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Article by DailyStocks_admin    (01-21-09 05:23 AM)

Filed with the SEC from Jan 08 to Jan 14:

Community Bancorp (CBON)
Investor David E. Sorensen reported owning 535,958 shares (5.05%), but provided no transaction details.

BUSINESS OVERVIEW

Community Bancorp

Community Bancorp is the bank holding company for Community Bank of Nevada, a Nevada State chartered bank headquartered in Las Vegas, and Community Bank of Arizona, an Arizona state chartered bank headquartered in Phoenix, Arizona (collectively “the Company”). Through its subsidiary banks Community Bancorp delivers an array of commercial bank products and services with an emphasis on customer relationships and personalized service. At December 31, 2007, the Company had total assets of $1.7 billion, gross loans of $1.4 billion, total deposits of $1.2 billion and stockholders’ equity of $235.1 million.

Community Bank of Nevada was organized in July 1995 by local community leaders and experienced bankers with the purpose of providing superior community banking services to the greater Las Vegas area. Community Bancorp was formed in 2002 and Community Bank of Nevada became its wholly-owned subsidiary. As a result of this reorganization, shareholders of Community Bank of Nevada became shareholders of Community Bancorp. In the fourth quarter of 2004, Community Bancorp successfully completed its initial public offering (“IPO”) and concurrent listing of common stock on the NASDAQ Global Market. In the offering, $39.3 million was raised, net of expenses, and certain selling shareholders received net proceeds of $16.5 million.

In September 2006, Community Bank of Arizona (formerly Cactus Commerce Bank) was acquired adding the Company’s first full-service bank outside of Nevada. Community Bank of Arizona was established in November 2003, primarily to serve small business and professional customers.

The Company focuses on meeting the banking needs associated with the population and economic growth of the greater Las Vegas and Phoenix areas. Customers are generally small to medium size businesses (e.g., less than $50 million in annual revenues) that desire personalized commercial banking products and services, with an emphasis on relationship banking and prefer locally-managed banking institutions that provide personalized service.

Historically, the Company has focused its lending activities on commercial real estate loans, construction loans and land acquisition and development loans, which comprised 81.7% of its loan portfolio at December 31, 2007. While this continues to be a large part of the Company’s business, management believes significant opportunities for growth exist in commercial and industrial (C&I) and Small Business Administration (SBA) loans.

As of December 31, 2007, the Company had thirteen full-service branches and various administrative offices located in greater Las Vegas, Nevada and three full-service branches, one administrative office and one loan production office (LPO) located in greater Phoenix, Arizona. Six of the branches located in greater Las Vegas were opened as de novo branches (one in 2007), three branches were added in 2005 with the acquisition of Bank of Commerce and four branches were added in 2006 with the acquisition of Valley Bancorp. The Company’s Arizona operations commenced with the purchase of Community Bank of Arizona, which consisted of one branch. During 2007, the Company expanded its Arizona operations through the opening of two de novo branches and an administrative office.

The Company’s headquarters are located at 400 South 4th Street, Suite 215, Las Vegas, Nevada 89101 and its telephone number is (702) 878-0700. The Company’s website can be accessed at www.communitybanknv.com . None of the information on or hyperlinked from the Company’s website is incorporated herein.

Strategies

The Company’s growth and operating strategies are centered on creating long term benefit to our shareholders, customers and employees. The key elements of the Company’s growth and operating strategies are:

Growth Strategies


• Capitalize on organic growth opportunities for loans and deposits in the Las Vegas and Phoenix markets.

• Expand franchise value through establishment or acquisition of new branches or banks in markets that offer regional continuity, including the greater Las Vegas and Phoenix markets.

• Continue to grow commercial real estate lending by maintaining the professional respect of the community’s developers and leveraging background and depth of experienced lenders.

• Expand commercial and industrial lending, as well as small business relationships and SBA loans which commonly are associated with deposits that are a lower cost funding source.

• Continue as a public company with common stock that is quoted and traded on a global stock market.

Operating Strategies


• Maintain high asset quality by maintaining rigorous loan underwriting standards and credit risk management practices.

• Continue to actively manage interest rate and market risks by closely matching the volume and maturity of interest rate sensitive assets to interest rate sensitive liabilities in order to mitigate adverse effects of rapid changes in interest rates.

• Diversify revenue sources by expanding product lines and maximizing products to each client relationship.

• Enhance risk management functions by proactively managing sound procedures and committing experienced human resources to this effort.

Market Area

The Company currently operates in what management believes to be some of the most attractive markets in the western United States. The market areas have historically reported high per capita income and experienced some of the fastest population growth in the country.

Nevada

The primary market area served by Community Bank of Nevada is Clark County, Nevada. Clark County is one of the fastest growing areas in the United States. According to the Center for Business and Economic Research based at the University of Nevada, Las Vegas, or the CBER, between 2002 and 2007, Clark County’s population grew from approximately 1.5 million to 2.0 million. This growth has been driven by a variety of factors, including growth in the service economy associated with the hospitality and gaming industries, affordable housing, the benefits of no state income tax, a growing base of senior and retirement communities, and general recreational opportunities associated with a favorable climate.

Arizona

The primary market area served by Community Bank of Arizona is the greater Phoenix metropolitan area, in Maricopa County. According to the Economic and Business Research Center based at The Eller College of Management, The University of Arizona, Tucson, the greater Phoenix population is in excess of 3.9 million persons at December 31, 2007. The Phoenix metropolitan area contains companies operating in the following industries: 1) aerospace, 2) high-tech, 3) manufacturing, 4) construction, 5) energy, 6) transportation, 7) minerals and mining and 8) financial services.

Business Activities

The Company provides full-service banking services primarily in the Las Vegas and Phoenix metropolitan markets with a focus on small to medium size businesses. Many of these businesses provide goods and services, directly or indirectly, for the development of the infrastructure that services the growing population specific to the aforementioned markets. Customers include developers, contractors, professionals, distribution and service businesses, local residential home builders and manufacturers. Further, a broad range of traditional banking services and products are offered to individuals, including personal checking and savings accounts and other consumer banking products, including electronic banking, as well as lending products.

The Company originates a variety of loans, including commercial real estate and construction loans, secured and unsecured C&I loans, residential real estate loans, SBA loans, and, to a lesser extent, consumer loans. In addition to direct loan origination, the Company utilizes relationships within the banking industry to participate in loans that meet its credit criteria. The amount of purchased (bought) participation loans at December 31, 2007 constituted approximately 11.8% of the Company’s total loan portfolio.

Management has emphasized the utilization of variable rate pricing for the majority of loan commitments. Among the variety of credit products provided, only the permanent commercial real estate loans have competitive pressures to provide a fixed rate pricing. The Company has remained competitive in the fixed rate market with a rate product that adjusts every 36 to 60 months, tied to recognized indexes (e.g., Prime and LIBOR).

The Company manages its loan portfolio to provide for an adequate return and a diversification of risk. The Company has consistently maintained strong asset quality.

The Company’s lending activities are concentrated in three main categories, as described below.

Real Estate Loans. The Company’s real estate loan portfolio consists of: 1) commercial, 2) residential and 3) construction and land development loans. Commercial real estate (“CRE”) loans totaled $370.5 million, or 30.8% of the real estate loan portfolio. Owner occupied commercial real estate loans were approximately 50.5% of the commercial category. Residential loans totaled $43.2 million, or 3.6% of the real estate portfolio, and include farmland loans and loans for custom homes to high net worth borrowers. This loan category does not contain any conventional mortgage or subprime loans. Construction and land development loans totaled $789.2 million, or 65.6% of the real estate portfolio, and includes loans for undeveloped land of $178.3 million.

To manage the concentration of loans in CRE and the inherently higher risk associated with construction lending (see “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Allowance for Loan Losses”), diversification is sought through maintaining a broad base of borrowers and adjusting exposure to property types based on overall strength in a particular sector, which includes a variety of factors, such as vacancy trends. While the weakening economy during the second half of 2007 caused by the deterioration of the residential real estate sector has affected the office and retail segments of the Company’s markets, these market sectors have historically been high growth areas with markedly low vacancies. Currently, the majority of the Company’s CRE portfolio is in the retail and office sectors. As of December 31,

CRE loans are generally underwritten with a minimum equity position of 25% (or a maximum loan-to-value of 75%) and a minimum debt coverage ratio of 1.25:1. The Company generally lends to developers who have already entered into leases for more than 50% of the subject property. Construction and land loans are short term in nature and generally do not exceed 18 months. Permanent commitments are primarily restricted to no greater than 10-year maturities with rate adjustment periods every 36 months when fixed commitments exist.

Commercial and Industrial Loans. A variety of C&I loan products are offered by the Company, including lines of credit for working capital, term loans for capital expenditures, and commercial stand-by letters of credit.

Lines of credit typically have a 12-month commitment and are secured by the asset financed. In cases of larger commitments, a borrowing base certificate may be required to determine eligible collateral and advance parameters. Term loans seldom exceed 60 months, but in no case, exceed the depreciable life of the tangible asset being financed.

The Company is a “Preferred Lender” with the U.S. Small Business Administration (SBA). SBA loan products offered by the Company consist of: 1) Express, 2) SBA 7a and 3) SBA 504 programs. Under the SBA Express program, loans or lines are offered for credit up to $350,000 with a guarantee of up to 50% by the SBA. Under the 7a program, loans up to $150,000 are guaranteed up to 85% by the SBA. Loans in excess of $150,000, but not in excess of $2,000,000, are guaranteed up to 75% by the SBA. Generally, the guarantee may become invalid only if the loan does not meet the SBA documentation guidelines.

Historically the Company has sold a portion of its SBA 7a originations. Based in part on liquidity requirements, loan concentrations, loan yields and market premiums, future SBA originations might be sold. In the event of a sale, the Company anticipates it will continue to service the loans.

Commercial credits less than $500,000 and consumer loan requests are underwritten by the Express Loan department. Credit scoring software is utilized to assist with the credit decision process. Borrowers realize a faster turnaround time on loan decisions and to date have been willing to pay a premium for this service.

As of December 31, 2007, the Company had $210.6 million of C&I loans outstanding and C&I commitments of $103.3 million.

Consumer Lending. Consumer credit is offered as a complementary product to the Company’s primary product line and viewed by management as a “value added” product for business customers. Products offered include home equity credit lines, automobile loans, personal lines of credit and home improvement loans.

Lending and Credit Policies

The Board of Directors of Community Bancorp establishes lending policies. The three key principles of the Company’s lending policies are:

(1) Debt service coverage,

(2) Risk rating system and pricing for risk, and

(3) Managed concentration levels.

Debt Service Coverage. The Company’s risk management philosophy is to extend credit only when an applicant has proven adequate equity, cash flow to service the proposed debt and demonstrated an independent secondary source of repayment.

Risk Rating System and Pricing for Risk. Management has developed a risk rating system of eight categories, or grades, which clearly defines the fundamentals for each risk rating. At the time of origination, the underwriter assigns a risk rating which is subsequently reviewed on a periodic basis by the Credit Administration department. This system is used to manage levels of risk, pricing and a forward-thinking strategy for future extensions of certain loan categories.

Managed Concentration Levels. The Company has established policy guidelines for loan concentration levels and return on equity by loan category. Management actively monitors these levels and can elevate the return on equity aspect of the loan category in the event the Company is approaching the maximum concentration level established by the Company’s policies and guidelines.

If a potential credit falls outside of the guidelines set forth in the Company’s lending policies, the loan is reviewed by a higher level of credit approval authority, which has three levels, as listed below from lowest to highest level. Based on the historically strong emphasis on business development, the Company’s policies were written to ensure a high degree of secondary review for a credit consideration. Any conditions placed on loans in the approval process must be satisfied before the Credit Administration department releases the loan documentation for

execution. The Company’s Credit Administration department works entirely independent of loan production personnel and has full responsibility for all loan disbursements.


• Individual Authorities. Except for real estate loans which require approval by the Senior Loan Committee and/or the Board Loan Committee, loan officers have approval authorities for secured and unsecured loans, as defined by the approved policies of each subsidiary bank. The Chief Executive Officer and the Chief Credit Officer also have defined approval authorities for secured and unsecured loans.

• Senior Loan Committee. Community Bank of Nevada and Community Bank of Arizona each maintain Senior Loan Committees. The Senior Loan Committee of each bank consists of the Chief Executive Officer of Community Bancorp and the Chief Executive Officer, Chief Operating Officer, the Chief Credit Officer, and the managers of Commercial Lending and Commercial Real Estate departments of each respective bank. These committees have approval authority for secured and unsecured loans.

• Board Loan Committee. The Board Loan Committee consists of all of the members of the Board of Directors of each respective bank. This committee has approval authority of up to the legal lending limits of each subsidiary bank.

Loan Grading and Loan Review. The Company seeks to quantify the risk in its loan portfolio by maintaining a loan grading system consisting of eight different categories (Grades 1-8). The grading system is used to determine, in part, the provision for loan losses. The first four grades in the system are considered satisfactory. The other four grades range from a “Watch/Pass” category to a “Doubtful” category. These four grades are further discussed below under the section subtitled “Loan classifications.”

During the loan origination and approval process an initial grade is assigned to each loan (generally by the loan officer). After funding, all loans over a specified dollar amount are reviewed by the Executive Vice President/Credit Administrator who may assign a different grade to the credit. The grade on each individual loan is reviewed at least annually by the loan officer overseeing the loan. Monthly, the Board of Directors of the subsidiary bank reviews the aggregate amount of all loans graded as “Special Mention”, “Substandard” or “Doubtful”, and each individual loan over a certain dollar amount that has a grade within such range. Changes in the grade of a loan may occur through any of the following means:


• Random reviews of the loan portfolio conducted by the loan administration department;

• Annual reviews conducted by an outside loan reviewer;

• Bank regulatory examinations;

• Monthly action plans submitted to the loan administration department by the responsible lending officers for each credit with a Grade of 5-8; or

• At the monthly credit risk managers meeting if a loan is exhibiting certain delinquency tendencies.

Loan Delinquencies. When a borrower fails to make a committed payment, attempts are made to alleviate the deficiency by contacting the borrower to seek payment. Habitual delinquencies and loans that are delinquent 30 days or more are reviewed at the monthly credit risk managers meeting for possible changes in grading.

Loan Classifications. Federal guidelines require that each insured bank classify its assets on a regular basis. In addition, relating to examinations of insured institutions, examiners have authority to identify problem assets, and, if appropriate, classify them. Grades 5-8 of the loan grading system are used to identify potential problem assets with grades 7 and 8 (“Substandard” and “Doubtful” ) considered classified loans. Classified loans were $14.5 million, $2.9 million and $2.3 million at December 31, 2007, 2006 and 2005, respectively.

Operating Segments

The Company’s operations are managed along two reportable operating segments consisting of Community Bank of Nevada and Community Bank of Arizona. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Segment Reporting” and Note 21 — Segment Information” in the Notes to Consolidated Financial Statements.

CEO BACKGROUND
Community Bancorp

Community Bancorp is the bank holding company for Community Bank of Nevada, a Nevada State chartered bank headquartered in Las Vegas, and Community Bank of Arizona, an Arizona state chartered bank headquartered in Phoenix, Arizona (collectively “the Company”). Through its subsidiary banks Community Bancorp delivers an array of commercial bank products and services with an emphasis on customer relationships and personalized service. At December 31, 2007, the Company had total assets of $1.7 billion, gross loans of $1.4 billion, total deposits of $1.2 billion and stockholders’ equity of $235.1 million.

Community Bank of Nevada was organized in July 1995 by local community leaders and experienced bankers with the purpose of providing superior community banking services to the greater Las Vegas area. Community Bancorp was formed in 2002 and Community Bank of Nevada became its wholly-owned subsidiary. As a result of this reorganization, shareholders of Community Bank of Nevada became shareholders of Community Bancorp. In the fourth quarter of 2004, Community Bancorp successfully completed its initial public offering (“IPO”) and concurrent listing of common stock on the NASDAQ Global Market. In the offering, $39.3 million was raised, net of expenses, and certain selling shareholders received net proceeds of $16.5 million.

In September 2006, Community Bank of Arizona (formerly Cactus Commerce Bank) was acquired adding the Company’s first full-service bank outside of Nevada. Community Bank of Arizona was established in November 2003, primarily to serve small business and professional customers.

The Company focuses on meeting the banking needs associated with the population and economic growth of the greater Las Vegas and Phoenix areas. Customers are generally small to medium size businesses (e.g., less than $50 million in annual revenues) that desire personalized commercial banking products and services, with an emphasis on relationship banking and prefer locally-managed banking institutions that provide personalized service.

Historically, the Company has focused its lending activities on commercial real estate loans, construction loans and land acquisition and development loans, which comprised 81.7% of its loan portfolio at December 31, 2007. While this continues to be a large part of the Company’s business, management believes significant opportunities for growth exist in commercial and industrial (C&I) and Small Business Administration (SBA) loans.

As of December 31, 2007, the Company had thirteen full-service branches and various administrative offices located in greater Las Vegas, Nevada and three full-service branches, one administrative office and one loan production office (LPO) located in greater Phoenix, Arizona. Six of the branches located in greater Las Vegas were opened as de novo branches (one in 2007), three branches were added in 2005 with the acquisition of Bank of Commerce and four branches were added in 2006 with the acquisition of Valley Bancorp. The Company’s Arizona operations commenced with the purchase of Community Bank of Arizona, which consisted of one branch. During 2007, the Company expanded its Arizona operations through the opening of two de novo branches and an administrative office.

The Company’s headquarters are located at 400 South 4th Street, Suite 215, Las Vegas, Nevada 89101 and its telephone number is (702) 878-0700. The Company’s website can be accessed at www.communitybanknv.com . None of the information on or hyperlinked from the Company’s website is incorporated herein.

Strategies

The Company’s growth and operating strategies are centered on creating long term benefit to our shareholders, customers and employees. The key elements of the Company’s growth and operating strategies are:

Growth Strategies


• Capitalize on organic growth opportunities for loans and deposits in the Las Vegas and Phoenix markets.

• Expand franchise value through establishment or acquisition of new branches or banks in markets that offer regional continuity, including the greater Las Vegas and Phoenix markets.

• Continue to grow commercial real estate lending by maintaining the professional respect of the community’s developers and leveraging background and depth of experienced lenders.

• Expand commercial and industrial lending, as well as small business relationships and SBA loans which commonly are associated with deposits that are a lower cost funding source.

• Continue as a public company with common stock that is quoted and traded on a global stock market.

Operating Strategies


• Maintain high asset quality by maintaining rigorous loan underwriting standards and credit risk management practices.

• Continue to actively manage interest rate and market risks by closely matching the volume and maturity of interest rate sensitive assets to interest rate sensitive liabilities in order to mitigate adverse effects of rapid changes in interest rates.

• Diversify revenue sources by expanding product lines and maximizing products to each client relationship.

• Enhance risk management functions by proactively managing sound procedures and committing experienced human resources to this effort.

Market Area

The Company currently operates in what management believes to be some of the most attractive markets in the western United States. The market areas have historically reported high per capita income and experienced some of the fastest population growth in the country.

Nevada

The primary market area served by Community Bank of Nevada is Clark County, Nevada. Clark County is one of the fastest growing areas in the United States. According to the Center for Business and Economic Research based at the University of Nevada, Las Vegas, or the CBER, between 2002 and 2007, Clark County’s population grew from approximately 1.5 million to 2.0 million. This growth has been driven by a variety of factors, including growth in the service economy associated with the hospitality and gaming industries, affordable housing, the benefits of no state income tax, a growing base of senior and retirement communities, and general recreational opportunities associated with a favorable climate.

Arizona

The primary market area served by Community Bank of Arizona is the greater Phoenix metropolitan area, in Maricopa County. According to the Economic and Business Research Center based at The Eller College of Management, The University of Arizona, Tucson, the greater Phoenix population is in excess of 3.9 million persons at December 31, 2007. The Phoenix metropolitan area contains companies operating in the following industries: 1) aerospace, 2) high-tech, 3) manufacturing, 4) construction, 5) energy, 6) transportation, 7) minerals and mining and 8) financial services.

Business Activities

The Company provides full-service banking services primarily in the Las Vegas and Phoenix metropolitan markets with a focus on small to medium size businesses. Many of these businesses provide goods and services, directly or indirectly, for the development of the infrastructure that services the growing population specific to the aforementioned markets. Customers include developers, contractors, professionals, distribution and service businesses, local residential home builders and manufacturers. Further, a broad range of traditional banking services and products are offered to individuals, including personal checking and savings accounts and other consumer banking products, including electronic banking, as well as lending products.

The Company originates a variety of loans, including commercial real estate and construction loans, secured and unsecured C&I loans, residential real estate loans, SBA loans, and, to a lesser extent, consumer loans. In addition to direct loan origination, the Company utilizes relationships within the banking industry to participate in loans that meet its credit criteria. The amount of purchased (bought) participation loans at December 31, 2007 constituted approximately 11.8% of the Company’s total loan portfolio.

Management has emphasized the utilization of variable rate pricing for the majority of loan commitments. Among the variety of credit products provided, only the permanent commercial real estate loans have competitive pressures to provide a fixed rate pricing. The Company has remained competitive in the fixed rate market with a rate product that adjusts every 36 to 60 months, tied to recognized indexes (e.g., Prime and LIBOR).

The Company manages its loan portfolio to provide for an adequate return and a diversification of risk. The Company has consistently maintained strong asset quality.

The Company’s lending activities are concentrated in three main categories, as described below.

Real Estate Loans. The Company’s real estate loan portfolio consists of: 1) commercial, 2) residential and 3) construction and land development loans. Commercial real estate (“CRE”) loans totaled $370.5 million, or 30.8% of the real estate loan portfolio. Owner occupied commercial real estate loans were approximately 50.5% of the commercial category. Residential loans totaled $43.2 million, or 3.6% of the real estate portfolio, and include farmland loans and loans for custom homes to high net worth borrowers. This loan category does not contain any conventional mortgage or subprime loans. Construction and land development loans totaled $789.2 million, or 65.6% of the real estate portfolio, and includes loans for undeveloped land of $178.3 million.

To manage the concentration of loans in CRE and the inherently higher risk associated with construction lending (see “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Allowance for Loan Losses”), diversification is sought through maintaining a broad base of borrowers and adjusting exposure to property types based on overall strength in a particular sector, which includes a variety of factors, such as vacancy trends. While the weakening economy during the second half of 2007 caused by the deterioration of the residential real estate sector has affected the office and retail segments of the Company’s markets, these market sectors have historically been high growth areas with markedly low vacancies. Currently, the majority of the Company’s CRE portfolio is in the retail and office sectors. As of December 31,

CRE loans are generally underwritten with a minimum equity position of 25% (or a maximum loan-to-value of 75%) and a minimum debt coverage ratio of 1.25:1. The Company generally lends to developers who have already entered into leases for more than 50% of the subject property. Construction and land loans are short term in nature and generally do not exceed 18 months. Permanent commitments are primarily restricted to no greater than 10-year maturities with rate adjustment periods every 36 months when fixed commitments exist.

Commercial and Industrial Loans. A variety of C&I loan products are offered by the Company, including lines of credit for working capital, term loans for capital expenditures, and commercial stand-by letters of credit.

Lines of credit typically have a 12-month commitment and are secured by the asset financed. In cases of larger commitments, a borrowing base certificate may be required to determine eligible collateral and advance parameters. Term loans seldom exceed 60 months, but in no case, exceed the depreciable life of the tangible asset being financed.

The Company is a “Preferred Lender” with the U.S. Small Business Administration (SBA). SBA loan products offered by the Company consist of: 1) Express, 2) SBA 7a and 3) SBA 504 programs. Under the SBA Express program, loans or lines are offered for credit up to $350,000 with a guarantee of up to 50% by the SBA. Under the 7a program, loans up to $150,000 are guaranteed up to 85% by the SBA. Loans in excess of $150,000, but not in excess of $2,000,000, are guaranteed up to 75% by the SBA. Generally, the guarantee may become invalid only if the loan does not meet the SBA documentation guidelines.

Historically the Company has sold a portion of its SBA 7a originations. Based in part on liquidity requirements, loan concentrations, loan yields and market premiums, future SBA originations might be sold. In the event of a sale, the Company anticipates it will continue to service the loans.

Commercial credits less than $500,000 and consumer loan requests are underwritten by the Express Loan department. Credit scoring software is utilized to assist with the credit decision process. Borrowers realize a faster turnaround time on loan decisions and to date have been willing to pay a premium for this service.

As of December 31, 2007, the Company had $210.6 million of C&I loans outstanding and C&I commitments of $103.3 million.

Consumer Lending. Consumer credit is offered as a complementary product to the Company’s primary product line and viewed by management as a “value added” product for business customers. Products offered include home equity credit lines, automobile loans, personal lines of credit and home improvement loans.

Lending and Credit Policies

The Board of Directors of Community Bancorp establishes lending policies. The three key principles of the Company’s lending policies are:

(1) Debt service coverage,

(2) Risk rating system and pricing for risk, and

(3) Managed concentration levels.

Debt Service Coverage. The Company’s risk management philosophy is to extend credit only when an applicant has proven adequate equity, cash flow to service the proposed debt and demonstrated an independent secondary source of repayment.

Risk Rating System and Pricing for Risk. Management has developed a risk rating system of eight categories, or grades, which clearly defines the fundamentals for each risk rating. At the time of origination, the underwriter assigns a risk rating which is subsequently reviewed on a periodic basis by the Credit Administration department. This system is used to manage levels of risk, pricing and a forward-thinking strategy for future extensions of certain loan categories.

Managed Concentration Levels. The Company has established policy guidelines for loan concentration levels and return on equity by loan category. Management actively monitors these levels and can elevate the return on equity aspect of the loan category in the event the Company is approaching the maximum concentration level established by the Company’s policies and guidelines.

If a potential credit falls outside of the guidelines set forth in the Company’s lending policies, the loan is reviewed by a higher level of credit approval authority, which has three levels, as listed below from lowest to highest level. Based on the historically strong emphasis on business development, the Company’s policies were written to ensure a high degree of secondary review for a credit consideration. Any conditions placed on loans in the approval process must be satisfied before the Credit Administration department releases the loan documentation for

execution. The Company’s Credit Administration department works entirely independent of loan production personnel and has full responsibility for all loan disbursements.


• Individual Authorities. Except for real estate loans which require approval by the Senior Loan Committee and/or the Board Loan Committee, loan officers have approval authorities for secured and unsecured loans, as defined by the approved policies of each subsidiary bank. The Chief Executive Officer and the Chief Credit Officer also have defined approval authorities for secured and unsecured loans.

• Senior Loan Committee. Community Bank of Nevada and Community Bank of Arizona each maintain Senior Loan Committees. The Senior Loan Committee of each bank consists of the Chief Executive Officer of Community Bancorp and the Chief Executive Officer, Chief Operating Officer, the Chief Credit Officer, and the managers of Commercial Lending and Commercial Real Estate departments of each respective bank. These committees have approval authority for secured and unsecured loans.

• Board Loan Committee. The Board Loan Committee consists of all of the members of the Board of Directors of each respective bank. This committee has approval authority of up to the legal lending limits of each subsidiary bank.

Loan Grading and Loan Review. The Company seeks to quantify the risk in its loan portfolio by maintaining a loan grading system consisting of eight different categories (Grades 1-8). The grading system is used to determine, in part, the provision for loan losses. The first four grades in the system are considered satisfactory. The other four grades range from a “Watch/Pass” category to a “Doubtful” category. These four grades are further discussed below under the section subtitled “Loan classifications.”

During the loan origination and approval process an initial grade is assigned to each loan (generally by the loan officer). After funding, all loans over a specified dollar amount are reviewed by the Executive Vice President/Credit Administrator who may assign a different grade to the credit. The grade on each individual loan is reviewed at least annually by the loan officer overseeing the loan. Monthly, the Board of Directors of the subsidiary bank reviews the aggregate amount of all loans graded as “Special Mention”, “Substandard” or “Doubtful”, and each individual loan over a certain dollar amount that has a grade within such range. Changes in the grade of a loan may occur through any of the following means:


• Random reviews of the loan portfolio conducted by the loan administration department;

• Annual reviews conducted by an outside loan reviewer;

• Bank regulatory examinations;

• Monthly action plans submitted to the loan administration department by the responsible lending officers for each credit with a Grade of 5-8; or

• At the monthly credit risk managers meeting if a loan is exhibiting certain delinquency tendencies.

Loan Delinquencies. When a borrower fails to make a committed payment, attempts are made to alleviate the deficiency by contacting the borrower to seek payment. Habitual delinquencies and loans that are delinquent 30 days or more are reviewed at the monthly credit risk managers meeting for possible changes in grading.

Loan Classifications. Federal guidelines require that each insured bank classify its assets on a regular basis. In addition, relating to examinations of insured institutions, examiners have authority to identify problem assets, and, if appropriate, classify them. Grades 5-8 of the loan grading system are used to identify potential problem assets with grades 7 and 8 (“Substandard” and “Doubtful” ) considered classified loans. Classified loans were $14.5 million, $2.9 million and $2.3 million at December 31, 2007, 2006 and 2005, respectively.

Operating Segments

The Company’s operations are managed along two reportable operating segments consisting of Community Bank of Nevada and Community Bank of Arizona. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Segment Reporting” and Note 21 — Segment Information” in the Notes to Consolidated Financial Statements.

MANAGEMENT DISCUSSION FROM LATEST 10K

The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes to the consolidated financial statements included in Item 8 of this Report as well as “Item 1A. Risk Factors.”

As of December 31, 2007, the Company operated in two reportable segments: Community Bank of Nevada and Community Bank of Arizona. Community Bancorp is included in the “other” category because it represents an overhead function rather than an operating segment.

Overview

Since Community Bank of Nevada commenced operations in 1995, it has experienced consistent growth in total assets and profitability. Through its 2006 acquisition, the Company expanded operations to the Phoenix metropolitan market area. Growth has been fueled by the significant population and economic growth of the greater Las Vegas, and now by the Phoenix, markets (e.g., areas in which the Company operates). The growth in the greater Las Vegas area has accompanied significant investments in the gaming and tourism industry. The significant population increases in the Las Vegas and Phoenix market areas has resulted in an increase in the acquisition of undeveloped/developed land for residential and commercial development, the construction of residential communities, shopping centers and office buildings, and the development and expansion of the businesses and professions that provide essential goods and services to this expanded population. The Company’s results have been influenced by the following strategies, which were implemented in order to benefit from these market factors:


• Reduce cost of funds by attracting a higher share of non-interest bearing deposit accounts;

• Provide competitive CRE loans, construction loans and land acquisition and development loans, and C&I loans to high quality borrowers;

• Focus and commitment to profitable banking relationships;

• Encourage business development of profitable customer relationships with a “pay for performance” compensation culture;

• Maintain disciplined controls over non-interest expense in order to consistently grow on a profitable basis;

• Maintain strong underwriting standards and credit administration functions as well as increase lending capacity by the growth in capital base; and

• Add seasoned professionals to the staff with banking expertise, local market knowledge and a network of client relationships.

• Continue to look for acquisition opportunities to expand the Company’s franchise value.

KEY FACTORS IN EVALUATING FINANCIAL CONDITION AND OPERATING PERFORMANCE

Return to shareholders. For 2007, the Company’s return on average shareholders’ equity (“ROAE”) was 8.9% compared to 11.6% for 2006. The decrease in ROAE was due in part to the issuance of approximately 3.0 million shares of Community Bancorp common stock, resulting in an increase of $94.7 million in the Company’s equity, as part of the October 2006 acquisition of Valley Bancorp.

Diluted earnings per share were $1.95 for 2007, compared to $1.92 for 2006. The moderate growth in the Company’s diluted earnings per share, compared to the increases in net income during the same years, reflects the issuance of approximately 3.0 million shares in the fourth quarter 2006 as part of the acquisition of Valley Bancorp.

Return on average assets. Return on average assets (“ROAA”) was 1.2% for 2007 compared to 1.4% in 2006. The relatively stable ROAA from year to year reflects the Company’s increase in average earning assets and elimination of excess liquidity which off-set the impact of the increase in non-interest bearing assets (goodwill and core deposit intangibles), resulting from the Company’s 2006 acquisitions.

Asset quality. Non-performing loans as of December 31, 2007 were $12.1 million compared to $647,000 at December 31, 2006. As a percentage of total gross loans, non-performing loans increased to 0.85% at December 31, 2007 as compared to 0.05% at December 31, 2006. The increase in non-performing loans from December 31, 2006 is composed of non-accrual commercial and industrial, commercial real estate and construction and land development loans that are well secured with sufficient loan to values. At December 31, 2007 three credit relationships accounted for approximately $9.2 million of the non accrual loans with the balance of the non-accrual loans related to 18 borrowers with loan balances that range from $5,000 to $550,000.

Asset growth. Total assets increased by 7.8% to $1.7 billion as of December 31, 2007, from $1.6 billion as of December 31, 2006. The increase in total assets was driven primarily by a $162.0 million increase in net loans off set in part by reductions in cash and cash equivalents and securities of $46.9 million from December 31, 2006 to December 31, 2007. Asset growth during 2007 was funded primarily through increases in interest bearing deposits of $88.6 million, borrowings of $53.5 million, and current year income of $20.4 million, offset in part by a reduction in non-interest bearing deposits of $34.3 million.

Operating efficiency. The Company’s efficiency ratio increased to 53.3% in 2007 compared to 49.9% in 2006. The increase in the efficiency ratio was driven primarily by the 0.31% compression in net interest margin and increases (due to a full year of amortization) of core deposit intangible amortization and costs (e.g., payroll, rent, supplies, etc) associated with opening three new branches and one administrative office.

CRITICAL ACCOUNTING POLICIES

The Company’s accounting policies are integral to understanding its financial results. The most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. The Company has established detailed policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from year to year. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief description of the Company’s current accounting policies involving significant management valuation judgments.

Allowance for Loan Losses. The allowance for loan losses represents Managements’ best estimate of the probable losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loan charge-offs, net of recoveries.

Management evaluates the Company’s allowance for loan losses on a quarterly basis. Management believes the allowance for loan losses, or ALLL, is a “critical accounting estimate” because it is based upon the assessment of various quantitative and qualitative factors affecting the collectibility of loans, including current economic conditions, past credit experience, delinquency status, the value of the underlying collateral, if any, and a continuing review of the portfolio of loans. For a discussion of the allowance and the Company’s methodology, see “Financial Condition — Loans — Allowance for Loan Losses in this section.”

The Company’s ALLL is based on a number of quantitative and qualitative factors, including levels and trends of past due and nonaccrual loans, asset classifications, loan grades, changes in the volume and mix of loans, collateral value, historical loss experiences, peer group loss experiences, size and complexity of individual credits, and economic conditions. Provisions for loan losses are provided on both a specific and general basis. Specific allowances are provided for impaired credits for which the expected or anticipated loss is measurable. General valuation allowances are based on a portfolio segmentation based on risk grading, with a further evaluation of various quantitative and qualitative factors noted above.

The Company incorporates statistics provided by the FDIC regarding loss percentages experienced by banks in the western United States, as well as an internal five-year loss history, to establish potential risk based on the type of collateral securing each loan. As an additional comparison, data from local banks within the Company’s peer group is reviewed to determine the nature and scope of their losses to date. These reviews provide an understanding of the geographic and size trends in the local banking community. Finally, each credit graded “Special Mention” and below with a loan balance of $200,000 or higher (e.g., an impaired loan) is individually assessed to determine the appropriate loan loss reserve for a particular credit.

Management periodically reviews the qualitative and quantitative loss factors utilized in its analysis of the specific and general allowance for loan losses in an effort to incorporate the current status of the factors described above.

Although Management believes the level of the allowance as of December 31, 2007 was adequate to absorb probable losses in the loan portfolio, a decline in local, economic or other factors could result in increasing losses that cannot be reasonably predicted at this time.

Available- for-Sale Securities. Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities , requires that available-for-sale securities be carried at fair value. The Company believes this to be a “critical accounting estimate” in that the fair value of a security is based on quoted market prices or, if quoted market prices are not available, fair values are extrapolated from the quoted prices of similar instruments. Management utilizes the services of a reputable third party vendor to assist with the determination of estimated fair values.

Adjustments to the fair value resulting from unrealized gains or losses on available-for-sale securities impact the consolidated financial statements by increasing or decreasing assets and stockholders’ equity. If a decline in fair value of any available-for-sale security is deemed other than temporarily impaired, the security is written down to fair market value with a corresponding charge to operating income.

Goodwill and Other Intangibles. Net assets of entities acquired in purchase transactions are recorded at fair value at the date of acquisition. The historical cost basis of individual assets and liabilities are adjusted to reflect their fair value. Identified intangibles are amortized on a straight-line basis over the period benefited. Goodwill is not amortized for book purposes, although it is reviewed for potential impairment on an annual basis on October 1, or if events or circumstances indicate a potential impairment. The impairment test is performed in two phases. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed. That additional procedure compares the implied fair value of the reporting unit’s goodwill (as defined in SFAS No. 142, Goodwill and Other Intangible Assets ) with the carrying amount of that goodwill. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value.

Other intangible assets subject to amortization are evaluated for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long Lived Assets . An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible is considered “not recoverable” if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset.

Share-Based Compensation. Effective January 1, 2006 (the “adoption date”), the Company adopted the provisions of the FASB issued Statement No. 123 (revised 2004), or SFAS No. 123R, Share-Based Payment , and SEC Staff Accounting Bulletin No. 107 (“SAB 107”), Share-Based Payment , requiring the measurement and recognition of all share-based compensation under the fair value method. The Company adopted SFAS No. 123R using the modified prospective method for options granted. Under this transition method, SFAS No. 123R applies to new awards and to awards that were outstanding on the adoption date that are subsequently modified, repurchased or cancelled. In addition, the expense recognition provision of SFAS No. 123R applies to options granted prior to the adoption date that were unvested at the adoption date. In determining the fair value of stock options, the Company uses the Black-Scholes option-pricing model that employs the following assumptions:


• Expected volatility — based on the historical volatility of similar entities’ stock price that have been public for a period of time at least equal to the expected life of the option.

• Expected term of the option — based on the simple average of the vesting term and the original contract term.

• Risk-free rate — based upon the rate on a zero coupon U.S. Treasury bill, for periods within the expected term of the option.

• Dividend yield — based on the assumption that Management does not foresee any circumstances in the immediate future in which cash dividends would be paid on the Company’s common stock.

Segment Reporting. With the acquisition of Community Bank of Arizona on September 30, 2006, the Company increased its business presence in the greater Phoenix market area. As of December 31, 2007, certain changes were implemented in the management and reporting of certain business units and currently, the Company has two reportable operating segments: Community Bank of Nevada and Community Bank of Arizona.

Trends and Developments Impacting the Company’s Recent and Future Results

Certain trends and developments have occurred that are important in understanding the Company’s recent and future results.


• Growth in Market Areas. The Company’s organic growth has been fueled primarily by rapid population and economic growth in greater Las Vegas where it conducts a majority of its operations. The economic growth in Las Vegas has paralleled significant investments in the gaming and tourism industries. The population growth resulted in an increase in loans for acquisition of raw land for residential and commercial development, the construction of residential communities, retail centers, office buildings and the expansion of professionals providing services to this increased population. Similarly, expansion into the Phoenix market has contributed to the Company’s growth since September 2006 (see discussion below).

Recently, economic trends in Las Vegas and Phoenix have been influenced by the weakening United States economy. The residential real estate market deteriorated significantly during 2007, which has led to a decrease in the Company’s ability to originate loans in the construction and commercial real estate sectors. Continuing economic weakness in the local economies and on the national level will adversely affect the Company’s profitability and its ability to sustain it historic growth rates.


• 2006 Acquisitions. An integral component of the Company’s growth over the past three years has been the successful completion of three mergers, including the acquisitions of Community Bank of Arizona (formerly Cactus Commerce Bank) and Valley Bancorp in 2006. These mergers have expanded the Company’s balance sheet, increased earnings and expanded operations into greater Phoenix. While acquisitions remain a strategic objective of the Company, acquisition activity for the foreseeable future will likely be limited as a result of current credit issues encountered by many financial institutions and the recent decline in the Company’s stock price. Additionally, attempting to grow through acquisition does present risks, such as finding suitable opportunities at affordable prices, integrating acquired institutions and other items as discussed in “Item 1A. Risk Factors.”

• Balance Sheet Management. The Company’s earnings are sensitive to changes in interest rates. Between 2005 and 2006, the Company’s net interest margin remained relatively stable as the increased yield on interest earning assets, caused in part from continuing residual impact of increases in market interest rates that occurred in mid-2004 through mid-2006 were offset by higher cost of funding liabilities driven primarily by a change in deposit mix that required the use of more expensive funding sources (e.g., FHLB borrowings and junior subordinated debt versus customer deposits). During the first nine months of 2007 the Company’s net interest margin compressed to 4.95% compared to 5.39% for the same period in 2006 as yields on interest earning assets increased 44 basis points (due primarily to changes in market rates and an increase in the percentage of loans to total interest earning assets) and the cost of interest bearing liabilities increased 87 basis points (due primarily to changes in market rates and an unfavorable change in the mix of funding liabilities). By the end of the third quarter 2007 the Company had repositioned its balance sheet to a liability sensitive position in an effort to prepare for a falling interest rate environment. As short-term rates began dropping in September 2007 the Company should have experienced an increase in net interest margin. However, offsetting the benefit of being liability sensitive was lost interest from increases in non-accrual loans and unfavorable changes in deposit mix. As a result the Company’s net interest margin compressed to 4.71% during the fourth quarter of 2007 as compared to 4.90% during the quarter ended September 30, 2007.

Management uses various modeling strategies to manage the re-pricing characteristics of the Company’s assets and liabilities. These models contain a number of assumptions and cannot take into account all the various factors that influence the sensitivities of the Company’s assets and liabilities. At December 31, 2007, the Company’s balance sheet was liability sensitive, demonstrating that a larger amount of its interest sensitive liabilities will re-price within certain time horizons than will its interest sensitive assets. Being liability sensitive means generally that in times of rising interest rates, a company’s net interest margin will decrease. It also means that generally in times of falling interest rates a company’s net interest margin will be favorably impacted.

While the Company’s balance sheet was liability sensitive based on an interest rate shock analysis, various factors could further compress the Company’s net interest margin in a falling interest rate environment. These factors include, but are not limited to, reversal of interest income on non-accrual loan, changes in deposit mix and waiving of interest rate floors on variable rate loans. Additionally, the Company’s net interest margin is coming under pressure from: (i) competitor pricing strategies for both loans and deposits that the Company may need to respond to in order to retain key customers and (ii) changes in deposit mix as customers move funds from low or non-interest bearing transaction and savings accounts to higher yielding time deposits. If short-term market rates continue to drop in 2008 as they did in January, the Company might experience further compression of its net interest margin. See “Sensitivity of Net Interest Income” for potential impact of 2008 rate reductions by the Federal Open Market Committee and “Item 7A. Quantitative and Qualitative Disclosure about Market Risk.”


• Impact of Expansion on Non-Interest Expense. In 2006, in conjunction with the aforementioned acquisitions, the Company increased the number of branches from nine to fifteen, and in 2007 added three branches and closed two branches. These additional properties significantly increased the Company’s occupancy and equipment expense. In addition, the acquisitions contributed to the increase in the Company’s salaries, wages and employee benefits expense. While the management does not anticipate any significant increase in recurring operational costs during 2008, two new branch locations are scheduled to open in late 2008 which will increase operational costs during the third and fourth quarters of 2008.

• Asset Quality. The Company’s results can be significantly influenced by changes in the credit quality of its borrowers. Non-performing loans totaled $12.1 million or 0.85% of total gross loans at December 31, 2007 and $647,000 or 0.05% of total gross loans at December 31, 2006. This increase is primarily the result of the weakening economies and deterioration of the residential real estate sectors experienced in the Company’s primary market areas during the second half of 2007 and the effect these conditions had on its commercial and industrial, commercial real estate and construction and land development loans. While the economic slowdown has affected the ability of certain borrowers to service their loans within the terms of their loan agreements, the total amount of nonperforming loans is a small percentage of the Company’s gross loans at December 31, 2007. Management does not anticipate any material losses from nonperforming loans in excess of those already reflected in the allowance for loan losses at December 31, 2007 since these loans currently retain sufficient collateral value to liquidate the underlying principal balance. However, January and February of 2008 continued to reflect a deteriorating condition in the residential real estate sectors in the Company’s markets. Any prolonged or further deterioration in the real estate markets with resulting declines in the value of real estate collateral may cause higher levels of nonperforming assets and loan losses in future periods. See “Financial Condition — Loans — Non-Performing Assets.”

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Forward-Looking Statements
When used in this document, the words or phrases such as “will likely result in,” “management expects that,” “will continue,” “is anticipated,” “estimate,” “projected,” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Specific factors include, but are not limited to the current financial turmoil in the United States and abroad, the recent fluctuations in the U.S. capital and credit markets, loan production, balance sheet management, the economic condition of the markets in Las Vegas, Nevada, or Phoenix, Arizona and their deteriorating real estate sectors, net interest margin, loan quality, the ability to control costs and expenses, interest rate changes and financial policies of the United States government, our ability to manage systemic risks and control operating risks, and general economic conditions. Additional information on these and other factors that could affect financial results are included in “Item 1A. Risk Factors” of our Annual Report on Form 10K for the year ended December 31, 2007, and our other Securities and Exchange Commission filings. Readers should not place undue reliance on forward-looking statements, which reflect management’s view only as of the date hereof. Community Bancorp undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. This statement is included for the express purpose of protecting Community Bancorp under the PSLRA’s safe harbor provisions. When relying on forward-looking statements to make decisions with respect to our Company, investors and others are cautioned to consider these and other risks and uncertainties.
EXECUTIVE OVERVIEW
Community Bancorp is a bank holding company headquartered in Las Vegas, Nevada, with four wholly-owned subsidiaries: 1) Community Bank of Nevada, 2) Community Bank of Arizona, 3) Community Bancorp (NV) Statutory Trust II and 4) Community Bancorp (NV) Statutory Trust III. Community Bancorp exists primarily for the purpose of holding the stock of its wholly-owned subsidiaries and facilitating their activities. In accordance with FIN 46 (revised December 2004), the statutory trusts are not reported on a consolidated basis. Community Bancorp and its consolidated subsidiaries are collectively referred to herein as the “Company.” Community Bank of Nevada and Community Bank of Arizona are collectively referred to herein as the “Banks.”
During the three and nine months ended September 30, 2008, the Company continued to be challenged by difficult economic conditions in its primary markets as the deterioration of the real estate market that occurred during the second half of 2007 has continued throughout 2008. The deterioration in the real estate market is due to a variety of factors, the most significant of which has been the fallout from the defaults associated with the residential sub-prime market and Alt-A loans. While the Company does not engage in sub-prime lending or Alt-A loans, its markets have been affected by these factors.
Results of operations
•
The provision for loan losses increased to $8.0 million and $26.4 million for the three and nine months ended September 30, 2008, respectively, compared to a provision for loan losses of $533,000 and $1.5 million for the same periods in 2007.
•
Interest and dividend income was adversely affected due to an increase in non-performing loans for the three and nine months ended September 30, 2008.
•
As a result of the increased provision for loan losses and the adverse effect of the increase in non-performing loans on interest and dividend income (including the effect of non-earning assets on interest and dividend income), the Company recognized a loss for the three and nine months ended September 30, 2008 of $3.0 million, or $0.29 per diluted share and $4.9 million, or $0.49 per diluted share, respectively, compared to net income of $5.5 million, or $0.53 per share, and $16.6 million, or $1.59 per diluted share, for the same periods in 2007.
Financial condition
•
The allowance for loan losses increased to $34.3 million, or 2.32% of total gross loans, at September 30, 2008, compared to $17.1 million, or 1.20% of total gross loans, at December 31, 2007.
•
Non-performing loans totaled $185.5 million, or 12.5% of total gross loans, at September 30, 2008, compared to $12.1 million, or 0.85% of total gross loans, at December 31, 2007.
•
Impaired loans, which include all non-performing loans, increased to $195.1 million at September 30, 2008, compared to $29.8 million at December 31, 2007.

(1) Net interest margin represents net interest income on a tax equivalent basis as a percentage of average interest-earning assets.

(2) Efficiency ratio represents non-interest expenses, excluding provision for loan losses, as a percentage of the aggregate of net interest income and non-interest income.

(3) Non-performing loans are defined as loans that are past due 90 days or more plus loans placed in non-accrual status.

(4) Non-performing assets are defined as assets that are past due 90 days or more plus assets placed in non-accrual status and other real estate owned.

(5) Weighted average shares outstanding-diluted were equal to weighted average shares-basic for the three and nine months ended September 30, 2008, as any common stock equivalents would have been anti-dilutive.

(6) Annualized.


CONF CALL

Patrick Hartman

Thank you, Mitch. Good morning. Thank you for joining us today. During this call, we discuss Community Bancorp’s third quarter performance. Before we begin, please recognize that certain statements will be made during this call that may not be historical facts. They may be deemed therefore to be forward-looking statements under the Private Securities Litigation Reform Act of 1995.

Many important factors may cause the company’s results to differ materially from those discussed and/or implied by such forward-looking statements. These risks and uncertainties will be described in further detail on the company’s filings with the Securities and Exchange Commission, including the Form 10-Q for the period ended September 30, 2008. It will be filed no later than November 10, 2008. Community Bancorp undertakes no obligation to publicly update or revise these forward-looking statements.

This call is planned to be one hour in duration. First, our Chairman, President and Chief Executive Officer, Ed Jamison, will discuss the third quarter. Following his comments, we will open this call for a question-and-answer discussion. Larry Scott, Executive Vice President and Chief Operation Officer of the company and President of the Community Bank of Nevada is also present.

Now I will turn the call over to Ed Jamison.

Ed Jamison

Thanks, Patrick. Good morning and thanks for taking your time to learn more information about Community Bancorp. As shown in our release yesterday, the third quarter results continue to be impacted by the economic conditions and the deterioration of the real estate market in Las Vegas and in the Phoenix area. Both Nevada and Arizona have and will continue to experience challenges in real estate values, continuing foreclosures in the residential market, along with general weakness in the other real estate sectors as well.

While there are encouraging signs in the residential sector in Las Vegas with residential re-sales continuing to show stronger sales from a year-ago period, the reduction in standing inventory and property values declines have lessened and are good indicators of some improvement.

The primary drivers of the economies of each of our markets have been historically benefited from strong population growth, strong job creation numbers, and low unemployment. Today while population growth continues, the job creation has been significantly slowed. The United States unemployment figures for September was 6.1, while unemployment were 7.4 in Clark County and 7.3 for the State of Nevada. Likewise the State of Arizona showed unemployment of 5.3.

Though as we see the $26 billion in construction on the Las Vegas strip completed, the employment numbers should begin to improve dramatically in the next few months. The Wynn’s new resort Encore, which is scheduled to open in December of this year, has announced opening for 3,500 new jobs. Aliante, another property of Station Casinos, will be open in a few months with several thousand new job applicants available. Likewise, we see City Center -- a huge project, the Fontainebleau, M Resort, Caesars Palace, and Planet Hollywood expansions, along with the Grand Hyatt and other smaller projects will establish employment centers to process their employment needs over the next six to nine months.

It is anticipated that the property openings will provide substantial employment opportunities and therefore reduce the unemployment rate and add to the overall economic improvement in 2009. Much has been said about the resale and residential market in Las Vegas and the Phoenix market, but I’ll focus a little bit more on Las Vegas.

Residential resale inventory while elevated showed some encouraging signs of improvement. Today’s inventory of resale homes stands at 22,000, which is a decrease from 28,000 in September of 2007. But 12,268 or 56.6% of the inventory of resale homes are currently vacant. We believe these homes were primarily speculators and investor owned properties are now believed to be owned by banks through foreclosure.

Since the beginning of the year, we have seen a tremendous increase in sales for these properties. Since June, we have had more than 7,000 homes classified as having pended or contingent sales, which leads into closed transactions. This trend could lead you to believe that there is a heightening demand for these properties since the beginning of the year.

Currently, there is resale inventory of about six to nine months based on 2007 absorption. It appears that the inventory absorption will, over time, bring inventory numbers back into a more normalized range. The median price of both new and resale homes have decreased from a high median price for new homes in 2006 of $339,000. Today's median price is $251,000. Resale homes median price in 2006 was $286,500 with September median price at $189,000, becoming much more affordable.

The price reduction has assisted in the decrease of both new and resale home inventory and moved the whole pricing index and affordability indeed more in line. It is estimated there is only a 45-day standing inventory on new homes, and we’ve seen a modest increase in residential permits [ph] for the new home inventory since the beginning of the year. It should be noted that a majority of resale homes are sold on a short-sale basis.

Other sectors of the real estate market have experienced decreases in value such as residential lot and land in outlying areas of Southern Nevada and areas outside the Phoenix Metro. Office building vacancies are at 17% or higher in certain areas. Likewise, we see higher vacancy in retail from 3% year-end to 6% to 9% currently depending on the area of the community.

Industrial vacancy has increased to about 6% to 10%, again depending on the areas. Overall vacancy at least in Southern Nevada has increased, whereas Maricopa County has seen even higher vacancy numbers for office, retail, and industrial space. The information given has been primarily based on Southern Nevada data. While we have a presence in Arizona, the majority of our lending activity has been in the Southern Nevada market and it is more relevant to the full view of our company.

I have provided an overview of what we see in our local markets for a reference as to the current conditions and projected conditions of the market in which we operate. Much has been said about residential property and sales. While we have no subprime mortgages or Alt-A loans, we have been impacted by the continued decline of residential property values in the overall mortgage market. Additionally, the lack of available credit has hindered a number of our lending relationships’ ability to obtain alternative financing and term debt.

While we see opportunity to lend, we also as with most lenders in our market have limited or eliminated certain lending activities such as certain types of land loans, speculative office and retail space due to the economic conditions, and the vacancy rates in these sectors. Generally, local economies have slowed with hotel occupancy, while remained relatively high, room rates have declined, as well as visitor volume decreasing slightly year-over-year; gaming revenue is off year-over-year, which has been influenced by the sluggish economy nationally; higher-than-normal unemployment rate, coupled with prices of gas and increase in air fare, all have affected the communities in which we operate.

With that said, we believe with the anticipated opening in numbered new resort hotels with almost 17,000 rooms could and should ease the unemployment and create new jobs both at the hotels and our communities. While we can’t forecast events that may impede our economy’s growth, we believe there are factors such as the new hotel rooms, convention space, new retail venues, continuing population growth, and job creation, will be part of the emergence of our economy to a more normalized range.

Results of the company’s operation for the quarter were strongly influenced by credit issues, with increased loan reserves and non-performing loans having a major effect on earnings for the period. The deposit environment has been impacted because of national and local concern with the banking community as a whole. Impact of bank failures have been felt by all banks in our market and changed the deposit mix over the short-term.

We have narrowed the loss in the quarter and are optimistic moving forward with our earnings prospect in the near-term. We have taken aggressive collection management approach to identifying potential non-performing loans and credits that have then or are moving towards higher risk rates. These relationships have been identified many months ago, and we have had open dialogue with the borrowers to notice them of our concerns and plan for their maturity. This collection strategy has contributed to the increased non-performing loans as well as the higher level of foreclosures.

We believe that, prior to default, the borrowers had adequate time to plan how they are going to repay their obligation with us. Upon default and without a clear plan or ability to repay in the near-term, we have initiated all available remedies of collection, including foreclosure and finalization [ph] against the guarantors of these credits. Each loan has been regarded to a higher risk level or had been reclassified as impaired, has been analyzed, and with few exceptions new appraisals completed on collateral security obligation, as well as review of the guarantor’s ability to perform under the guarantees.

Where we found an impairment under FASB 114, we have assigned an adequate reserve pursuant to pronouncement. That impairment today stands at $18 million at the end of the quarter. Although last year we had a number of conversations regarding our loan portfolio and its segments, and on our second quarter release, we provided two schedules titled "Detail Composite of Loan Portfolio” to assisting your understanding of our loan mix and give more clarity as to where the trouble credits are and those that can be still found at pages 13 and 14 in the current release. We believe this information may be helpful in understanding our loan mix.

As may know, in the release we’ve stated that 80% of our non-performing loans or $147 million were concentrated in 13 relationships. Let me give you some further information on those relationships, so I’ll give you a little bit more clarity of that. I’ll begin by listing them just as note 1 through 13. Note 1 is the $32,333,000 loan on 45 acres that is zoned residential and commercial, which we have an appraisal of $38 million. We are set to go to sail on that property through trustees in January of ’09. Note 2, the amount is $26,138,000, 24 acres zoned retail with an appraisal of $47 million. And the sale date is pending because the applicant and the borrowers filed bankruptcy.

Note 3, $15,250,000, which is an 18-hole golf course, zones as other, and we have an adequate appraisal and that sale date is scheduled for December of ’08. Note 4, $17,538,000, a 36-unit apartment complex with 110 other lots available for further development of multi-family. And appraisal, we have $15.8 million within a reserve on that one of about $3.3 million, set for sale this month.

Note 5, $11,294,000, 9.43 acres, zoned retail, with an appraisal of 25 million, set for sale in January of ’09. Note 6, $7,210,000 with an allowance of 450,000, it is four single-family homes, 96 lots on 11 acres, zoned residential, set for sale in December of ’08. Note 7, $6,857,000, 46 single-family lots on 13 acres, zoned residential, set for sale in January of ’09.

Note 8, $6 million loan, 97 acres, zoned residential, set for sale in January of ’09. Note 9, $5.4 million, 84 acres, zoned residential, set for sale in January of ’09. Note 10, $5,502,000, one single-family resident and eight single-family lots, residential zone, set for sale in October -- this month.

Note 11, $4,666,000, 19 single-family homes with 51 single-family lot loans, zoned residential, set for sale in November. Note 12, $4,589,000, 28 acres, zoned residential, set for sale in November of ’08. Note 13 is $4,164,000, eight single-family homes, 76 single-family lots, residential, which we are a participant in this credit on, and set for sale this month.

As you can see, the abundance of problems – credits that we have here today are focusing on land, both residential and a few multi-family and a little retail. Likewise, we only have 32 standing inventory of homes. These homes are primarily completed because of the paralysis in the mortgage market, they were unable to sell before we processed our default.

Give you a little clarity as far as the amount of 147, the valuation reserves we have set aside are $13 million for that group, which is 8.85% reserve on those loans. We believe that we have maybe an appropriate analysis as far as the impairment, and we have an appropriate reserve for that. As we see moving forward in our process of foreclosure on some of these properties, the majority of these loans are – half of them would be done before year-end and the other half would be done in the early part of the second quarter – first quarter of ’09.

We believe that these relationships are the portfolio’s problems, not saying that there may be other minor credit issues, which will be based on today’s economic environment should we expect it. We believe by aggressive collection, we’ll be able to return non-performing assets to earning assets by moving quickly to assess the problems and to move quickly to foreclose and resale the collateral as quickly as possible. We do anticipate a number of payoffs of these non-performing loans. Over $5 million of these non-performing loans will be paid off this month or refinanced under new terms and conditions this month. We continue to receive expressions of interesting properties that are in foreclosure and believe that we’ll liquidity properties after the legal process is concluded.

One indicator for us in the potential loan problems is delinquency. Our 30 to 59-day delinquency stands at 13 basis points or $2 million, or 60 to 89 days is 2%, which is primarily made up of two relationships that constitute 67% or $20 million. One is a participation that has never been late and has matured and awaiting refinance from the lead lender. The other is a loan we have in the foreclosure that is in the process of being refinanced and should be off our delinquency this month.

While we have had these challenging times and credit has deteriorated, we still believe strongly in our market and that we have been able to identify and develop strategies for returning these non-performing assets to earning assets in the near-term.

With that, we’d open it up to questions.

Patrick Hartman
Mitch, would you please explain the technical elements of the Q&A session.

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