<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-57491
[LOGO OF COMMUNITY
BANCSHARES, INC.
APPEARS HERE] 500,000 SHARES
COMMUNITY BANCSHARES, INC.
COMMON STOCK
----------------
Community Bancshares, Inc. (the "Company"), a Delaware corporation and a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended (the "Bank Holding Company Act"), hereby offers for sale up to 500,000
shares of its common stock, $.10 par value per share (the "Common Stock"), at
$19.00 per share. The minimum required purchase is 25 shares of Common Stock,
representing an investment of $475. This offering will expire at 5:00 p.m.
Central Time on December 1, 1998 (the "Expiration Date"), unless terminated
earlier by the Company. See "The Offering."
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO THE
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................. $19.00 -0- $19.00
- --------------------------------------------------------------------------------
Total Minimum(4)........... -0- -0- -0-
- --------------------------------------------------------------------------------
Total Maximum.............. $9,500,000.00 -0- $9,500,000.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) The offering price has been determined solely by the Company's Board of
Directors. See "The Offering." There is no established trading market for
the Common Stock and there can be no assurance that such a market will
develop following this offering. See "Market for Common Stock and Dividend
Policy."
(2) The Common Stock is being offered on a best-efforts basis solely by certain
of the Company's officers who will receive no compensation for such
services but who may be reimbursed for reasonable expenses, if any,
incurred on behalf of the Company in connection therewith. Such officers
are relying in part on the "safe harbor" provisions set forth in Rule 3a4-1
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
in connection with this offering. See "The Offering."
(3) Before deducting expenses of this offering payable by the Company,
estimated at approximately $55,000. No arrangements have been made to place
the proceeds received from this offering in an escrow or trust account.
Upon acceptance by the Company of a subscription to purchase shares of
Common Stock offered hereby, the subscription price remitted in payment of
such subscription will be available for immediate use by the Company.
(4) The Company has not established a minimum amount of securities to be sold
in this offering, but the minimum required purchase is 25 shares of Common
Stock, representing a minimum investment of $475.
The Common Stock is offered subject to prior sale, approval of certain legal
matters by counsel to the Company and certain other conditions. The Company
reserves the right, in its sole discretion, to withdraw, cancel or modify this
offering, and to accept or reject subscriptions in whole or in part, and to
allocate shares of the Common Stock among subscribers. Delivery of certificates
for shares of Common Stock will be made promptly after acceptance of
subscriptions.
THE DATE OF THIS PROSPECTUS IS AUGUST 14, 1998.
<PAGE>
[BLANK PAGE]
<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY........................................... 4
RISK FACTORS................................................. 5
Offering Price Set by Board of Directors; No Underwriting... 5
Limited Trading Market...................................... 5
Effect of Monetary Policies and Economic Factors............ 5
Limitation on Dividends..................................... 5
Competition................................................. 5
Rising Interest Rates....................................... 6
Governmental Regulation and Legislation..................... 6
Lack of Specified Uses For Proceeds......................... 6
Year 2000................................................... 6
Anti-Takeover Provision..................................... 6
THE COMPANY.................................................. 7
General..................................................... 7
Supervision and Regulation.................................. 7
THE OFFERING................................................. 10
General..................................................... 10
Determination of Offering Price............................. 10
Method of Subscription...................................... 10
Processing of Subscriptions................................. 10
Limited Market for Common Stock............................. 11
USE OF PROCEEDS.............................................. 11
MARKET FOR COMMON STOCK AND DIVIDEND POLICY.................. 12
CAPITALIZATION............................................... 13
DESCRIPTION OF CAPITAL STOCK................................. 14
Common Stock................................................ 14
Preferred Stock............................................. 14
Anti-Takeover Provision..................................... 14
AVAILABLE INFORMATION........................................ 15
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............ 15
EXPERTS...................................................... 15
LEGAL MATTERS................................................ 15
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS
SET FORTH OR INCORPORATED BY REFERENCE HEREIN OR AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT ANY INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY
SECURITIES OTHER THAN THE COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER IS NOT QUALIFIED TO DO SO OR TO ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER.
3
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information in this Prospectus and in the documents and financial statements,
including the notes thereto, incorporated herein by reference, and should be
read together therewith. Unless otherwise specified, all information in this
Prospectus has been adjusted to reflect a three-for-one split of the Common
Stock effected as of June 1, 1993 and a two-for-one split of the Common Stock
effected as of March 26, 1998. Unless the context otherwise indicates, the
"Company" refers to and includes the Company and its direct and indirect
subsidiaries.
THE COMPANY
Community Bancshares, Inc. (the "Company") is a Delaware corporation and a
bank holding company registered with the Board of Governors of the Federal
Reserve System (the "Federal Reserve") under the Bank Holding Company Act of
1956, as amended (the "Bank Holding Company Act"). The Company was organized in
1983 and commenced operations in 1985. The Company has one bank subsidiary,
Community Bank, an Alabama banking corporation, which conducts a general
commercial banking business in northern Alabama and southern Tennessee. At
June 30, 1998, the Company had total assets of approximately $531.5 million and
total deposits of approximately $478.7 million.
Community Bank operates through 26 locations in 11 counties in northern
Alabama and southern Tennessee. It offers a wide range of commercial and retail
banking services, including demand and time deposit accounts, personal and
commercial loans and personal and commercial checking accounts. The majority of
loans by Community Bank are to individuals and small to mid-sized businesses in
Alabama and Tennessee. Community Bank seeks to provide superior service to its
customers and to become a vital component of each of the communities it serves.
Community Bank operates in small non-urban communities, including locations
in Blountsville, Cleveland, Oneonta, Snead and West Blount in Blount County,
Alabama, Fort Payne and Rainsville in DeKalb County, Alabama, Rogersville in
Lauderdale County, Alabama, Elkmont in Limestone County, Alabama, Gurley,
Meridianville and New Hope in Madison County, Alabama, Hamilton in Marion
County, Alabama, Arab and Guntersville in Marshall County, Alabama, Falkville
and Hartselle in Morgan County, Alabama, Uniontown in Perry County, Alabama,
Double Springs and Haleyville in Winston County, Alabama and Pulaski in Giles
County, Tennessee. Four of these offices are located within Wal-Mart stores,
including three offices opened in 1997 and the first quarter of 1998.
1st Community Credit Corporation, another subsidiary of the Company,
operates finance company offices in nine Alabama communities, including
Albertville, Arab, Athens, Boaz, Cullman, Decatur, Gadsden, Hartselle and
Moulton, Alabama. Other subsidiaries of the Company consist of Community
Appraisals, Inc., which operates a real estate appraisal business, and Community
Insurance Corp., which serves as an agent in the sale of title, life,
automobile, homeowners and farmowners insurance policies. In April 1998,
Community Insurance Corp. acquired 100% ownership of the outstanding shares of
capital stock of Southern Select Insurance, Inc., a property and casualty
insurance general agency located in Birmingham, Alabama that serves as the
general agent to over 140 insurance agencies in Alabama. The Company had
acquired a controlling interest in Southern Select Insurance, Inc. in August
1997. In August 1997, the Company merged a second bank subsidiary, Community
Bank, a Tennessee banking corporation, into the Company's Alabama bank
subsidiary.
THE OFFERING
Common Stock offered........................... Up to 500,000 shares.
Common Stock outstanding after this offering... Up to 4,637,924 shares.
Minimum subscription per investor.............. 25 shares ($475).
Use of proceeds by the Company................. To finance additional branch
locations for Community Bank,
with any remaining proceeds to
be used for working capital and
general corporate purposes.
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RISK FACTORS
In evaluating an investment in shares of Common Stock, the following factors
should be considered carefully, along with other matters discussed in or
incorporated by reference into this Prospectus. This Prospectus contains certain
forward-looking statements, including, without limitation, statements relating
to the Company's future growth and "Year 2000" compliance. Such forward-looking
statements involve certain risks and uncertainties, including those described
below, that could cause actual results to differ materially from those
anticipated or projected.
OFFERING PRICE SET BY BOARD OF DIRECTORS; NO UNDERWRITING
The price of the Common Stock offered hereby has been determined solely by
the Company's Board of Directors, without negotiation or independent evaluation,
based primarily on the Company's stockholders' equity, its earnings and
prospects, and prices at which the Company believes shares of Common Stock have
recently traded. There can be no assurance that the offering price represents
the fair market value of the Common Stock. At December 31, 1997, an independent
investment banking firm valued the Common Stock at $16.00 per share for purposes
of the Company's Employee Stock Ownership Plan. The Company is aware that during
1997 shares of Common Stock traded at a price per share less than that amount.
The Common Stock is offered directly by the Company, and is not subject to any
underwriting agreements assuring the sale of all the Common Stock offered. See
"The Offering" and "Market for Common Stock and Dividend Policy."
LIMITED TRADING MARKET
No active trading market exists for the Common Stock and no assurance can
be given that an active trading market will develop in the foreseeable future.
The Company does not currently intend to qualify or list the Common Stock on any
securities market or exchange to facilitate such trading. See "The Offering."
For information regarding certain recent trades of the Common Stock, see "Market
for Common Stock and Dividend Policy."
EFFECT OF MONETARY POLICIES AND ECONOMIC FACTORS
The ability of Community Bank to attract deposits and extend loans is
affected by the monetary policies of federal regulatory authorities,
particularly the Federal Reserve, and by economic conditions in the Company's
service area and the United States generally. The nature and timing of any
changes in such conditions and policies and their impact on the Company cannot
be predicted.
LIMITATION ON DIVIDENDS
The Company derives its income solely from dividends upon shares of
Community Bank's common stock. The declaration and payment of such dividends is
limited by law, and any funds held by the Company available for payment of
dividends on the Common Stock are subject to restrictions imposed by Federal
Reserve policy. The declaration and payment of dividends on the Common Stock is
subject to the prior payment of principal and interest on the Company's long-
term debt and certain other factors. See "Capitalization", "Market for Common
Stock and Dividend Policy" and "Description of Capital Stock."
COMPETITION
The banking business in Alabama and southern Tennessee is extremely
competitive. The Company competes, and will compete, with financial institutions
that are well established, several of which have significantly greater resources
and lending limits than the Company. Such competitors perform certain services,
such as trust, investment and international banking services, which the Company
does not provide.
5
<PAGE>
RISING INTEREST RATES
During periods of rising interest rates, the Company may make loans at
interest rates lower than interest rates that the Company is then paying for
certain of its interest-bearing liabilities, which would result in a negative
interest rate spread with respect to those loans. This disparity would have an
adverse effect on the Company's earnings that would increase in the event that
interest rates continued to rise while the Company had outstanding loans at
lower interest rates that could not be adjusted to a higher interest rate.
GOVERNMENTAL REGULATION AND LEGISLATION
The Company is subject to extensive governmental regulation and control.
The nature, timing and effect on the Company of any changes in such regulation
and control cannot be predicted. Changes in applicable laws could have a
material adverse effect on the business and prospects of the Company. See "The
Company - Supervision and Regulation."
LACK OF SPECIFIED USES FOR PROCEEDS
The Company will use the net proceeds from this offering to finance
additional branch locations for Community Bank, with any remaining proceeds to
be used for working capital and general corporate purposes. The Company will
have broad discretion, subject to federal and state banking regulations, over
the use of the proceeds without obtaining stockholder approval. See "Use of
Proceeds."
YEAR 2000
Many software applications and operational programs are not designed to
recognize calendar dates beginning in the Year 2000. The failure of such
applications or systems to properly recognize the dates beginning in the Year
2000 could result in miscalculations or system failures. The Company's business
depends in part upon its ability to store, retrieve, process and manage
significant databases, and periodically, to expand and upgrade its information
processing capabilities. The Company is installing a new computer mainframe and
software system and has developed an implementation plan to resolve potential
problems arising from the Year 2000. The Company expects its Year 2000 date
conversion project to be completed on a timely basis, and anticipates that the
related effect on the Company's business, financial condition and results of
operations should be immaterial. The Year 2000 issue may affect the systems of
various entities with which the Company interacts, including the Company's
suppliers, and the Company is coordinating its efforts to address the Year 2000
issue with those entities. There can be no assurance, however, that the systems
of other companies on which the Company's systems rely will be timely converted,
or that a failure to convert by another company, or a conversion that is
incompatible with the Company's systems, would not have material adverse effect
on the Company.
ANTI-TAKEOVER PROVISION
Section 203 of the Delaware General Corporation Law generally prevents a
corporation from entering into certain business combinations with an interested
stockholder (defined as any person or entity that is the beneficial owner of at
least 15% of a corporation's voting stock) or its affiliates for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless (i) the transaction is approved by the board of
directors of the corporation prior to such business combination, (ii) the
interested stockholder acquires 85% of the corporation's voting stock in the
same transaction in which it exceeds 15%, or (iii) the business combination is
approved by the board of directors and by a vote of two-thirds of the
outstanding voting stock not owned by the interested stockholder. The Delaware
General Corporation Law provides that a corporation may elect not to be governed
by Section 203. The Company has made no such election and is therefore governed
by Section 203. This anti-takeover provision may have an adverse effect on the
market for the Company's securities.
6
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THE COMPANY
GENERAL
The Company is a Delaware corporation and a bank holding company registered
with the Federal Reserve under the Bank Holding Company Act. The Company was
organized in 1983 and commenced operations in 1985. The Company has one bank
subsidiary, Community Bank, an Alabama banking corporation, which conducts a
general commercial banking business in northern Alabama and southern Tennessee.
At June 30, 1998, the Company had total assets of approximately $531.5 million
and total deposits of approximately $478.7 million.
Community Bank operates through 26 locations in 11 counties in northern
Alabama and southern Tennessee. It offers a wide range of commercial and retail
banking services, including demand and time deposit accounts, personal and
commercial loans and personal and commercial checking accounts. The majority of
loans by Community Bank are to individuals and small to mid-sized businesses in
Alabama and Tennessee. Community Bank seeks to provide superior service to its
customers and to become a vital component of each of the communities it serves.
Community Bank operates in small non-urban communities, including locations
in Blountsville, Cleveland, Oneonta, Snead and West Blount in Blount County,
Alabama, Fort Payne and Rainsville in DeKalb County, Alabama, Rogersville in
Lauderdale County, Alabama, Elkmont in Limestone County, Alabama, Gurley,
Meridianville and New Hope in Madison County, Alabama, Hamilton in Marion
County, Alabama, Arab and Guntersville in Marshall County, Alabama, Falkville
and Hartselle in Morgan County, Alabama, Uniontown in Perry County, Alabama,
Double Springs and Haleyville in Winston County, Alabama and Pulaski in Giles
County, Tennessee. Four of these offices are located within Wal-Mart stores,
including three offices opened in 1997 and the first quarter of 1998.
1st Community Credit Corporation, another subsidiary of the Company,
operates finance company offices in nine Alabama communities, including
Albertville, Arab, Athens, Boaz, Cullman, Decatur, Gadsden, Hartselle and
Moulton, Alabama. Other subsidiaries of the Company consist of Community
Appraisals, Inc., which operates a real estate appraisal business, and Community
Insurance Corp., which serves as an agent in the sale of title, life,
automobile, homeowners and farmowners insurance policies. In April 1998,
Community Insurance Corp. acquired 100% ownership of the outstanding shares of
capital stock of Southern Select Insurance, Inc., a property and casualty
insurance general agency located in Birmingham, Alabama that serves as the
general agent to over 140 insurance agencies in Alabama. The Company had
acquired a controlling interest in Southern Select Insurance, Inc. in August
1997. On August 8, 1997, the Company merged a second bank subsidiary, Community
Bank, a Tennessee banking corporation, into the Company's Alabama bank
subsidiary.
The Company maintains its principal executive offices at 68149 Main Street,
P.O. Box 1000, Blountsville, Alabama 35031, and its telephone number is (205)
429-1000.
SUPERVISION AND REGULATION
The banking industry is highly regulated. To the extent that the following
information describes or summarizes statutory or regulatory provisions, it is
qualified in its entirety by reference to the particular statutory or regulatory
provision. The following supervision and representation affect the Company's
operations:
Federal Reserve. The Company is a bank holding company within the meaning
of the Bank Holding Company Act, and is registered with, and subject to
supervision by, the Federal Reserve and the Federal Reserve Bank of Atlanta. The
Company is required to file periodic reports and such additional information as
the Federal Reserve may require pursuant to the Bank Holding Company Act. The
Federal Reserve may also examine the Company and its subsidiaries.
7
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Subject to certain exceptions, the Bank Holding Company Act requires
Federal Reserve approval before the Company can acquire substantially all the
assets of any bank if as a result of the acquisition the Company would own or
control more than 5% of the voting shares of the bank, or for a merger or
consolidation with another bank holding company. The Company may, however,
engage in or acquire an interest in a company that engages in activities which
the Federal Reserve has determined by regulation or order to be so closely
related to banking or managing or controlling banks as to be properly incidental
thereto.
The Federal Reserve has adopted a risk-based capital adequacy assessment
system for bank holding companies. Assets are weighted by a risk factor and a
ratio is calculated by dividing qualifying capital by the risk-weighted assets.
Tier I capital generally includes common stock and retained earnings. Tier II
capital generally includes certain allowances for loan losses and subordinated
debt. Total capital is comprised of Tier I capital and Tier II capital. The
Company's Tier I and total capital ratios exceeded the required minimum levels
at June 30, 1998.
FDIC. Deposits in Community Bank are insured by the Federal Deposit
Insurance Corporation ("FDIC") and, therefore, Community Bank is subject to
examination by the FDIC. Pursuant to provisions of the Federal Deposit Insurance
Act, any FDIC-insured subsidiary of the Company can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC in connection
with the default of a commonly controlled FDIC-insured subsidiary or any
assistance by the FDIC to any commonly controlled FDIC-insured subsidiary in
danger of default. The FDIC charges an annual assessment for the insurance of
deposits based upon the risk a particular institution poses to the FDIC's
deposit insurance fund.
FDICIA. The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") implemented a number of provisions applicable to insured banks and
bank holding companies. Federal bank regulatory agencies are required to
establish standards for safety and soundness of banks and bank holding companies
relating to internal controls and audit systems, loan documentation, credit
underwriting, interest rate risk exposure, asset growth and compensation. The
FDICIA also requires bank holding companies to guarantee compliance with any
capital restoration plans entered into by a subsidiary bank and the FDIC. The
activities of insured state banks, including non-subsidiary equity investment,
is generally limited under the FDICIA to those permitted for national banks. The
FDICIA also requires regulations by federal banking agencies establishing
minimum loan to value ratios for all real estate mortgage and construction
loans. The FDICIA also requires regulations to limit risks posed by an insured
bank's "exposure" to another bank. Exposure includes extension of credit,
purchases of securities issued by the other bank or acceptance of securities
issued by the other bank as collateral for an extension of credit. Regulations
pursuant to FDICIA limit such exposure.
Interstate Banking. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("IBBEA") permits adequately capitalized and managed bank
holding companies to acquire control of banks in states other than their home
states, subject to federal regulatory approval, without regard to whether such a
transaction is prohibited by the laws of any state. IBBEA permits states to
continue to require that an acquired bank have been in existence for a certain
minimum time period, which may not exceed five years. A bank holding company may
not, following an interstate acquisition, control more than 10% of the nation's
total amount of bank deposits or 30% of bank deposits in the relevant state
(unless the state enacts legislation to raise the 30% limit). States retain the
ability to adopt legislation to effectively lower the 30% limit. Federal banking
regulators may approve merger transactions involving banks located in different
states, without regard to laws of any state prohibiting such transactions,
except that mergers may not be approved with respect to banks located in states
that, prior to June 1, 1997, enacted legislation prohibiting mergers by banks
located in such states with out-of-state institutions. Federal banking
regulators may permit an out-of-state bank to open new branches in another state
if such state has enacted legislation permitting interstate branching.
Affiliated institutions are authorized to accept deposits for existing accounts,
8
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renew time deposits, and close and service loans for affiliated institutions
without being deemed an impermissible branch of the affiliate.
FIRREA. The Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") permits, among other things, the acquisition by bank holding
companies of savings associations, irrespective of their financial condition.
FIRREA also provides that commonly controlled federally insured financial
institutions must reimburse the FDIC for losses incurred by the FDIC in
connection with the default of another commonly controlled financial institution
or in connection with the provision of FDIC assistance to such a commonly
controlled financial institution in danger of default. Reimbursement liability
under FIRREA is superior to any obligations to shareholders of such federally
insured institutions (including a bank holding company such as the Company if it
were to acquire another federally insured financial institution), arising as a
result of their status as a shareholder of a reimbursing financial institution.
CRA. The Community Reinvestment Act of 1977 ("CRA") and its implementing
regulations are intended to encourage regulated financial institutions to meet
the credit needs of their local community or communities, including low and
moderate income neighborhoods, consistent with the safe and sound operation of
such financial institutions. The regulations provide that the appropriate
regulatory authority will assess CRA reports in connection with applications for
establishment of domestic branches, acquisition of banks or mergers involving
bank holding companies. Regulators are placing increased emphasis on CRA
assessments. An unsatisfactory CRA rating may serve as a basis to deny an
application to acquire or establish a new bank, to establish a new branch or to
expand banking services.
State Regulation. Community Bank is subject to regulation and examination
by the Alabama Superintendent of Banks. State regulations in Alabama relate to
such matters as loans, mortgages, consolidations, required reserves, allowable
investments, issuance of securities, payment of dividends, establishment of
branches, filing of periodic reports and other matters affecting the business of
Community Bank.
9
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THE OFFERING
GENERAL
This offering of up to 500,000 shares is being made by the Company.
Subscriptions to purchase Common Stock, which will be processed by designated
officers of the Company, will be taken until 5:00 p.m. Central Time on December
1, 1998, the Expiration Date, unless this offering is terminated earlier by the
Company. The Company reserves the right, in its sole discretion and without
notice, to terminate this offering at any time. Management of the Company will
consider the number of shares of Common Stock for which subscriptions are
received by the Company, the number of requests for a Prospectus and other
indications of interest in subscribing for shares of Common Stock, among other
factors, in determining whether to terminate this offering. The Company has not
established a minimum number of shares of Common Stock to be sold in this
offering, other then the requirement that each investor must purchase a minimum
of 25 shares ($475) of Common Stock.
In determining which subscriptions to accept and in what amounts, the
Company may take into account the order in which subscriptions are received, a
subscriber's potential to do business with, or to direct customers to, its
subsidiaries, and the Company's desire to have a broad distribution of stock
ownership. The Company reserves the right in its sole discretion to accept or
reject subscriptions for shares of Common Stock in whole or in part and to
allocate Common Stock among subscribers.
No discounts or commissions will be granted or paid in connection with the
sale of the Common Stock. Bishop K. Walker, Jr., the Company's Executive Vice
President and General Counsel, will solicit offers to purchase Common Stock from
prospective subscribers, and may be reimbursed for his reasonable expenses
incurred on behalf of the Company in connection therewith.
DETERMINATION OF OFFERING PRICE
The offering price of $19.00 per share of Common Stock was determined
solely by the Company's Board of Directors, based primarily on the Company's
stockholders' equity, its earnings and prospects, and prices at which the
Company believes shares of Common Stock have recently traded.
METHOD OF SUBSCRIPTION
Subscription applications may be made by completing and signing the
subscription agreement (the "Subscription Agreement") accompanying this
Prospectus, and delivering the Subscription Agreement, accompanied by a check
for the full subscription price, to the Company at 68149 Main Street, P.O. Box
1000, Blountsville, Alabama 35031, Attention: Bishop K. Walker, Jr. All checks
in payment of subscriptions should be made payable to "Community Bancshares,
Inc."
PROCESSING OF SUBSCRIPTIONS
Subscriptions are not binding on the Company unless and only to the extent
accepted by the Company. The Company will decide whether to accept a
subscription within ten business days after the receipt of such subscription and
good collectible and available funds in full payment thereof. Upon acceptance by
the Company of a subscription, the subscription price remitted in payment of
such subscription will be available for immediate use by the Company. In the
event the Company rejects all or a portion of any subscription, it will refund
by mail to the subscriber all or the appropriate portion of the amount remitted
with the subscription, without interest. If the Company accepts a portion of a
subscription and returns funds remitted with respect to the rejected portion of
a subscription to a subscriber, the subscriber may not cancel the portion of the
subscription accepted
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by the Company. Subscribers may revoke subscriptions, in whole or in part, by
written notice to the Company prior to acceptance by the Company. After all
appropriate refunds have been mailed to the address shown in the Subscription
Agreement upon rejection of a subscription in whole or in part, or termination
or expiration of this offering, the Company and its directors, officers,
employees and agents will have no further liability to the subscribers whose
subscriptions are returned.
The Company will confirm all sales of Common Stock. Certificates
representing shares of Common Stock duly subscribed and fully paid for will be
issued by the Company promptly after the Company's acceptance of the
subscriptions.
LIMITED MARKET FOR COMMON STOCK
Except for the shares of Common Stock acquired by the Company's directors,
executive officers and other affiliates, the Common Stock will be freely
transferable immediately upon issuance and will not be subject to any specific
transfer restrictions. However, there is no active market for the Common Stock
and no assurance can be given that an active trading market will develop in the
foreseeable future. The Company does not presently intend to qualify or list the
Common Stock on any securities market or exchange to facilitate such trading.
Therefore, prospective subscribers should invest only if they can afford to hold
the Common Stock as a long-term investment. See "Risk Factors."
USE OF PROCEEDS
The net proceeds from the sale of the Common Stock offered hereby, after
deducting estimated offering expenses of $55,000, will be $9,445,000 if the
maximum number of shares of Common Stock offered is sold. The Company has not
established a minimum number of shares of Common Stock to be sold in this
offering, other then the requirement that each investor must purchase a minimum
of 25 shares ($475) of Common Stock. The Company will use the net proceeds from
the sale of Common Stock offered hereby to finance additional branch locations
for Community Bank, with any remaining proceeds to be used for working capital
and general corporate purposes.
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MARKET FOR COMMON STOCK AND DIVIDEND POLICY
The Common Stock was held by approximately 1,304 stockholders of record at
June 30, 1998. There is no established trading market for shares of the Common
Stock, which have been inactively traded in private transactions. Therefore, no
reliable information is available as to trades of the Common Stock, or as to the
prices at which the Common Stock have been traded. Management has reviewed the
limited information provided to the Company in its capacity as an escrow agent
for certain actual purchases and sales of Common Stock with respect to the
ranges at which shares of Common Stock have been sold. The following data
regarding the Common Stock is provided for informational purposes only and
should not be viewed as necessarily indicative of the actual market value of the
Common Stock. At December 31, 1997, an independent investment banking firm
valued the Company's Common Stock at $16.00 per share for purposes of the
Company's Employee Stock Ownership Plan.
<TABLE>
<CAPTION>
Estimated Price Range
Per Share (1)
---------------------- Dividends
High Low Per Share (1)
------ ----- -------------
<S> <C> <C> <C>
1998
First Quarter........................... $15.00 $ 15.00 $ 0.50
Second Quarter.......................... 19.00 19.00 --
1997
First Quarter........................... $12.50 $ 11.50 $0.375
Second Quarter.......................... 13.00 12.50 --
Third Quarter........................... 15.00 13.00 --
Fourth Quarter.......................... 15.00 14.095 --
1996
First Quarter........................... $10.00 $ 10.00 $ 0.25
Second Quarter.......................... 10.00 10.00 --
Third Quarter........................... 10.00 10.00 --
Fourth Quarter.......................... 11.50 11.00 --
</TABLE>
__________________
(1) Adjusted to reflect a three-for-one split of the Common Stock effected as
of June 1, 1993 and a two-for-one split of the Common Stock effected as of
March 26, 1998.
The payment of dividends on the Common Stock is subject to regulatory
restrictions, the Company's subsidiaries attaining sufficient earnings and
capital and prior payment of principal and interest on the Company's long-term
debt. There can be no assurance that the Company will declare or pay dividends
on its Common Stock in the future, given the restrictions imposed by applicable
regulatory authorities on the Company and on Community Bank, the need to
maintain adequate capital and to support the Company's growth, and amounts
required to be paid to service the Company's indebtedness. The Company derives
its income solely from the payment of dividends on shares of common stock of its
subsidiaries. Accordingly, the Company's ability to declare and pay dividends
is limited by restrictions applicable to the payment of dividends by Community
Bank. In addition, the Company, as a corporation organized under the laws of the
State of Delaware, is prohibited from paying any dividend unless it has capital
surplus or net profits available for such purpose. See "The Company -
Supervision and Regulation" and "Description of Capital Stock - Dividends."
Under the Alabama Banking Code, unless the surplus of an Alabama state bank
(such as Community Bank) equals at least 20% of its capital, it cannot declare
or pay a dividend in excess of 90% of its net earnings for that year, and at
least 10% of an Alabama bank's net earnings must be
12
<PAGE>
transferred to surplus each year until surplus of the bank equals at least 20%
of its capital. After an Alabama bank's surplus equals or exceeds 20% of
capital, prior written approval of the Alabama Superintendent of Banks is
required for dividends declared in any calendar year in excess of net earnings
for that year combined with retained net earnings of the preceding two years,
less any required transfers to surplus. No dividends, withdrawals or transfers
may be made from an Alabama bank's surplus without the prior written approval of
the Alabama Superintendent of Banks.
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1998 and as adjusted to give effect to the sale of all 500,000 shares of
Common Stock offered hereby and receipt of the net proceeds therefrom.
<TABLE>
<CAPTION>
June 30, 1998
---------------------------------
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Long-term debt.............................................................. $ 6,951 $ 6,951
------- -------
Common Stock, $.10 par value; 5,000,000 shares authorized; 4,137,924 shares
issued; 4,637,924 shares issued as adjusted................................ 414 464
Preferred Stock, $.10 par value; 200,000 shares authorized; no shares
issued and outstanding..................................................... -- --
Capital surplus............................................................. 19,329 28,724(1)
Retained earnings........................................................... 18,382 18,382
Unearned ESOP shares (194,794 shares at June 30, 1998)...................... (1,940) (1,940)
Unrealized losses on investment securities available for sale, net of
deferred tax benefit....................................................... 500 500
------- -------
Total stockholders' equity............................................... 36,685 46,130
------- -------
Total long term debt and stockholders' equity............................ $43,636 $53,081
======= =======
</TABLE>
_______________________
(1) Net of estimated offering expenses of $55,000.
13
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 5,000,000 shares of
Common Stock and 200,000 shares of preferred stock, $.10 par value (the
"Preferred Stock"). At June 30, 1998, there were 4,137,924 shares of Common
Stock issued and outstanding and no shares of Preferred Stock were outstanding.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders of the Company. In the event of
a voluntary or involuntary liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all of the
assets remaining after payment of liabilities, including all distributions to
holders of Preferred Stock having a liquidation preference over the Common
Stock. Holders of Common Stock are entitled to receive dividends and other
distributions when, as and if declared from time to time by the Board of
Directors of the Company out of funds legally available therefor. The
declaration, payment and amount of future dividends, if any, is dependent on the
future earnings, results of operations, financial position and capital
requirements of the Company and its subsidiaries, and the prior payment of
principal and interest on the Company's long-term debt, among other factors.
See "The Company - Supervision and Regulation" and "Market For Common Stock and
Dividend Policy."
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes 200,000 shares of
Preferred Stock, in one or more classes or series with voting, dividend and
liquidation rights, and preferences, redemption, sinking fund and conversion
provisions, and other rights, preferences and provisions as the Board of
Directors of the Company may determine, without any further vote or action by
the stockholders of the Company. The Board of Directors designated 20,000 shares
of Preferred Stock as Series 1984-1 Cumulative Preferred Stock. On December 31,
1993, the Company redeemed all of the 11,692 issued and outstanding shares of
Series 1984-1 Cumulative Preferred Stock, which may be reissued by the Company.
ANTI-TAKEOVER PROVISION
Section 203 of the Delaware General Corporation Law generally prevents a
corporation from entering into certain business combinations with an interested
stockholder (defined as any person or entity that is the beneficial owner of at
least 15% of a corporation's voting stock) or its affiliates for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless (i) the transaction is approved by the board of
directors of the corporation prior to such business combination, (ii) the
interested stockholder acquires 85% of the corporation's voting stock in the
same transaction in which it exceeds 15%, or (iii) the business combination is
approved by the board of directors and by a vote of two-thirds of the
outstanding voting stock not owned by the interested stockholder. The Delaware
General Corporation Law provides that a corporation may elect not to be governed
by Section 203. The Company has made no such election and is therefore governed
by Section 203. This anti-takeover provision may have an adverse effect on the
market for the Company's securities.
14
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission, at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as the following Commission Regional Offices: New York
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048; and
Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois
60601-2511. Copies can be obtained by mail at prescribed rates. Requests should
be directed to the Commission's Public Reference Section, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains
an Internet web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
The Company has filed with the Commission a Registration Statement on Form
S-2 (the "Registration Statement") under the Securities Act of 1933, as amended,
with respect to the securities offered hereby. This Prospectus, which is a part
of the Registration Statement, does not contain all the information set forth in
the Registration Statement and the exhibits thereto. Certain items have been
omitted in accordance with the Commission's rules and regulations. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement, including all amendments
thereto and the exhibits filed as a part thereof.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1997 and Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1998, an amendment thereto on Form 10-Q/A-1 filed with the Commission on June
16, 1998, and Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1998, each as filed with the Commission by the Company, are incorporated
herein by reference. A copy of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 and Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1998 accompany this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this Prospectus modifies
or supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
EXPERTS
The audited financial statements of the Company have been included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997
delivered with this Prospectus in reliance upon the report of Dudley, Hopton-
Jones, Sims & Freeman PLLP, independent certified public accountants, and upon
the authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Company by Waller Lansden Dortch & Davis, A
Professional Limited Liability Company, Nashville, Tennessee.
15
