3%, most banking organizations are required to
maintain ratios of at least 100 to 200 basis points above 3%.
Prompt
Corrective Action.
The
Federal Deposit Insurance Company Improvement Act of 1991 ("FDICIA"), among
other things, 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 of at least 6%, a total capital ratio 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 of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4%, or 3% in some cases.
As
of
December 31, 2006, both Community Bancorp. and Community National Bank were
considered "well capitalized" under all applicable regulatory 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 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. The federal banking agencies have
indicated that paying dividends that deplete a bank's capital base to an
inadequate level would be an unsound and unsafe banking practice and that
banking organizations should generally pay dividends only out of current
operating earnings.
"Source
of Strength" Policy.
According to Federal Reserve Board policy, bank holding companies are expected
to act as a source of financial strength to each subsidiary bank and to commit
resources to support each such subsidiary. This support may be required at
times
when a bank holding company may not be able to provide such support. Similarly,
under the cross-guarantee provisions of the Federal Deposit Insurance Act,
in
the event of a loss suffered or anticipated by the Federal Deposit Insurance
Corporation (the "FDIC")--either as a result of default of a banking subsidiary
of a bank holding company or related to FDIC assistance provided to a subsidiary
in danger of default--the other banking subsidiaries of such bank holding
company may be assessed for the FDIC's loss, subject to certain exceptions.
OCC
Supervision; FDIC Deposit Insurance.
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. The deposits of the Bank are insured by the FDIC. Accordingly,
the Bank is also subject to the provisions of the Federal Deposit Insurance
Act.
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 2005, it
received a rating of “outstanding”.
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 $100,000. 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.
Due
to
the nature of the placement of funds, CDARS deposits are considered to be
“brokered deposits.” Although it has been the Company’s policy in the past not
to accept any brokered deposits, management and the directors deemed it
advisable to make a limited exception for the CDARS program. Accordingly,
the
Company’s Asset Liability policy now states that the Company will not accept
brokered deposits, other than through the CDARS program in the Promontory
Interfinancial Network. To date, the amount of brokered deposits accepted
through the CDARS program is not considered by management to be
material.
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
expects to review deposit classifications during 2007, with a view toward
reclassifying deposits, to the extent permissible under Regulation D, to
reduce
required reserves.
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.
Industry
Factors
Investments
in Community Bancorp. stock involve risk. The following discussion highlights
risks that management believes are material for our Company, but does not
necessarily include all risks that the Company may face.
Fluctuations
in interest rates could adversely affect our business
Significant
increases in market interest rates, or the perception that an increase may
occur, could adversely affect both our ability to originate new loans and
our
ability to grow. Conversely, decreases in interest rates could result in
an
acceleration of loan prepayments. An increase in market interest rates could
also adversely affect the ability of our floating-rate borrowers to meet
their
higher payment obligations. If this occurred, it could cause an increase
in
nonperforming assets and charge-offs, which could adversely affect our
business.
Significant
increases in market interest rates could also affect our cost of funds by
requiring us to increase the rates we pay on interest bearing deposits and
other
liabilities and by providing an incentive for depositors to more rapidly
move
funds into higher yielding deposits and investments. Also, such increases
in
market rates could increase our borrowing costs.
Fluctuations
in interest rates could adversely affect our margin spread
Changes
in market interest rates, including changes in the relationship between
short-term and long-term market interest rates or between different interest
rate indices, can impact our margin spread, that is, the difference between
the
interest rates we charge on interest earning assets, such as loans, and the
interest rates we pay on interest bearing liabilities, such as deposits or
other
borrowings. The impact could result in a decrease in our interest income
relative to interest expense.
Substantial
competition could adversely affect us
Banking
is a highly competitive business. We compete actively for loan, deposit,
and
other financial services business in northeastern and central Vermont. Our
competitors include a number of state and national banks and credit unions,
as
well as financial and nonfinancial firms that offer services similar to those
offered by us. Some of our competitors are community or regional banks that
have
strong local market positions. Our large regional bank competitors, in
particular, have substantial capital, technology and marketing resources
that
are well in excess of ours. Such large regional financial institutions may
have
greater access to capital at a lower cost and a higher per-borrower lending
limit than our company, which may adversely affect our ability to compete
with
them effectively.
There
are an increasing number of non-bank and out-of-market competitors providing
financial services
Technology
and other changes increasingly allow parties to complete financial transactions
electronically, without the need for a physical presence in a market area.
We
are therefore likely to face increasing competition from out-of-market
competitors. In addition, in many cases transactions may now be completed
without the involvement of banks. For example, consumers can pay bills and
transfer funds over the Internet and by telephone without banks. Many non-bank
financial service providers have lower overhead costs and are subject to
fewer
regulatory constraints. If consumers do not use banks to complete their
financial transactions, we could potentially lose fee income, deposits and
income generated from those deposits.
Adverse
effects of, or changes in, banking or other laws and regulations or governmental
fiscal or monetary policies could adversely affect us
We
are
subject to significant federal regulation and supervision and to certain
state
requirements. These laws and regulatory supervision are primarily for the
benefit and protection of our customers and not for the benefit of investors.
Laws, regulations or policies, including accounting standards and
interpretations, currently affecting us and our subsidiary may change at
any
time. Regulatory authorities may also change their interpretation of these
statutes and regulations. Therefore, our business may be adversely affected
by
changes in laws, regulations, policies or interpretations or regulatory
approaches to compliance and enforcement.
Additionally,
our business is affected significantly by the fiscal and monetary policies
of
the U.S. federal government and its agencies. We are particularly affected
by
the policies of the Federal Reserve Board, which regulates the supply of
money
and credit in the U.S. Under long-standing policy of the Federal Reserve
Board,
a bank holding company is expected to act as a source of financial strength
for
its subsidiary banks. As a result of that policy, we may be required to commit
financial and other resources to our subsidiary bank in circumstances where
we
might not otherwise do so. Among the instruments of monetary policy available
to
the Federal Reserve Board are (a) conducting open market operations in U.S.
government securities, (b) changing the discount rates on borrowings by
depository institutions, and (c) imposing or changing reserve requirements
against certain borrowings by banks and their affiliates. These methods are
used
in varying degrees and combinations to directly affect the availability of
bank
loans and deposits, as well as the interest rates charged on loans and paid
on
deposits. The policies of the Federal Reserve Board may have a material effect
on our business, prospects, results of operations and financial
condition.
See
“Supervision and Regulation” under Item 1 above for discussion of other laws and
regulations that may have a material effect on our business, prospects, results
of operations and financial condition.
Changes
in accounting standards could materially impact our financial
statements
From
time
to time the Financial Accounting Standards Board and the SEC change the
financial accounting and reporting standards that govern the preparation
of our
financial statements. These changes can be very difficult to predict and
can
materially impact how we record and report our financial condition and results
of operations. In some cases, we could be required to apply a new or revised
standard retroactively, resulting in our restating prior period financial
statements. Implementation of accounting changes, with associated professional
consultation and advice, can be costly, even if the change will not have
any
material impact on the Company’s financial statements.
Company
Factors
Allowance
for loan losses may be insufficient
We
maintain an allowance for loan losses based on, among other things, our estimate
of local and regional economic conditions, historical loss experience and
delinquency trends. However, we cannot predict loan losses with certainty,
and
cannot ensure that charge-offs in future periods will not exceed the allowance
for loan losses. If charge-offs exceed our allowance, our earnings would
decrease. In addition, the Comptroller of the Currency reviews our allowance
for
loan losses from time to time and may require additions to the allowance
based
on their judgment about information available to them at the time of their
examination. An increase in our allowance for loan losses would require a
charge
against earnings.
Adverse
local economic conditions could negatively impact our business
Substantially
all of our assets, deposits and fee income is generated in northeastern Vermont.
As a result, poor economic conditions in northeastern Vermont may cause us
to
incur losses associated with higher default rates and decreased collateral
values in our loan portfolio. Our primary market area is located in the poorest
region of Vermont. Economic conditions in northeastern Vermont are subject
to
various uncertainties, to a greater degree than other regions of the state.
If
economic conditions in northeastern Vermont decline, we expect that our level
of
problem assets could increase and our prospects for growth could be impaired.
Adverse
economic factors affecting certain industries we serve could adversely affect
our business
We
are
subject to certain industry-specific economic factors. For example, a
significant and increasing portion of our total loan portfolio is related
to
residential real estate, especially in northeastern Vermont. Accordingly,
a
downturn in the real estate and housing industries in northeastern Vermont
could
have an adverse effect on our operations and the quality of our real estate
loan
portfolio. Increases in residential mortgage loan interest rates could also
have
an adverse effect on our operations by depressing new mortgage loan
originations. We provide financing to businesses in a number of other industries
that may be vulnerable to industry-specific economic factors. Industry-specific
risks are beyond our control and could adversely affect our portfolio of
loans,
potentially resulting in an increase in nonperforming loans or charge-offs
and a
slowing of growth or reduction in our loan portfolio.
We
are
not able to offer all of the financial services and products of a financial
holding company
Banks,
securities firms, and insurance companies can now combine under a “financial
holding company” umbrella. Financial holding companies can offer virtually any
type of financial service, including banking, securities underwriting, insurance
(both agency and underwriting), and merchant banking. Some of our competitors
have elected to become financial holding companies.
Our
common stock is not traded on any securities exchange
Our
common stock is not traded on any securities exchange. Trades in our stock
affected by certain brokerage firms are reported on the Over-the-Counter
(OTC)
Bulletin Board maintained by the NASD, but trading in the stock is sporadic.
Therefore, an investment in our stock is not as liquid as an investment in
a
company whose stock is actively traded on an exchange.
Restrictions
on dividends and other distributions could limit amounts payable to
us
As
a
holding company, our cash flow typically comes from dividends our bank
subsidiary pays to us. Statutory provisions restrict the amount of dividends
our
subsidiary can pay to us without regulatory approval. In addition, if our
subsidiary were to liquidate, its creditors would be entitled to receive
distributions from assets to satisfy their claims against it before we, as
a
holder of an equity interest in the subsidiary, would be entitled to receive
any
of such assets.
We
rely on third parties for important products and services
Third-party
vendors provide key components of our business infrastructure such as Internet
connections, network access and transaction processing and we do not control
their actions. Any problems caused by these third parties, including as a
result
of their not providing us their services for any reason or their performing
their services poorly, could adversely affect our ability to deliver products
and services to our customers and otherwise to conduct our business. Replacing
these third-party vendors could also entail significant delay and
expense.
Our
business could suffer if we fail to attract and retain skilled
personnel
Our
success depends, in large part, on our ability to attract and retain key
personnel, including executives. Any of our current employees, including
our
senior management, may terminate their employment with us at any time.
Competition for qualified personnel in our industry can be intense and our
geographic market area might not be favorably perceived by potential executive
management candidates. We may not be successful in attracting and retaining
sufficient qualified personnel. We may also incur increased expenses and
be
required to divert the attention of other senior executives to recruit
replacements for the loss of any key personnel.
Significant
legal actions could subject us to substantial uninsured
liabilities
We
are
from time to time subject to claims related to our operations. These claims
and
legal actions, including supervisory or enforcement actions by our regulators,
could involve large monetary claims and significant defense costs. To protect
ourselves from the cost of these claims, we maintain insurance coverage in
amounts and with deductibles that we believe are appropriate for our operations.
However, our insurance coverage may not cover all claims against us or continue
to be available to us at a reasonable cost. As a result, we may be exposed
to
substantial uninsured liabilities, which could adversely affect our business,
prospects, results of operations and financial condition.
Changes
in our tax rates could affect our future results
Our
future effective tax rates and tax liabilities could be favorably or unfavorably
affected by increases or decreases in applicable tax rates and changes in
federal or state tax laws, regulations and agency interpretations. Our effective
tax rates could also be affected by changes in the valuation of our deferred
tax
assets and liabilities or by the outcomes of any examinations of our income
tax
returns by the Internal Revenue Service or the Vermont Department of
Taxes.
Not
Applicable
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 and St. Johnsbury, and the Villages of Island Pond, Troy
and
Derby Line.
The
Bank's main offices are located on U.S. Route 5 in Derby, Vermont, in a freshly
renovated 15,000 square foot two-story brick building with a 19,000 square
foot
state of the art addition, which was completed in the first quarter of 2006.
An
operations center houses most of the addition 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. A remote drive-up facility
and
an additional ATM featuring drive-up access were also part of this major
renovation project.
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 formerly
housed the Bank's trust department and is now 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.
The
St.
Johnsbury office 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 Murphy Realty of St. Johnsbury. Peter Murphy, President
of
Murphy Realty, is a member of the Bank's St. Johnsbury Advisory Board.
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 office space
is
leased in an adjacent building at 99 State Street to accommodate a residential
mortgage loan originator, as well as a conference room used for loan closings.
A
stand-alone ATM in a Kiosk building is also located at this site.
The
Bank's newest office is located in Barre in a two-story, 8,000 square foot
building located at 316 North Main Street. This new building constructed
in 2003
on leased land, 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
ground lease provided for a twenty year term and including a purchase option
exercisable at the end of the sixth year, with one-half of the annual rental
previously paid applied to the purchase price. During the third quarter of
2006,
the Company was offered the option to buy the property earlier than the sixth
year, and as a result, exercised that option.
There
are
no pending legal proceedings to which the Company 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 operations or
financial condition.
Item
4. Submission of Matters to a Vote of Security
Holders
None
PART
II.
Information
on the market price of, and dividends paid on, the Company's common stock
is
incorporated by reference to Page 62 of the Annual Report to Shareholders
for
2006 under the caption "Common Stock Performance by Quarter".
The
following table provides information as to purchases of the Company’s common
stock during the fourth quarter ended December 31, 2006, 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
|
|||
|
Shares
Purchased
|
Purchased
Under
|
|||
|
Total
Number of
|
Average
Price
|
as
Part of Publicly
|
the
Plan at the
|
|
|
For
the month ended:
|
Shares
Purchased(1)
|
Paid
Per Share
|
Announced
Plan(2)
|
End
of the Period(2)
|
|
October
1 - October 31
|
3,250
|
$13.50
|
0
|
226,110
|
|
November
1 - November 30
|
800
|
$13.35
|
0
|
226,110
|
|
December
1 - December 31
|
834
|
$13.70
|
0
|
226,110
|
|
Total
|
4,884
|
$13.51
|
0
|
226,110
|
(1) 4,884
shares were purchased by Community Financial Services Group, LLC (“CFSG”), which
may be deemed to be an affiliate of the Company under Rule 10b-18, for the
account of participants invested in the Company Stock Fund under the Company’s
Retirement Savings Plan. All purchases by CFSG were made in the open market
in
brokerage transactions and reported on the OTC Bulletin Board©.
(2) The
Company’s Board of Directors in April, 2000 initially authorized the repurchase
from time to time of up to 205,000 shares of the Company’s common stock in open
market and privately negotiated transactions, in management’s discretion and as
market conditions may warrant. The Board extended this authorization on October
15, 2002 to repurchase an additional 200,000 shares, with an aggregate limit
for
such repurchases under both authorizations of $3.5 million. The approval
did not
specify a termination date, and although there were no repurchases during
2006,
the repurchase program is still open.
Incorporated
by reference to Pages 33, 38, 50, and 51 of the Annual Report to Shareholders
for 2006, filed as Exhibit 13 to this report.
Incorporated
by reference to Pages 40-62 of the Annual Report to Shareholders for 2006,
filed
as Exhibit 13 to this report.
Incorporated
by reference to the section labeled "Risk Management", beginning on page
49, of
Management's Discussion and Analysis of Financial Condition and Results of
Operation in the Annual Report to Shareholders for 2006, 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 2006, filed as Exhibit
13
to this report, at Page 11 through Note 25 on Page 39.
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
NONE
Item
9A. Controls and Procedures
As
required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), the Company has evaluated the effectiveness of the design
and operation of the Company’s disclosure controls and procedures as of the end
of the period covered by this report. This evaluation was carried out under
the
supervision and with the participation of the Company’s management, including
the Company’s Chairman and Chief Executive Officer and its President and Chief
Operating Officer (Chief Financial Officer). Based upon that evaluation,
such
officers concluded that the Company’s disclosure controls and procedures were
effective as of the end of the period covered by this report. For this purpose,
the term “disclosure controls and procedures” means controls and other
procedures of the Company that are designed to ensure that information required
to be disclosed by it in the reports that it files or submits under the Exchange
Act (15 U.S.C. 78a et
seq.)
is
recorded, processed, summarized and reported, within the time periods specified
in the SEC’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
There
were no changes during the Company’s last fiscal quarter in the Company’s
internal control over financial reporting identified in connection with the
evaluation of the Company’s disclosure controls and procedures 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 15, 2007:
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 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.
Item
11. Executive Compensation
The
following is incorporated by reference to the Company's Proxy Statement for
the
Annual Meeting of Shareholders to be held on May 15, 2007:
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, and the Compensation
Discussion and Analysis, 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."
Item
12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
The
following is incorporated by reference to the Company's Proxy Statement for
the
Annual Meeting of Shareholders to be held on May 15, 2007:
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 15, 2007:
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.”
The
following is incorporated by reference to the Company's Proxy Statement for
the
Annual Meeting of Shareholders to be held on May 15, 2007 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
From
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 fiscal year 2006, filed
as
Exhibit 13 to this report.
(b) Exhibits
The
following exhibits are incorporated by reference:
Exhibit
3(i) - Amended and Restated Articles of Association filed as Exhibit 3(i)
of the
Company's Form 10-Q report
filed
with the Commission on November 9, 2004.
Exhibit
3(ii) - Amended and Restated By-laws of Community Bancorp. as amended through
April 4, 2006 filed as Exhibit 3(ii) in the Company’s Form 10-K/A filed on April
13, 2006.
Exhibit
10(i) - Directors Deferred Compensation Plan* is incorporated by reference
to
exhibit 10(i) of the Form 10-K filed with the Commission on March 31, 2000,
and
supplemented by the disclosure contained in the Company's Current Report
on Form
8-K filed with the Commission on December 19, 2005.
Exhibit
10(ii) - Supplemental Retirement Plan* is incorporated by reference to exhibit
10(ii) of the Form 10-K
filed
with the Commission on March 29, 2002.
Exhibit
10(iii) - Description of the Officer Incentive Plan* is incorporated by
reference to the section of the Company's Proxy Statement for the Annual
Meeting
of Shareholders to be held on May 15, 2007, under the
caption
"EXECUTIVE COMPENSATION - Officer Incentive Plan".
Exhibit
10(iv) - Description of the Directors Retirement Plan* filed as exhibit 10(iv)
of the Company's Form 10-K filed with the Commission on March 30, 2005; plan
terminated in 2005 with respect to future accruals, as disclosed in the
Company's Current Report on Form 8-K filed with the Commission on December
19,
2005.
Exhibit
14 - Code of Ethics for Senior Financial Officers and the Principal Executive
Officer is incorporated by reference to Exhibit 14 of the Form 10-K filed
with
the Commission 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
2006,
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/ Richard C.
White
|
Date: March
20, 2007
|
|
|
Richard
C. White, Chairman
|
||
|
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
20, 2007
|
|
|
Stephen
P. Marsh, President and COO
|
||
|
|
||
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COMMUNITY
BANCORP. DIRECTORS
|
||
|
/s/
Thomas E. Adams
|
Date: March
20, 2007
|
|
|
Thomas
E. Adams
|
||
|
/s/
Aminta K. Conant
|
Date: March
20, 2007
|
|
|
Aminta
K. Conant
|
||
|
/s/
Jacques R. Couture
|
Date: March
20, 2007
|
|
|
Jacques
R. Couture
|
||
|
/s/
Elwood G. Duckless
|
Date: March
20, 2007
|
|
|
Elwood
G. Duckless
|
||
|
/s/
Michael H. Dunn
|
Date: March
20, 2007
|
|
|
Michael
H. Dunn
|
||
|
/s/
Rosemary M. Lalime
|
Date: March
20, 2007
|
|
|
Rosemary
M. Lalime
|
||
|
/s/
Marcel Locke
|
Date: March
20, 2007
|
|
|
Marcel
Locke
|
||
|
/s/
Stephen P. Marsh
|
Date: March
20, 2007
|
|
|
Stephen
P. Marsh
|
||
|
/s/
Dorothy R. Mitchell
|
Date: March
20, 2007
|
|
|
Dorothy
R. Mitchell
|
||
|
/s/
Anne T. Moore
|
Date: March
20, 2007
|
|
|
Anne
T. Moore
|
||
|
/s/
Dale Wells
|
Date: March
20, 2007
|
|
|
Dale
Wells
|
||
|
/s/Richard
C. White
|
Date: March
20, 2007
|
|
|
Richard
C. White
|
||