<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter ended September 30, 1995
------------------
Commission file number 0-14620
-------
Community Bankshares, Inc.
(Exact name of registrant as specified in its charter)
New Hampshire 02-0394439
------------- ----------
(State of incorporation (I.R.S. Employer
or organization) Identification No.)
43 North Main Street
Concord, New Hampshire 03301
----------------------------
(Address of principal executive offices)
(Zip Code)
(603) 224-1100
--------------
(Registrant's telephone number, including area code)
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____
----
1,735,795 shares of Community Bankshares, Inc.'s Common Stock ($1.00 Par Value)
were outstanding as of September 30, 1995. Community Bankshares, Inc. has no
other classes of common stock.
<PAGE>
PART I -FINANCIAL INFORMATION
ITEM 1 -Financial Statements
- ----------------------------
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, June 30,
(Dollars in Thousands Except Share Data) 1995 1995
- ----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,460 $ 8,227
Interest-bearing deposits in other banks 5,823 10,870
---------- ---------
Total cash and cash equivalents 13,283 19,097
---------- ---------
Securities available for sale - amortized
cost $61,911 on September 30, 1995 and
$58,225 on June 30, 1995 62,579 58,754
Securities held to maturity - market value
$50,929 on September 30, 1995 and $53,350
on June 30, 1995 50,961 53,408
Federal Home Loan Bank stock 3,803 3,803
Mortgage loans held for sale 3,891 4,392
Loans 268,273 271,461
Allowance for possible loan losses (2,987) (2,970)
---------- ---------
Net loans 265,286 268,491
---------- ---------
Premises and equipment 7,790 7,422
Real estate acquired by foreclosure 893 1,134
Accrued interest receivable 3,478 3,100
Other assets 5,850 6,113
---------- ---------
Total assets $417,814 $425,714
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Non-interest bearing $ 19,875 $ 16,420
Savings 111,359 115,174
Time certificates 184,730 176,962
---------- ---------
Total deposits 315,964 308,556
Borrowed funds 67,930 82,768
Liability relating to ESOP 158 197
Accrued interest payable 1,244 1,177
Other liabilities 2,382 3,618
---------- ---------
Total liabilities 387,678 396,316
---------- ---------
Stockholders' equity:
Preferred stock, $1.00 par value per share;
1,000,000 shares authorized, none issued - -
Common stock, $1.00 par value per share;
3,000,000 shares authorized; 1,747,605
issued and outstanding on September 30,
1995 and 1,747,032 on June 30, 1995 1,748 1,747
Additional paid-in capital 17,151 17,146
Retained earnings 11,170 10,567
---------- ---------
30,069 29,460
Unrealized net gains on securities
available for sale, net 418 328
Unearned compensation expense - ESOP (158) (197)
Treasury stock - 11,810 shares at cost (193) (193)
---------- ---------
Total stockholders' equity 30,136 29,398
---------- ---------
Total liabilities and stockholders'
equity $417,814 $425,714
========== =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
September 30,
(In Thousands Except Per Share Data) 1995 1994
-----------------------------------------------------------------------
<S> <C> <C>
Interest and dividend income:
Loans $ 6,117 $ 4,704
Securities available for sale 998 1,015
Securities held to maturity 819 514
Dividends on Federal Home Loan Bank stock 65 38
Deposits in other banks 56 33
------------ -----------
Total interest and dividend income 8,055 6,304
------------ -----------
Interest expense:
Deposits 3,368 2,608
Borrowed funds 1,110 349
------------ -----------
Total interest expense 4,478 2,957
------------ -----------
Net interest and dividend income 3,577 3,347
Provision for possible loan losses 175 100
------------ -----------
Net interest and dividend income after
provision for possible loan losses 3,402 3,247
------------ -----------
Non-interest income:
Deposit account fees 141 122
Gains on sales of investment securities - 30
Gains on sales of loans 244 161
Loan servicing income 199 125
Other 91 74
------------ -----------
Total non-interest income 675 512
------------ -----------
Non-interest expense:
Salaries and employee benefits 1,438 1,300
Occupancy and equipment 419 349
Foreclosed property 48 25
FDIC deposit insurance premiums (20) 166
Marketing 80 69
Proposed acquisition costs to date 125 -
Other 705 674
------------ -----------
Total non-interest expense 2,795 2,583
------------ -----------
Income before income tax 1,282 1,176
Income tax expense 436 379
------------ -----------
Net income $ 846 $ 797
============ ===========
Earnings per common and
common equivalent share $ 0.47 $ 0.44
============ ===========
Average number of common and common
equivalent shares outstanding 1,783,704 1,810,278
============ ===========
Dividends paid per share $ 0.14 $ 0.12
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
(In Thousands) 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 846 $ 797
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for possible loan losses 175 100
Depreciation and amortization 333 232
Gains on sales of investment
securities - (30)
Mortgage loans originated for sale (15,509) (8,782)
Mortgage loans sold 16,010 11,727
Net (gains) losses on sales and
writedowns of real estate
acquired by foreclosure (10) 36
Increase in other assets (164) (252)
Increase in other liabilities 586 1,207
------------ -----------
Net cash provided by operating
activities 2,267 5,035
------------ -----------
Cash flows from investing activities:
Proceeds from sales - securities
available for sale - 2,962
Proceeds from maturities and
principal payments - securities
available for sale 5,571 5,257
Proceeds from maturities and
principal payments - securities held
to maturity 2,456 564
Purchases - securities available for
sale (9,248) (5,979)
Purchases - securities held to
maturity - (7,932)
Net (increase) decrease in loans (4,591) (7,048)
Proceeds from sales of automobile
loans 7,342 -
Additions to real estate acquired by
foreclosure - (223)
Proceeds from disposition of real
estate acquired by foreclosure 433 147
Additions to premises and equipment (583) (419)
Cash paid for mortgage servicing
rights (1,755) -
------------ -----------
Net cash used in investing
activities (375) (12,671)
------------ -----------
Cash flows from financing activities:
Net increase in certificate accounts 7,768 4,220
Net decrease in demand, NOW, savings
and money market accounts (360) (163)
Proceeds from borrowings 47,251 11,210
Repayments of borrowings (62,089) (7,469)
Repayments of liability related to
ESOP (39) (40)
Proceeds from issuance of common stock 6 13
Dividend paid on common stock (243) (209)
------------ -----------
Net cash provided by (used in)
financing activities (7,706) 7,562
------------ -----------
Net decrease in cash and cash
equivalents (5,814) (74)
Cash and cash equivalents at beginning
of period 19,097 8,012
------------ -----------
Cash and cash equivalents at end of
period $ 13,283 $ 7,938
============ ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Income taxes, net $ 65 $ 25
============ ===========
Interest $ 4,411 $ 2,883
============ ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH
ACTIVITIES:
Additions to real estate acquired by
foreclosure $ 182 $ 230
============ ===========
Increase in net unrealized gains
(losses) on securities
available for sale, net $ 90 $ (224)
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1995 and 1994
1. Basis of Presentation
---------------------
The unaudited consolidated financial statements of Community Bankshares, Inc.
and its wholly owned subsidiaries ("the Company"), Concord Savings Bank ("the
Bank") and its wholly owned subsidiary, Bancredit Corporation ("Bancredit"),
presented herein should be read in conjunction with the consolidated financial
statements of Community Bankshares, Inc. and subsidiaries as of and for the year
ended June 30, 1995. In the opinion of management, the unaudited financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair presentation. Interim results are
not necessarily indicative of results to be expected for the entire year.
2. Earnings Per Share
------------------
Earnings per share for the periods presented are based on the weighted average
number of common and common equivalent shares outstanding during each period.
3. Acquisition Agreement
---------------------
On August 29, 1995, the Company entered into a definitive merger agreement to
acquire Centerpoint Bank by exchanging 1.073 of the Company's common shares for
each Centerpoint common share outstanding. At that time, Centerpoint had
590,349 common shares outstanding. In addition, options outstanding under
Centerpoint's employee stock option plan will convert into options to purchase
common shares of the Company. The merger, anticipated to be accounted for as a
pooling-of-interests, is subject to stockholder and regulatory approval. At
September 30, 1995, Centerpoint had approximately $89,000,000 (unaudited) in
total assets, $71,000,000 (unaudited) in total deposits and $6,000,000
(unaudited) in stockholders' equity.
4. Accounting Change
-----------------
On July 1, 1995, the Company adopted SFAS No. 114 "Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosure." These statements require
changes in both the disclosure and impairment measurement of certain loans.
Adoption of these statements had no material impact on the Company's financial
position or results of operations. At September 30, 1995, the Company had no
impaired loans as defined under SFAS No. 114 and 118.
5
<PAGE>
Commercial, commercial real estate, and individually significant mortgage and
consumer loans are considered impaired when it is probable that the Company will
not be able to collect all amounts due according to the contractual terms of the
loan agreement. The amount of impairment for these types of impaired loans is
determined by the difference between the present value of the expected cash
flows related to the loan, using the original contractual interest rate, and its
recorded value, or, as a practical expedient in the case of collateralized
loans, the difference between the fair value of the collateral and the recorded
amount of the loans. When foreclosure is probable, impairment is measured based
on the fair value of the collateral. Mortgage and consumer loans which are not
individually significant are measured for impairment collectively.
Restructured, accruing loans entered into prior to the adoption of these
statements are not required to be reported as impaired unless such loans are not
performing according to the restructured terms at adoption of SFAS No. 114.
Loan restructurings entered into after adoption of SFAS No. 114 are reported as
impaired loans, and impairment is measured as described above using the loan's
pre-modification rate of interest.
SFAS No. 114 also changes the criteria for classification of a loan as an in-
substance foreclosure. Beginning July 1, 1995, loans are classified as in-
substance foreclosure when the Company is in possession of the collateral.
The Company's method of recognizing interest income on loans remains unchanged.
Interest income on loans is recognized on the accrual method. Nonaccrual loans
are those on which the accrual of interest is discontinued when collectibility
of principal or interest is uncertain and payments of principal or interest have
become contractually past due 90 days. Upon such discontinuance, all unpaid
accrued interest is reversed against the current period's earnings. A loan
which has principal or interest payments contractually past due 90 days may
remain on accrual status, however, if the value of the collateral securing the
loan is sufficient to cover principal and interest, and the loan is in the
process of collection. Interest received on nonaccrual loans is either applied
against principal or reported as income according to management's judgment as to
the collectibility of principal.
A summary of activity in the allowance for possible loan losses for the three
months ended September 30, 1995 and 1994 follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------
(In Thousands) 1995 1994
------------------
<S> <C> <C>
Balance at beginning of period $2,970 $3,351
Provision for possible loan losses 175 100
Recoveries on loans previously charged-off 69 82
------------------
3,214 3,533
Less loans charged-off 227 317
------------------
Balance at end of period $2,987 $3,216
==================
</TABLE>
6
<PAGE>
5. Revision of Previous Year's Quarterly Operating Results
-------------------------------------------------------
Effective July 1, 1994, the Company adopted SFAS No. 122, "Accounting for
Mortgage Servicing Rights, an amendment of FASB No. 65." This statement
requires the Company to recognize as separate assets rights to service mortgage
loans for others, however those servicing rights are acquired. When the Company
acquires mortgage servicing rights through the purchase or origination of
mortgage loans (originated mortgage servicing rights) and sells or securitizes
those loans with servicing rights retained, it allocates the total cost of the
mortgage loans to the mortgage servicing rights and the loans (without the
servicing rights) based on their relative fair values. As a result of adopting
SFAS No. 122, the Company revised the previously reported operating results for
the three months ended September 30, 1994. As a result of such revision, gains
on the sale of loans, net income and earnings per common and common equivalent
share were increased by $58,000, $39,000 and $0.02, respectively.
7
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Financial Condition
- -------------------
At June 30, 1995, total assets amounted to $417,814,000, a decrease of
$7,900,000, or 1.9%, from $425,714,000 at June 30, 1995. The Company used the
proceeds from the sale of automobile loans to repay borrowed funds which
resulted in lower total assets at September 30, 1995.
The sale of automobile loans was also the primary reason for the reduction of
$3,188,000, or 1.2%, in total loans since June 30, 1995 which more than offset
the net new loan growth of $3,893,000 in consumer loans. In order to continue
generating new volume and enhance non-interest income from the gain on sales of
loans and subsequent loan servicing income, the Bank sold two pools of
automobile loans totaling $7,342,000 to two different buyers during the quarter
ended September 30, 1995. As part of the agreement relating to the sale of
$6,843,000 of these loans, the Bank is obligated to assume a certain portion of
credit losses should they occur and as a reduction of the sale proceeds accrued
$36,000 to absorb such possible losses. The remainder of these loans were sold
without credit enhancement. The Bank has an agreement in place to sell up to an
additional $36,000,000 of new automobile loan production, with credit
enhancement, on a best efforts basis.
Commercial loans increased by $1,377,000 since June 30, 1995. The majority of
this loan growth was in commercial construction lending and was primarily
related to one local community construction project in which the Bank is
providing the temporary construction financing. Permanent financing for this
loan, upon completion, has already been approved and is in place and will be
shared among the Bank and seven other local financial institutions.
Due to lower market interest rates, the Bank's residential mortgage loan
origination activity was up from prior quarters. The majority of these
originations were fixed rate mortgages held for sale and were subsequently sold
into the secondary market. Dollars outstanding in the Bank's total residential
mortgage portfolio remained relatively unchanged from June 30, 1995.
Commercial and consumer (indirect auto and recreational vehicle) lending may
entail additional risks compared to residential mortgage lending. Commercial
loans may involve large loan balances to single or groups of related borrowers.
In addition, the payment experience on loans secured by income producing
properties is typically dependent on the successful operation of the properties
and thus may be subject to a greater extent to adverse conditions in the local
real estate market or in the economy in general. Money lent for consumer loans
may be expensive and time consuming to recover in the event of borrower default.
Total investment securities amounted to $113,540,000, or 27.2% of total assets,
at September 30, 1995 compared to $112,162,000, or 26.3% of total assets, at
June 30, 1995. At September 30, 1995, securities available for sale amounted to
$62,579,000, or 55.1% of total investment securities. Securities held to
maturity amounted to $50,961,000 and represented 44.9% of total
8
<PAGE>
investment securities. The investment portfolio consists primarily of U.S.
Treasury and Agency securities, mortgage-backed securities guaranteed by Federal
Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association
(FNMA), and to a lesser extent other mortgage-backed securities, corporate
bonds, municipal investments and marketable equity securities.
Total deposits increased by $7,408,000 since June 30, 1995 and amounted to
$315,964,000 at September 30, 1995. The Bank's deposit growth during the
quarter ended September 30, 1995 was primarily in time certificates and non-
interest bearing deposits which increased by $7,768,000 and $3,455,000,
respectively, since June 30, 1995. Growth in these two categories more than
offset the decline in savings which decreased by $3,815,000 during the quarter
ended September 30, 1995. The growth in time certificates, which was partially
due to a shifting from savings to time certificates, was primarily due to higher
market interest rates offered on time certificates than those offered on
savings. The increase in non-interest bearing deposits was primarily due to an
increase in custodial account balances associated with the June 1995 purchase of
mortgage servicing rights on loans of approximately $180,000,000.
Deposit growth and the proceeds from automobile loan sales enabled the Bank to
reduce its borrowed funds from $82,768,000 at June 30, 1995 to $67,930,000 at
September 30, 1995 which represents a decrease of 17.9%. The Bank's borrowed
funds consist primarily of Federal Home Loan Bank (FHLB) advances and, to a
lesser extent, repurchase agreements.
At September 30, 1995, the Company's stockholders' equity totaled $30,136,000,
resulting in an equity-to-assets ratio of 7.21%, a Tier 1 leverage ratio of
7.02% and a total risk-based capital ratio of 11.75%. The Company's capital
ratios exceed all published regulatory minimums. For further information on the
Company's and the Bank's capital ratios see the "Liquidity and Capital
Resources" section below.
The unrealized net gain on securities available for sale, included in
stockholders' equity, amounted to $418,000, net of estimated taxes, at September
30, 1995 as compared to $328,000 at June 30, 1995.
On August 29, 1995, The Company entered into a definitive merger agreement to
acquire Centerpoint Bank by exchanging 1.073 of the Company's common shares for
each Centerpoint common share outstanding. For further information, see Note 3
of Notes to Consolidated Financial Statements of this Report on Form 10Q.
Risk Elements
- -------------
At September 30, 1995, total non-performing assets amounted to $3,042,000, or
0.73% of total assets compared to $3,232,000, or 0.76%, respectively, at June
30, 1995. The decrease of $190,000 since June 30, 1995 was due to sales and
resolutions of non-performing assets exceeding new non-performing loans.
9
<PAGE>
Non-performing assets consist of non-performing loans, loans for which the
accrual of interest has been stopped and commercial loans that have been
restructured with modified terms, and property or other assets which have been
acquired by foreclosure or repossession. Non-performing loans decreased
slightly to $1,708,000 at September 30, 1995 from $1,730,000 at June 30, 1995.
Foreclosed property and repossessed autos and mobile homes decreased from a
total of $1,502,000 at June 30, 1995 to $1,334,000 at September 30, 1995. The
Bank has no impaired loans as defined in SFAS No. 114 and 118.
The following table summarizes non-performing assets and loans delinquent 90
days or more at the dates indicated.
<TABLE>
<CAPTION>
September 30, June 30, September 30,
(Dollars in Thousands) 1995 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-accrual loans $ 1,708 $ 1,730 $ 813
Restructured loans - - 173
----------- -------- ----------
Total non-performing loans 1,708 1,730 986
----------- -------- ----------
Real estate acquired by 893 1,134 1,106
foreclosure
Other assets acquired 441 368 315
----------- -------- ----------
Total assets acquired toward 1,334 1,502 1,421
satisfaction of debt
----------- -------- ----------
Total non-performing assets 3,042 3,232 2,407
Loans delinquent 90 days or more 343 - 64
and still accruing
----------- -------- ----------
Total non-performing assets
and loans
delinquent 90 days or more $ 3,385 $ 3,232 $ 2,471
and still accruing
=========== ======== ==========
Non-performing assets as a
percent of total loans
and assets acquired toward 1.13 % 1. 18 % 1.05 %
satisfaction of debt
======= ======== =======
</TABLE>
During the quarter ended September 30, 1995, the Bank provided $175,000 into its
allowance for possible loan losses, bringing the allowance to $2,987,000 after
net charge-offs of $158,000. This action produced an allowance for possible
loan losses totaling 1.11% of total loans at September 30, 1995 which was up
slightly from 1.09% of total loans at June 30, 1995. At September 30, 1995, the
allowance for possible loan losses represented 174.9% of non-performing loans of
$1,708,000 versus 171.7% of non-performing loans of $1,730,000 at June 30, 1995.
The allowance for possible loan losses is maintained at a level believed by
management to adequately meet reasonably foreseeable loan losses on the basis
of many factors including risk characteristics of the portfolio, underlying
collateral, current and anticipated economic conditions that may affect the
borrower's ability to pay, specific problem loans, trends in loan delinquencies,
loan charge-offs and loan growth. While management uses the best information
available to establish the allowance for possible loan losses, future additions
to the allowance may be necessary if economic conditions differ substantially
from the assumptions used in making the evaluation. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for possible loan losses. Such
agencies may require the Bank to recognize additions to the allowance based on
judgments different from those of management.
10
<PAGE>
Results of Operations for the Three Months Ended
------------------------------------------------
September 30,1995 and 1994
--------------------------
Results of Operations
- ---------------------
The Company earned net income of $846,000, or $0.47 per share, for the quarter
ended September 30, 1995 compared to net income of $797,000, or $0.44 per share,
for the same quarter of the prior year. The September 30, 1995 quarter
includes a charge amounting to $0.05 per share after-tax for expenses incurred
to date relating to the proposed acquisition of Centerpoint Bank which was
announced on August 30, 1995, as well as income of $0.02 per share relating to a
non-recurring refund of Federal Deposit Insurance Corporation insurance
assessments which were paid in a prior period. Pre-tax income increased by
$106,000, or 9.0%, to $1,282,000 for the current quarter versus $1,176,000 for
the quarter ended September 30, 1994. The increase in pre-tax income was
largely due to an increase of $230,000 in net interest and dividend income which
resulted from higher levels of average earning assets during the current quarter
versus the same quarter of last year.
The Company provided $175,000 into the allowance for possible loan losses for
the current quarter compared to a provision for possible loan losses of $100,000
for the comparable period of the prior year. The increase in the provision for
loan losses for the three months ended September 30, 1995 versus the same period
of 1994 was primarily due to an increase in loans outstanding. Net charge-offs
for the quarter ended September 30, 1995 decreased to $158,000 compared to
$235,000 during the same quarter of last year.
Interest Income
- ---------------
Total interest and dividend income for the quarter ended September 30, 1995
amounted to $8,055,000, an increase of $1,751,000 over the same quarter of the
prior year. Interest income on loans increased by $1,413,000 for the quarter
ended September 30, 1995 versus the same quarter of last year due to an increase
in average loans outstanding during the period of $49,261,000 coupled with an
increase in average yield for the quarter of 58 basis points. The increase in
average loans outstanding has been primarily in indirect vehicle lending as a
result of the Company's increased penetration into that market statewide over
the past year.
Interest income on investments for the current quarter increased by $338,000
from the same quarter a year ago. Average investment balances and the average
yield earned on investments increased this quarter from the same quarter last
year by $16,069,000 and 30 basis points, respectively. The increase in average
investments was primarily due to securitizing mortgage loans and transferring
them into the investment portfolio during June of 1995, an increase in municipal
investments resulting from the establishment of a municipal services department
and an increase in FHLB stock which was required by the Bank's increase in FHLB
borrowings.
11
<PAGE>
<TABLE>
<CAPTION>
Three months ended
September 30,
(Dollars in Thousands) 1995 1994
- ------------------------------------------ --------- ---------
<S> <C> <C>
Interest and dividend income:
Loans $ 6,117 $ 4,704
Investments 1,938 1,600
------- -------
Total interest and dividend income 8,055 6,304
------- -------
Interest expense:
Deposits 3,368 2,608
Borrowed funds 1,110 349
------- -------
Total interest expense 4,478 2,957
------- -------
Net interest and dividend income $ 3,577 $ 3,347
======= =======
Average yield on:
Loans 8.82 % 8.24 %
Investments 6.39 6.09
Average earning assets 8.08 7.56
Average cost of:
Deposits 4.54 % 3.73 %
Borrowed funds 6.07 5.14
All interest-bearing liabilities 4.84 3.86
Net interest margin 3.60 % 4.02 %
Annualized return on average assets 0.81 0.91
Annualized return on average equity 11.40 11.79
Average equity to average assets 7.07 7.73
Equity-to-assets at end of period 7.21 7.61
</TABLE>
Interest Expense
- ----------------
Interest expense on deposits for the quarter ended September 30, 1995 increased
by $760,000 versus the same quarter of the prior year due to an 81 basis point
increase in average cost coupled with an increase of $17,198,000 in average
interest-bearing deposits. The Bank's deposit growth has been primarily in the
higher cost time certificates of deposit. This coupled with increased market
interest rates paid on deposits has increased the Company's deposit interest
costs. Competitive interest rates and deposit products offered by the Bank, as
well as the continued investment in, and expansion of, the Bank's product
distribution system, continues to produce deposit growth.
Increases of $46,007,000 in average outstanding borrowed funds and 93 basis
points on average rates paid on borrowed funds for the current quarter versus
the same period of the prior year combined to increase interest expense on
borrowed funds for the quarter by $761,000. The Bank
12
<PAGE>
utilized borrowed funds, along with deposit growth, to fund its earning asset
growth over the past year.
Non-Interest Income
- -------------------
Non-interest income for the quarter ended September 30, 1995 increased by
$163,000 from the same quarter of last year. Each of the major non-interest
income categories increased this year versus last year, with the exception of
security gains, primarily due to increased business volumes.
Increased transaction activity and numbers of accounts were the primary reasons
for the growth of $19,000 in deposit account fees this quarter when compared to
the same quarter of the prior year. The increase in these volumes are partly
the result of opening the Steeplegate Mall office during September of 1994.
The Bank did not sell any securities this quarter and therefore recorded no
security gains compared to sales of $2,962,000 and resulting net gains of
$30,000 for the quarter ended September 30, 1994.
Gains on the sale of loans increased by $83,000 for the quarter ended September
30, 1995 versus the same quarter of 1994 primarily due to gains on the sale of
automobile loans which amounted to $50,000 for the quarter ended September 30,
1995.
Loan servicing income increased this quarter over the same period of last year
by $74,000 primarily due to income related to the Bank's purchase of mortgage
servicing rights which were transferred to the Bank during August of 1995.
Non-Interest Expense
- --------------------
Non-interest expense for the quarter ended September 30, 1995 increased by
$212,000 over the same quarter of last year. The combined increases of $250,000
in salaries and benefits, occupancy and equipment, marketing and the other
expense category were primarily related to the investments made by the Company
to expand its business lines and product distribution system. Since the end of
the September 30, 1994 quarter, the Bank has expanded its indirect automobile
dealer financing capacity, established a municipal services program, opened its
Steeplegate Mall office in Concord, New Hampshire and installed a remote
automated teller machine in Tilton, New Hampshire. The Bank also recorded start
up expenses related to a new full-service office, also in Tilton, which opened
during October 1995.
Also contributing to the increase in non-interest expense this quarter versus
the same period of last year were expenses incurred to date relating to the
proposed acquisition of Centerpoint Bank which amounted to $125,000 for the
quarter ended September 30, 1995. The Company expects to incur additional
expenses associated with this proposed acquisition which are currently estimated
to be $275,000.
13
<PAGE>
Offsetting a portion of the above described increases in non-interest expense
was a reduction in FDIC deposit insurance premiums of $186,000 for the quarter
ended September 30, 1995 versus the same quarter of the prior year. This
reduction was due to a refund received by the Bank from the FDIC as a result of
substantially lower premiums that it charges banks to insure deposits. This
premium reduction was made retroactive to June 1, 1995. The premiums were
lowered after the Bank Insurance Fund (BIF) met its congressionally mandated
level during the month of May 1995, and thereby allowed the FDIC to refund
excess premiums already paid by the banks for the four month period ended
September 30, 1995. The refund included $48,000 which was related to the prior
quarter ended June 30, 1995. The Company expects to benefit from reduced FDIC
premiums in future periods.
Income Taxes
- ------------
Income tax expense for the quarters ended September 30, 1995 and 1994 amounted
to $436,000 and $379,000, respectively, which resulted in effective tax rates of
34% and 32%, respectively. The lower effective tax rate for the prior fiscal
year was primarily the result of the Company reducing its valuation reserve on
its deferred tax asset by approximately $38,000 for the quarter ended September
30, 1994. At September 30, 1995, the Company's net deferred income tax asset,
net of related valuation reserves, was approximately $120,000.
Liquidity and Capital Resources
- -------------------------------
Liquidity is a measure of the Company's ability to meet its cash needs at a
reasonable cost. Cash needs arise primarily as a result of funding lending
opportunities, the maturity of liabilities such as borrowings and the withdrawal
of deposits. Asset liquidity is achieved through the management of earning
asset maturities, loan amortization, deposit growth, securities available for
sale and access to borrowed funds. As a member, the Bank may borrow from the
Federal Home Loan Bank of Boston on a secured basis. Borrowing usually requires
the pledging of the Bank's FHLB stock as well as certain residential mortgage
loans and investment securities. At September 30, 1995, the Bank's sources of
liquidity included $63 million of investment securities classified as
"available for sale" and unused available borrowing capacity of approximately
$85 million at the Federal Home Loan Bank of Boston.
The Holding Company's primary sources of liquidity are dividends from the Bank
and its cash balances. Dividends paid from the Bank to the Holding Company are
limited to the extent necessary for the Bank to comply with regulatory capital
guidelines.
The Bank's deposits are insured by the Federal Deposit Insurance Corporation
which issues and enforces regulations designed to protect the safety and
soundness of insured institutions. At September 30, 1995, the Company had
equity capital of $30,136,000, resulting in an equity-to-assets ratio of 7.21%
and a Tier 1 leverage ratio of 7.02%. Stockholders' equity includes
14
<PAGE>
$418,000 of net unrealized security gains, net of estimated income taxes,
relative to investment securities classified as available for sale.
The following table summarizes the Company's regulatory capital ratios as of
September 30, 1995.
<TABLE>
<CAPTION>
Actual Required
Regulatory Regulatory
Capital Capital
Ratio Ratio
---------- ----------
<S> <C> <C>
Tier 1 leverage 7.02 % 3.00-4.00 %
Risk-based:
Tier 1 10.66 4.00
Total 11.75 8.00
</TABLE>
The following table summarizes the Bank's regulatory capital ratios as of
September 30, 1995.
<TABLE>
<CAPTION>
Actual Required
Regulatory Regulatory
Capital Capital
Ratio Ratio
---------- ----------
<S> <C> <C>
Tier 1 leverage 6.61 % 3.00-4.00 %
Risk-based:
Tier 1 10.05 4.00
Total 11.14 8.00
</TABLE>
15
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
-----------------
The Company is not involved in any pending legal proceedings other than those
involved in the ordinary course of business. Management believes that the
resolution of these matters will not materially affect the business or the
consolidated financial condition or results of operations of the Company and its
subsidiaries.
Item 2 - Changes in Securities
---------------------
Not applicable
Item 3 - Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable
Item 5 - Other Information
-----------------
Not applicable
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibits Method of Filing
- -------------- ----------------------- ----------------
<S> <C> <C>
3.2 By-laws of Community Bankshares, Filed herewith
Inc. as currently in effect
10.16 Agreement and Plan of Merger Incorporated by reference
between Community Bankshares, Inc. to Current Report on Form
and Centerpoint Bank dated 8/29/95 8-K dated September 19, 1995
10.17 Stock Option Agreement between Incorporated by reference
between Community Bankshares, Inc. to Current Report on Form
and Centerpoint Bank dated 8/29/95 8-K dated September 19, 1995
11 Statement re computation of Filed herewith
income per share
</TABLE>
16
<PAGE>
The Company filed two Reports on Form 8-K during the quarter ended September 30,
1995:
<TABLE>
<CAPTION>
Date of Report Items Reported Financials Filed
-------------- ------------- ----------------
<S> <C> <C>
August 29, 1995 Agreement and Plan of Merger and Not Applicable
Stock Option Agreement between
Community Bankshares, Inc. and
Centerpoint Bank.
September 19, 1995 Change in fiscal year from a June 30 Not Applicable
to a December 31 fiscal year end
effective December 31, 1995.
</TABLE>
17
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY BANKSHARES, INC.
November 10, 1995 /s/ Douglas Crichfield
----------------------------
Douglas Crichfield
President and Chief Executive Officer
(Principal Executive Officer)
November 10, 1995 /s/ Gerald R. Emery
----------------------------
Gerald R. Emery
Treasurer (Principal Financial
and Accounting Officer)
18
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
COMMUNITY BANKSHARES, INC.
ARTICLE I
Shareholders
SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders of the
corporation, for the election of the Directors to succeed those whose terms
expire and for the transaction of such other business as may properly come
before the meeting, shall be held on the fourth Thursday in April in each year
(or if that be a legal holiday in the place where the meeting is to be held, on
the next succeeding full business day) at the hour stated in the notice of the
meeting. If the annual meeting of the shareholders is not held on such date,
the Directors shall cause the meeting to be held as soon thereafter as
convenient.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the President or by order of the Board of Directors, and shall be
called by the Secretary (or in the case of the death, absence, incapacity or
refusal of the Secretary, by any other officer) upon written application by one
or more stockholders who together hold at least ten percent in interest of the
capital stock entitled to vote at the meeting. Such written request shall state
the purpose or purposes of the meeting and shall be delivered to the principal
office of the corporation addressed to the attention of the President not less
than sixty days before the date of the meeting.
SECTION 3. PLACE AND HOUR OF MEETINGS. All meetings of shareholders shall
be held at the principal office of the corporation at 10:00 a.m. local time
unless a different place or hour is fixed by the person or persons calling the
meeting and stated in the notice of the meeting.
SECTION 4. NOTICES OF MEETINGS AND ADJOURNED MEETINGS. A written notice of
each annual or special meeting of the shareholders, stating the place, date, and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given by or at the direction of the President or the Secretary (or the
person or persons calling the meeting), not less than ten nor more than fifty
days before the date of the meeting, to each shareholder entitled to vote
thereat, by leaving such notice with him or at his residence or usual place of
business, or by depositing it postage prepaid in the United States mail,
directed to each shareholder at his address as it appears on the records of the
corporation. The notice of a special meeting of the shareholders shall state
the purpose or purposes for which the meeting is called. An affidavit of the
Secretary, Assistant Secretary, or transfer agent of the corporation that the
notice has been given shall, in the absence of fraud, be prima facie
<PAGE>
evidence of the facts stated therein. No notice need be given to any person
with whom communication is unlawful or to any person who has waived such notice
(a) in writing (which writing need not specify the business to be transacted at,
or the purpose of, the meeting) signed by such person before or after the time
of the meeting or (b) by attending the meeting except for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. When a meeting is
adjourned to another time and place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken except that, if the adjournment is for more than thirty
days or if, after the adjournment, a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given in the manner provided
in this Section 4.
SECTION 5. QUORUM. At any meeting of the shareholders, a quorum for the
transaction of business shall consist of one or more individuals appearing in
person or represented by proxy and owning or representing a majority of the
shares of the corporation then outstanding and entitled to vote, provided that
less than such quorum shall have power to adjourn the meeting from time to time.
SECTION 6. VOTING. Unless otherwise provided in the Articles of
Incorporation and subject to the provisions of Section 10 of this Article I,
each shareholder shall have one vote for each share of stock entitled to vote
held by him of record according to the records of the corporation. Persons
holding stock in a fiduciary capacity shall be entitled to vote the shares so
held. Persons whose stock is pledged shall be entitled to vote unless in the
transfer by the pledgor on the books of the corporation he has expressly
empowered the pledgee to vote the pledged shares, in which case only the pledgee
or his proxy shall be entitled to vote. If shares stand of record in the names
of two or more persons or if two or more persons have the same fiduciary
relationship respecting the shares then, unless the Secretary is given written
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided to the
contrary: (a) if only one votes, his act binds all; (b) if more than one vote,
the act of the majority so voting binds all; and (c) if more than one vote and
the vote is evenly split, the effect shall be as provided by law. Neither
treasury shares nor shares held by another corporation, if a majority of the
shares entitled to vote for the election of directors of the other corporation
is held by the corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares at any given time.
SECTION 7. PROXIES. Each shareholder entitled to vote at a meeting of
shareholders may vote in person or by proxy executed in writing by the
shareholder or his duly authorized attorney-in-fact. Any proxy purporting on
its face to have been executed by a shareholder or his attorney-in-fact, unless
contested prior to its being voted, shall be conclusively presumed to be valid,
but no such proxy shall be voted or acted upon after eleven months from its
date, unless the proxy provides for a longer period.
SECTION 8. ACTION AT MEETING. When a quorum is present at any meeting,
action of the shareholders on any matter properly brought before such meeting
shall require, and may be effected by, the affirmative vote of the holders of a
majority in interest of the stock
-2-
<PAGE>
present or represented and entitled to vote and voting on such matter, except
where a different vote is required by law, the Articles of Incorporation or
these By-laws.
SECTION 9. SHAREHOLDER LISTS. The officer or agent who has charge of the
stock transfer books of the corporation shall prepare and make a complete list
of shareholders entitled to vote at each meeting of shareholders, arranged in
alphabetical order, and showing the address of each shareholder and the number
of shares registered in the name of each shareholder. Such list shall be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time thereof. The stock
transfer books shall be the only evidence as to who are the shareholders
entitled to examine the list required by this section or the books of the
corporation, or to vote in person or by proxy at any meeting of shareholders.
SECTION 10. RECORD DATE.
(a) In order that the corporation may determine the shareholders entitled
to notice of or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than fifty nor less than ten days before the date of such meeting,
nor more than fifty days prior to any other action.
(b) If no record date is fixed:
(1) The record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the opening of
business on the day on which notice is given, or, if notice is waived, at
the opening of business on the day on which the meeting is held.
(2) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(c) A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE II
Directors
SECTION 1. POWERS. The business and affairs of the corporation shall be
managed by or under the direction of the Board of Directors.
-3-
<PAGE>
SECTION 2. NUMBER OF DIRECTORS; CLASSIFICATION. The Board of Directors
shall consist of such number of persons, not less than nine, as shall be fixed
from time to time by the Board of Directors. The Board of Directors of the
corporation shall be divided into three classes, each such class to consist, as
nearly as possible, of the same number of directors as each other class.
SECTION 3. ELECTION AND TENURE. Each Director shall be elected by
plurality vote of the shareholders at the annual meeting or as provided in
Section 5 of this Article II. At the first annual meeting of shareholders, the
shareholders shall designate one class of Directors whose term of office shall
expire at the next annual meeting, a second class whose term of office shall
expire at the annual meeting to be held one year thereafter, and a third class
whose term of office shall expire at the annual meeting to be held two years
thereafter; and after the expiration of the initial terms so designated, each
Director shall be elected for a term of three years so that the term of office
of one class of Directors shall expire in each year.
SECTION 4. QUALIFICATION. No Director need be a shareholder.
SECTION 5. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Vacancies and newly
created Directorships resulting from any increase in the authorized number of
Directors may be filled by the shareholders at any meeting, by a majority of the
Directors then in office, although less than a quorum, or by a sole remaining
Director. When one or more Directors shall resign from the Board, effective at
a future date, a majority of Directors then in office, including those who have
so resigned shall have power to fill such vacancy or vacancies by vote to take
effect when such resignation or resignations shall become effective.
SECTION 6. REMOVAL. Any Director or the entire Board of Directors may be
removed with or without cause, by the holders of the shares then entitled to
vote at an election of the Directors; provided that the vote of eighty percent
(80%) of the outstanding capital stock having power to vote in the election of
Directors shall be required to remove a Director without cause.
SECTION 7. RESIGNATION. Any Director of the corporation may resign at any
time by giving written notice to the Board of Directors, to the Chairman of the
Board, if any, to the President, or to the Secretary, and any member of a
committee may resign therefrom at any time by giving notice as aforesaid or to
the chairman or secretary of such committee. Any such resignation shall take
effect at the time specified therein, or, if the time be not specified, upon
receipt thereof; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 8. ANNUAL MEETING. Immediately after each annual meeting of
shareholders and at the place thereof, if a quorum of the Directors is present,
there shall be a meeting of the Directors without notice.
SECTION 9. REGULAR MEETINGS. Regular meetings of the Directors may be
held at such times and places as shall from time to time be fixed by resolution
of the Board, and no
-4-
<PAGE>
notice need be given of regular meetings held at times and places so fixed,
PROVIDED, HOWEVER, that any resolution relating to the holding of regular
meetings shall remain in force only until the next annual meeting of
shareholders and that, if at any meeting of Directors at which a resolution is
adopted fixing the times or place or places for any regular meetings any
Director is absent, no meeting shall be held pursuant to such resolution without
notice to or waiver by such absent Director pursuant to Section 11 of this
Article II.
SECTION 10. SPECIAL MEETINGS. Special meetings of the Directors may be
called by the Chairman of the Board (if any), the President, or by any two
Directors, and shall be held at the place and on the date and hour designated in
the call thereof.
SECTION 11. NOTICES. Notices of any special meeting of the Directors
shall be given by the Secretary or an Assistant Secretary to each Director, by
mailing to him, postage prepaid, and addressed to him at his address as
registered on the books of the corporation, or if not so registered at his last
known home or business address, a written notice of such meeting at least four
days before the meeting or by delivering such notice to him at least 48 hours
before the meeting or by sending to him at least 48 hours before the meeting, by
prepaid telegram addressed to him at such address, notice of such meeting. In
the absence of all such officers, such notice may be given by the officer or one
of the Directors calling the meeting. Notice need not be given to any Director
who has waived notice (a) in writing executed by him before or after the meeting
and filed with the records of the meeting, or (b) by attending the meeting
except for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called or
convened. A notice or waiver of notice of a meeting of the Directors need not
specify the business to be transacted at or the purpose of the meeting.
SECTION 12. QUORUM. At any meeting of the Directors a majority of the
total number of Directors shall constitute a quorum for the transaction of
business; provided always that any number of Directors (whether one or more and
whether or not constituting a quorum) present at any meeting or at any adjourned
meeting may adjourn such meeting, provided that all absent Directors receive or
waive notice pursuant to Section 11 of Article II of any such adjournment that
exceeds four business days.
SECTION 13. ACTION AT MEETING. At any meeting of the Directors at which a
quorum is present, the action of the Directors on any matter brought before the
meeting shall be decided by vote of a majority of those present and voting,
unless a different vote is required by law, the Articles of Incorporation, or
these By-laws.
SECTION 14. ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
SECTION 15. TELEPHONE MEETINGS. Members of the Board of Directors, or any
committee thereof, may participate in a meeting of such Board or committee by
means of
-5-
<PAGE>
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 15 shall constitute presence in person at such
meeting.
SECTION 16. PLACE OF MEETINGS. The Board of Directors may hold its
meetings, and have an office or offices, within or without the State of New
Hampshire.
SECTION 17. COMPENSATION. The Board of Directors shall have the authority
to fix the compensation of Directors.
SECTION 18. COMMITTEES. (a) The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members an executive committee and one or more other committees each of
which, to the extent provided in the resolution creating the committee or any
subsequent resolution adopted by vote of a majority of the full Board of
Directors, shall have and may exercise all the authority of the Board of
Directors, except that no such committee shall have the authority to:
(i) Declare dividends or distributions;
(ii) Approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders;
(iii) Designate candidates for the office of Director, for purposes
of proxy solicitation or otherwise, or fill vacancies on the
Board of Directors or any committee of the Board;
(iv) Amend the By-laws;
(v) Approve a plan of merger not requiring shareholder approval;
(vi) Reduce earned or capital surplus;
(vii) Authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board
of Directors; or
(viii) Authorize or approve the issuance or sale of, or any contract
to issue or sell, shares or designate the terms of a series of
a class of shares.
A committee may perform the acts prohibited in clauses (i) through (viii)
above if the Board of Directors, having acted regarding general authorization
for the issuance or sale of shares, or any contract for sale, and, in the case
of a series, the designation of a series, pursuant to a general formula or
method specified by the Board by resolution or by adoption of a stock option or
other plan, authorizes a committee to fix the terms of any contract for the sale
of the shares and to fix the terms upon which the shares may be issued or sold,
including, without limitation, the price, the dividend rate, provisions for
redemption, sinking fund, conversion, voting or preferential rights, and
provisions for other features of a class of
-6-
<PAGE>
shares, or a series of a class of shares, with full power in the committee to
adopt any final resolution setting forth all the terms thereof and to authorize
the statement of the terms of a series for filing with the secretary of state
under the New Hampshire Business Corporation Act.
(b) At any meeting of any committee, a majority of the whole committee
shall constitute a quorum and, except as otherwise provided by statute, by the
Articles of Incorporation, or by these By-laws, the affirmative vote of at least
a majority of the members present at a meeting at which there is a quorum, or
such greater vote as shall be required by resolution of the Board of Directors,
shall be the act of the committee.
(c) Each committee, except as otherwise provided by resolution of the Board
of Directors, shall fix the time and place of its meetings within or without the
State of New Hampshire, shall adopt its own rules and procedures, and shall keep
a record of its acts and proceedings and report the same from time to time to
the Board of Directors.
ARTICLE III
Officers
SECTION 1. OFFICERS AND THEIR ELECTIONS. The officers of the corporation
shall be a President, a Secretary, a Treasurer and such Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers as the Board of
Directors may from time to time determine and elect or appoint. The Board of
Directors may appoint one of its members to the office of Chairman of the Board
and another of its members to the office of Vice-Chairman of the Board and from
time to time define the powers and duties of these offices notwithstanding any
other provisions of these By-laws. The President, the Secretary and the
Treasurer shall be elected by the Board of Directors at its annual meeting or at
the first meeting of the Board after the date fixed by these By-laws therefor
and may, but need not, be members of the Board of Directors. Two or more
offices may be held by the same person.
SECTION 2. TERM OF OFFICE. The President, the Treasurer and the Secretary
shall, unless sooner removed under the provisions of these By-laws, hold office
until the next annual election of officers and thereafter until their respective
successors are elected and qualified or until their earlier resignation or
removal. All other officers shall hold office for such term as shall be
determined from time to time by the Board of Directors.
SECTION 3. VACANCIES. Any vacancy at any time existing in any office may
be filled by the Directors.
SECTION 4. PRESIDENT. The President shall be the chief executive officer
of the corporation except as the Board of Directors may otherwise provide. It
shall be his duty and he shall have the power to see that all orders and
resolutions of the Board of Directors are carried into effect. He shall from
time to time report to the Board of Directors all matters within his knowledge
which the interests of the corporation may require to be brought to its
-7-
<PAGE>
notice. The President, when present, shall preside at all meetings of the
shareholders and, in the absence of the Chairman or if no Chairman shall have
been elected, of the Board of Directors. The President shall perform such
duties and have such powers additional to the foregoing as the Board of
Directors shall designate.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of the Board and shall perform such duties and have such powers
additional thereto as the Board of Directors shall designate.
SECTION 6. VICE PRESIDENTS. In the absence or disability of the
President, his powers and duties shall be performed by the Vice President, if
only one, or, if more than one, by the one designated for the purpose by the
Board of Directors. Each Vice President shall perform such duties and have such
powers additional to the foregoing as the Board of Directors shall designate.
SECTION 7. TREASURER. The Treasurer shall supervise the keeping of the
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all monies and other valuable effects in the name and to the
credit of the corporation in such depositories as shall be designated by the
Board of Directors or in the absence of such designation in such depositories as
he shall from time to time deem proper. He shall disburse the funds of the
corporation as shall be ordered by the Board of Directors, taking proper
vouchers for such disbursements. He shall promptly render to the President and
to the Board of Directors such statements of his transactions and accounts as
the President and Board of Directors respectively may from time to time require.
The Treasurer shall perform such duties and have such powers additional to the
foregoing as the Board of Directors may designate.
SECTION 8. ASSISTANT TREASURERS. In the absence or disability of the
Treasurer, his powers and duties shall be performed by the Assistant Treasurer,
if only one, or if more than one, by the one designated for the purpose by the
Board of Directors. Each Assistant Treasurer shall perform such duties and have
such powers additional to the foregoing as the Board of Directors shall
designate.
SECTION 9. SECRETARY. The Secretary of the corporation shall be a
resident of the State of New Hampshire. The Secretary shall be registered with
the Secretary of State of the State of New Hampshire as the registered agent.
The Secretary shall issue notices of all meetings of shareholders, of the Board
of Directors and of committees thereof where notices of such meetings are
required by law or these By-laws. He shall record the proceedings of the
meetings of the shareholders and of the Board of Directors and shall be
responsible for the custody thereof in a book to be kept for that purpose. He
shall also record the proceedings of the committees of the Board of Directors
unless such committees appoint their own respective secretaries. Unless the
Board of Directors shall appoint a transfer agent and/or registrar, the
Secretary shall be charged with the duty of keeping, or causing to be kept,
accurate records of all stock outstanding, stock certificates issued and stock
transfers. He shall sign such instruments as require his signature. The
Secretary shall have custody of the corporate seal and shall affix and attest
such seal on all documents whose execution under
-8-
<PAGE>
seal is duly authorized. In his absence at any meeting, an Assistant Secretary
or the Secretary pro tempore designated by the presiding officer shall perform
his duties thereat. He shall perform such duties and have such powers
additional to the foregoing as the Board of Directors shall designate.
SECTION 10. ASSISTANT SECRETARIES. In the absence or disability of the
Secretary, his powers and duties shall be performed by the Assistant Secretary,
if only one, or, if more than one, by the one designated for the purpose by the
Board of Directors. Each Assistant Secretary shall perform such duties and have
such powers additional to the foregoing as the Board of Directors shall
designate.
SECTION 11. SALARIES. The salaries and other compensation of officers,
agents and employees shall be fixed from time to time by or under authority from
the Board of Directors. No officer shall be prevented from receiving a salary
or other compensation by reason of the fact that he is also a Director of the
corporation.
SECTION 12. REMOVAL. The Board of Directors may remove any officer,
either with or without cause, at any time.
SECTION 13. BOND. The corporation may secure the fidelity of any or all
of its officers or agents by bond or otherwise.
SECTION 14. RESIGNATIONS. Any officer, agent or employee of the
corporation may resign at any time by giving written notice to the Board of
Directors, to the Chairman of the Board, if any, to the President or to the
Secretary of the corporation. Any such resignation shall take effect at the
time specified therein, or, if the time be not specified, upon receipt thereof;
and unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
ARTICLE IV
Capital Stock
SECTION 1. STOCK CERTIFICATES. Each shareholder shall be entitled to have
a certificate Signed by the Chairman or Vice-Chairman of the Board or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, and sealed with the corporate seal
or a facsimile of the seal. Any or all of the signatures on the certificate may
be a facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before the
certificate is issued, such certificate may nevertheless be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
SECTION 2. CLASSES OF STOCK. If the corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
face or back of each
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<PAGE>
certificate issued by the corporation to represent such class or series shall
either (a) set forth in full or summarize the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
thereof, or (b) contain a statement that the corporation will furnish a
statement of the same upon request and without charge to any shareholder.
SECTION 3. TRANSFER OF STOCK. Shares of stock shall be transferable on
the books of the corporation pursuant to applicable law and such rules and
regulations as the Board of Directors shall from time to time prescribe. The
Board of Directors may at any time or from time to time appoint a transfer agent
or agents or a registrar or registrars for the transfer or registration of
shares of stock.
SECTION 4. HOLDERS OF RECORD. Prior to due presentment for registration
of transfer the corporation may treat the holder of record of a share of its
stock as the complete owner thereof exclusively entitled to vote, to receive
notifications and otherwise entitled to all the rights and powers of a complete
owner thereof, notwithstanding notice to the contrary.
SECTION 5. LOST, STOLEN, OR DESTROYED STOCK CERTIFICATES. The Board of
Directors may direct a new stock certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen, or destroyed upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stole or destroyed
certificate or certificates or his legal representative, to give the corporation
a bond sufficient to indemnify it against any claim that may be made against the
corporation on account of the alleged loss, theft, or destruction, of such
certificates or the issuance of such new certificate.
ARTICLE V
Miscellaneous Provisions
SECTION 1. INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the corporation and one or more of
its Directors or officers, or between the corporation and any other corporation,
partnership, association, or other organization in which one or more of its
Directors or officers are Directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the Director
or officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the Board of Directors
or the committee, and the Board or committee in good faith authorizes the
contract or transaction by the affirmative
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<PAGE>
vote of a majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum; or
(2) The material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is authorized,
approved or ratified by the shareholders; or
(3) The contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the shareholders.
(b) Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
SECTION 2. INDEMNIFICATION.
(a) The corporation shall indemnify and reimburse any individual person who
was or is a party to any action, suit or proceeding, whether civil, criminal or
administrative, by reason of the fact that such party, or the person whose legal
representative or successor such party is, was or is serving as a Director,
officer, employee or agent of the corporation, or at its request, of another
entity in which the corporation has an interest, or was or is serving at the
request of the corporation as a fiduciary of any employee benefit plan of the
corporation or any subsidiary. Such indemnification and reimbursement shall
include all expenses (including attorney's fees), and such amount of any
judgment, money decree, fine, penalty or settlement for which such person may
have become liable as the Board of Directors deems reasonable, actually incurred
by such person in connection with the defense or reasonable settlement of any
such action, suit or proceeding, or any appeal therein, to the extent and under
the circumstances permitted by the New Hampshire Business Corporation Act. Such
indemnification and reimbursement (unless ordered by a court) shall be made as
authorized in a specific case upon a further determination that indemnification
of the Director, officer or employee is proper in the circumstances because such
person has met the applicable standards of conduct set forth in the New
Hampshire Business Corporation Act.
(b) Such determination of reasonableness and propriety with respect to
persons other than Directors shall be made by the Board of Directors by a
majority vote, and with respect to Directors shall be made (i) by the Board of
Directors by a majority vote of a quorum consisting of Directors who were not
parties to such action, suit or proceeding or (ii) if such a quorum is not
obtainable, or even if obtainable, if a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (iii) by the
shareholders.
(c) The foregoing right of indemnification shall not be exclusive of other
rights to which such person, or the legal representatives or successors of such
person may be entitled as a matter of law, under the Articles of Incorporation,
by contract or otherwise.
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<PAGE>
(d) The corporation may purchase and maintain insurance on behalf of any
person who was or is a Director, officer or employee of the corporation or was
or is serving at the request of the corporation as a fiduciary of any employee
benefit plan of the corporation or any subsidiary against any liability asserted
against, and incurred by, such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify such person against such liability under the provisions of
the New Hampshire Business Corporation Act. The obligation to indemnify and
reimburse set forth hereinabove, if applicable, shall be reduced by the amount
of any such insurance proceeds paid to such person, or the representatives or
successors of such person.
SECTION 3. STOCK IN OTHER CORPORATIONS. Subject to any limitations that
may be imposed by the Board of Directors, the President or any person or persons
authorized by the Board of Directors may, in the name and on behalf of the
corporation, (a) call meetings of the holders of stock or other securities of
any corporation or other organization, stock or other securities of which are
held by this corporation, (b) act, or appoint any other person or persons (with
or without powers of substitution) to act in the name and on behalf of the
corporation, or (c) express consent or dissent, as a holder of such securities,
to corporate or other action by such other corporation or organization.
SECTION 4. CHECKS, NOTES, DRAFTS AND OTHER INSTRUMENTS. Checks, notes,
drafts and other instruments for the payment of money drawn or endorsed in the
name of the corporation may be signed by any officer or officers or person or
persons authorized by the Board of Directors to sign the same. No officer or
person shall sign any such instrument as aforesaid unless authorized by the
Board of Directors to do so.
SECTION 5. CORPORATE SEAL. The seal of the corporation shall be circular
in form, bearing the name of the corporation, the words "New Hampshire", and the
year of incorporation, and the same may be used by causing it or a facsimile
thereof to be impressed or affixed or in any other manner reproduced.
SECTION 6. FISCAL YEAR. The fiscal year of the corporation shall be the
year ending with December 31 in each year.
SECTION 7. SEPARABILITY. If any term or provision of the By-laws, or the
application thereof to any person or circumstances or period of time, shall to
any extent be invalid or unenforceable, the remainder of the By-laws shall be
valid and enforced to the fullest extent permitted by law.
SECTION 8. AMENDMENTS. The By-laws may be amended at any time by a
majority of the full Board of Directors subject to repeal or change by vote of
the holders of two-thirds of the shares entitled to vote in the election of
directors at a meeting expressly called for that purpose.
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<PAGE>
"EXHIBIT 11"
The following table sets forth in detail the computation of earnings per share
for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
1995 1994
------------------------------
<S> <C> <C>
Net income $ 846,000 $ 797,000
Primary average common and common
equivalent shares 1,783,704 1,810,278
Primary earnings per common and common
equivalent shares $ 0.47 $ 0.44
Fully diluted average common and common
equivalent shares 1,785,743 1,812,018
Fully diluted earnings per common and
common equivalent shares $ 0.47 $ 0.44
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,460
<INT-BEARING-DEPOSITS> 5,823
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 66,382
<INVESTMENTS-CARRYING> 50,961
<INVESTMENTS-MARKET> 50,929
<LOANS> 272,164
<ALLOWANCE> 2,987
<TOTAL-ASSETS> 417,814
<DEPOSITS> 315,964
<SHORT-TERM> 67,930
<LIABILITIES-OTHER> 3,784
<LONG-TERM> 0
<COMMON> 30,136
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 417,814
<INTEREST-LOAN> 6,117
<INTEREST-INVEST> 1,882
<INTEREST-OTHER> 56
<INTEREST-TOTAL> 8,055
<INTEREST-DEPOSIT> 3,368
<INTEREST-EXPENSE> 4,478
<INTEREST-INCOME-NET> 3,577
<LOAN-LOSSES> 175
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,795
<INCOME-PRETAX> 1,282
<INCOME-PRE-EXTRAORDINARY> 1,282
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 846
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
<YIELD-ACTUAL> 3.60
<LOANS-NON> 1,708
<LOANS-PAST> 343
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,970
<CHARGE-OFFS> 227
<RECOVERIES> 69
<ALLOWANCE-CLOSE> 2,987
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
