<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM 10-K/A-2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1994 Commission File No. 0-16461
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMUNITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Delaware 63-0868361
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
Main Street, P. O. Box 1000
Blountsville, Alabama 35031
----------------------------------------
(Address of principal executive offices)
(205) 429-1000
-------------------------------
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.10 PAR VALUE
----------------------------
(TITLE OF CLASS)
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
--- ---
AS OF FEBRUARY 1, 1995 THE AGGREGATE MARKET VALUE OF VOTING STOCK HELD
BY NON-AFFILIATES WAS $ 20,495,688.
INDICATE THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S CLASS OF COMMON
STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT FEBRUARY 1, 1995
---------------------------- -------------------------------
COMMON STOCK, $.10 PAR VALUE 1,620,215
DOCUMENTS INCORPORATED BY REFERENCE PART OF 10-K IN WHICH INCORPORATED
- --------------------------------------- ----------------------------------
PROXY STATEMENT FOR 1995 ANNUAL MEETING PART III
<PAGE> 2
<TABLE>
<CAPTION>
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
Financial Statements Page(s)
-------
<S> <C>
Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Financial Condition as of December 31, 1994 and 1993 . . . . . . . . . . . . . 3
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7
Notes to Consolidated Financial Statements -
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-31
</TABLE>
<PAGE> 3
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of Community Bancshares, Inc.
We have audited the consolidated statements of financial condition of Community
Bancshares, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Community
Bancshares, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
Birmingham, Alabama
February 17, 1995
DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP
2
<PAGE> 4
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
--------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,708,337 $ 2,259,434
Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,840,264 11,292,371
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . 2,113,823 1,940,050
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 2,700,000
Securities available for sale, estimated fair value of
$41,049,000 for 1993 . . . . . . . . . . . . . . . . . . . . . . . . . 20,853,532 39,742,884
Securities held to maturity, estimated fair values of
$39,431,333 and $43,817,000 . . . . . . . . . . . . . . . . . . . . . 41,532,909 42,490,610
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,109,397 155,690,565
Less: Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . 5,681,403 4,039,534
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . 1,547,834 1,254,843
--------------- --------------
NET LOANS . . . . . . . . . . . . . . . . . . . . . . . . 204,880,160 150,396,188
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 10,383,364 6,852,263
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,680,379 2,094,682
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,577,189 1,703,952
Other real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290,024 284,175
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,521,585 435,692
--------------- --------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . $ 299,481,566 $ 262,192,301
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,515,704 $ 29,472,107
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,896,857 198,298,237
--------------- --------------
TOTAL DEPOSITS . . . . . . . . . . . . . . . . . . . . . . 263,412,561 227,770,344
Other short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . 2,043,902 1,849,610
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,395,336 1,058,776
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,712,953 6,391,667
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,264,478 1,657,026
--------------- --------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . 276,829,230 238,727,423
Shareholders' equity
Common stock, par value $.10 per share, 5,000,000
shares authorized, 1,803,817 shares and 1,739,816
shares issued as of December 31, 1994 and 1993 . . . . . . . . . . 180,382 173,982
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,983,010 13,031,807
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 13,076,135 10,259,089
Unearned ESOP shares - 68,576 shares unreleased at December 31, 1994 . (1,028,640) -0-
Treasury stock - 115,978 shares at cost . . . . . . . . . . . . . . . (2,899,460) -0-
Unrealized losses on investment securities available for
sale, net of deferred tax benefit . . . . . . . . . . . . . . . . (659,091) -0-
--------------- --------------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . 22,652,336 23,464,878
--------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . $ 299,481,566 $ 262,192,301
=============== ==============
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 5
CONSOLIDATED STATEMENTS OF INCOME
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE FROM EARNING ASSETS
Interest and fees on loans . . . . . . . . . . . . . . . . $ 16,324,063 $ 13,085,690 $ 12,921,638
Interest on investment securities:
Taxable securities . . . . . . . . . . . . . . . . . . . 3,105,299 3,528,033 4,129,116
Securities exempt from federal income taxes . . . . . . . 1,133,722 961,989 612,953
Interest on federal funds sold . . . . . . . . . . . . . . 80,821 158,041 90,639
Interest on deposits in other banks . . . . . . . . . . . . 107,539 40,634 43,401
------------- ------------- -------------
TOTAL REVENUE FROM EARNING ASSETS . . . . . 20,751,444 17,774,387 17,797,747
------------- ------------- -------------
INTEREST EXPENSE
Interest on deposits . . . . . . . . . . . . . . . . . . . 8,849,159 7,714,351 8,648,666
Interest on other short-term borrowings . . . . . . . . . . 112,289 22,148 30,408
Interest on long-term debt . . . . . . . . . . . . . . . . 545,879 272,037 270,027
------------- ------------- -------------
TOTAL INTEREST EXPENSE . . . . . . . . . . . 9,507,327 8,008,536 8,949,101
------------- ------------- -------------
NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . 11,244,117 9,765,851 8,848,646
Provision for loan losses . . . . . . . . . . . . . . . . . . 638,228 417,500 539,350
------------- ------------- -------------
NET INTEREST INCOME
AFTER PROVISION FOR LOAN LOSSES . . . . . 10,605,889 9,348,351 8,309,296
NONINTEREST INCOME
Service charges on deposits . . . . . . . . . . . . . . . . 1,521,380 1,332,566 1,233,959
Insurance commissions . . . . . . . . . . . . . . . . . . . 827,938 526,970 528,637
Bank club dues . . . . . . . . . . . . . . . . . . . . . . 306,160 258,273 244,045
Other operating income . . . . . . . . . . . . . . . . . . 512,588 325,468 522,875
Investment securities gains . . . . . . . . . . . . . . . . 20,694 470,738 88,591
------------- ------------- -------------
TOTAL NONINTEREST INCOME . . . . . . . . . . 3,188,760 2,914,015 2,618,107
------------- ------------- -------------
NONINTEREST EXPENSES
Salaries and employee benefits . . . . . . . . . . . . . . 5,876,916 4,973,942 4,087,211
Occupancy expense . . . . . . . . . . . . . . . . . . . . . 756,021 730,830 650,914
Furniture and equipment expense . . . . . . . . . . . . . . 611,510 509,509 471,434
Director and committee fees . . . . . . . . . . . . . . . . 286,650 241,300 183,900
Other operating expenses . . . . . . . . . . . . . . . . . 2,661,796 2,369,181 1,903,568
------------- ------------- -------------
TOTAL NONINTEREST EXPENSES . . . . . . . . . 10,192,893 8,824,762 7,297,027
------------- ------------- -------------
Income before income taxes . . . . . . . . . . . . . . . . . 3,601,756 3,437,604 3,630,376
Provision for income taxes . . . . . . . . . . . . . . . . . 784,710 865,238 931,592
------------- ------------- -------------
NET INCOME . . . . . . . . . . . . . . . . . $ 2,817,046 $ 2,572,366 $ 2,698,784
============= ============= =============
EARNINGS PER COMMON SHARE - PRIMARY
AND FULLY DILUTED
Net income per common share . . . . . . . . . . . . . . . . $ 1.67 $ 1.94 $ 2.19
Weighted average common shares outstanding . . . . . . . . 1,681,892 1,290,290 1,203,822
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Unrealized
Preferred Common Capital Retained Unearned Stock In Losses On
Stock Stock Surplus Earnings ESOP Shares Treasury Securities Total
---------- ---------- ----------- ----------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1992 . . . $ 811,892 $ 40,127 $ 5,206,581 $ 5,117,955 $ -0- $ -0- $ -0- $11,176,555
Net income - 1992 . . . 2,698,784 2,698,784
Cash dividends:
Preferred - $5.56
per share . . . . . . (65,008) (65,008)
---------- --------- ----------- ----------- ----------- ----------- ------------ -----------
Balance at
December 31, 1992 . . 811,892 40,127 5,206,581 7,751,731 -0- -0- -0- 13,810,331
Net Income - 1993 . . . 2,572,366 2,572,366
Cash dividends:
Preferred - $5.56
per share . . . . . . (65,008) (65,008)
Effect of 3-for-1
Stock split 80,255 (80,313) (58)
Issuance of
Common Stock . . . . 53,600 7,905,539 7,959,139
Purchase and retirement
of preferred stock. . (811,892) (811,892)
---------- --------- ----------- ----------- ----------- ----------- ------------ -----------
BALANCE AT
DECEMBER 31, 1993 . . -0- 173,982 13,031,807 10,259,089 -0- -0- -0- 23,464,878
EFFECT OF ADOPTING
SFAS 115. . . . . . . 783,670 783,670
NET INCOME - 1994 . . . 2,817,046 2,817,046
ISSUANCE OF
COMMON STOCK. . . . . 6,400 951,203 957,603
RECOGNITION OF UNRELEASED
ESOP SHARES AT
JANUARY 1, 1994 . . . (1,200,000) (1,200,000)
RELEASE OF ESOP SHARES
DURING YEAR ENDED
DECEMBER 31, 1994 . . 171,360 171,360
NET CHANGE IN UNREALIZED
LOSSES ON SECURITIES. (1,442,761) (1,442,761)
ACQUISITION OF
TREASURY STOCK . . . (2,899,460) (2,899,460)
---------- --------- ----------- ----------- ----------- ----------- ------------ -----------
BALANCE AT
DECEMBER 31, 1994 . . $ -0- $ 180,382 $13,983,010 $13,076,135 $(1,028,640) $(2,899,460) $ (659,091) $22,652,336
========== ========= =========== =========== =========== =========== ============ ===========
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 7
CONSOLIDATED STATEMENTS OF CASH FLOWS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 2,817,046 $ 2,572,366 $ 2,698,784
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses . . . . . . . . . . . . . . . 638,228 417,500 539,350
Provision for depreciation and amortization . . . . . . 747,268 553,623 511,792
Amortization of investment security
premiums and accretion of discounts . . . . . . . . . (194,964) (45,304) (140,531)
Deferred tax benefit . . . . . . . . . . . . . . . . . . (91,068) -0- (7,000)
Realized investment security gains . . . . . . . . . . . (20,694) (470,738) (88,591)
Loss on sale of premises and equipment . . . . . . . . . 28,579 -0- 1,969
(Increase) decrease in accrued interest receivable . . . (585,697) (94,302) 215,852
Increase (decrease) in accrued interest payable . . . . 336,560 (57,890) (264,054)
Other . . . . . . . . . . . . . . . . . . . . . . . . . (955,304) 736,542 (212,330)
------------ ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES
2,719,954 3,611,797 3,255,241
------------ ----------- -----------
INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale . . . 19,809,531 7,734,857 3,426,506
Proceeds from maturity of securities available for sale . . 3,975,895 -0- -0-
Proceeds from maturity of securities held to maturity . . . 29,080,007 15,405,302 13,081,044
Purchase of securities available for sale . . . . . . . . . (6,007,844) -0- -0-
Purchase of securities held to maturity . . . . . . . . . . (27,893,363) (45,979,670) (12,482,446)
Net (increase) decrease in interest-bearing
deposits with other banks . . . . . . . . . . . . . . . . (173,773) (1,209,407) 269,486
Net increase in loans to customers . . . . . . . . . . . . (55,207,261) (16,318,491) (15,142,842)
Proceeds from sale of premises and equipment . . . . . . . 296,741 -0- 18,640
Capital expenditures . . . . . . . . . . . . . . . . . . . (4,476,926) (981,069) (1,439,044)
Net proceeds from sale of other real estate . . . . . . . . 86,537 -0- 52,260
------------ ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . (40,510,456) (41,348,478) (12,216,396)
------------ ----------- -----------
FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts,
and savings accounts . . . . . . . . . . . . . . . . . . 13,167,552 25,150,383 12,883,432
Net increase in certificates of deposit . . . . . . . . . . 22,474,665 4,308,275 378,716
Net increase in short-term borrowings . . . . . . . . . . . 194,292 66,436 906,363
Proceeds from long-term debt . . . . . . . . . . . . . . . -0- 4,041,667 245,000
Repayment of long-term debt . . . . . . . . . . . . . . . . (707,354) (1,395,432) (775,000)
Issuance of common stock . . . . . . . . . . . . . . . . . 957,603 7,959,081 -0-
Redemption of preferred stock . . . . . . . . . . . . . . . -0- (811,892) -0-
Purchase of treasury stock . . . . . . . . . . . . . . . . (899,460) -0- -0-
Cash dividends . . . . . . . . . . . . . . . . . . . . . . -0- (65,008) (65,008)
------------ ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . 35,187,298 39,253,510 13,573,503
------------ ----------- -----------
Net (decrease) increase in cash and cash equivalents . . . . (2,603,204) 1,516,829 4,612,348
Cash and cash equivalents at beginning of year . . . . . . . 16,251,805 14,734,976 10,122,628
------------ ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . $ 13,648,601 $16,251,805 $14,734,976
============ =========== ===========
</TABLE>
See notes to consolidated financial statements
6
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 9,170,767 $ 8,066,426 $ 9,213,155
Income taxes . . . . . . . . . . . . . . . . . . . . . . 1,235,165 932,064 901,911
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Other real estate of $350,553, $330,416 and $155,192 was acquired in 1994,
1993 and 1992, respectively, through foreclosure.
Long-term debt was increased and equity was decreased $1,200,000 on January
1, 1994 to reflect the existence of leveraged, unreleased ESOP shares. The
debt was reduced and shares were released by $171,360 during the year ended
December 31, 1994 as a result of payments made by the Company's ESOP.
Investment securities of $39,742,884 were transferred during 1994 to
securities available for sale in accordance with the provisions of SFAS 115.
During 1994, Treasury Stock in the amount of $2,899,460 was acquired for
cash and the assumption of a $2,000,000 subordinated capital installment
note.
See notes to consolidated financial statements
7
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
DECEMBER 31, 1994, 1993 AND 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of Community Bancshares, Inc. and its wholly owned subsidiaries (the
"Company"), Community Bank (Alabama), Community Bank (Tennessee), Community
Appraisals, Inc. and Community Insurance Corp. (collectively, the "Bank"). All
significant intercompany balances and transactions have been eliminated.
Investments in subsidiaries are carried at the parent company's equity in the
underlying net assets.
Investments in Securities: Effective January 1, 1994, the Company and its
subsidiary banks adopted Statement of Financial Accounting Standards No, 115,
Accounting for Certain Investments in Debt and Equity Securities ("SFAS 115").
This statement, among other things, requires debt and equity securities to be
divided into one of three categories: held to maturity, available for sale, and
trading.
The Company's investments in securities are classified in two categories and
accounted for as follows:
- Securities Held to Maturity. Bonds, notes and debentures for which the Bank
has the positive intent and ability to hold to maturity are reported at
cost, adjusted for amortization of premiums and accretion of discounts
which are recognized in interest income using methods which approximate
level yields over the period to maturity.
- Securities Available for Sale. Securities available for sale consist of
bonds, notes, debentures, and certain equity securities not classified as
securities held to maturity.
The Company and its subsidiaries have no trading securities.
Unrealized holding gains and losses, net of tax, on securities available for
sale are reported as a net amount in a separate component of shareholders's
equity until realized.
Gains and losses on the sale of securities available for sale are determined
using the specific-identification method.
For 1993, investment securities are stated at cost adjusted for amortization of
premiums and accretion of discounts on the straight- line method. The
amortized cost of the specific security sold is used to compute gain or loss at
the time of disposition.
Revenue Recognition: Interest on loans is accrued and credited to operations
based upon the principal amount outstanding, except for interest on certain
consumer loans which is recognized over the term of the loan using a method
which approximates level yields.
The accrual of interest income is discontinued on a loan when management
believes, after considering economic and business conditions and collection
efforts, that a borrower's financial condition is such that collection of
interest is doubtful. When interest accruals are discontinued, interest
credited to income in the current year is reversed, and interest accrued in the
prior year is charged to the allowance for loan losses. Management may elect
to continue the accrual of interest when the estimated net realizable value of
collateral is sufficient to cover the principal balance and accrued interest.
8
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Allowance for Loan Losses: The allowance for loan losses is maintained at a
level believed adequate by management to absorb potential loan losses in the
loan portfolio. Management's determination of the adequacy of the allowance is
based on an evaluation of the portfolio, past loan loss experience, current
domestic and international economic conditions, volume, growth and composition
of the loan portfolio, and other relevant factors. Loans deemed uncollectible
are charged to the allowance. Provisions for loan losses and recoveries on
loans previously charged off are added to the allowance.
Loan Fees: The Company accounts for loan fees and origination costs in
accordance with FASB Statement No. 91, entitled: Accounting for Nonrefundable
Fees and Costs Associated with Originating or Acquiring Loans and Direct Costs
of Leases. The basic requirement of this statement calls for the Company to
treat loan fees, net of direct costs, as an adjustment to the yield of the
related loan over the term of the loan.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Expenditures for additions and major improvements
that significantly extend the useful lives of the assets are capitalized.
Expenditures for repairs and maintenance are charged to expense as incurred.
The carrying value of assets traded in are used to adjust the carrying values
of the new assets acquired by trade. Assets which are disposed of are removed
from the accounts and the resulting gains or losses are recorded in operations.
Depreciation is provided generally by accelerated and straight-line methods
based on the estimated useful lives of the respective assets.
Other Real Estate: Other real estate comprises properties acquired through a
foreclosure proceeding or acceptance of a deed in lieu of foreclosure. These
properties are carried at the lower of cost or fair market value based on
appraised value at the date acquired. Loan losses arising from the acquisition
of such properties are charged against the allowance for loan losses. An
allowance for losses on other real estate is maintained for subsequent
valuation adjustments on a specific property basis.
Earnings Per Common Share: Earnings per common share are calculated on the
basis of the weighted average number of common shares outstanding on net income
adjusted for preferred stock dividend requirements after giving retroactive
effect to a 3-for-1 stock split for the year ended December 31, 1992.
Income Taxes: Provisions for income taxes are based on amounts reported in the
statement of income (after exclusion of non-taxable income such as interest on
state and municipal securities) and include deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes. Deferred tax assets and liabilities are included in the
financial statements at currently enacted income tax rates applicable to the
period in which the deferred tax assets and liabilities are expected to be
realized or settled as prescribed in SFAS No. 109, Accounting for Income Taxes.
As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
9
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
The Company and its subsidiaries file a consolidated federal income tax return.
Each subsidiary provides for income taxes on a separate-return basis, and
remits to the Company amounts determined to be currently payable.
Pension and Employee Stock Ownership Plans: The Company and its subsidiaries
have various employee benefit plans which cover substantially all employees.
Pension expense is determined based on an actuarial valuation. The Company
contributes amounts to the pension fund sufficient to satisfy funding
requirements of the Employee Retirement Income Security Act. Contributions to
the Employee Stock Ownership Plan are determined by the Board of Directors.
Intangibles: Intangibles consist primarily of legal organizational costs and
core deposits intangible. Organizational costs are generally amortized over 5
years using the straight-line method. The core deposits intangible represents
premiums paid on the purchase of deposit liabilities. The asset is stated at
cost, net of accumulated amortization, which is provided using the
straight-line method over the estimated useful life of approximately 25 years.
Off Balance Sheet Financial Instruments: In the ordinary course of business
the Company has entered into off-balance-sheet financial instruments consisting
of commitments to extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they become payable.
The Company also has available as a source of short-term financing the purchase
of federal funds from another commercial bank from an available line of up to
$2,000,000.
Cash Flow Information: For purposes of the statements of cash flows, the
Company considers cash, due from banks and federal funds sold as cash and cash
equivalents.
NOTE 2 - RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The subsidiary bank is required to maintain average reserve balances either in
vault cash or on deposit with the Federal Reserve Bank. The average amount of
those reserves required at December 31, 1994 was approximately $3,282,000.
10
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 3 - INVESTMENT SECURITIES
Effective January 1, 1994, the Company applied the accounting and reporting
requirements of Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities. This pronouncement
requires that all investments in debt securities be classified as either HELD
TO MATURITY SECURITIES, which are reported at amortized cost; TRADING
SECURITIES, which are reported at fair value, with unrealized gains and losses
included in earnings; or AVAILABLE FOR SALE SECURITIES, which are reported at
fair value, with unrealized gains and losses excluded from earnings and
reported in a separate component of shareholders' equity (net of deferred tax
effect).
At December 31, 1994, the Company's available-for-sale securities reflected net
unrealized losses of $1,098,484 which resulted in a decrease in stockholders'
equity of $659,091 net of deferred tax benefit. There were no trading
securities. Had SFAS 115 been in effect at December 31, 1993, the investment
securities would have reflected $1,306,116 of net unrealized gains in available
for sale securities, with an increase to stockholders' equity, net of deferred
tax liability, of $783,670.
The carrying amounts of investment securities as shown in the consolidated
statements of financial condition of the Company and their approximate fair
values at December 31, 1994 and 1993 are presented below.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------ ------------- -------------
As of December 31, 1994:
- -----------------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
U. S. GOVERNMENT AND AGENCY SECURITIES . . . . $ 16,918,181 $ 12,167 $ 1,211,442 $ 15,718,906
STATE AND MUNICIPAL SECURITIES . . . . . . . . 2,679,787 130,650 6,449 2,803,988
MORTGAGE-BACKED SECURITIES . . . . . . . . . . 2,354,048 10,009 33,419 2,330,638
------------- ------------ ------------- ------------
$ 21,952,016 $ 152,826 $ 1,251,310 $ 20,853,532
============= ============ ============= ============
SECURITIES HELD TO MATURITY:
U. S. GOVERNMENT AND AGENCY SECURITIES . . . . $ 12,345,287 $ 3,385 $ 756,097 $ 11,592,575
STATE AND MUNICIPAL SECURITIES . . . . . . . . 16,507,703 178,235 728,968 15,956,970
MORTGAGE-BACKED SECURITIES . . . . . . . . . . 12,679,919 44,412 842,543 11,881,788
------------- ------------ ------------- ------------
$ 41,532,909 $ 226,032 $ 2,327,608 $ 39,431,333
============= ============ ============= ============
</TABLE>
11
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 3 - INVESTMENT SECURITIES - CONTINUED
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------ ------------- -------------
As of December 31, 1993:
- -----------------------
<S> <C> <C> <C> <C>
Securities Available for Sale:
U. S. government and agency securities . . . . $ 24,655,313 $ 714,433 $ 31,746 $ 25,338,000
State and municipal securities . . . . . . . . 2,861,896 395,104 -0- 3,257,000
Mortgage-backed securities . . . . . . . . . . 12,225,675 245,785 17,460 12,454,000
------------- ------------ ------------- ------------
$ 39,742,884 $ 1,355,322 $ 49,206 $ 41,049,000
============= ============ ============= ============
Securities Held to Maturity:
U. S. government and agency securities . . . . $ 10,563,910 $ 62,090 $ -0- $ 10,626,000
State and municipal securities . . . . . . . . 14,961,928 886,072 -0- 15,848,000
Mortgage-backed securities . . . . . . . . . . 16,479,677 380,323 -0- 16,860,000
Foreign debt securities . . . . . . . . . . . . 485,095 -0- 2,095 483,000
------------- ------------ ------------- ------------
$ 42,490,610 $ 1,328,485 $ 2,095 $ 43,817,000
============= ============ ============= ============
</TABLE>
12
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 3 - INVESTMENT SECURITIES - CONTINUED
The contractual maturities of securities held to maturity and securities
available for sale at December 31, 1994 are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------- ------------
AS OF DECEMBER 31, 1994:
- -----------------------
<S> <C> <C>
SECURITIES AVAILABLE FOR SALE:
DUE IN ONE YEAR OR LESS . . . . . . . . . . . . . . . . . . . . . . . . $ 2,606,650 $ 2,616,548
DUE AFTER ONE YEAR THROUGH FIVE YEARS . . . . . . . . . . . . . . . . . 10,396,505 9,868,557
DUE AFTER FIVE YEARS THROUGH TEN YEARS . . . . . . . . . . . . . . . . 6,295,530 5,663,767
DUE AFTER TEN YEARS . . . . . . . . . . . . . . . . . . . . . . . . . . 2,653,331 2,704,660
------------- ------------
$ 21,952,016 $ 20,853,532
============= ============
SECURITIES HELD TO MATURITY:
DUE IN ONE YEAR OR LESS . . . . . . . . . . . . . . . . . . . . . . . . $ 3,626,591 $ 3,616,036
DUE AFTER ONE YEAR THROUGH FIVE YEARS . . . . . . . . . . . . . . . . . 7,729,282 7,389,153
DUE AFTER FIVE YEARS THROUGH TEN YEARS . . . . . . . . . . . . . . . . 5,915,414 5,538,650
DUE AFTER TEN YEARS . . . . . . . . . . . . . . . . . . . . . . . . . . 24,261,622 22,887,494
------------- ------------
$ 41,532,909 $ 39,431,333
============= ============
</TABLE>
Mortgage-backed securities have been included in the maturity tables based upon
the guaranteed payoff date of each security.
Gross realized gains and losses on investments in debt securities available for
sale for each of the three years in the period ended December 31, 1994 were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------ -------------
<S> <C> <C> <C>
Gross realized gains . . . . . . . . . . . . . . . . . $ 207,639 $ 470,738 $ 88,591
Gross realized losses . . . . . . . . . . . . . . . . . 186,945 -0- -0-
</TABLE>
Investment securities pledged to secure public funds on deposit, securities
sold under agreements to repurchase, and for other purposes as required by law
amounted to approximately $47,219,000 and $30,940,000 at December 31, 1994 and
1993, respectively.
13
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 4 - LOANS
The subsidiary banks grant loans to customers primarily in North Central
Alabama and South Central Tennessee.
The major classifications of loans as of December 31, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
-------------- --------------
<S> <C> <C>
Commercial, financial and agricultural . . . . . . . . . . . . . . . . . . $ 46,892,157 $ 34,199,967
Real estate - construction . . . . . . . . . . . . . . . . . . . . . . . . 3,972,582 2,185,915
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . 103,193,969 75,834,573
Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,050,689 43,470,110
-------------- --------------
212,109,397 155,690,565
Unearned income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,681,403 4,039,534
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . 1,547,834 1,254,843
-------------- --------------
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 204,880,160 $ 150,396,188
============== ==============
</TABLE>
Loans on which the accrual of interest has been discontinued or reduced
amounted to approximately $422,000 and $265,000 at December 31, 1994 and 1993,
respectively.
For the years ended December 31, 1994, 1993 and 1992, the difference between
gross interest income that would have been recorded in such period if
nonaccruing loans had been current in accordance with their original terms and
the amount of interest income on those loans that was included in such period's
net income was negligible.
NOTE 5 - ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for each of the three years in the
period ended December 31, 1994 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------ -------------
<S> <C> <C> <C>
Balance at beginning of year . . . . . . . . . . . . . . . . $ 1,254,843 $ 1,062,280 $ 939,657
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . (410,226) (295,954) (480,982)
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . 64,989 71,017 64,255
------------- ------------ -----------
Net charge-offs . . . . . . . . . . . . . . . . . . . . . . (345,237) (224,937) (416,727)
Provision for loan losses . . . . . . . . . . . . . . . . . . 638,228 417,500 539,350
------------- ------------ -----------
Balance at end of year . . . . . . . . . . . . . . . . . . . $ 1,547,834 $ 1,254,843 $ 1,062,280
============= ============ ===========
</TABLE>
14
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,350,670 $ 1,016,468
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,696,789 4,398,506
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,318,222 3,250,006
Automobiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 756,798 522,968
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 407,913 308,807
------------ ------------
13,530,392 9,496,755
Less allowance for depreciation . . . . . . . . . . . . . . . . . . . . . . . 3,147,028 2,644,492
------------ ------------
$ 10,383,364 $ 6,852,263
============ ============
</TABLE>
The provisions for depreciation charged to occupancy and furniture and
equipment expense for the years ended December 31, 1994, 1993 and 1992 were
$620,505, $469,441 and $426,100, respectively.
NOTE 7 - DEPOSITS
The major classifications of deposits as of December 31, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1994 1993
--------------- --------------
<S> <C> <C>
Noninterest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . . $ 29,515,704 $ 29,472,107
Interest-bearing demand . . . . . . . . . . . . . . . . . . . . . . . . . . 48,551,826 44,775,856
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,315,233 42,967,248
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,267,270 79,198,995
Certificates of deposit of $100,000 or more . . . . . . . . . . . . . . . . 31,207,528 25,801,138
Time deposits open . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,555,000 5,555,000
--------------- --------------
$ 263,412,561 $ 227,770,344
=============== ==============
</TABLE>
The maturities of time certificates of deposit and other time deposits of
$100,000 or more issued by the Company at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
TIME OTHER
CERTIFICATES TIME
OF DEPOSIT DEPOSITS TOTAL
------------- ------------ -------------
<S> <C> <C> <C>
Three months or less . . . . . . . . . . . . . . . . . . . . $ 5,369,092 $ 14,555,000 $ 19,924,092
Over three through six months . . . . . . . . . . . . . . . . 2,676,120 -0- 2,676,120
Over six through twelve months . . . . . . . . . . . . . . . 4,609,490 -0- 4,609,490
Over twelve months . . . . . . . . . . . . . . . . . . . . . 18,552,826 -0- 18,552,826
------------- ------------- ------------
$ 31,207,528 $ 14,555,000 $ 45,762,528
============= ============= ============
</TABLE>
15
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 8 - LONG TERM DEBT
At December 31, 1994 and 1993, the Company had notes payable totaling
$8,712,953, and $6,391,667, respectively.
On December 17, 1992, the Company entered into a loan agreement with Colonial
Bank for amounts up to $6,500,000. At December 31, 1994 and 1993, the amounts
outstanding were $5,692,014 and $6,391,667, respectively, due December 17,
2002, bearing interest at a floating prime, collateralized by 100% of the
common stock of the subsidiary banks. The note agreement contains provisions
which limit the Company's right to transfer or issue shares of subsidiary
banks' stock. Principal payments of $58,681 are due monthly; however, the
Company has the option of postponing up to twenty-four monthly principal
payments, provided that no more than six consecutively scheduled installments
are deferred.
On November 3, 1993 the Company's ESOP (Note 16) borrowed $1,200,000 for the
acquisition of Company common stock. The note is due December 5, 2005, bearing
interest at a floating rate, collateralized by shares of the Company's common
stock purchased by the ESOP. The Company has not guaranteed this debt;
however, new accounting and reporting guidelines mandated the debt's
recognition on the Company's balance sheet as of January 1, 1994 with an
offsetting charge against equity. As principal payments are made by the ESOP,
the debt and offsetting charge against equity are reduced. Principal payments
of $14,280 are due monthly, at which time the lender releases a proportionate
amount of the stock held as collateral to the ESOP for allocation to its
participants. The outstanding balance of this note was $1,028,640 at December
31, 1994.
On October 4, 1994, the Company entered into a twenty year, subordinated
installment capital note due October 1, 2014 for the purchase of treasury
stock. Monthly principal and interest payments of $15,506 are made on the note,
which bears interest at the fixed rate of 7 %. The Company maintains the right
to prepay the note at its sole discretion. The balance of the note was
$1,992,299 at December 31, 1994.
Maturities of long-term debt following December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995 . . . . . . . . . . $ 923,663
1996 . . . . . . . . . . 927,142
1997 . . . . . . . . . . 930,874
1998 . . . . . . . . . . 934,875
1999 . . . . . . . . . . 939,165
Thereafter . . . . . . . 4,057,234
-------------
$ 8,712,953
=============
</TABLE>
16
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 9 - OTHER OPERATING EXPENSES
Other operating expenses consist of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Amortization of intangibles . . . . . . . . . . . . . . . $ 126,764 $ 84,182 $ 85,692
Advertising . . . . . . . . . . . . . . . . . . . . . . . 249,514 238,966 164,126
Insurance . . . . . . . . . . . . . . . . . . . . . . . . 725,383 506,578 511,250
Professional fees . . . . . . . . . . . . . . . . . . . . 218,426 222,247 275,883
Supplies . . . . . . . . . . . . . . . . . . . . . . . . 213,208 223,375 209,495
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 1,128,501 1,093,833 657,122
------------- ------------- -------------
$ 2,661,796 $ 2,369,181 $ 1,903,568
============= ============= =============
</TABLE>
NOTE 10 - INCOME TAXES
Federal and state income taxes receivable and (payable) as of December 31, 1994
and 1993 included in other assets and other liabilities, respectively, were as
follows:
<TABLE>
<CAPTION>
1994 1993
------------ -------------
<S> <C> <C>
Current
Federal . . . . . . . . . . . . . . . . . . . . . . . . . $ 382,128 $ 121,683
============ ============
State . . . . . . . . . . . . . . . . . . . . . . . . . . $ (106,288) $ (141,593)
============ ============
</TABLE>
The components of the net deferred income tax asset included in other assets
are as follows:
<TABLE>
<S> <C> <C>
Deferred tax asset:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,067,892 $ 387,214
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,105 68,332
------------ ------------
Total gross deferred income tax asset . . . . . . . . . . . . . . . . 1,218,997 455,546
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . (172,045) (82,066)
------------ ------------
1,046,952 373,480
------------ ------------
Deferred tax liability:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (385,233) (317,458)
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68,413) (56,022)
------------ -------------
(453,646) (373,480)
------------ ------------
Net deferred income tax asset . . . . . . . . . . . . . . . . . . . . . . $ 593,306 $ -0-
============ ============
</TABLE>
17
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 10 - INCOME TAXES - CONTINUED
The tax effects of each type of income and expense item that gave rise to
deferred taxes are:
<TABLE>
<CAPTION>
1994 1993
------------ -------------
<S> <C> <C>
Alternative minimum tax credit carryover . . . . . . . . . . . . . . . . $ 207,070 $ -0-
Net unrealized loss on securities available
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439,394 -0-
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (439,350) (359,325)
Pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,197 101,052
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . 444,473 354,494
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,567 (14,155)
------------ ------------
765,351 82,066
Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . (172,045) (82,066)
------------ ------------
$ 593,306 $ -0-
============ ============
</TABLE>
The net changes in the total valuation allowance for the years ended December
31, 1994 and 1993 were $89,979 and $82,066, respectively.
The components of income tax expense for each of the years ended December 31,
1994, 1993 and 1992 were:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------- ------------------------- --------------------------
CURRENT Deferred Current Deferred Current Deferred
------------ ------------ ------------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Federal . . . $ 769,490 $ (100,092) $ 719,640 $ -0- $ 825,528 $ (4,500)
State . . . . 106,288 9,024 145,598 -0- 113,064 (2,500)
----------- ----------- ------------ -------- ------------- ---------
$ 875,778 $ (91,068) $ 865,238 $ -0- $ 938,592 $ (7,000)
=========== =========== ============ ======== ============= =========
</TABLE>
The principal sources of temporary differences resulting in deferred income
taxes included in the accompanying consolidated statements of income and the
tax effect of each are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------ ------------- ------------
<S> <C> <C> <C>
Depreciation . . . . . . . . . . . . $ 80,025 $ 157,140 $ 18,966
Provision for loan losses . . . . . . (89,979) (218,280) (24,525)
Pension expense . . . . . . . . . . . (144) (49,406) 822
Alternative minimum
tax credit . . . . . . . . . . . . (207,070) -0- -0-
Change in valuation
allowance . . . . . . . . . . . . . 89,979 82,066 -0-
Other . . . . . . . . . . . . . . . . 36,121 28,480 (2,263)
------------ ------------- ----------
$ (91,068) $ -0- $ (7,000)
============ ============= ==========
</TABLE>
18
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 10 - INCOME TAXES - CONTINUED
Tax effects of securities transactions resulted in an increase in income taxes
for 1994, 1993 and 1992 of $8,278, $188,295 and $35,436, respectively.
The following is a reconciliation of the difference in the effective tax rate
and the federal statutory rate:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1994 1993 1992
------------- ------------ -------------
<S> <C> <C> <C>
Statutory federal income tax rates . . . . . . . . . . . 34.0 % 34.0 % 34.0 %
Effect on rate of:
Tax-exempt securities . . . . . . . . . . . . . . . . . (10.7) (9.5) (5.7)
Tax-exempt loan income . . . . . . . . . . . . . . . . (5.3) (4.4) (4.6)
State income tax, net of federal tax benefit . . . . . 1.9 2.8 2.1
Bad debt expense limitation . . . . . . . . . . . . . . 2.1 2.0 -0-
Interest expense disallowance . . . . . . . . . . . . . 1.2 1.0 .7
Alternative minimum tax credit . . . . . . . . . . . . -0- -0- (1.9)
Other items . . . . . . . . . . . . . . . . . . . . . . (1.4) (.7) 1.1
------------- ------------ -------------
Effective income tax rate . . . . . . . . . . . . . . . . 21.8 % 25.2 % 25.7 %
============= ============ =============
</TABLE>
NOTE 11 - SHAREHOLDERS' EQUITY
On June 1, 1993 the Board of Directors approved a 3-for-1 stock split of the
Company's common stock. This split was effected in the form of a stock
dividend and resulted in the issuance of 802,548 additional shares.
Effective October 1, 1993, the Company offered a maximum of 600,000 shares of
its $.10 par value common stock at $15 per share with the anticipation of
raising up to $9,000,000 of capital. As of December 31, 1993, 535,999 shares
had been issued, raising $7,959,139 of capital after reduction of offering
costs. On February 11, 1994 the offering was closed upon full subscription of
all shares offered for sale, raising an additional $957,603 of capital after
offering costs.
On October 4, 1994, the Company purchased 115,978.384 shares of the Company's
common stock, including 7,144.384 shares vested under the Company's ESOP, from
ffrey K. Cornelius, a former director and officer of the Company, at a price per
share of approximately $25. The Company paid Mr. Cornelius $899,460 in cash and
issued to him a subordinated promissory note in the original principal amount of
$2,000,000. Such note bears interest on the outstanding principal amount at a
rate of 7.0% per annum, is payable in 240 equal monthly installments of
principal and interest, and may be prepaid in whole or in part at any time
without penalty. In addition, the Company conveyed to Mr. Cornelius a 1994
automobile valued at approximately $25,200, free of any liens or encumbrances,
and a life insurance policy, which had no cash surrender value, in the amount of
$100,000, the premiums for which were thereafter assumed by Mr. Cornelius. The
price per share paid to Mr. Cornelius by the Company exceeded $18.50 per share,
the valuation provided to the Company at December 31, 1994 from an independent
appraisal for purposes of shares held by the ESOP, and $18 per share, the next
highest trading price per share reported to the Company during 1994. The $18.50
per share valuation was expressly limited by the independent appraiser for
19
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 11 - SHAREHOLDERS' EQUITY - CONTINUED
purposes of valuing the Company's common stock to be utilized for the ESOP.
Management believes that the price per share paid by the Company for Mr.
Cornelius' shares represented the fair value of such shares at the date of the
purchase. The 115,978.384 shares of the Company's common stock acquired by the
Company from Mr. Cornelius comprised approximately 6.68% of the outstanding
shares of the Company's common stock, which represented the third largest block
of the Company's common stock outstanding. Management determined that the
acquisition of such block of shares by a person with a view toward exerting
control or substantial influence with respect to the management, policies and
operations of the Company could have proven detrimental to the efficiency and
profitability of the Company and, therefore, was not in the best interests of
the shareholders of the Company. In addition, management determined that Mr.
Cornelius would likely have attempted to sell his shares of the Company's
common stock to persons in the Company's market area, and that such an attempt
by Mr. Cornelius, who had a long and prominent association with the Company,
may have negatively impacted the Company's financial condition and results of
operations. There is no active trading market for the the Company's common
stock and, accordingly, there is a limited amount of information available
regarding the market value of the Company's common stock. No other trades of
the Company's common stock were reported to the Company during the fourth
quarter of 1994. Management did not obtain any independent advice, appraisal
or other evidence to evaluate whether the price per share paid to Mr. Cornelius
was economically justified. Such purchase price was determined based upon
management's subjective determination of the fair value of such shares.
Management was not aware of other bona fide offers to purchase Mr. Cornelius'
shares of the Company's common stock.
On January 9, 1995, the Board of Directors of the Company declared a dividend
of $.50 per share to shareholders of record as of January 15, 1995 which was
paid on January 20, 1995. The payment of dividends on common stock is subject
to the prior payment of principal and interest on the Company's long-term debt,
maintenance of sufficient earnings and capital of the subsidiaries and to
regulatory restrictions. (See Notes 8 and 17).
Also on January 9, 1995, the Board of Directors passed a resolution authorizing
the preparation of a Registration Statement for the proposed sale of 312,161
shares of the Company's $.10 par value common stock, consisting of the
Company's 115,978 shares of treasury stock and 196,183 newly issued shares. If
it occurs as expected in the first half of 1995, this sale would create
approximately $6,200,000 of additional capital for the Company.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company offers a variety of financial
products to its customers to aid them in meeting their requirements for
liquidity, credit enhancement, and interest rate protection. Generally
accepted accounting principles recognize these transactions as contingent
liabilities and, accordingly, they are not reflected in the accompanying
financial statements. Commitments to extend credit, credit card arrangements,
commercial letters of credit, and standby letters of credit all include
exposure to some credit loss in the event of nonperformance of the customer.
The Company's credit policies and procedures for credit commitments and
financial guarantees are the same as those for extension of credit that are
recorded on the consolidated statements of financial condition. Because these
20
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 12 - COMMITMENTS AND CONTINGENCIES - CONTINUED
instruments have fixed maturity dates, and because many of them expire without
being drawn upon, they do not generally present any significant liquidity risk
to the Company. The Company has not been required to perform on any financial
guarantees nor has it incurred any losses on its commitments in either 1994 or
1993. Following is a discussion of these commitments:
Standby Letters of Credit: These agreements are used by the Company's
customers as a means of improving their credit standings in their dealings with
others. Under these agreements, the Company agrees to honor certain financial
commitments in the event that its customers are unable to do so. As of
December 31, 1994 and 1993, the Company has issued standby letters of credit of
approximately $642,000 and $411,000, respectively.
Management conducts regular reviews of these instruments on an individual
customer basis, and the results are considered in assessing the adequacy of the
Company's allowance for loan losses. Management does not anticipate any
material losses as a result of these letters of credit.
Loan Commitments: As of December 31, 1994 and 1993, the Company had
commitments outstanding to extend credit totaling approximately $4,270,000 and
$2,994,000, respectively. These commitments generally require the customers to
maintain certain credit standards. Management does not anticipate any material
losses as a result of these commitments.
Litigation: The Company and its subsidiaries are parties to litigation and
claims arising in the normal course of business. Management, after
consultation with legal counsel, believes that the liabilities, if any, arising
from such litigation and claims are not material to the consolidated financial
statements.
NOTE 13 - CONCENTRATIONS OF CREDIT
All of the Company's loans, commitments and standby letters of credit have been
granted to customers in the Company's market area. Substantially all such
customers are depositors of the Company. Investments in state and municipal
securities also involve governmental entities within the Company's market area.
The concentrations of credit by type of loan are set forth in Note 4. The
commitments to extend credit relate primarily to consumer cash lines which
represented approximately $2,395,000 and $2,136,000 of the unused commitment
balances at December 31, 1994 and 1993. All remaining commitments consist
primarily of unused real estate draw lines.
The Company maintains its cash accounts at various commercial banks in Alabama.
The total cash balances are insured by the FDIC up to $100,000. Total
uninsured balances held at other commercial banks amounted to $4,169,956 and
$3,239,818, at December 31, 1994 and 1993, respectively.
21
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 14 - CUMULATIVE PREFERRED STOCK
Holders of Series 1984-1 8% Cumulative Preferred Stock generally do not have
voting rights. The annual dividend rate on this preferred stock was 8% of
stated value. This preferred stock was redeemed by the Company on December 31,
1993. The redemption price per share was $69.44.
NOTE 15 - PENSION PLAN
The Company has a defined benefit plan that provides retirement and disability
benefits for substantially all employees of the Company and its subsidiaries,
and death benefits for their beneficiaries. Employees who are expected to work
1,000 hours in any calendar year become participants in the Pension Plan on
January 1 of each year. All employees are eligible to become participants in
the Pension Plan regardless of age on the date they begin employment and the
normal retirement age is the later of age 65 or five years after the date of
employment. In addition, participants in the Pension Plan accrue benefits
after they have attained the normal retirement age.
Benefits under the Pension Plan depend upon a participant's years of credited
service with the Company or any of its subsidiaries and his average monthly
earnings for the five year period prior to the retirement or termination of
employment. A participant is 20% vested in his accrued benefits after
completion of two years of service. Vesting increases 20% per year for the
next four years with the participant becoming fully vested upon completion of
six years of service. An employee who completes ten years of service and
attains age fifty-five is eligible for early retirement benefits. Plan assets
consist primarily of corporate stocks and bonds.
The Company contributes amounts to the pension funds sufficient to satisfy
funding requirements of the Employee Retirement Income Security Act.
Net pension cost for 1994, 1993 and 1992 is composed of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------------- ------------ ------------
<S> <C> <C> <C>
Service . . . . . . . . . . . . . . . . . . . . . . . . . $ 222,624 $ 193,714 $ 164,203
Interest cost on projected benefit obligations . . . . . 187,062 166,793 127,320
Actual return on assets . . . . . . . . . . . . . . . . . (9,652) (134,727) (112,441)
Net amortization and deferral . . . . . . . . . . . . . . (160,235) (15,291) (31,449)
------------- ------------ ------------
Net periodic pension cost . . . . . . . . . . . . . . . $ 239,799 $ 210,489 $ 147,633
============= ============ ============
</TABLE>
22
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 15 - PENSION PLAN - CONTINUED
The following table sets forth the funding status of the plan and the amount
recognized in the Company's consolidated statements of financial condition at
December 31:
<TABLE>
<CAPTION>
1994 1993
------------ -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,923,605 $ 1,666,994
Nonvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,989 20,891
------------ -------------
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . $ 1,959,594 $ 1,687,885
============ =============
Actuarial present value of projected benefit obligation . . . . . . . . . . $ 2,728,056 $ 2,403,336
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . 2,217,143 1,986,434
------------ -------------
Projected benefit obligation in excess of plan assets . . . . . . . . . . . (510,913) (416,902)
Unamortized net assets at transition . . . . . . . . . . . . . . . . . . . (121,947) (138,826)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,358 26,378
Prior service cost not yet recognized in net periodic pension cost . . . . 159,230 170,929
------------ -------------
Non-current pension liability . . . . . . . . . . . . . . . . . . . . . . . $ (370,272) $ (358,421)
============ =============
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used in determining actuarial present value of the projected benefit
obligations were eight percent and six percent, respectively, for 1994 and
1993. The assumed long-term rate of return on plan assets in 1994 and 1993 was
eight percent.
NOTE 16 - EMPLOYEE STOCK OWNERSHIP PLAN
The Company adopted an Employee Stock Ownership Plan (the "ESOP") effective as
of January 1, 1985, which enables eligible employees of the Company and its
subsidiaries to own Company common stock. Employees who work 1,000 hours in
any consecutive twelve month period become participants in the ESOP on December
31 of that year, and remain eligible in every subsequent year in which 1,000
hours of work are completed. Employer contributions, which are made at the
discretion of the Company's Board of Directors, are allocated to eligible
participants in proportion to their eligible pay, which equals W-2 wages plus
pre-tax reductions for the Company's cafeteria plan. The Internal Revenue
Service imposes a limit ($150,000 in 1994) on the maximum amount of eligible
pay under the plan.
On November 3, 1993, the ESOP's Trustees executed a promissory note of
$1,200,000 in order to purchase common stock from the Company's public offering
of new common stock. The note was originally secured by 80,000 shares of
purchased stock, which are released prorata by the lender as monthly payments
of principal and interest are made. As of December 31, 1994, there were 68,576
unreleased shares with a fair value of approximately $1,250,000. These shares
are subtracted from outstanding shares for earnings per share calculations.
23
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 16 - EMPLOYEE STOCK OWNERSHIP PLAN - CONTINUED
Effective January 1, 1994, the Company applied the accounting and reporting
requirements of Statement of Position No. 93-6, Employers' Accounting for
Employee Stock Ownership Plans ("SOP 93-6"). SOP 93-6 removes any distinctions
between ESOP loans which are guaranteed by the employer and those which are
not. Under the provisions of SOP 93-6, the employer must recognize the
indebtness of its sponsored ESOP on its financial statement and reduce its
stockholder's equity for shares of stock which have not been released by a
lender to the ESOP for allocation to its participating employees. Adjustments
are also required to the method of recording payments made by the Company to
the ESOP on behalf of its participating employees.
Dividends paid on released ESOP shares are credited to the accounts of the
participants to whom the shares are allocated. Dividends on unreleased shares
are treated as other income of the ESOP.
At December 31, 1994, the Company's financial statements reflect long term and
a corresponding contra-equity account, as a result of the ESOP debt, of
$1,028,640.
Company contributions to the ESOP amounted to $276,991, $236,312, and $198,000,
for 1994, 1993 and 1992, respectively.
NOTE 17 - RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES
Dividends paid by Community Bank (Alabama) are the primary source of funds
available to the Company for debt repayment, payment of dividends to its
stockholders and other needs. Certain restrictions exist regarding the ability
of the Bank to transfer funds to the Company in the form of cash dividends,
loans or advances. The approval of the Superintendent of Banks is required to
pay dividends in excess of the Bank's earnings retained in the current year
plus retained net profits for the preceding two years. At December 31, 1994,
Community Bank (Alabama) could have declared dividends of $6,688,768 without
approval of regulatory authorities.
NOTE 18 - RELATED PARTY TRANSACTIONS
Loans: Certain directors, executive officers and principal shareholders,
including their immediate families and associates were loan customers of the
subsidiary bank during 1994 and 1993. Such loans are made in the ordinary
course of business at normal credit terms, including interest rates and
collateral and do not represent more than a normal risk of collection. Total
loans to these persons at December 31, 1994 and 1993, amounted to $6,364,448
and $4,704,163, respectively. An analysis of activity during 1994 in loans to
related parties resulted in additions of $3,360,645 representing new loans,
reductions of $1,387,304, representing payments, and a decrease of $313,056
representing a change in the composition of related parties.
Leases: Community Bank (Alabama) has lease agreements with Com-Pac, a
partnership composed of Kennon R. Patterson, Sr., Birl Bryson and Bishop K.
Walker, Jr., all of whom are directors and officers of the Company, for the
lease of land and banking facilities. Lease expense on these properties
amounted
24
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 18 - RELATED PARTY TRANSACTIONS - CONTINUED
to $143,352, $142,552 and $140,952 for the years ended December 31, 1994, 1993
and 1992, respectively.
Maintenance Contract: Community Bank (Alabama) has a service contract with
Royal Acres, a partnership composed of Kennon R. Patterson, Sr. and Bishop K.
Walker, Jr., both of whom are directors and officers of the Company, for the
upkeep and maintenance of the external grounds of the Bank's seventeen
locations. Maintenance expense under this contract amounted to $60,000 for the
year ended December 31, 1994, a monthly average of $294 per location. This
expense was $60,000 and $43,500 for the years ended December 31, 1993 and 1992,
respectively.
Interior Design : During 1994 Community Bank (Alabama) and Community Bank
(Tennessee) paid Heritage Interiors, a decorating and design firm owned and
operated by the wife of Kennon R. Patterson, Sr., a director and officer of the
Company, for the interior design, furniture, appliances, fixtures, carpets,
wallcoverings, drapes, and accessories for facilities in Arab-Downtown ($210),
Arab-Parkway ($2,394), Blountsville ($5,290), Corporate headquarters ($1,112),
Pulaski-Martin house ($165,265), Pulaski-West College ($22,743), Rainsville
($282), Snead ($39,066) and West Blount ($45).
The purchases were made at a cost more favorable than could be obtained from
unrelated parties.
See Note 11.
NOTE 19 - LEASES
The Company has a number of operating lease agreements, involving land and
buildings. These leases are noncancellable and expire on various dates through
the year 2006. The leases provide for renewal options and generally require
the Company to pay maintenance, insurance and property taxes. Options to
purchase are also included in some leases. For the years ended December 31,
1994, 1993 and 1992, rental expense for operating leases was approximately
$232,122, $199,135, and $163,722, respectively.
Future minimum lease payments for all leases at December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
OPERATING
-------------
<S> <C>
Years Ending December 31,
1995 . . . . . . . . . . . . . . . . . . $ 145,588
1996 . . . . . . . . . . . . . . . . . . 35,265
1997 . . . . . . . . . . . . . . . . . . 25,700
1998 . . . . . . . . . . . . . . . . . . 25,700
1999 . . . . . . . . . . . . . . . . . . 21,050
Thereafter . . . . . . . . . . . . . . . 27,900
------------
Total minimum lease payments . . . . . . $ 281,203
============
</TABLE>
25
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 20 - BUSINESS COMBINATIONS
On November 15, 1993, the Company capitalized a new Tennessee bank subsidiary
in Pulaski, Tennessee and commenced operations. The new subsidiary bank,
Community Bank (Tennessee), was capitalized with $3,500,000 and is wholly owned
by the Company. All of the Tennessee bank's stock is pledged as security
against a note agreement. (See Note 8)
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which is practicable to estimate that
value:
Cash and Short-Term Investments: For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Investment Securities: For securities and marketable equity securities held
for investment purposes, fair values are based on quoted market prices or
dealer quotes. For other securities held as investments, fair value equals
quoted market price, if available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar securities.
Loan Receivables: For certain homogeneous categories of loans, such as some
residential mortgages, credit card receivables, and other consumer loans, fair
value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics. The fair
value of other types of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Deposit Liabilities: The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposit of similar remaining maturities.
Long-term Debt: Rates currently available to the Bank for debt with similar
terms and remaining maturities are used to estimate fair value of existing
debt.
Commitments to Extend Credit, Standby Letters of Credit, and Financial
Guarantees Written: The fair value of commitments and letters of credit is
estimated to be approximately the same as the notional amount of the related
commitment.
26
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 21 - FAIR VALUE OF FINANCIAL INSTRUMENTS - CONTINUED
The estimated fair values of the Company's financial instruments as of December
31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
---------------------------- -----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------------ ------------ ------------ ------------
(in Thousands) (in Thousands)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and short-term investments . . . $ 15,762 $ 15,762 $ 18,192 $ 18,192
Investment securities . . . . . . . . 62,386 60,285 82,233 84,866
Loans . . . . . . . . . . . . . . . . 206,428 151,651
Less: allowance for losses . . . . . 1,548 1,255
------------ ------------
Net Loans . . . . . . . . . . . . . . 204,880 200,936 150,396 152,815
------------ ------------ ------------ ------------
TOTAL FINANCIAL ASSETS . . . . . . . $ 283,028 $ 276,983 $ 250,821 $ 255,873
============ ============ ============ ============
FINANCIAL LIABILITIES:
Deposits . . . . . . . . . . . . . . $ 263,413 $ 262,658 $ 227,770 $ 228,514
Short-term borrowings . . . . . . . . 2,044 2,044 1,850 1,850
Long-term debt . . . . . . . . . . . 8,713 9,087 6,392 6,392
------------ ------------ ------------ ------------
TOTAL FINANCIAL LIABILITIES . . . . . $ 274,170 $ 273,789 $ 236,012 $ 236,756
============ ============ ============ ============
UNRECOGNIZED FINANCIAL INSTRUMENTS:
Commitments to extend credit . . . . $ 4,191 $ 4,191 $ 2,994 $ 2,994
Standby letters of credit . . . . . . 642 642 411 411
------------ ------------ ------------ ------------
TOTAL UNRECOGNIZED
FINANCIAL INSTRUMENTS . . . . . . . $ 4,833 $ 4,833 $ 3,405 $ 3,405
============ ============ ============ ============
</TABLE>
27
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 22 - CONDENSED PARENT COMPANY INFORMATION
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
-------------------------------
1994 1993
-------------- --------------
<S> <C> <C>
ASSETS
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,202,932 $ 2,060,659
Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . 2,993,782 5,975,996
Interest-bearing deposits with other banks . . . . . . . . . . . . . . . 522,123 -0-
Investment in subsidiaries (equity method) -
eliminated upon consolidation . . . . . . . . . . . . . . . . . . . . . 22,577,210 20,953,306
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 77,156 54,417
Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,536,764 1,652,632
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 734,785 110,509
------------- -------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,644,752 $ 30,807,519
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,712,953 $ 6,391,667
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,463 950,974
------------- -------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . 8,992,416 7,342,641
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . . . 22,652,336 23,464,878
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . . . . $ 31,644,752 $ 30,807,519
============= =============
</TABLE>
28
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 22 - CONDENSED PARENT COMPANY INFORMATION - CONTINUED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
INCOME
From subsidiaries - eliminated upon consolidation
Dividends . . . . . . . . . . . . . . . . . . . . . . $ 1,150,058 $ 984,876 $ 1,255,649
Management fees . . . . . . . . . . . . . . . . . . . 145,000 210,000 180,000
Interest . . . . . . . . . . . . . . . . . . . . . . . 24,408 1,130 1,980
Other Income . . . . . . . . . . . . . . . . . . . . . 272,109 40,922 1,200
------------- ------------- -------------
1,591,575 1,236,928 1,438,829
------------- ------------- -------------
EXPENSES
Salaries and employee benefits . . . . . . . . . . . . 411,098 549,690 362,992
Interest . . . . . . . . . . . . . . . . . . . . . . . 599,025 272,037 270,027
Other expenses . . . . . . . . . . . . . . . . . . . . 357,021 389,616 302,320
------------- ------------- -------------
1,367,144 1,211,343 935,339
------------- ------------- -------------
Income before income taxes and equity in
undistributed earnings of subsidiaries . . . . . . . . 224,431 25,585 503,490
Income tax benefit . . . . . . . . . . . . . . . . . . . (309,620) (351,452) (313,839)
------------- ------------- -------------
Income before equity in undistributed earnings
of subsidiaries . . . . . . . . . . . . . . . . . . . . 534,051 377,037 817,329
Equity in undistributed earnings of subsidiaries . . . . 2,282,995 2,195,329 1,881,455
------------- ------------- -------------
NET INCOME . . . . . . . . . . . . . . . . . . $ 2,817,046 $ 2,572,366 $ 2,698,784
============= ============= =============
</TABLE>
29
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 22 - CONDENSED PARENT COMPANY INFORMATION - CONTINUED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 2,817,046 $ 2,572,366 $ 2,698,784
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in undistributed income of subsidiaries . . . . (2,282,995) (2,195,329) ( 1,881,455)
Provision for depreciation, amortization and accretion (88,446) 73,343 92,716
Realized investment security losses . . . . . . . . . 172 -0- -0-
Increase in other assets . . . . . . . . . . . . . . . (624,276) (84,430) (181,029)
Increase (decrease) in other liabilities . . . . . . . (671,511) 604,572 (1,502)
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES . . . . . . . . . . . . . (850,010) 970,522 727,514
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities held to maturity . . . . . . . . . (18,797,778) (5,957,533) -0-
Proceeds from maturity of securities held to maturity . 21,996,058 -0- -0-
Increase in interest-bearing deposits with banks . . . . (522,123) -0- -0-
Proceeds from sale of assets . . . . . . . . . . . . . . 29,899 345,650 16,607
Capitalization of bank subsidiary . . . . . . . . . . . . -0- (3,500,000) -0-
Capital expenditures . . . . . . . . . . . . . . . . . . (64,562) (31,676) (319,948)
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES . . . . . . . . . . . . . . 2,641,494 (9,143,559) (303,341)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt . . . . . . . . . . . . . . . -0- 4,041,667 245,000
Repayment of long-term debt . . . . . . . . . . . . . . . (707,354) (1,395,432) (775,000)
Issuance of common stock . . . . . . . . . . . . . . . . 957,603 7,959,081 -0-
Purchase of treasury stock . . . . . . . . . . . . . . . (899,460) -0- -0-
Redemption of preferred stock . . . . . . . . . . . . . . -0- (811,892) -0-
Cash dividends . . . . . . . . . . . . . . . . . . . . . -0- (65,008) (65,008)
------------- ------------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES . . . . . . . . . . . . . . (649,211) 9,728,416 (595,008)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents . . . 1,142,273 1,555,379 (170,835)
Cash and due from banks at beginning of year . . . . . . . 2,060,659 505,280 676,115
------------- ------------- -------------
CASH AND DUE FROM BANKS AT END OF YEAR . . . . . . . . . . $ 3,202,932 $ 2,060,659 $ 505,280
============= ============= =============
</TABLE>
30
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMUNITY BANCSHARES, INC. AND SUBSIDIARIES
NOTE 22 - CONDENSED PARENT COMPANY INFORMATION - CONTINUED
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 585,358 $ 280,872 $ 332,295
Income taxes . . . . . . . . . . . . . . . . . . . . . 474,057 (422,192) (363,397)
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Long-term debt was increased and equity was decreased $1,200,000 on January
1, 1994 to reflect the existence of leveraged, unreleased ESOP shares. The
debt was reduced and shares were released by $171,360 during the year ended
December 31, 1994 as a result of payments made by the Company's ESOP.
During 1994, Treasury Stock in the amount of $2,899,460 was acquired for cash
and the assumption of a $2,000,000 subordinated capital installment rate.
31
<PAGE> 33
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, in the City of
Blountsville, Alabama, on this 13th day of June, 1995.
COMMUNITY BANCSHARES, INC.
By /s/ Kennon R. Patterson, Sr.
----------------------------
KENNON R. PATTERSON, SR.
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
32
