<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 20, 1996
--------------
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)
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On March 20, 1996, Community Interim Trust Company, a wholly owned subsidiary of
Community Bankshares, Inc. (the "Registrant"), was merged (the "Merger") with
and into Centerpoint Bank, a New Hampshire-chartered trust company
("Centerpoint"), pursuant to an Agreement and Plan of Merger by and between the
Registrant and Centerpoint dated as of August 29, 1995. As a result of the
Merger, Centerpoint became a wholly owned subsidiary of the Registrant.
A Current Report on Form 8-K with respect to the Merger was filed with the
Commission on April 3, 1996. This Amendment to the Report contains the required
financial statements for Centerpoint (see Item 7, below), as permitted by
paragraph 4 of Item 7(a).
Item 5. Other Events
------------
The Merger was accounted for as a pooling-of-interests. The Registrant hereby
files supplemental financial information. See Exhibit 99(a) and (b).
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Business Acquired
(i) Report of Ernst & Young LLP dated February 1, 1996 with
respect to the Balance Sheets of Centerpoint Bank as of December 31, 1995 and
1994, and the related Statements of Operations, Shareholders' Equity and Cash
Flows for each of the three years in the period ended December 31, 1995.
(ii) Balance Sheets of Centerpoint Bank as of December 31, 1995
and 1994, and the related Statements of Operations, Shareholders' Equity
and Cash Flows for each of the three years in the period ended December 31, 1995
(and Notes to Financial Statements).
2
<PAGE>
The following exhibits are filed as part of this report:
Exhibit 23. Consent Forms
-------------
(a) Consent of KPMG Peat Marwick LLP
(b) Consent of Ernst & Young LLP
Exhibit 99. Supplemental Financial Information
----------------------------------
(a) Report of KPMG Peat Marwick LLP dated March 20, 1996 with respect to
the Supplemental Consolidated Balance Sheets of Community Bankshares, Inc. and
subsidiaries as of December 31, 1995 and June 30, 1995 and 1994, and the related
Supplemental Consolidated Statements of Income, Changes in Stockholders' Equity
and Cash Flows for the six months ended December 31, 1995 and for each of
the three years in the three year period ended June 30, 1995 (and Notes to
Supplemental Consolidated Financial Statements).
(b) Supplemental Consolidated Balance Sheets of Community Bankshares,
Inc. and subsidiaries as of December 31, 1995 and June 30, 1995 and 1994, and
the related Supplemental Consolidated Statements of Income, Changes in
Stockholders' Equity and Cash Flows for the six months ended December 31, 1995
and for each of the three years in the three year period ended June 30, 1995
(and Notes to Supplemental Consolidated Financial Statements).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMMUNITY BANKSHARES, INC.
by /s/ GERALD R. EMERY
_____________________________________
Gerald R. Emery
Principal Financial and Chief
Accounting Officer
Date: May 30 , 1996
3
<PAGE>
ITEM 7. (A) (I)
Report of Independent Auditors
Shareholders and Board of Directors
Centerpoint Bank
We have audited the accompanying balance sheets of Centerpoint Bank as of
December 31, 1995 and 1994, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Centerpoint Bank at December
31, 1995 and 1994, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1995 the Bank changed its
method of accounting for impairment of a loan. As discussed in Note 3 to the
financial statements, in 1994 the Bank changed its method of accounting for
investments in debt securities.
ERNST & YOUNG LLP
Manchester, New Hampshire
February 1, 1996
4
<PAGE>
ITEM 7.(A)(II)
CENTERPOINT BANK
BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31
1995 1994
---------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks:
Interest(bearing deposits $ 445 $ 252
Non interest(bearing deposits and cash 8,456 6,066
---------------------------------
8,901 6,318
Federal funds sold 200 900
---------------------------------
Cash and cash equivalents 9,101 7,218
Federal Home Loan Bank stock 608 180
Held(to(maturity securities 3,996 12,180
Available(for(sale securities 13,270 4,753
Loans 60,378 41,875
Less: Deferred loan fees (59) (34)
Allowance for loan losses (660) (422)
---------------------------------
Net loans 59,659 41,419
Mortgage loans held for resale - 1,275
Premises and equipment (net) 691 640
Accrued interest receivable 523 404
Other assets 657 669
---------------------------------
Total assets $88,505 $68,738
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Interest(bearing $ 48,496 $44,226
Non interest(bearing 21,403 16,619
---------------------------------
Total deposits 69,899 60,845
Securities sold under agreements to repurchase and other
borrowings 9,906 1,371
Advances from Federal Home Loan Bank of Boston 1,496 700
Capital lease obligation - 54
Accrued interest payable and other liabilities 1,226 739
---------------------------------
Total liabilities 82,527 63,709
Shareholders equity:
Common stock, $1 par value:
Authorized shares - 3,000,000
Issued and outstanding shares - 590,349 590 590
Additional paid(in capital 4,663 4,663
Unrealized loss on available(for(sale securities (133) (348)
Retained-earnings 858 124
---------------------------------
Total shareholders equity 5,978 5,029
---------------------------------
Total liabilities and shareholders equity $ 88,505 $68,738
=================================
</TABLE>
See accompanying notes
5
<PAGE>
CENTERPOINT BANK
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $5,500 $3,722 $2,665
Interest on securities--taxable 1,021 848 638
Interest on Federal funds sold 172 150 129
Interest on interest-bearing deposits 11 10 1
------------------------------------------------
Total interest income 6,704 4,730 3,433
Interest expense:
Interest on deposits 1,624 1,181 907
Interest on borrowings 388 72 45
------------------------------------------------
Total interest expense 2,012 1,253 952
------------------------------------------------
Net interest income 4,692 3,477 2,481
Provision for loan losses 273 268 250
------------------------------------------------
Net interest income after provision for loan losses 4,419 3,209 2,231
Other income:
Customer service fees 164 163 143
Securities gains (losses) - (1) 124
------------------------------------------------
Total other income 164 162 267
------------------------------------------------
4,583 3,371 2,498
Other expenses:
Salaries and employee benefits 1,478 1,224 1,021
Net occupancy and equipment 517 458 390
Merger costs (Note 15) 219 - -
Other 911 786 722
------------------------------------------------
Total other expenses 3,125 2,468 2,133
------------------------------------------------
Income before income taxes 1,458 903 365
Income taxes (Note 8) 635 125 -
------------------------------------------------
Net income 823 778 365
Dividends on preferred stock - 3 30
------------------------------------------------
Net income available to common stock $ 823 $ 775 $ 335
================================================
Earnings per common and common equivalent share:
Primary $ 1.37 $ 1.32 $ .59
Fully diluted 1.36 1.32 .59
Weighted average number of common and common equivalent shares
outstanding:
Primary 601 587 563
Fully diluted 605 587 563
</TABLE>
See accompanying notes.
6
<PAGE>
CENTERPOINT BANK
STATEMENTS OF SHAREHOLDERSO EQUITY
(Dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Unrealized
Additional Loss on Retained-
Preferred Stock Common Stock Paid-in Available-for- Earnings
-------------------------------------------
Shares Amount Shares Amount Capital Sale Securities (Deficit) Total
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1993 62,581 $63 563,392 $563 $4,912 $(927) $4,611
Dividends on preferred stock--
$.48 per share (30) (30)
Net income 365 365
--------------------------------------------------------------------------------------------------
Balances at December 31, 1993 62,581 63 563,392 563 4,912 (592) 4,946
Adjustment to beginning balance
for change in accounting
method, net of income taxes
of $5 (Note 3) $ (11) (11)
Dividends on preferred stock--
$.04 per share (3) (3)
Preferred stock exchanged for
common stock (Note 11) (26,957) (27) 26,957 27
Redemption of preferred stock
(Note 11) (35,624) (36) (249) (285)
Dividends on common stock--
$.10 per share (59) (59)
Net income 778 778
Change in unrealized loss, net of
income taxes of $210 (337) (337)
--------------------------------------------------------------------------------------------------
Balances at December 31, 1994 0 $ -0- 590,349 590 4,663 (348) 124 5,029
======================
Dividends on common stock--
$.15 per share (89) (89)
Net income 823 823
Change in unrealized loss, net of
income taxes of $132 215 215
-----------------------------------------------------------------------------
Balances at December 31, 1995 590,349 $590 $4,663 $(133) $ 858 $5,978
=============================================================================
</TABLE>
See accompanying notes.
7
<PAGE>
CENTERPOINT BANK
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
-----------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 823 $ 778 $ 365
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses 273 268 250
Depreciation and amortization 198 244 222
Deferred income taxes (24) (93) -
Amortization of investment securities premiums and accretion of
discounts 16 42 78
Securities (gains) losses - 1 (124)
(Increase) decrease in accrued interest receivable (119) (186) 18
Increase in accrued interest payable 51 21 4
Other, net 325 242 139
-----------------------------------------------
Net cash provided by operating activities 1,543 1,317 952
INVESTING ACTIVITIES
Purchases of held-to-maturity securities - (4,940) -
Proceeds from maturities and principal repayments of held-to-maturity securities 1,494 1,020 -
Purchases of available-for-sale securities (2,447) (4,299) -
Proceeds from maturities and principal repayments of available-for-sale
securities 524 4,355 -
Proceeds from sales of available-for-sale securities - 1,149 -
Purchases of investment securities - - (9,710)
Proceeds from maturities and principal repayments of investment
securities - - 7,853
Net increase in loans (18,503) (9,340) (10,030)
Decrease in mortgage loans held for resale 1,275 1,347 933
Purchases of premises and equipment (235) (178) (249)
Other (10) (175) (193)
-----------------------------------------------
Net cash used in investing activities (17,902) (11,061) (11,396)
FINANCING ACTIVITIES
Net increase in deposit accounts 4,205 453 14,063
Net increase (decrease) in certificates of deposit 4,849 8,510 (642)
Net increase (decrease) in short-term borrowings 8,535 (982) 849
Advances from Federal Home Loan Bank of Boston, net 796 100 600
Redemption of preferred stock - (285) -
Dividends on preferred stock - (3) (30)
Dividends on common stock (89) (59) -
Other (54) (55) (49)
-----------------------------------------------
Net cash provided by financing activities 18,242 7,679 14,791
-----------------------------------------------
Increase (decrease) in cash and cash equivalents 1,883 (2,065) 4,347
Cash and cash equivalents at beginning of year 7,218 9,283 4,936
-----------------------------------------------
Cash and cash equivalents at end of year $ 9,101 $ 7,218 $ 9,283
===============================================
</TABLE>
See accompanying notes.
8
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
ORGANIZATION
Centerpoint Bank ("Bank") is a state-chartered trust company incorporated under
the laws of the State of New Hampshire. The Bank provides a full range of
banking services (attracting deposits, making commercial and consumer loans and
making investments in securities) to individuals and corporate customers located
primarily in southern New Hampshire. The Bank is subject to competition from
other financial institutions. The Bank is also subject to the regulations of
certain state and federal agencies and undergoes periodic examination by those
regulatory authorities.
USE OF ESTIMATES
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles and with general practices within the
banking industry. In preparing the financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and income and expenses for the
period. Actual results could differ significantly from these estimates.
FEDERAL HOME LOAN BANK STOCK
Stock in the Federal Home Loan Bank of Boston ("FHLBB") represents stock
purchased under the requirements of the FHLBB. As and when such stock is
redeemed, the Bank will receive an amount equal to the par value of the stock.
The stock is carried at cost.
SECURITIES
Management determines the appropriate classification of debt securities at the
time of purchase and reevaluates such designation as of each balance sheet date.
Debt securities are classified as held-to-maturity when the Bank has the
positive intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost. Debt securities not classified as held-
to-maturity are classified as available-for-sale. Available-for-sale securities
are stated at fair value, with the unrealized gains and losses, net of tax,
reported in a separate component of shareholdersO equity.
The cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity, or in the case of mortgage-backed
securities, over the estimated life of the security. Such amortization is
included in interest income on securities. Realized gains and losses, and
declines in value judged to be other-than-temporary are included in net
securities gains (losses). The cost of securities sold is based on the specific
identification method.
LOANS
Loans generally are stated at their outstanding unpaid principal balances, net
of any deferred fees or costs on originated loans. Interest income is accrued on
the unpaid principal balance. Loan origination fees, net of certain direct
origination costs, are deferred and recognized as an adjustment of the yield
(interest income) of the related loans.
9
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES (CONTINUED)
Nonaccrual loans. Generally, a loan (including a loan impaired under Statement
114) is classified as nonaccrual and the accrual of interest on such loan is
discontinued when the contractual payment of principal or interest has become 90
days past due or management has serious doubts about further collectibility of
principal or interest, even though the loan currently is performing. A loan may
remain on accrual status if it is in the process of collection and is either
guaranteed or well secured. When a loan is placed on nonaccrual status, unpaid
interest credited to income in the current year is reversed and unpaid interest
accrued in prior years is charged against the allowance for loan losses.
Interest received on nonaccrual loans, including impaired loans classified as
nonaccrual, generally is either applied against principal or reported as
interest income, according to management's judgment as to the collectibility of
principal. Generally, loans are restored to accrual status when the obligation
is brought current, has performed in accordance with the contractual terms for a
reasonable period of time and the ultimate collectibility of the total
contractual principal and interest is no longer in doubt.
Allowance for Loan Losses. The allowance for loan losses is established through
provisions for loan losses charged against income. Loans, including impaired
loans, deemed to be uncollectible are charged against the allowance for loan
losses, and subsequent recoveries, if any, are credited to the allowance.
Beginning in 1995, the Bank adopted Financial Accounting Standards Board
("FASB") Statement No. 114, "Accounting by Creditors for Impairment of a Loan."
Impaired loans are commercial, commercial real estate, residential construction
and individually significant residential mortgage and consumer loans for which
it is probable that the Bank will not be able to collect all amounts due
according to the contractual terms of the loan agreement. The definition of
"impaired loans" is not the same as the definition of "nonaccrual loans,"
although the two categories overlap. Generally, a loan, including an impaired
loan, is classified as nonaccrual and the accrual of interest on such loan is
discontinued when the contractual payment of principal or interest has become 90
days past due or management has serious doubts about further collectibility of
principal or interest, even though the loan currently is performing. The Bank
may choose to place a loan on nonaccrual status due to payment delinquency,
while not classifying the loan as impaired, if (i) it is probable that the Bank
will collect all amounts due in accordance with the contractual terms of the
loan or (ii) the loan is not a commercial, commercial real estate, residential
construction or an individually significant residential mortgage or consumer
loan. In addition, the Bank may classify a loan as impaired, even though it is
still accruing, if the Bank does not have serious doubts about the
collectibility of principal or interest but believes that the repayment of the
loan will only be made through the Bank's foreclosure on the collateral. Factors
considered by management in determining impairment include payment status and
collateral value. Under the new standard, 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 loan. When foreclosure is
probable, impairment is measured based on the fair value of the collateral.
Residential mortgage and consumer loans that are not individually significant
are measured for impairment collectively. Loans that experience insignificant
payment delays and insignificant shortfalls in payment amounts generally are not
classified as impaired. Management determines the significance of payment delays
and payment shortfalls on a case-by-case basis, taking into consideration all of
the circumstances surrounding the loan and the borrower, including the length of
the delay, the reasons for the delay, the borrower's prior payment record, and
the amount of the shortfall in relation to the principal and interest owed.
10
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Prior to 1995, the amount of impairment on commercial, commercial real estate,
residential construction and individually significant residential mortgage and
consumer loans was based on undiscounted cash flows or the fair value of the
collateral for collateral-dependent loans. Adoption of the new standard had no
material impact on the Bank's financial position or results of operations.
The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated probable loan losses. Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's past loan
loss experience, known and inherent risks in the portfolio, adverse situations
that may affect the borrower's ability to repay (including the timing of future
payments), the estimated value of any underlying collateral, composition of the
loan portfolio, current economic conditions, and other relevant factors. This
evaluation is inherently subjective as it requires material estimates, including
the amounts and timing of future cash flows expected to be received on impaired
loans, that may be susceptible to significant change.
MORTGAGE LOANS HELD FOR RESALE
Mortgage loans held for resale are recorded at the lower of cost or market value
determined on an aggregate basis.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, less accumulated depreciation and
amortization. The provision for depreciation and amortization is generally
computed by the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over their estimated useful lives
or the lives of the respective leases, whichever is less.
INCOME TAXES
Deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Primary earnings per common and common equivalent share and fully diluted
earnings per common and common equivalent share are computed using the weighted
average number of shares outstanding adjusted for the incremental shares
attributed to outstanding options to purchase common stock.
CASH FLOW INFORMATION
For purposes of the statement of cash flows, the Bank considers cash and due
from banks and federal funds as cash and cash equivalents. Cash paid during the
years ended December 31, 1995, 1994 and 1993 for interest was $1,574,000,
$1,232,000 and $949,000, respectively. Cash paid during the year ended December
31, 1995 for income taxes was $390,000. No cash was paid for income taxes prior
to 1995.
2. RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The Bank is required to maintain average balances with the Federal Reserve Bank.
The average amount of those reserve balances for the year ended December 31,
1995 was approximately $669,000.
11
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SECURITIES
In May 1993, the Financial Accounting Standards Board issued Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The Bank
adopted the provisions of the new standard for investments held as of or
acquired after January 1, 1994. In accordance with the Statement, prior period
financial statements have not been restated to reflect the change in accounting
principle. The opening balance of shareholders' equity was decreased by $11,000
(net of $5,000 in deferred income taxes) to reflect the net unrealized
depreciation on securities classified as available-for-sale previously carried
at amortized cost.
On November 15, 1995, the FASB staff issued a Special Report, A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities. In accordance with provisions in that Special Report, the
Bank chose to reclassify certain securities from held-to-maturity to available-
for-sale. At the date of transfer, the amortized cost of those securities was
$6,878,291 and the unrealized loss on those securities was $164,942, which is
included in shareholders' equity.
The following is a summary of held-to-maturity securities and available-for-sale
securities at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
December 31, 95
--------------------------------------------------------------------------------
Held-to-Maturity Securities
--------------------------------------------------------------------------------
Gross Gross
Amortized Unrealize Unrealize Estimated
Cost Gains Losses Fair Value
--------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
Government agencies $ 3,996 $11 $ -- $ 4,007
--------------------------------------------------------------------------------
$ 3,996 $11 $ -- $ 4,007
================================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
--------------------------------------------------------------------------------
Held-to-Maturity Securities
--------------------------------------------------------------------------------
Gross Gross
Amortized Unrealize Unrealize Estimated
Cost Gains Losses Fair Value
--------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
Government agencies $ 4,954 $ -- $ 85 $ 4,869
Mortgage-backed securities 7,445 -- 804 6,641
--------------------------------------------------------------------------------
$12,399 $ -- $889 $11,510
================================================================================
</TABLE>
12
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SECURITIES (CONTINUED)
During 1994, available-for-sale securities with an estimated fair value of
$5,156,058 were transferred to held-to-maturity securities. Amortized cost of
held-to-maturity securities at December 31, 1994 does not reflect unrealized
holding losses of $218,910 that existed at the date of the transfer. During
1995, these same securities were transferred back to available-for-sale
securities under the provisions of the FASB Special Report discussed above.
<TABLE>
<CAPTION>
December 31, 95
------------------------------------------------------------------------
Available-for-Sale Securities
------------------------------------------------------------------------
Gross Gross
Amortized Unrealize Unrealize Estimated
Cost Gains Losses Fair Value
------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
Government agencies $ 3,000 $ 3 $ 2 $ 3,001
Corporate securities 1,256 - 26 1,230
Mortgage-backed securities 9,116 9 199 8,926
Other securities 113 - - 113
------------------------------------------------------------------------
$13,485 $12 $227 $13,270
========================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 94
------------------------------------------------------------------------
Available-for-Sale Securities
------------------------------------------------------------------------
Gross Gross
Amortized Unrealize Unrealize Estimated
Cost Gains Losses Fair Value
------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S.
Government agencies $ 995 - $ 40 $ 955
Corporate securities 1,257 - 131 1,126
Mortgage-backed securities 2,738 $ 1 174 2,565
Other securities 107 - - 107
------------------------------------------------------------------------
$ 5,097 $ 1 $345 $ 4,753
========================================================================
</TABLE>
During the years ended December 31, 1995, 1994 and 1993, debt securities (for
1995 and 1994, securities classified as available-for-sale) with a fair value at
the date of sale of $-0-, $1,148,591 and $3,899,063, respectively, were sold.
The gross realized gains on such sales totaled $-0-, $6,255 and $123,847,
respectively, and the gross realized losses totaled $-0-, $7,170 and $-0-,
respectively. The net adjustment to unrealized holding gains (losses) on
available-for-sale securities included as a separate component of shareholders'
equity totaled $215,000 and $(337,000), respectively, in 1995 and 1994.
13
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. SECURITIES (CONTINUED)
The amortized cost and estimated fair value of debt securities at December 31,
1995 and 1994, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because the issuers of the securities may
have the right to prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>
December 31
1995 1994
------------------------------------------------------
Amortized Estimated Amortized Estimated
Cost Fair Value Cost Fair Value
------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
HELD-TO-MATURITY SECURITIES
Due in one year or less $ 3,996 $ 4,007 $ 984 $ 976
Due after one year through five years -- -- 3,970 3,893
------------------------------------------------------
3,996 4,007 4,954 4,869
Mortgage-backed securities -- -- 7,445 6,641
------------------------------------------------------
$ 3,996 $ 4,007 $12,399 $11,510
======================================================
AVAILABLE-FOR-SALE SECURITIES
Due in one year or less $ 3,116 $ 3,097 $ 107 $ 107
Due after one year through five years 1,000 994 1,676 1,636
Due after five years through ten years 253 253 576 445
------------------------------------------------------
4,369 4,344 2,359 2,188
Mortgage-backed securities 9,116 8,926 2,738 2,565
------------------------------------------------------
$13,485 $13,270 $ 5,097 $ 4,753
======================================================
</TABLE>
At December 31, 1995 and 1994, investment securities with a book value of
$13,326,000 and $4,440,000, respectively, were pledged as collateral to secure
securities sold under agreements to repurchase (which are short-term borrowings
with maturities of one day) and for other purposes.
4. LOANS
Loans consist of the following:
<TABLE>
<CAPTION>
December 31
1995 1994
-----------------------------
(In thousands)
<S> <C> <C>
Commercial $21,321 $15,408
Real estate:
Commercial 24,365 17,675
Residential 1,722 1,356
Residential construction 4,749 2,966
Installment 5,498 2,991
Home equity and other 2,723 1,479
-----------------------------
$60,378 $41,875
=============================
</TABLE>
14
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
-----------------------------------
(In thousands)
<S> <C> <C> <C>
Balance at beginning of $422 $329 $277
Provision for loan loss 273 268 250
Recoveries 53 32 44
Charge-offs (88) (207) (242)
-----------------------------------
Balance at end of year $660 $422 $329
===================================
</TABLE>
At December 31, 1995, the recorded investment in loans that are considered to be
impaired under Statement 114 was $293,000 (of which $204,000 was on a nonaccrual
basis), for which the related allowance for loan losses is $188,000 which is
exclusive of a partial guaranty by the Small Business Administration of $80,000.
All of the Bank's impaired loans are collateralized and, therefore, all impaired
loans are measured by the difference between the fair value of the collateral
and the recorded amount of the loan. The average recorded investment in impaired
loans during the year ended December 31, 1995 was approximately $283,000. For
the year ended December 31, 1995, the Bank recognized interest income on those
impaired loans of $17,000, which included $8,000 of interest income recognized
using the cash basis method of income recognition.
6. PREMISES AND EQUIPMENT
The following is a summary of premises and equipment:
<TABLE>
<CAPTION>
December 31
1995 1994
-----------------------------
(In thousands)
<S> <C> <C>
Leasehold improvements $ 413 $ 363
Furniture and equipment 1,091 914
-----------------------------
1,504 1,277
Less accumulated depreciation and amortization 813 637
-----------------------------
$ 691 $ 640
=============================
</TABLE>
15
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. DEPOSITS
Deposits consist of the following:
<TABLE>
<CAPTION>
December 31
1995 1994
-------------------------------
(In thousands)
<S> <C> <C>
Demand $21,403 $16,619
Savings:
Regular savings 13,552 14,616
NOW accounts 9,822 8,015
Money-market accounts 3,084 4,406
Time certificates of deposits 22,038 17,189
-------------------------------
$69,899 $60,845
===============================
</TABLE>
Time deposits with a minimum balance of $100,000 at December 31, 1995 and 1994
totaled approximately $5,529,000 and $3,712,000, respectively.
8. INCOME TAXES
Significant components of the provision for income taxes are as follow:
<TABLE>
<CAPTION>
Year ended December 31
1995 1994
-------------------------------
(In thousands)
<S> <C> <C>
Current:
Federal $567 $200
State 92 18
-------------------------------
659 218
Deferred:
Federal (20) (77)
State (4) (16)
-------------------------------
(24) (93)
-------------------------------
$635 $125
===============================
</TABLE>
16
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. INCOME TAXES
A reconciliation of income taxes attributable to continuing operations computed
at the U.S. federal statutory rate to income tax expense is as follows:
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
------------------------------
(In thousands)
<S> <C> <C> <C>
Federal income tax at statutory rate $496 $307 $124
Effect of:
Change in Statement 109 valuation allowance - (183) (125)
State taxes, net of federal benefit 58 1 -
Non-deductible merger costs 75 - -
Other 6 - 1
------------------------------
$635 $125 $ -
==============================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Bank's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 31
1995 1994
------------------------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Unrealized loss on available-for-sale securities $ 82 $215
Allowance for loan losses 204 119
Accrued book expenses 156 140
Other - net 19 30
------------------------
Total deferred tax assets 461 504
Deferred tax liabilities:
Accrued book income 203 160
Tax over book depreciation 20 -
Other - net 38 36
------------------------
Total deferred tax liabilities 261 196
------------------------
Net $200 $308
========================
</TABLE>
A valuation allowance against deferred tax assets is required if, based on the
weight of available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized. The Bank believed that some
uncertainty existed with respect to future realization and established a
valuation allowance of $308,721 as of January 1, 1993. The valuation allowance
was reduced by $125,484 during 1993 as a result of a reduction in total deferred
tax assets. The valuation allowance was fully eliminated during 1994 as it
became evident that it was more likely than not that all of the deferred tax
assets would be realized.
17
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. ADVANCES FROM FEDERAL HOME LOAN BANK OF BOSTON
Advances from the Federal Home Loan Bank of Boston ("FHLBB") consist of the
following:
<TABLE>
<CAPTION>
December 31
1995 1994
-----------------------
(In thousands)
<S> <C> <C>
4.73%, due August 1996 $ 300 $300
4.64%, due September 1996 300 300
5.87%, due September 1998 800 -
3.75%, $595 principal and interest payable 96 100
maturing September through December 2014
-----------------------
$1,496 $700
=======================
</TABLE>
Advances received from the FHLBB are collateralized with FHLBB stock owned by
the Bank and with certain commercial real estate loans. The Bank paid $48,261
and $29,073 in interest on advances from the FHLBB during the years ended
December 31, 1995 and 1994, respectively.
10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
AND CONCENTRATIONS OF CREDIT RISK
The Bank is a party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby
letters of credit. These financial instruments involve, to varying degrees,
elements of credit risk in excess of the amount recognized in the balance sheet.
The Bank's exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit written is represented by the contractual notional amount of
those instruments. The Bank generally requires collateral to support such
financial instruments in excess of the contractual notional amount of those
instruments and, therefore, is in a fully secured position. The Bank uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments.
The Bank has outstanding loan commitments/lines of credit and standby letters of
credit aggregating $21,681,127 and $1,260,655, respectively, at December 31,
1995, and $17,395,496 and $826,000, respectively, at December 31, 1994.
18
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
AND CONCENTRATIONS OF CREDIT RISK (CONTINUED)
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on managementOs
credit evaluation of the counter-party. Collateral held varies but may include
certificates-of-deposit, accounts receivable, inventory, property, plant, and
equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing, and similar transactions. Letters of credit
expire within one year of issuance. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loan facilities
to customers. The Bank holds collateral supporting those commitments for which
collateral is deemed necessary.
The Bank originates commercial, real estate and consumer loans to customers
throughout New Hampshire. The Bank estimates that most of its loans are based in
New Hampshire, with less than 4% of total loans based out-of-state. There are no
other significant concentrations of credit risk.
11. SHAREHOLDERS' EQUITY
PREFERRED STOCK
In December 1993, the board of directors of the Bank, in accordance with the
original terms of a Preferred Stock issuance in September 1992, voted to offer
to holders of shares of Preferred Stock the option to either redeem their
preferred shares at a per share price of $8.00 or exchange their preferred
shares at the rate of one share of the Bank's Common Stock for each share of
Preferred Stock. During 1994, 35,624 preferred shares were redeemed and 26,957
preferred shares were exchanged for Common Stock.
STOCK OPTION PLAN
The Centerpoint Bank 1989 Stock Option Plan provides for the granting of options
to key employees, officers and directors. The Plan has a term of 10 years, and a
total of 120,000 shares of Common Stock are reserved for issuance under the
Plan.
It is intended that certain options granted under the Plan will qualify as
incentive stock options (an "ISO") under Section 422 of the Internal Revenue
Code, and other options granted thereunder will be nonstatutory stock options.
ISO's are eligible for favored tax treatment pursuant to the Code, while
nonstatutory stock options do not qualify for such favored tax treatment. The
Plan provides authority for the grant of stock appreciation rights in addition
to nonstatutory stock options, alternative stock appreciation rights in
conjunction with nonstatutory stock options or ISO's and the grant of stock
appreciation rights without related stock options. Stock appreciation rights
permit the holder of such rights to receive cash, Common Stock, or a combination
of cash and Common Stock having a fair market value equal in amount to the
increase in the fair market value of the Common Stock subject to the right,
measured from the date the right was granted to the date on which the stock
appreciation right is exercised.
19
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. SHAREHOLDERS' EQUITY (CONTINUED)
The price at which stock options or stock appreciation rights may be exercised
under the Plan is determined by the stock option committee of the Board of
Directors, but in the case of ISO's may not be less than 100% of the fair market
value of the Common Stock on the date of grant. In the case of nonstatutory
stock options and stock appreciation rights unrelated to ISO's, the exercise
price may not be less than 100% of the fair market value of the Common Stock on
the date of grant. Each option granted under the Plan must be exercised within a
period fixed by the stock option committee; however, the period may not exceed
ten years from the date of grant and no stock option or stock appreciation right
may be exercised during the first six months of its term.
Changes in the status of stock options are summarized as follows:
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
-----------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 77,500 70,000 70,000
Granted - 7,500 -
Canceled - - -
Exercised - - -
-----------------------------------
Outstanding at end of year 77,500 77,500 70,000
===================================
Exercisable at end of year 72,500 60,000 47,500
Price of options outstandin $10.00 $10.00 $10.00
</TABLE>
12. COMMITMENTS
The Bank has lease agreements for its main and branch offices, operations center
and certain equipment for terms ranging from three to fifteen years. The main
and branch offices and operations center leases are classified as operating
leases, while the equipment lease was classified as a capital lease.
Premises and equipment included the following amounts at December 31, 1994 for
the equipment lease that had been capitalized (in thousands):
<TABLE>
<S> <C>
Equipment $256
Less accumulated amortization (235)
-----------
$ 21
===========
</TABLE>
Amortization of equipment under the capital lease, computed by the straight-line
method over the term of the lease, was included in depreciation and amortization
expense.
20
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS (CONTINUED)
Future minimum payments, by year and in the aggregate, under noncancelable
operating leases with initial or remaining terms of one year or more consist of
the following at December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996 $174,107
1997 174,432
1998 142,420
1999 115,706
2000 90,378
Thereafter 264,204
------------
Total minimum lease payments $961,247
============
</TABLE>
Rent expense for all operating leases was $154,000, $139,000 and $115,000 during
the years ended December 31, 1995, 1994 and 1993, respectively.
During 1995, the Bank executed a lease agreement for a proposed new branch bank.
The lease, which does not take effect until the Bank receives appropriate
regulatory approvals, has an initial term of five years with initial annual
lease payments of $30,000.
13. LOANS TO RELATED PARTIES
Certain directors of the Bank, including their immediate families and companies
in which they are principal owners, are loan customers of the Bank. Such loans
were made in the ordinary course of business at the BankOs normal credit terms,
including interest rates and collateral, and do not represent more than a normal
risk of collection. Such loans amounted to $339,236 and $287,593 at December 31,
1995 and 1994, respectively. During 1995, $176,309 of new loans or advances were
made and repayments totaled $124,666.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, Disclosures about Fair
Value of Financial Instruments, requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate that value. In cases where quoted market
prices are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected by
the assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Bank.
The following methods and assumptions were used by the Bank in estimating its
fair value disclosures for financial instruments:
21
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
CASH AND CASH EQUIVALENTS: The carrying amounts reported in the balance sheet
for cash and cash equivalents approximate those assets' fair values.
SECURITIES: Fair values for securities are based on quoted market prices, where
available. If quoted market prices are not available, fair values are based on
quoted market prices of comparable instruments.
LOANS: Fair values are estimated for portfolios of loans with similar financial
characteristics, segregated by type such as commercial, real estate and
installment loans. For variable-rate loans that reprice frequently with no
significant change in credit risk, fair values are based on carrying values. The
fair values for other loans are estimated using a discounted cash flow
calculation that applies a discount rate, based upon the loan's terms, structure
of interest, credit quality factors, and prepayment risk inherent in the
portfolio, to a schedule of aggregated expected monthly maturities on loans.
ACCRUED INTEREST RECEIVABLE: The carrying amount of accrued interest receivable
approximates fair value.
DEPOSITS: The fair values for demand deposits, NOW accounts, regular savings,
and money-market accounts are, by definition, equal to the amount payable on
demand at the reporting date (i.e., their carrying amounts). Fair values for
fixed-rate time certificates of deposit are estimated using a discount rate
based upon the certificate's terms, structure of interest and withdrawal risk to
a schedule of aggregated expected monthly maturities on time deposits.
For deposits with no stated maturities, Statement 107 defines fair value as the
amount payable on demand. Statement 107 defines the fair value of demand
deposits as the amount payable on demand, and prohibits adjusting fair value for
any value derived from retaining those deposits for an expected future period of
time. That component, commonly referred to as a deposit base intangible, is
estimated to be approximately $675,000 at December 31, 1995 and is neither
considered in the fair value amounts nor is it recorded as an intangible asset
in the balance sheet.
SHORT-TERM BORROWINGS: The carrying amounts of borrowings under repurchase
agreements approximate their fair values.
LONG-TERM BORROWINGS: The fair values of the Bank's advances from Federal Home
Loan Bank of Boston are estimated using discounted cash flow analyses, based on
the Bank's current incremental borrowing rates for similar types of borrowing
arrangements.
22
<PAGE>
CENTERPOINT BANK
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following presents the carrying value and fair value of the Bank's financial
instruments at December 31, 1995:
<TABLE>
<CAPTION>
Carrying Value Fair Value
---------------------------------------
<S> <C> <C>
Financial Assets:
Cash and cash equivalents $ 9,101 $ 9,101
Securities 17,874 17,885
Net loans 59,659 60,833
Accrued interest receivable 523 523
Financial Liabilities:
Deposits (with no stated maturity) 47,861 47,861
Time deposits 22,038 22,091
Short-term borrowings 9,906 9,906
Long-term borrowings 1,496 1,569
</TABLE>
15. ACQUISITION AGREEMENT
On August 29, 1995, the Bank entered into a definitive merger agreement to be
acquired by Community Bankshares, Inc. ("Community"). Upon consummation of the
merger, each outstanding share of the Bank's common stock will be converted into
and exchanged for 1.073 shares of Community common stock. The merger,
anticipated to be accounted for as a pooling-of-interests, is subject to
shareholder and regulatory approval.
Concurrent with the execution of the merger agreement, the Bank and Community
entered into a Stock Option Agreement pursuant to which the Bank granted an
option to Community to purchase up to 165,920 shares of the Bank's common stock,
under certain conditions, at a price of $12.00 per share.
Subsequent to December 31, 1995, the shareholders of both the Bank and Community
voted to approve the merger.
23
<PAGE>
EXHIBIT 23 (A)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Community Bankshares, Inc.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-53678, 33-18853, 33-44264 and 333-02157) on Form S-8 and (No. 33-87956)
on Form S-3 of our report dated March 20, 1996, relating to the supplemental
consolidated balance sheets of Community Bankshares, Inc. and subsidiaries (the
Company) as of December 31, 1995 and June 30, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the six months ended December 31, 1995 and for each year in the three
year period ended June 30, 1995, which appears in the Current Report on Form
8-K/A of Community Bankshares, Inc. dated March 20, 1996. Our report indicates
that the Company adopted Statements of Financial Accounting Standards No. 122
effective July 1, 1994.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
May 20, 1996
24
<PAGE>
EXHIBIT 23 (B)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-53678, 33-18853, 33-44264 and 333-02157) on Form S-8 and (No. 33-
87956) on Form S-3 of Community Bankshares, Inc. of our report dated February 1,
1996, with respect to the financial statements of Centerpoint Bank as of
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995, incorporated by reference in this Current Report (Form 8-K)
of Community Bankshares, Inc.
ERNST & YOUNG LLP
Manchester, New Hampshire
May 28, 1996
25
<PAGE>
EXHIBIT 99 (A)
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Community Bankshares, Inc.:
We have audited the accompanying supplemental consolidated balance sheets
of Community Bankshares, Inc. and subsidiaries as of December 31, 1995 and June
30, 1995 and 1994, and the related supplemental consolidated statements of
income, changes in stockholders' equity and cash flows for the six months ended
December 31, 1995 and for each of the years in the three-year period ended June
30, 1995. These supplemental consolidated financial statements are the
responsibility of Community's management. Our responsibility is to express an
opinion on these supplemental consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The supplemental consolidated financial statements give retroactive effect
to the merger of Community Bankshares, Inc. and Centerpoint Bank on March 20,
1996, which has been accounted for as a pooling-of-interests as described in
Note 17 to the supplemental consolidated financial statements. Generally
accepted accounting principles proscribe giving effect to a consummated business
combination accounted for by the pooling-of-interests method in financial
statements that do not include the date of consummation. These financial
statements do not extend through the date of consummation. However, they will
become the historical consolidated financial statements of Community Bankshares,
Inc. and subsidiaries after financial statements covering the date of
consummation of the business combination are issued.
In our opinion, the supplemental consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Community Bankshares, Inc. and subsidiaries at December 31, 1995 and June 30,
1995 and 1994, and the results of their operations and their cash flows for the
six months ended December 31, 1995 and each of the years in the three-year
period ended June 30, 1995, in conformity with generally accepted accounting
principles applicable after financial statements are issued for a period which
includes the date of consummation of the business combination.
As explained in Note 1 of Notes to Consolidated Financial Statements,
effective July 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 122, "Accounting for Mortgage Servicing Rights, an Amendment of
FASB Statement No. 65."
KPMG PEAT MARWICK LLP
Boston, Massachusetts
March 20, 1996
26
<PAGE>
EXHIBIT 99(B)
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31 YEARS ENDED JUNE 30,
---------------------
1995 1995 1994 1993
------- ------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans (Note 3)........................................ $ 15,322 $ 26,086 $ 21,489 $ 21,957
Securities available for sale......................... 2,203 4,441 4,832 --
Securities held for sale.............................. -- -- -- 761
Securities held to maturity........................... 1,939 2,921 422 4,605
Dividends on Federal Home Loan Bank stock............. 137 202 165 181
Deposits in other banks............................... 203 223 296 192
---------- --------- --------- ---------
Total interest and dividend income............... 19,804 33,873 27,204 27,696
---------- --------- --------- ---------
Interest expense:
Deposits.............................................. 7,657 12,904 11,262 12,446
Borrowed funds........................................ 2,399 2,914 506 490
---------- --------- --------- ---------
Total interest expense........................... 10,056 15,818 11,768 12,936
---------- --------- --------- ---------
Net interest and dividend income............................ 9,748 18,055 15,436 14,760
Provision for possible loan losses (Note 4)................. 498 777 925 2,351
---------- --------- --------- ---------
Net interest and dividend income after
provision for possible loan losses............ 9,250 17,278 14,511 12,409
---------- --------- --------- ---------
Non-interest income:
Deposit account fees................................... 342 618 469 410
Gains on sales of investment securities, net
(Note 2)............................................ 228 148 524 977
Gains on sales of loans, net (Note 1).................. 456 501 1,089 927
Mortgage servicing income.............................. 334 522 476 341
Other ........................................ 225 412 260 376
---------- --------- --------- ---------
Total non-interest income......................... 1,585 2,201 2,818 3,031
---------- --------- --------- ---------
Non-interest expense:
Salaries and employee benefits (Note 12)............... 3,673 6,763 6,141 5,207
Occupancy and equipment................................ 1,115 1,963 1,735 1,602
Foreclosed property (Note 6)........................... 156 146 67 1,875
FDIC deposit insurance premiums........................ 14 806 814 750
Marketing.............................................. 260 353 348 251
Acquisition costs (Note 17)............................ 669 -- -- --
Other ........................................ 1,910 3,411 3,706 3,295
---------- --------- --------- ---------
Total non-interest expense........................ 7,797 13,442 12,811 12,980
---------- --------- --------- ---------
Income before income taxes.................................. 3,038 6,037 4,518 2,460
Income tax expense (Note 11)................................ 1,264 1,862 897 --
---------- --------- --------- ---------
Net income............................................. 1,774 4,175 3,621 2,460
Dividends on preferred stock ............................... -- -- 19 24
---------- --------- --------- ---------
Net income available to common stock.................. $ 1,774 $ 4,175 $ 3,602 $ 2,436
========== ========= ========= =========
Earnings per common and common equivalent share........ $ 0.73 $ 1.70 $ 1.49 $ 1.09
Average number of common and common
equivalent shares outstanding........................ 2,434 2,458 2,424 2,240
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
27
<PAGE>
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------
1995 1995 1994
--------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
Assets
Cash and due from banks (Note 13)..................................................... $ 19,226 $ 17,368 $ 12,165
Interest-bearing deposits in other banks.............................................. 11,967 13,981 3,235
--------- --------- ---------
Total cash and cash equivalents........................................... 31,193 31,349 15,400
--------- --------- ---------
Securities available for sale--amortized cost $66,467 at December 31, 1995, $63,129 at
June 30, 1995 and $70,588 at June 30, 1994 (Notes 2, 8 and 9)....................... 67,411 63,568 69,922
Securities held to maturity--fair value $47,760 at December 31, 1995, $65,322 at
June 30, 1995 and $40,152 at June 30, 1994 (Notes 2, 8 and 9)....................... 47,525 65,397 41,324
Federal Home Loan Bank stock, at cost (Notes 2 and 9)................................. 4,411 4,009 2,040
Mortgage loans held for sale (Note 3)................................................. 2,940 4,635 6,106
Loans (Notes 3 and 9)................................................................. 327,014 321,933 260,855
Allowance for possible loan losses (Note 4)........................................... (3,667) (3,524) (3,772)
--------- --------- ---------
Net loans................................................................. 323,347 318,409 257,083
--------- --------- ---------
Premises and equipment (Note 5)....................................................... 8,938 8,140 7,771
Real estate acquired by foreclosure (Note 6).......................................... 566 1,134 836
Due from broker from security sale ................................................... 1,710 --
Accrued interest receivable........................................................... 3,724 3,540 2,812
Other assets (Notes 6 and 11)......................................................... 6,238 6,843 3,968
--------- --------- ---------
Total assets.............................................................. $ 498,003 $ 507,024 $ 407,262
========= ========= =========
Liabilities and Stockholders' Equity
Liabilities:
Deposits (Note 7):
Non-interest bearing demand.................................................. $ 39,969 $ 37,829 $ 30,228
Savings...................................................................... 137,835 138,620 160,690
Time certificates............................................................ 207,633 196,735 155,471
--------- --------- ---------
Total deposits............................................................ 385,437 373,184 346,389
Borrowed funds (Notes 8 and 9)................................................. 70,936 93,021 25,986
Liability relating to ESOP (Note 12)........................................... 118 197 355
Accrued interest payable....................................................... 1,517 1,229 719
Other liabilities.............................................................. 3,227 4,418 2,595
--------- --------- ---------
Total liabilities......................................................... 461,235 472,049 376,044
--------- --------- ---------
Commitments and contingencies (Notes 5, 12 and 13)
Stockholders' equity (Notes 10, 11 and 12):
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; issued and
outstanding 2,382,849 at December 31, 1995, 2,380,476 at June 30, 1995 and
2,376,869 at June 30, 1994................................................. 2,383 2,380 2,377
Additional paid-in capital..................................................... 21,784 21,766 21,962
Retained earnings.............................................................. 12,299 11,068 7,870
--------- --------- ---------
36,466 35,214 32,209
Unrealized net gains (losses) on securities available for sale, net (Note 2)... 578 151 (636)
Unearned compensation expense--ESOP (Note 12).................................. (118) (197) (355)
Treasury stock (at cost)--9,655 shares at December 31, 1995
and 11,810 at June 30, 1995.................................................. (158) (193) --
--------- --------- ---------
Total stockholders' equity................................................ 36,768 34,975 31,218
--------- --------- ---------
Total liabilities and stockholders' equity................................ $ 498,003 $ 507,024 $ 407,262
========= ========= =========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
28
<PAGE>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
UNREALIZED NET
GAINS (LOSSES)
ADDITIONAL ON SECURITIES
PREFERRED COMMON PAID-IN RETAINED AVAILABLE FOR
STOCK STOCK CAPITAL EARNINGS SALE, NET
----- ----- ------- --------- ---------
(DOLLAR IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1992....................... $ -- $ 2,186 $ 20,950 $ 2,240 $ --
Net income..................................... -- -- -- 2,460 --
Amortization of unearned
compensation--ESOP........................... -- -- -- -- --
Issuance of preferred stock.................... 63 -- 438 -- --
Issuance of common stock....................... -- 125 774 -- --
Issuance of common stock through
stock option plans (Note 12)................ -- 3 (124) -- --
Issuance of common stock through
employee stock purchase plan
(Note 12).................................... -- 4 8 -- --
Cash dividends on preferred stock.............. -- -- -- (24) --
------ -------- --------- -------- -------
Balances at June 30, 1993....................... 63 2,318 22,046 4,676 --
Net income..................................... -- -- -- 3,621 --
Amortization of unearned
compensation--ESOP........................... -- -- -- -- --
Preferred stock exchanged for
common stock................................. (27) 27 -- -- --
Redemption of preferred stock.................. (36) -- (250) -- --
Issuance of common stock through
stock option plans (Note 12)................. -- 28 141 -- --
Issuance of common stock through
employee stock purchase plan
(Note 12).................................... -- 4 25 -- --
Cash dividends on preferred stock.............. -- -- -- (19) --
Cash dividends on common stock................. -- -- -- (408) --
Change in unrealized net gains
(losses) on securities available for
sale, net.................................... -- -- -- -- (636)
------ -------- --------- -------- -------
Balances at June 30, 1994....................... -- 2,377 21,962 7,870 (636)
Net income..................................... -- -- -- 4,175 --
Amortization of unearned
compensation--ESOP........................... -- -- -- -- --
Issuance of common stock through
stock option plans (Note 12)................. -- 3 (193) -- --
Issuance of common stock through
employee stock purchase plan
(Note 12).................................... -- -- (4) -- --
Purchase of 42,500 shares of
treasury stock............................... -- -- -- -- --
Redemption of preferred stock.................. -- -- 1 -- --
Cash dividends on common stock................. -- -- -- (977) --
Change in unrealized net gains
(losses) on securities available for
sale, net.................................... -- -- -- -- 787
------ -------- --------- -------- -------
Balances at June 30, 1995....................... -- 2,380 21,766 11,068 151
Net income..................................... -- -- -- 1,774 --
Amortization of unearned
compensation--ESOP........................... -- -- -- -- --
Issuance of common stock through
stock option plans (Note 12)................. -- 3 21 -- --
Issuance of common stock through
employee stock purchase plan
(Note 12).................................... -- -- (3) -- --
Cash dividends on common stock................. -- -- -- (543) --
Change in unrealized net gains
(losses) on securities available for
sale, net.................................... -- -- -- -- 427
------ -------- --------- -------- -------
Balances at December 31, 1995................... $ -- $ 2,383 $ 21,784 $ 12,299 $ 578
====== ======== ========= ======== =======
<CAPTION>
UNEARNED
COMPENSATION
EXPENSE TREASURY
ESOP STOCK TOTAL
----- ----- --------
<S> <C> <C> <C>
Balances at June 30, 1992....................... $ (670) $ (174) $ 24,532
Net income..................................... -- -- 2,460
Amortization of unearned
compensation--ESOP........................... 157 -- 157
Issuance of preferred stock.................... -- -- 501
Issuance of common stock....................... -- -- 899
Issuance of common stock through
stock option plans (Note 12)................. -- 174 53
Issuance of common stock through
employee stock purchase plan
(Note 12).................................... -- -- 12
Cash dividends on preferred stock.............. -- -- (24)
------- -------- ---------
Balances at June 30, 1993....................... (513) -- 28,590
Net income..................................... -- -- 3,621
Amortization of unearned
compensation--ESOP........................... 158 -- 158
Preferred stock exchanged for
common stock................................. -- -- --
Redemption of preferred stock.................. -- -- (286)
Issuance of common stock through
stock option plans (Note 12)................. -- -- 169
Issuance of common stock through
employee stock purchase plan
(Note 12).................................... -- -- 29
Cash dividends on preferred stock.............. -- -- (19)
Cash dividends on common stock................. -- -- (408)
Change in unrealized net gains
(losses) on securities available for
sale, net.................................... -- -- (636)
------- -------- ---------
Balances at June 30, 1994....................... (355) -- 31,218
Net income..................................... -- -- 4,175
Amortization of unearned
compensation--ESOP........................... 158 -- 158
Issuance of common stock through
stock option plans (Note 12)................. -- 407 217
Issuance of common stock through
employee stock purchase plan
(Note 12).................................... -- 27 23
Purchase of 42,500 shares of
treasury stock............................... -- (627) (627)
Redemption of preferred stock.................. -- -- 1
Cash dividends on common stock................. -- -- (977)
Change in unrealized net gains
(losses) on securities available for
sale, net.................................... -- -- 787
------- -------- ---------
Balances at June 30, 1995....................... (197) (193) 34,975
Net income..................................... -- -- 1,774
Amortization of unearned
compensation--ESOP........................... 79 -- 79
Issuance of common stock through
stock option plans (Note 12)................. -- -- 24
Issuance of common stock through
employee stock purchase plan
(Note 12).................................... -- 35 32
Cash dividends on common stock................. -- -- (543)
Change in unrealized net gains
(losses) on securities available for
sale, net.................................... -- -- 427
------- -------- ---------
Balances at December 31, 1995................... $ (118) $ (158) $ 36,768
======= ======== =========
</TABLE>
See accompanying notes to supplemental financial statements.
29
<PAGE>
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED JUNE 30,
DECEMBER 31, ------------------------------------
1995 1995 1994 1993
---------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 1,774 $ 4,175 $ 3,621 $ 2,460
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for possible loan losses................ 498 777 925 2,351
Depreciation and amortization..................... 829 1,422 1,393 1,240
Gains on sales of investment
securities, net................................. (228) (148) (411) (977)
(Gain) loss on sales of premises
and equipment................................... -- -- 26 (61)
Net (gains) losses on sales and loss provisions
on real estate acquired by foreclosure......... 51 (51) (130) 1,323
Mortgage loans originated for sale................ (25,593) (28,655) (112,813) (85,742)
Mortgage loans sold............................... 27,288 30,126 120,332 75,959
(Increase) decrease in other assets............... 219 (3,410) 1,736 (2,473)
Increase (decrease) in other liabilities.......... (921) 2,311 (2,890) (3,246)
--------- -------- --------- --------
Net cash provided by (used in) operating
activities..................................... 3,917 6,547 11,789 (9,166)
--------- -------- --------- --------
Cash flows from investing activities:
Proceeds from sales of securities held
to maturity........................................ -- -- -- 1,958
Proceeds from sales of securities available for sale
and held for sale................................. 13,917 20,925 12,556 17,864
Proceeds from maturities and principal payments of
securities held to maturity....................... 11,204 6,014 12,494 6,435
Proceeds from maturities and principal payments of
securities available for sale and held for sale... 10,369 13,091 40,136 1,165
Purchase of securities held to maturity............. (4,000) (30,034) (40,075) (9,607)
Purchase of securities available for sale........... (16,616) (20,917) (45,319) --
Net (increase) decrease in FHLB stock.............. (402) (1,969) 403 (19)
Net increase in loans.............................. (22,875) (78,694) (37,077) (24,470)
Proceeds from sales of automobile loans............. 16,867 9,777 -- --
Capitalized expenses on real estate acquired by
foreclosure....................................... -- (232) (65) (101)
Proceeds from disposition of real estate acquired
by foreclosure................................... 937 984 2,404 4,219
Proceeds from sales of premises and equipment....... -- -- 28 249
Additions to premises and equipment................. (1,312) (1,317) (1,008) (1,934)
Cash paid for mortgage servicing rights............. (1,755) (453) -- --
--------- -------- --------- --------
Net cash provided by (used in) investing
activities...................................... 6,334 (82,825) (55,523) (4,241)
--------- -------- --------- --------
Cash flows from financing activities:
Net increase (decrease) in time certificates of
deposit........................................... 10,898 41,264 (3,067) (5,202)
Net increase (decrease) in demand, NOW, savings
and money market deposit accounts................. 1,355 (14,469) 17,276 29,017
Proceeds from borrowings............................ 103,318 165,945 31,382 12,303
Repayments of borrowings............................ (125,403) (98,910) (13,394) (16,305)
Repayments of liability relating to ESOP............ (79) (158) (158) (157)
Proceeds from issuance of preferred stock........... -- -- -- 501
Proceeds from issuance of common stock.............. 53 175 171 964
Purchase of treasury stock.......................... -- (627) -- --
Redemption of preferred stock....................... -- -- (286) --
Dividends paid on preferred stock................... -- -- (19) (24)
Dividends paid on common stock...................... (549) (993) (416) --
--------- -------- --------- --------
Net cash provided by (used in) financing
activities..................................... (10,407) 92,227 31,489 21,097
--------- -------- --------- --------
Net increase (decrease) in cash and cash
equivalents.................................... (156) 15,949 (12,245) 7,690
Cash and cash equivalents at beginning of period..... 31,349 15,400 27,645 19,955
------ ------ ------ ------
Cash and cash equivalents at end of period........... $ 31,193 $ 31,349 $ 15,400 $ 27,645
========= ========= ========= =========
Supplemental cash flow information:
Cash paid for:
Income taxes, net................................. $ 1,112 $ 1,528 $ 1,186 $ 135
Interest.......................................... 9,767 15,316 11,725 13,115
</TABLE>
30
<PAGE>
SUPPLEMENTAL STATEMENTS OF CASH FLOWS
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
--------------------------
1995 1995 1994 1993
--------- ------ ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Supplemental schedule of non-cash activities:
Transfer of securities to available for sale (Note 2) $ 10,666 $ -- $ 56,028 $ --
Transfer of securities from available for sale to held to maturity.................. -- -- 16,113 --
Mortgage loans securitized during the period........................................ -- 5,551 19,625 6,827
Additions to real estate acquired by foreclosure.................................... 420 999 477 1,994
Transfer of real estate acquired by foreclosure to premises and equipment........... -- -- -- 609
Change in net unrealized gains (losses) on securities available for sale, net....... 427 787 (636) --
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
31
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On March 20, 1996, the Company completed its acquisition of Centerpoint
Bank through the issuance of 657,587 shares of common stock. The acquisition was
accounted for as a pooling-of-interests and, accordingly, the financial
information for all periods presented has been restated to present the combined
financial condition and results of operations of both companies as if the
acquisition had been in effect for all periods presented. For further details
pertaining to the acquisition, see Note 17 of Notes to Supplemental Consolidated
Financial Statements.
Basis of Presentation
The supplemental consolidated financial statements include the accounts of
Community Bankshares, Inc. and its wholly-owned subsidiaries ("the Company"),
Concord Savings Bank and its wholly owned subsidiary, Bancredit Corporation
("Bancredit"), and Centerpoint Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain amounts in prior
years have been reclassified to conform with the current year's presentation.
The principal business of the Company consists of originating residential
mortgage loans on property located primarily in New Hampshire, commercial loans
and consumer loans, and attracting deposits to fund these assets. Through its
subsidiary, Bancredit Corporation, the Company is active throughout the state in
originating consumer automobile, recreational vehicle and boat loans. The
Company also provides banking and financial advisory services to municipalities
and public agencies throughout New Hampshire.
The supplemental consolidated financial statements of the Company have been
prepared to give retroactive effect to the acquisition of Centerpoint Bank on
March 20, 1996. Generally accepted accounting principles proscribe giving effect
to a consummated business combination accounted for as a pooling-of-interests
in financial statements that do not include the date of consummation. These
financial statements do not extend through the date of consummation, however,
they will become the historical consolidated financial statements after
financial statements covering the date of consummation of the business
combination are issued.
In preparing the supplemental consolidated financial statements, management
is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the dates of the balance sheets and revenues and
expenses for the periods. Actual results could differ from these estimates.
Material estimates that are susceptible to change because of changing
market conditions relate to the determination of the allowance for possible loan
losses, valuation of real estate acquired by foreclosure and the carrying value
of mortgage servicing rights.
Investment and Mortgage-Backed Securities
Debt securities that management has the positive intent and ability to hold
to maturity are classified as "held to maturity" and carried at amortized
cost. Investments that are purchased and held principally for the purpose of
selling them in the near term are classified as "trading" and carried at fair
value, with unrealized gains and losses included in earnings. Investments not
classified as either "held to maturity" or "trading" are classified as
"available for sale" and carried at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component of
stockholders' equity. When a debt security is transferred into the "held to
maturity" category from the "available for sale" category, the unrealized
gain or loss at the transfer date continues to be reported as a separate
component of stockholders' equity and is amortized over
32
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)
the remaining life of the related security as a yield adjustment. If a decline
in fair value below the amortized cost basis of an investment is judged by
management to be other than temporary, the cost basis of the investment is
written down to fair value and the amount of the writedown is included in
earnings.
Premiums and discounts on investment and mortgage-backed securities are
recognized in the statements of income using a method that approximates the
level-yield method over the lives of the securities. Gains and losses on
securities are recognized when realized with the cost basis of investments sold
determined on a specific identification basis.
Loans
Interest income on loans is recognized on the accrual method. Nonaccrual
loans include impaired loans and are those loans on which the accrual of
interest is discontinued when collectibility of principal or interest is
uncertain or 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 non-impaired loan which has principal
or interest payments contractually past due 90 days may remain on accrual
status, however, if value of the collateral securing the loan is sufficient to
cover principal and accrued 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. Interest received on impaired loans is applied
against principal. Loan origination fees and certain direct origination costs
are capitalized and recognized in income as an adjustment of the yield on the
related loan.
Loan Sale Activity
Loans held for sale are carried at the lower of aggregate cost or market
value, based upon commitments from investors to purchase such loans and upon
prevailing market conditions. Deferred origination fees collected for such
loans, net of sale commitment fees paid, are included in the lower of cost or
market determination. Such fees are recognized as part of gains on sales of
loans when the loans are sold.
Gains and losses on loans sold with servicing rights retained are adjusted
to recognize the difference between the present value of future service fee
income and a normal service fee. The resulting excess loan servicing rights are
amortized as a reduction of service fee income using the level yield method over
the remaining lives of the loans adjusted by expected prepayments. Actual loan
prepayment experience is reviewed periodically and the carrying value of excess
loan servicing rights is reduced when actual prepayment experience exceeds that
originally estimated.
Effective July 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 122, "Accounting for Mortgage Servicing Rights,
an Amendment of FASB Statement No. 65." As a result of adoption, gains on sales
of loans increased by approximately $170,000 for the year ended June 30, 1995.
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 either through the purchase
or origination of mortgage loans (originated mortgage loan 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 mortgage servicing rights) based on their relative fair values.
When the Company purchases mortgage loan servicing rights (purchased mortgage
loan servicing rights) separately, the initial purchase cost is recognized as an
asset.
33
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)
Originated and purchased mortgage loan servicing rights are amortized as a
reduction of service fee income in proportion to, and over the period of,
estimated net servicing income by use of the level yield method.
On a quarterly basis, the Company assesses the carrying values of
originated and purchased mortgage servicing rights for impairment based on the
fair value of such rights. A valuation model that calculates the present value
of future cash flows is used to estimate such fair value. This valuation model
incorporates assumptions that market participants would use in estimating future
net servicing income including estimates of the cost of servicing loans,
discount rate, float value, ancillary income, prepayment speeds, and default
rates. Any impairment is recognized as a charge to earnings through a valuation
allowance.
Allowance for Possible Loan Losses
The allowance for possible loan losses is maintained at a level believed by
management to be adequate to meet reasonably foreseeable loan losses on the
basis of many factors including the risk characteristics of the portfolio,
underlying collateral, current and anticipated economic conditions that may
affect the borrower's ability to pay, specific problem loans, and trends in loan
delinquencies and charge-offs. Possible losses on loans are provided for under
the allowance method of accounting. The allowance is increased by provisions
charged to earnings and reduced by loan charge-offs, net of recoveries. Loans,
including impaired loans, are charged off in whole or in part when, in
management's opinion, collectibility is not probable.
While management uses available information to establish the allowance for
possible loan losses, future additions to the allowance may be necessary if
economic developments 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 allowance for possible loan
losses. Such agencies may require the Company to recognize additions to the
allowance based on judgments different from those of management.
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 December 31, 1995, the Company
had impaired loans, as defined under SFAS No. 114 and 118, amounting to
$819,000.
Impaired loans are commercial, commercial real estate, and individually
significant mortgage and consumer loans for which 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 definition of "impaired loans" is not the
same as the definition of "nonaccrual loans," although the two categories
overlap. Nonaccrual loans include impaired loans and are those on which the
accrual of interest is discontinued when collectibility of principal or interest
is uncertain or payments of principal or interest have become contractually past
due 90 days. The Company may choose to place a loan on nonaccrual status due to
payment delinquency or uncertain collectibility, while not classifying the loan
as impaired, if (i) it is probable that the Company will collect all amounts due
in accordance with the contractual terms of the loan or (ii) the loan is not a
commercial, commercial real estate or an individually significant mortgage or
consumer loan. Factors considered by management in determining impairment
include payment status and collateral value. 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.
34
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)
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. Loans that experience
insignificant payment delays and insignificant shortfalls in payment amounts
generally are not classified as impaired. Management determines the significance
of payment delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower's
prior payment record, and the amount of the shortfall in relation to the
principal and interest owed.
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.
Premises and Equipment
Land is stated at cost. Bank buildings, improvements and equipment are
carried at cost less accumulated depreciation. Depreciation is computed over the
estimated useful lives of the respective assets on the straight-line method for
buildings and improvements and on the straight-line and double-declining balance
methods for equipment.
Real Estate Acquired by Foreclosure
Real estate acquired by foreclosure includes foreclosed properties where
the Company is in possession of the collateral. Real estate acquired by
foreclosure in settlement of loans are recorded at the lower of the carrying
value of the loan or the fair value of the property received minus costs to
sell.
Losses arising from the acquisition of such properties or from the
writedowns to fair values of loans substantively repossessed are charged against
the allowance for possible loan losses. Operating expenses and any subsequent
provisions to reduce the carrying value to net fair value are charged to current
period earnings. Gains upon disposition are reflected in earnings as realized.
Realized losses are charged to an allowance for losses on real estate acquired
by foreclosure.
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.
Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and the respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
35
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)
Earnings Per Share
Earnings per share is based on the weighted average number of common and
common stock equivalents outstanding during the period.
36
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS --(CONTINUED)
(2) INVESTMENT AND MORTGAGE-BACKED SECURITIES
The amortized cost and estimated market values of investment and mortgage-
backed securities were as follows:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
------------------------------------------- --------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
--------- ---------- ---------- -------- --------- ---------- ----------- -------
COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE
--------- ---------- ---------- -------- --------- ---------- ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1995:
Investment securities:
U.S. Government and
Agency obligations.......... $ 30,892 $ 758 $ 23 $ 31,627 $ 34,953 $ 253 $ 38 $ 35,168
Municipal investments........... 971 -- -- 971 -- -- -- --
Marketable equity securities.... 181 115 30 266 -- -- -- --
Other debt securities........... 1,256 -- 26 1,230 -- -- -- --
Other........................... 113 -- -- 113 -- -- -- --
--------- -------- --------- -------- -------- --------- -------- --------
33,413 873 79 34,207 34,953 253 38 35,168
--------- -------- --------- -------- -------- --------- -------- --------
Mortgage-backed securities:
FHLMC............................ 11,340 67 98 11,309 10,621 23 36 10,608
FNMA............................. 17,853 236 134 17,955 1,844 33 -- 1,877
Other............................ 3,861 92 13 3,940 107 -- -- 107
--------- -------- --------- -------- -------- --------- -------- --------
33,054 395 245 33,204 12,572 56 36 12,592
--------- -------- --------- -------- -------- --------- -------- --------
Total investment securities.... $ 66,467 $ 1,268 $ 324 $ 67,411 $ 47,525 $ 309 $ 74 $ 47,760
========= ======== ========= ======== ======== ========= ======== ========
June 30, 1995:
Investment securities:
U.S. Government and
Agency obligations........... $ 32,810 $ 364 $ 84 $ 33,090 $ 37,907 $ 161 $ 174 $ 37,894
Municipal investments........... 987 -- -- 987 2,750 -- -- 2,750
Marketable equity securities.... 182 87 40 229 -- -- -- --
Other debt securities........... 1,256 -- 45 1,211 3,944 54 -- 3,998
Other........................... 110 -- -- 110 -- -- -- --
--------- -------- --------- -------- -------- --------- -------- --------
35,345 451 169 35,627 44,601 215 174 44,642
--------- -------- --------- -------- -------- --------- -------- --------
Mortgage-backed securities:
FHLMC............................ 6,136 8 92 6,052 12,773 35 163 12,645
FNMA............................. 12,566 254 22 12,798 6,902 43 32 6,913
Other............................ 9,082 89 80 9,091 1,121 3 2 1,122
--------- -------- --------- -------- -------- --------- -------- --------
27,784 351 194 27,941 20,796 81 197 20,680
--------- -------- --------- -------- -------- --------- -------- --------
Total investment securities.... $ 63,129 $ 802 $ 363 $ 63,568 $ 65,397 $ 296 $ 371 $ 65,322
========= ======== ========= ======== ======== ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
------------------------------------------- --------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
--------- ---------- ---------- -------- --------- ---------- ----------- -------
COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE
--------- ---------- ---------- -------- --------- ---------- ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1994:
Investment securities:
U.S. Government and Agency
obligations.................. $ 37,129 $ 148 $ 364 $ 36,913 $ 16,931 $ -- $ 346 $ 16,585
Municipal investments........... -- -- -- -- -- -- -- --
Marketable equity securities.... 127 72 44 155 -- -- -- --
Other debt securities........... 2,257 -- 94 2,163 977 -- 9 968
Other........................... 105 -- -- 105 -- -- -- --
--------- -------- --------- -------- -------- --------- -------- --------
39,618 220 502 39,336 17,908 -- 355 17,553
--------- -------- --------- -------- -------- --------- -------- --------
Mortgage-backed securities:
FHLMC............................ 12,803 60 307 12,556 13,641 -- 437 13,204
FNMA............................. 14,834 136 196 14,774 6,094 5 190 5,909
Other............................ 3,333 -- 77 3,256 3,681 -- 195 3,486
--------- -------- --------- -------- -------- --------- -------- --------
30,970 196 580 30,586 23,416 5 822 22,599
--------- -------- --------- -------- -------- --------- -------- --------
Total investment securities.... $ 70,588 $ 416 $ 1,082 $ 69,922 $ 41,324 $ 5 $ 1,177 $ 40,152
========= ======== ========= ======== ======== ========= ======== ========
</TABLE>
37
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As members of the Federal Home Loan Bank (FHLB) of Boston, the Company's
subsidiary banks are required to invest in $100 par value stock of the FHLB of
Boston in the amount of 1% of its outstanding loans secured by residential
housing, or 1% of 30% of total assets, or 5% of its outstanding advances from
the FHLB, whichever is higher. When such stock is redeemed, the banks would
receive from the FHLB an amount equal to the par value of the stock. As of
December 31, 1995, the subsidiary banks were required to have an investment of
at least $2,992,000.
An analysis of realized gains and losses on investment and mortgage-backed
securities and investments available and held for sale for the periods indicated
is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
-----------------------------------------------
1995 1995 1994 1993
------------------ ------------------ ------------------ -----------------
REALIZED REALIZED REALIZED REALIZED REALIZED REALIZED REALIZED REALIZED
-------- -------- -------- -------- -------- -------- -------- --------
GAINS LOSSES GAINS LOSSES GAINS LOSSES GAINS LOSSES
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Debt securities......... $ -- $ -- $ -- $ -- $ -- $ -- $ 95 $ --
Marketable equity
securities........... -- -- -- -- -- -- -- --
Mortgage-backed
securities........... -- -- -- -- -- -- 45 --
Investments, available
and held for sale.... 228 -- 171 23 531 7 837 --
------- -------- -------- ------- -------- -------- -------- --------
$ 228 $ -- $ 171 $ 23 $ 531 $ 7 $ 977 $
======= ======== ======== ======= ======== ======== ======== ========
</TABLE>
The following table sets forth the maturity distribution of investment
securities (excluding marketable equity securities) at December 31, 1995.
<TABLE>
<CAPTION>
AFTER ONE BUT AFTER FIVE BUT
WITHIN ONE YEAR WITHIN FIVE YEARS WITHIN TEN YEARS AFTER TEN YEARS TOTAL
----------------- ----------------- ---------------- --------------- ------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
--------- ---- --------- ---- --------- ---- --------- ---- --------- ----
COST VALUE COST VALUE COST VALUE COST VALUE COST VALUE
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available for Sale:
U.S. Government and
Agency obligations.......... $ 6,503 $ 6,514 $ 24,389 $25,113 $ -- $ -- $ -- $ -- $30,892 $31,627
Municipal investments......... 784 784 187 187 -- -- -- -- 971 971
Mortgage-backed securities.... 171 172 3,396 3,376 7,439 7,295 22,048 22,361 33,054 33,204
Other debt securities......... 500 479 503 498 253 253 -- -- 1,256 1,230
Other......................... 113 113 -- -- -- -- -- -- 113 113
------- ------- -------- ------- -------- -------- ------- ------- ------- -------
Total.......................... $ 8,071 $ 8,062 $ 28,475 $29,174 $ 7,692 $ 7,548 $ 22,048 $22,361 $66,286 $67,145
======= ======= ======== ======= ======== ======== ======== ======= ======= =======
Held to Maturity:
U.S. Government and
Agency obligations ......... $20,979 $21,059 $ 13,974 $14,109 $ -- $ -- $ -- -- $34,953 $35,168
Mortgage-backed securities.... -- -- 11,670 11,689 -- -- 902 903 12,572 12,592
------- ------- -------- ------- -------- -------- -------- ------- ------- -------
Total.......................... $20,979 $21,059 $ 25,644 $25,798 $ -- $ -- $ 902 $ 903 $47,525 $47,760
======= ======= ======== ======= ======== ======== ======== ======= ======= =======
</TABLE>
38
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Mortgage-backed securities are expected to have shorter average lives than
their contractual maturities because borrowers may repay obligations without
prepayment penalties. In a declining interest rate environment, prepayments on
mortgage-backed securities are likely to accelerate. In a rising rate scenario,
prepayments on mortgage-backed securities are likely to slow.
In 1995, the Financial Accounting Standards Board allowed a one-time
reassessment of the appropriateness of the classification of all securities
held, and the Company reclassified $10,831,000 of securities held to maturity to
available for sale during November 1995. At the time of reclassification, there
were $58,000 in unrealized gains and $165,000 in unrealized losses relating to
the securities transferred.
(3) LOANS
The Company's lending activities are concentrated primarily in central and
southern New Hampshire. The Company grants single family residential loans,
commercial real estate loans, commercial loans, indirect automobile and
recreational vehicle loans through dealers and a variety of other consumer
loans. In addition, the Company grants loans for the construction of residential
homes and commercial real estate properties, and for the development of land.
The ability and willingness of residential mortgage and consumer loan borrowers
to honor their repayment commitments is generally dependent on the level of
overall economic activity within the borrower's geographic areas and real estate
values. The ability and willingness of commercial real estate, construction loan
and commercial borrowers to honor their repayment commitments is generally
dependent on the health of the real estate economic sector in the borrower's
geographic areas and the general economy.
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------
AT DECEMBER 31,
1995 1995 1994
---- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Mortgage loans:
Residential............................................... $ 73,051 $ 68,927 $ 66,931
Home equity............................................... 17,586 18,489 19,925
Construction.............................................. 7,570 4,578 2,557
Commercial................................................ 78,673 73,368 56,805
-------- -------- --------
176,880 165,362 146,218
Deferred loan origination fees, net....................... (373) (353) (142)
-------- -------- --------
Mortgage loans, net................................... 176,507 165,009 146,076
-------- -------- --------
Other loans:
Indirect automobile and recreational vehicle.............. 92,845 102,867 66,748
Mobile home............................................... 11,677 12,427 14,156
Other consumer............................................ 10,342 9,391 10,042
Commercial................................................ 34,447 31,193 23,684
-------- -------- --------
149,311 155,878 114,630
-------- -------- --------
Deferred loan origination costs........................... 1,196 1,046 149
-------- -------- --------
Other loans........................................... 150,507 156,924 114,779
-------- -------- --------
Total loans........................................... $ 327,014 $ 321,933 $ 260,855
========= ========= =========
</TABLE>
39
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In the ordinary course of business, the Company has granted loans to
executive officers and directors, and their related interests, on substantially
the same terms, including interest and collateral, as those prevailing at the
time for comparable transactions with unrelated borrowers. The aggregate amount
of these loans at December 31, 1995 was $499,000. New loans were added amounting
to $123,000, and payments of $155,000 were recorded during the six months ended
December 31, 1995. The aggregate amount of these loans at June 30, 1995 was
$531,000. Activity in these loans during the year ended June 30, 1995 included
loan additions of $188,000 and loan repayments of $215,000. The balance of these
loans at June 30, 1994 was $558,000.
The Company from time to time originates automobile consumer finance
contracts through an automobile dealership owned and operated by one of its
directors, subject to the credit approval, on terms comparable to those accorded
other dealers. Contracts amounting to $319,000 during the six months ended
December 31, 1995 and $1,003,000 and $960,000, respectively, during the fiscal
years ended June 30, 1995 and 1994 were originated through this dealership.
Loans on nonaccrual at December 31, 1995, June 30, 1995 and 1994 totaled
$1,535,000, $1,926,000 and $816,000, respectively. At December 31, 1995 and June
30, 1994, loans delinquent 90 days and still accruing amounted to $69,000 and
$187,000 respectively. At June 30, 1995, there were no loans that were 90 days
or more past due and still accruing. At December 31, 1995 and June 30, 1994
restructured loans classified as non-performing amounted to $6,000 and $54,000
respectively. At June 30, 1995 there were no restructured loans classified as
non-performing. The Company has no additional funding commitments to these
borrowers.
Impaired loans amounted to $819,000, of which $730,000 are included in
nonaccrual loans, at December 31, 1995. At December 31, 1995, the portion of the
allowance for possible loan losses allocated to impaired loans was $272,000.
Income of $17,000 was earned, on an average balance of $605,000, on impaired
loans during the six months ended December 31, 1995.
The reduction in interest income for the periods indicated associated with
nonaccrual and restructured loans held at the end of such periods is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
--------------------
1995 1995 1994 1993
------ ------ ----- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Income in accordance with original terms..... $ 71 $ 162 $ 68 $ 264
Income recognized............................ (9) (71) (42) (199)
----- ------ ----- ------
Foregone income............................. $ 62 $ 91 $ 26 $ 65
===== ===== ==== =====
</TABLE>
At December 31, 1995, June 30, 1995 and 1994, the principal balance of
residential mortgage loans serviced by the Company for others amounted to
$345,328,000, $351,512,000 and $160,994,000, respectively. At December 31, 1995
and June 30, 1995, the principal balance of indirect automobile loans serviced
by the Company for others amounted to $25,942,000 and $11,536,000, respectively.
The Company did not service any indirect automobile loans for others during
fiscal 1994.
40
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Following is an analysis of activity concerning loan servicing rights from
June 30, 1994 to
December 31, 1995:
<TABLE>
<CAPTION>
ORIGINATED PURCHASED
EXCESS LOAN MORTGAGE LOAN MORTGAGE LOAN
SERVICING RIGHTS SERVICING RIGHTS SERVICING RIGHTS
----------------- ----------------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at June 30, 1994............................ $ -- $ -- $ --
Originations and acquisitions during the period.... 138 187 2,257
Amortization charged to service fee income......... (1) (8) --
-------- -------- --------
Balance at June 30, 1995............................ 137 179 2,257
Valuation allowance................................ -- (9) --
------- -------- --------
Carrying value at June 30, 1995 ....... 137 170 2,257
Originations and acquisitions during the pe........ 247 101 --
Receipt of purchase price adjustments.............. -- -- (117)
Amortization charged to service fee income......... (69) (17) (115)
Change in valuation allowance ..................... -- (6) (75)
------- -------- ---------
Carrying value at December 31, 1995................. $ 315 $ 248 $ 1,950
======= ======= ========
</TABLE>
At December 31, 1995, the carrying values of originated mortgage servicing
rights and purchased mortgage servicing rights was net of a valuation reserve of
$14,000 and $75,000, respectively. Excess loan servicing rights, at December 31,
1995 did not require a valuation reserve.
The December 31, 1995 and June 30, 1995 carrying values of originated and
purchased mortgage loan servicing rights are reasonable approximations of their
fair value at that date.
The risk characteristics of the underlying loans used to measure impairment
of originated and purchased mortgage loan servicing rights include loan type,
interest rate, loan origination date, term to maturity, and geographic location.
(4) ALLOWANCE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-----------------------
1995 1995 1994 1993
-------- -------- -------- --------
(in Thousands)
<S> <C> <C> <C> <C>
Balance at beginning of period.................. $ 3,524 $ 3,772 $ 4,105 $ 4,105
Provision for possible loan losses.............. 498 777 925 2,351
Recoveries on loans previously charged
off........................................... 361 482 672 381
-------- -------- -------- --------
4,383 5,031 5,702 6,837
Less loans charged off.......................... 716 1,507 1,930 2,732
-------- -------- -------- --------
Balance at end of period........................ $ 3,667 $ 3,524 $ 3,772 $ 4,105
======== ======== ======== ========
</TABLE>
41
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) PREMISES AND EQUIPMENT
The major categories of Company premises and equipment are as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
AT DECEMBER 31, AT JUNE 30, LIFE IN
---------------
1995 1995 1994 YEARS
---- ---- ---- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Land.................................... $ 1,014 $ 1,014 $ 1,014
Buildings............................... 7,796 7,178 6,861 15 to 40
Leasehold improvements 413 412 317 5 to 15
Construction in process................. 398 303 196
Furniture and equipment................. 5,261 4,664 4,241 2 to 20
Furniture and equipment under capital
leases................................ 552 552 513 3 to 5
------- ------- -------
15,434 14,123 13,142
Less accumulated depreciation........... 6,496 5,983 5,371
------- ------- -------
$ 8,938 $ 8,140 $ 7,771
======= ======= =======
</TABLE>
Depreciation and amortization of premises and equipment included in
operating expenses for the six months ended December 31, 1995 amounted to
$515,000 and $946,000, $859,000 and $767,000, respectively, for the years ended
June 30, 1995, 1994 and 1993.
The Company is obligated under various non-cancelable operating leases as
well as the capital leases included above, some of which provide for periodic
adjustments. At December 31, 1995, minimum lease payments for capital and
operating leases were as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
------ ------
(IN THOUSANDS)
<S> <C> <C>
Payable:
Within 1 year....................... $ 282 $ 129
From 1 to 2 years................... 286 129
From 2 to 3 years................... 247 69
From 3 to 4 years................... 217 17
From 4 to 5 years................... 146 --
After 5 years....................... 582 --
------- -----
Total minimum lease payments.......... 1,760 344
Less amount representing interest..... -- 38
------- -----
$ 1,760 $ 306
======= =====
</TABLE>
Total operating lease expense for the six months ended December 31, 1995
amounted to $128,000 and for the years ended June 30, 1995, 1994 and 1993
amounted to $223,000, $143,000 and $112,000, respectively.
42
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) REAL ESTATE ACQUIRED BY FORECLOSURE OR SUBSTANTIVELY REPOSSESSED
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
-------------
1995 1995 1994
-------- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Single family housing projects.... $ 14 $ 14 $ 85
Retail and office................. 247 247 234
Non-retail commercial............. -- -- 28
Residential....................... 305 873 489
----- ------ -----
$ 566 $1,134 $ 836
===== ====== =====
</TABLE>
The above summary excludes $225,000, $277,000 and $204,000, respectively, of
repossessed mobile homes and $108,000, $91,000 and $38,000, respectively, of
repossessed automobiles at December 31, 1995 and June 30, 1995 and 1994 which
are included in other assets in the accompanying balance sheets.
An analysis of real estate acquired by foreclosure for the periods indicated
is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
---------------------
1995 1995 1994
------------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at beginning of period....................................... $ 1,134 $ 836 $ 2,568
Foreclosures and properties substantively repossessed............ 420 1,231 542
Sales proceeds................................................... (937) (984) (2,404)
Gains on sales, net.............................................. 49 27 130
Recoveries subsequent to foreclosure, net........................ (100) 24 --
--------- --------- -------
Balance at end of period............................................. $ 566 $ 1,134 $ 836
========= ========= =======
</TABLE>
An analysis of foreclosed property expense for the periods indicated is
as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
--------------------
1995 1995 1994 1993
----- ----- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Foreclosure and holding costs, net......................... $ 105 $ 197 $ 197 $ 552
Recoveries and loss provisions during the period, net...... 100 (24) -- 1,029
(Gains) losses on sales, net............................... (49) (27) (130) 294
----- ----- ------ -------
$ 156 $ 146 $ 67 $ 1,875
===== ===== ====== =======
</TABLE>
43
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) DEPOSITS
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
--------------------
1995 1995 1994
------------ -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Non-interest bearing demand deposits....... $ 39,969 $ 37,829 $ 30,228
Savings deposits:
Savings, club and escrow accounts...... 92,396 92,675 115,208
Interest-bearing NOW accounts.......... 33,309 32,322 27,899
Money market accounts.................. 12,130 13,623 17,583
---------- ---------- ----------
Total savings deposits.............. 137,835 138,620 160,690
Time certificates of deposit........... 207,633 196,735 155,471
---------- ---------- ----------
Total deposits...................... $ 385,437 $ 373,184 $ 346,389
========== ========== ==========
</TABLE>
At December 31, 1995 and June 30, 1995 and 1994, time certificate of
deposit accounts with balances of $100,000 or more amounted to $31,646,000,
$23,456,000 and $15,288,000, respectively.
The average annual interest rates on time certificates of deposit
outstanding at December 31, 1995 by periods to maturity are summarized as
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
AMOUNT RATE
--------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Within 1 year...........$ 143,191 5.70%
From 1 to 2 years....... 46,792 5.92
From 2 to 3 years....... 10,380 6.11
From 3 to 5 years....... 7,270 6.32
--------
$207,633 5.79
========
</TABLE>
At December 31, 1995 and June 30, 1995 and 1994, time certificates of
deposit issued at rates which may be adjusted periodically during the term of
the certificate amounted to $32,638,000, $33,098,000 and $40,806,000,
respectively.
(8) SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
<TABLE>
<CAPTION>
MAXIMUM
OUTSTANDING
DAILY AVERAGE AT ANY
END OF PERIOD DURING PERIOD MONTH-END
------------- ----------------- ---------
BALANCE RATE BALANCE RATE
------- ------- ---------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Six Months ended December 31, 1995....... $11,860 4.72% $14,876 4.96% $20,212
Year Ended June 30, 1995................. 15,879 5.14 3,740 4.73 15,879
Year Ended June 30, 1994................. 1,797 2.71 1,634 1.80 4,283
</TABLE>
44
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Repurchase agreements outstanding at December 31, 1995, June 30, 1995 and
June 30, 1994 carried maturity dates of three months or less. U.S. Government
and Agency securities with a book value of $17,809,000, $20,438,000 and
$4,072,000, respectively, and a fair value of $17,698,000, $20,174,000 and
$3,856,000, respectively, were pledged as collateral and held by custodians to
secure the agreements at December 31, 1995, June 30, 1995 and June 30, 1994.
(9) OTHER BORROWED FUNDS
<TABLE>
<CAPTION>
AT DECEMBER 31, AT JUNE 30,
--------------------
1995 1995 1994
--------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Advances from the Federal Home Loan Bank of
Boston.............................................. $ 56,044 $ 76,748 $ 23,672
Capitalized leases.................................... 306 385 501
Note payable due in monthly installments including
interest at 7%...................................... 5 9 16
Federal funds purchased............................... 2,721 -- --
-------- -------- --------
$ 59,076 $ 77,142 $ 24,189
======== ======== ========
</TABLE>
At December 31, 1995, loans primarily secured by residential property, of
approximately $77,000,000, investment securities of $11,000,000 and all stock in
the Federal Home Loan Bank of Boston were pledged as collateral to secure the
above advances and a line of credit with the Federal Home Loan Bank of Boston of
$10,000,000. The average annual interest rates on advances from the Federal Home
Loan Bank of Boston outstanding at December 31, 1995 by periods to maturity are
summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
AMOUNT RATE
-------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Within 1 year............. $ 34,600 5.78%
From 1 to 2 years......... 20,000 5.66
From 2 to 3 years......... 800 5.87
From 3 to 5 years......... 75 8.13
After 5 years............. 569 6.76
--------
$ 56,044 5.75
========
</TABLE>
(10) STOCKHOLDERS' EQUITY
Federal regulations prohibit banking companies from paying dividends on
their stock if the effect would cause stockholders' equity to be reduced below
applicable regulatory capital requirements or if such declaration and payment
would otherwise violate regulatory requirements. At December 31, 1995, the
Company and its subsidiary banks were in compliance with all regulatory capital
requirements.
45
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT--(CONTINUED)
On October 17, 1989, the Board of Directors adopted a Shareholder Rights Plan
and declared a dividend distribution of one Right for each outstanding share of
common stock. The distribution was payable on November 15, 1989 to the
stockholders of record on October 31, 1989. Such Rights only become exercisable
upon the earliest to occur of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons (an ''Acquiring Person'')
has acquired, or obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding Common Shares, or (ii) 10 days following the
commencement of a tender offer or exchange offer the consummation of which would
result in the beneficial ownership by a person of 25% or more of such
outstanding Common Shares, or (iii) the declaration by the Board of Directors
that any person is an ''Adverse Person'' (the earliest of such dates being
called the ''Distribution Date''). Each Right entitles the registered holder to
purchase from the Company one one-hundredth of one share (a ''Unit'') of Series
A Preferred Stock, $1.00 par value, at a price of $40 per Unit, subject to
adjustment. If the Company is acquired in a merger or other business combination
transaction or more than 50% of its assets or earning power are sold, the Rights
entitle holders to acquire common stock of the Acquiring Person having a value
twice the exercise price of the Rights. The Rights may be redeemed in whole, but
not in part, at a price of $.01 per Right at any time prior to the Distribution
Date. The Rights will expire on October 30, 1999.
(11) INCOME TAXES
At December 31, 1995, June 30, 1995 and 1994, the Company's accrued income
tax payable was $465,000, $306,000 and $178,000, respectively.
During fiscal 1993, the Company was subject to an annual franchise tax
imposed by the State of New Hampshire at the rate of 1% of the total amount of
interest paid on its deposits each year. The Company was also subject to an
additional franchise tax in an amount equal to 1% of its outstanding capital
stock account. This additional franchise tax could be utilized as a credit
against the franchise tax imposed on interest paid on deposits. The Company was
also subject to a state business profits tax equal to 8% of taxable income, net
of permissible deductions under New Hampshire law for interest earned on United
States Government securities and a tax credit for franchise taxes paid.
On July 1, 1993, the State of New Hampshire modified many of its corporate
income tax laws. These changes resulted in the Company being subject to a state
business profits tax equal to 7.5% for fiscal year 1994 and 7.0% for years
thereafter. In addition, the Company is no longer subject to an annual franchise
tax but instead is subject to a business enterprise tax. This tax is imposed at
the rate of 0.25% of the sum of the Company's interest expense, compensation
expense and dividends paid. This additional enterprise tax may be utilized as a
credit against the business profits tax.
46
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The difference between the total expected income tax expense computed by
applying the federal income tax rate of 34% to income before income taxes and
the reported income tax expense is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
-------------------------
1995 1995 1994 1993
---- ------ -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Computed "expected" federal income tax
expense at statutory rate....................... $1,033 $2,053 $1,536 $ 836
Increase (decrease) resulting from:
State taxes (net of federal benefit, before... 82 76 54 (42)
change in valuation reserve)........
Dividend received deduction................... (2) (6) (21) (2)
Change in valuation reserve................... (55) (253) (664) (793)
Non-deductible acquisition costs.............. 216 -- -- --
Other......................................... (10) (8) (8) 1
------- ------ ------ -----
$ 1,264 $1,862 $ 897 $ --
======= ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
-------------------------
1995 1995 1994 1993
-------- ------- ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current tax expense:
Federal....................................... $ 1,158 $1,865 $ 1,016 $ 749
State......................................... 96 32 -- 10
------ ------ ------- -----
1,254 1,897 1,016 759
------ ------ ------ -----
Deferred tax expense (benefit):
Federal....................................... 37 135 463 108
State......................................... 28 83 82 (74)
Change in valuation reserve................... (55) (253) (664) (793)
------ ------- ------ ------
10 (35) (119) (759)
------ ------- ------ ------
$1,264 $1,862 $ 897 $ --
====== ======= ====== ======
</TABLE>
47
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences (the difference between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases) that give rise to significant portions of the
deferred tax asset and deferred tax liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------
1995 1995 1994
--------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax asset:
Allowance for possible loan losses ..................... $ 1,203 $1,095 $1,047
Deferred loan fees .................................... 177 170 80
Valuation allowance on repossessed assets............... -- 22 32
State net operating loss carryforward................... -- 20 73
Unrealized loss on securities available for sale........ -- -- 325
Purchased mortgage servicing rights..................... 52 -- --
Accrued expenses........................................ 156 151 102
Other................................................... 56 19 10
------- ------ ------
Gross deferred tax asset .................................. 1,644 1,477 1,669
Valuation reserve ......................................... (81) (136) (389)
-------- ------- -------
1,563 1,341 1,280
------- ------- -------
Deferred tax liability:
Originated mortgage servicing rights.................... 96 -- --
Valuation allowance on loans held for sale.............. -- -- 38
Pension ............................................... 40 40 88
Depreciation .......................................... 176 174 109
Deferred loan costs ................................... 485 425 78
Unrealized gain on securities available for sal......... 366 142 --
Accrued income.......................................... 203 192 146
Other ................................................. 67 4 25
------- ------- -------
1,433 977 484
------- ------- -------
Deferred income tax asset (liability), net.................. $ 130 $ 364 $ 796
======= ======= =======
</TABLE>
Retained earnings at December 31, 1995 include approximately $3,445,000 of
bad debt reserves for Federal income tax purposes which may be subject to tax if
not used to absorb loan losses. Related deferred taxes on such reserves of
approximately $1,330,000 have not been provided because it is not expected that
such reserves will be utilized for other than loan losses.
The realization of the net deferred tax asset may be based on utilization of
carrybacks to prior taxable periods, anticipation of future taxable income and
the utilization of tax planning strategies. Management has determined that it is
more likely than not that the net deferred tax asset can be realized by
carrybacks to federal taxable income in the three-year carryback period and by
expected future taxable income. The valuation reserve relates primarily to
certain state tax temporary differences.
48
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(12) EMPLOYEE BENEFITS
Stock Option Plans
The Company has stock option plans for the benefit of certain officers and
other employees. Outside directors may elect to receive options in lieu of a
portion of director fees. Employee options granted under the plans vest over
four years at 25% per year. Options are granted at not less than the fair market
value of the shares at the date of the grant, and expire ten years from the date
of the grant. Activity in the plans is summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
---------------------------------------------
1995 1995 1994 1993
-------------- -------------- ------------ -------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF OPTION OF OPTION OF OPTION OF OPTION
SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of
period......... 180,735 $ 8.74 205,615 $ 8.06 232,990 $7.70 221,240 $7.50
Granted......... 1,079 16.75 10,280 10.65 1,000 9.00 35,000 5.40
Canceled........ (500) 10.00 (3,000) 11.38 (375) 2.83 (1,000) 2.25
Exercised....... (2,373) 9.39 (32,160) 4.71 (28,000) 5.09 (22,250) 2.34
------- ------- ------- -------
Outstanding at
end of
period......... 178,941 $ 8.78 180,735 $ 8.74 205,615 $8.06 232,990 $7.70
======= ======= ======= =======
</TABLE>
At December 31, 1995 and June 30, 1995, exercisable stock options amounted to
162,014 and 161,704, respectively.
Stock Purchase Plan
Under the Stock Purchase Plan approved by the Company's stockholders,
participating employees may annually purchase shares through accumulated payroll
deductions. During the six months ended December 31, 1995, 2,155 shares were
purchased at $13.25 per share. During the years ended June 30, 1995, 1994 and
1993, 2,029, 3,412 and 4,207 shares were purchased at $11.375, $8.125 and $2.75
per share, respectively. At December 31, 1995, 38,197 shares were available for
issuance under the Plan.
Employee Stock Ownership Plan
In May of 1986, the Company adopted an Employee Stock Ownership Plan
("ESOP"). The Plan is designed to provide retirement benefits for eligible
employees of the Company. Because the Plan invests primarily in the stock of the
Company, it will also give eligible employees an opportunity to acquire an
ownership interest in the Company.
49
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Employees are eligible to participate in the Plan after reaching age twenty-one,
completing one year of service and working at least one thousand hours of
consecutive service during the previous year. Contributions are allocated to
eligible participants on the basis of compensation and years of credited
service.
During May 1986, the Company issued a total of 59,775 shares under the ESOP at
a total purchase price of $975,000. The purchase was made from the proceeds of a
$975,000 loan from an unrelated third party lender bearing interest at a rate of
75% of floating prime. Repayment of the loan is secured by contributions the
Company is obliged to make under a contribution agreement with the ESOP. In
1988, the ESOP purchased 24,696 additional shares at an average price of $11.80
per share which was funded by additional borrowings of approximately $291,000
under the same loan agreement. In 1991, the ESOP purchased 20,000 additional
shares at an average price of $4.81 per share funded by available cash in the
ESOP. During the six months ended December 31, 1995, the Company made
contributions to the ESOP totaling $85,000 and $167,000, $179,000 and $187,000,
respectively, for the fiscal years ended June 30, 1995, 1994 and 1993 to enable
the ESOP to make principal and interest payments on the loan. The amount
contributed was charged to salary and employee benefit expenses. The balance of
the loan will be repaid within one year with funds from the Company's future
contributions to the ESOP and the earnings on the ESOP's assets.
Shares used as collateral to secure the loan are released and available for
allocation to eligible employees as the principal balance of the loan is repaid.
Dividends on released shares are credited to the participants' ESOP accounts.
Dividends on unreleased shares may be allocated to participants or applied
towards payment of the loan.
At December 31, 1995, the shares held by the ESOP amounted to 85,330 of
which 70,927 were released and allocated to participants of the ESOP. Shares
held in suspense at December 31, 1995, to be released annually as the loan is
paid down, amounted to 14,403. The market value of these shares at December 31,
1995 was $18.875 per share. Dividends on ESOP shares are charged to retained
earnings and all ESOP shares are considered outstanding in determining earnings
per share.
Pension Plan
The Company provides a noncontributory pension plan for its employees. The
funded status of the plan as of December 31, 1995 and June 30, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------
1995 1995 1994
------ ------ ------
<S> <C> <C> <C>
(IN THOUSANDS)
Vested benefits..................................................... $ 1,498 $ 1,663 $ 1,397
Nonvested benefits.................................................. 42 46 39
--------- --------- --------
Accumulated benefit obligation.................................. 1,540 1,709 1,436
Additional benefits related to future compensation levels........... 541 602 564
--------- --------- ---------
Projected benefit obligation.................................... 2,081 2,311 2,000
Plan assets at fair value invested primarily in equity and
fixed-income securities........................................... 3,665 3,390 3,117
--------- --------- ---------
Plan assets in excess of projected benefit obligation............... 1,584 1,079 1,117
Unrecognized transition asset....................................... (746) (781) (850)
Unrecognized experience (gain) loss................................. (623) (113) 29
--------- --------- --------
Prepaid pension cost included in other assets................... $ 215 $ 185 $ 296
========= ========= ========
</TABLE>
50
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The weighted average discount rate and rate of increase in future
compensation levels used in calculating the actuarial present value of the
projected benefit obligations shown above were 7.0% and 5.0%, respectively, for
December 31, 1995 and 8.0% and 6.0%, respectively, for June 30, 1995 and 1994.
For all periods presented, the expected long-term rate of return on assets was
8.0%.
Net pension expense for the periods indicated include the following components:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED
DECEMBER 31, JUNE 30,
---------------
1995 1995 1994
------ ------ -------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost--benefits earned........................ $ 64 $ 258 $ 211
Interest cost on projected benefit obligation........ 77 155 129
Actual return on plan assets......................... (322) (127) (25)
Net amortization and deferral........................ 151 (186) (305)
------- ------- --------
Net pension expense (income).................... $ (30) $ 100 $ 10
======= ======= ========
</TABLE>
401(k) Savings Plan
The Company has a 401(k) Savings Plan covering all employees who have
reached the age of twenty-one, completed one year of service and worked at least
one thousand hours during the previous year. Participants may contribute from 1%
to 10% of their pre-tax compensation. The Company makes quarterly matching
contributions equal to 33% of the participants' contributions up to 6% of their
pre-tax compensation. Employer matching contributions vest at 25% per year.
Expense under the Plan amounted to $32,000 for the six months ended December 31,
1995 and $53,000 during the fiscal year ended June 30, 1995.
Employee Agreements
Concord Savings Bank (the "Bank") has a supplemental retirement agreement
for its chief executive officer. This plan provides retirement benefits designed
to supplement benefits available through the Bank's retirement plan for
employees. Total expense for these benefits amounted to $15,000 for the six
months ended December 31, 1995 and $26,000, $17,000 and $13,000, respectively,
for the years ended June 30, 1995, 1994 and 1993.
The Bank has entered into employment agreements with its senior officers
(10 individuals) which provide for a lump sum payment under certain
circumstances to the officer amounting to that officer's annual compensation for
a period of three years in the case of the chief executive officer, two years in
the case of the executive vice president and senior vice president (2
individuals) and one year in the case of each other officer, after the officer's
termination, if such termination follows a "change of control" as defined in
the agreements.
51
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Incentive Compensation Plans
The Company has two incentive compensation plans designed to provide an
annual incentive to improve financial performance, under which annual incentive
awards are paid if the Company achieves specified objectives.
All personnel employed at the beginning of the fiscal year are eligible to
participate in the General Profit Sharing Plan. Certain members of senior
management are eligible to participate in the Management Incentive Plan. The
Board of Directors may provide these incentive awards in the form of cash or
stock, or in the case of the General Profit Sharing Plan, a contribution to the
Company's 401(k) Plan. Based on financial results achieved during the past three
fiscal years, the Company paid total cash incentive awards, as defined in the
two plans, of $55,000 for the six months ended December 31, 1995 and $96,000,
$111,000 and $29,000, respectively, for the fiscal years ended June 30, 1995,
1994 and 1993.
(13) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND OTHER COMMITMENTS AND
CONTINGENCIES
The Company is party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include unused lines of credit, unadvanced portions
of construction loans, commitments to originate loans, and standby letters of
credit. The instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the balance sheet. The
amounts of those instruments reflect the extent of involvement the Company has
in particular classes of financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to its financial instruments (for unused lines of credit, loan
commitments and standby letters of credit) is represented by the contractual
amount of those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments. The Company evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Company upon extension of credit, is based on management's credit evaluation
of the borrower.
Financial instruments with off-balance sheet risk at the dates indicated
are as follows:
<TABLE>
<CAPTION>
AT
DECEMBER 31, AT JUNE 30,
-------------------
1995 1995 1994
------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Unused home equity lines of credit.................................. $ 16,387 $ 15,640 $ 18,586
Unused commercial lines of credit................................... 14,175 10,965 8,000
Unadvanced portions of construction loans........................... 6,207 5,174 2,270
Commitments to originate residential mortgage loans................. 4,314 4,094 5,192
Commitments to originate commercial, construction and commercial
real estate loans................................................. 7,603 15,146 11,197
Standby letters of credit........................................... 1,624 1,659 542
Unused consumer overdraft protection credit......................... 1,017 946 893
Commitments to sell residential mortgage loans...................... 6,322 7,589 5,494
Best efforts commitment to sell automobile loans.................... 24,000 48,000 --
Loans sold with credit enhancement.................................. 24,019 9,777 --
Unused portion of credit card loans................................. 1,489 1,443 1,614
</TABLE>
52
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Commitments to originate loans, unused lines of credit and unadvanced
portions of construction loans are agreements to lend to a customer provided
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since some of the commitments may expire without being
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements.
Commitments to sell residential mortgage loans for a fixed price are
generally entered into between the date lending commitments are issued to
borrowers and the date the loans are sold into the secondary market. Risks arise
from the possible inability of counter-parties to meet the terms of commitments
and movement in interest rates and related prices.
Standby letters of credit are conditional commitments issued by the Banks to
guarantee the performance by a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers.
The Company has periodically sold automobile loans with credit enhancement
that obligates the Company to assume a certain portion of credit losses should
they occur. At December 31, 1995, the outstanding balance of those loans totaled
$24,019,000. The Company has provided $139,000 to absorb such possible losses.
The Company has an agreement to sell up to an additional $24,000,000 of new loan
production to the same buyer on a best efforts basis.
The Company is required to maintain a portion of its cash and due from banks
as a reserve balance under the Federal Reserve Act. Such reserve is calculated
based upon deposit levels and amounted to $1,726,000 at December 31, 1995.
The Company is involved in various legal proceedings in the normal course of
business, none of which is believed by management to be material to the
financial condition or results of operations of the Company.
(14) FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimates of fair value of financial instruments are based on information
available at December 31, 1995, June 30, 1995 and June 30, 1994, and are not
indicative of the fair market value of those instruments at the date this report
is published. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Company's entire holdings of a
particular class of financial instruments. Because no market exists for a
portion of the Company's financial instruments, fair value estimates are based
on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
53
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial assets or liabilities include loans serviced for others,
premises and equipment and foreclosed real estate. In addition, the tax
ramifications related to the realization of the unrealized gains and losses can
have a significant effect on fair value estimates and have not been considered
in any of the estimates. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating fair values of its financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amounts reported in the
balance sheet for cash and cash equivalents approximate those assets' fair
values.
SECURITIES AVAILABLE FOR SALE, SECURITIES HELD TO MATURITY, AND
MORTGAGE LOANS HELD FOR SALE: Fair values for these instruments are based
on market prices, where available. If quoted market prices are not
available, fair values are based on market prices of comparable
instruments.
FHLB STOCK: The carrying amount reported in the balance sheet for
Federal Home Loan Bank (''FHLB'') stock approximates fair value. If
redeemed, the Company will receive an amount equal to the par value of the
stock.
LOANS: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying
values. The fair value of other loans are estimated using discounted cash
flow analyses using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. The fair value of
nonaccrual loans was estimated using the estimated fair values of the
underlying collateral. The carrying amount of accrued interest approximates
fair value.
LOAN SERVICING RIGHTS: The carrying values of loan servicing rights
are reasonable approximations of their fair value at that date.
DEPOSITS AND OTHER BORROWED FUNDS: The fair values of non-interest
bearing demand and savings deposits are, by definition, equal to the amount
payable on demand at the reporting date (i.e., their carrying amounts).
Fair values for time certificates of deposit and borrowed funds are
estimated using a discounted cash flow technique that applies interest
rates currently being offered to a schedule of aggregated expected monthly
maturities on time deposits and other borrowed funds.
REPURCHASE AGREEMENTS: Due to the short term nature of repurchase
agreements, carrying value is a reasonable estimation of fair value.
LIABILITY RELATING TO ESOP: The carrying amount reported in the
balance sheet approximates the liability relating to the ESOP's fair value.
The liability reprices quarterly.
54
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OFF-BALANCE SHEET INSTRUMENTS: The fair value of commitments to extend
credit was based on fees currently charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the
counterparties' credit standing. The estimated fair value of the commitments
to sell residential mortgage loans was based on the cost to terminate such
commitments.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 JUNE 30, 1995 JUNE 30, 1994
------------------- ------------------- -----------------
ESTIMATED ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
------ ----- ------ ------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents.................. $ 31,193 $ 31,193 $ 31,349 $ 31,349 $ 15,400 $ 15,400
Securities available for sale............... 67,411 67,411 63,568 63,568 69,922 69,922
Securities held to maturity................. 47,525 47,760 65,397 65,322 41,324 40,152
Federal Home Loan Bank stock................ 4,411 4,411 4,009 4,009 2,040 2,040
Mortgage loans held for sale................ 2,940 3,027 4,635 4,751 6,106 6,127
Loans, net.................................. 323,347 326,491 318,409 317,098 257,083 258,759
Accrued interest receivable................. 3,724 3,724 3,540 3,540 2,812 2,812
Loan servicing rights....................... 2,513 2,513 2,564 2,564 -- --
FINANCIAL LIABILITIES:
Non-interest bearing demand
deposits................................... $ 39,969 $ 39,969 $ 37,829 $ 37,829 $ 30,228 $ 30,228
Savings deposits............................ 137,835 137,835 138,620 138,620 160,690 160,690
Time certificates of deposit................ 207,633 208,577 196,735 196,892 155,471 155,872
Repurchase agreements....................... 11,860 11,860 15,879 15,879 1,797 1,797
Other borrowed funds........................ 59,076 59,119 77,142 77,171 24,189 24,067
Liability related to ESOP................... 118 118 197 197 355 355
Accrued interest payable.................... 1,517 1,517 1,229 1,229 719 719
Credit enhancement liability................ 139 139 51 51 -- --
OFF-BALANCE SHEET INSTRUMENTS:
Commitments to extend credit................ $ -- $ 123 $ -- $ 94 $ -- $ 168
Commitments to sell loans................... -- -- -- 1 -- 3
</TABLE>
55
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(15) CONDENSED PARENT COMPANY FINANCIAL INFORMATION
Condensed financial statements of Community Bankshares, Inc. (the "Parent
Company") as of December 31, 1995 and June 30, 1995 and 1994 and for six months
ended December 31, 1995 and for the years ended June 30, 1995, 1994 and 1993
follow:
COMMUNITY BANKSHARES, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------
1995 1995 1994
---------- ------- --------
(DOLLARS IN THOUSANDS EXCEPT SHARE
DATA)
<S> <C> <C> <C>
ASSETS
Cash................................................................... $ 1,263 $ 1,601 $ 2,048
Securities available for sale--amortized cost $80 at December 31
and June 30, 1995 and $25 at June 30, 1994........................... 108 97 35
Investment in subsidiary, at equity .................................. 35,510 33,418 29,453
Other assets........................................................... 85 95 84
---------- ------- --------
Total assets................................................. $ 36,966 $35,211 $ 31,620
========== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Liability relating to ESOP......................................... $ 118 $ 197 $ 355
Other liabilities.................................................. 80 39 47
---------- ------- --------
Total liabilities............................................ 198 236 402
---------- ------- --------
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; issued and outstanding, 2,382,849 at
December 31, 1995, 2,380,476 shares at June 30, 1995 and
2,376,869 at June 30, 1994....................................... 2,383 2,380 2,377
Additional paid-in capital......................................... 21,784 21,766 21,962
Retained earnings.................................................. 12,299 11,068 7,870
---------- ------- --------
36,466 35,214 32,209
Unrealized net gains (losses) on securities available for sale, net 578 151 (636)
Unearned compensation--ESOP........................................ (118) (197) (355)
Treasury stock (at cost) - 9,655 shares at December 31, 1995
and 11,810 shares at June 30, 1995............................... (158) (193) --
----------- ------- --------
Total stockholders' equity................................... 36,768 34,975 31,218
----------- ------- --------
Total liabilities and stockholders' equity................... $ 36,966 $35,211 $ 31,620
========== ======= ========
</TABLE>
56
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
COMMUNITY BANKSHARES, INC.
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
ENDED ----------------------------
1995 1995 1994 1993
-------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
Interest and dividend income........................... $ 27 $ 61 $ 54 $ 64
Dividends from subsidiary.............................. 549 993 330 --
Management fees from subsidiary........................ 98 131 145 110
Equity in undistributed income of subsidiary........... 1,675 3,182 3,291 2,460
------- --------- ------- -------
Total revenues....................................... 2,349 4,367 3,820 2,634
Operating expenses....................................... 575 192 199 174
------- --------- ------- -------
Net income........................................... $ 1,774 $ 4,175 $ 3,621 $ 2,460
======= ========= ======= =======
</TABLE>
The Parent Company's statements of changes in stockholders' equity are
identical to the consolidated statements of changes in stockholders' equity and
therefore are not reprinted here.
COMMUNITY BANKSHARES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-------------------------
1995 1995 1994 1993
-------- --------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash flows from operations:
Net income................................................... $ 1,774 $ 4,175 $ 3,621 $ 2,460
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in undistributed income of subsidiary.............. (1,675) (3,182) (3,291) (2,460)
(Increase) decrease in other assets....................... 10 68 (33) (4)
Increase (decrease) in other liabilities.................. 49 (8) 34 (17)
------- ------- ------- -------
Net cash provided by (used in) operating
activities........................................... 158 1,053 331 (21)
------- ------- ------- -------
Cash flows from investing activities:
Purchases of investment securities........................... -- (55) -- (17)
------- ------- ------- -------
Net cash used in investing activities................. -- (55) -- (17)
------- ------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock....................... 53 175 171 65
Purchase of treasury stock................................... -- (627) -- --
Dividends paid on common stock............................... (549) (993) (416) --
------- ------- ------- -------
Net cash provided by (used in) financing (496) (1,445) (245) 65
activities........................................... ------- ------- ------- -------
Net increase (decrease) in cash................................ (338) (447) 86 27
Cash at beginning of period.................................... 1,601 2,048 1,962 1,935
------- ------- ------- -------
Cash at end of period.......................................... $ 1,263 $ 1,601 $ 2,048 $ 1,962
======= ======= ======= =======
</TABLE>
57
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(16) UNAUDITED CONSOLIDATED CONDENSED INCOME STATEMENTS
<TABLE>
<CAPTION>
QUARTERLY INCOME STATEMENTS (UNAUDITED)
QUARTERS ENDED
-----------------------------
SEPTEMBER DECEMBER MARCH JUNE
--------- -------- ------ ------
30 31 31 30
-- -- -- -----
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
SIX MONTHS ENDED DECEMBER 31, 1995
Interest and dividend income................................. $ 9,852 $ 9,952
Interest expense............................................. 5,033 5,023
------- -------
Net interest and dividend income........................... 4,819 4,929
Provision for possible loan losses........................... 250 248
------- -------
Net interest and dividend income after provision for
possible loan losses..................................... 4,569 4,681
Non-interest income.......................................... 715 870
Non-interest expense......................................... (3,543) (4,254)
------- -------
Income before income taxes................................. 1,741 1,297
Income taxes................................................. 603 661
------- -------
Net income................................................. $ 1,138 $ 636
======= =======
Earnings per common and common equivalent share.............. $ 0.46 $ 0.27
======= =======
FISCAL YEAR ENDED JUNE 30, 1995
Interest and dividend income................................. $ 7,547 $ 8,064 $ 8,754 $ 9,508
Interest expense............................................. 3,293 3,602 4,152 4,771
------- ------- ------- -------
Net interest and dividend income........................... 4,254 4,462 4,602 4,737
Provision for possible loan losses........................... 159 193 200 225
------- ------- ------- -------
Net interest and dividend income after provision for
possible loan losses..................................... 4,095 4,269 4,402 4,512
Non-interest income.......................................... 548 480 521 652
Non-interest expense......................................... (3,187) (3,378) (3,405) (3,472)
------- ------- ------- -------
Income before income taxes................................. 1,456 1,371 1,518 1,692
Income taxes................................................. 429 385 491 557
------- ------- ------- -------
Net income................................................. $ 1,027 $ 986 $ 1,027 $ 1,135
======= ======= ======= =======
Earnings per common and common equivalent share.............. $ 0.42 $ 0.41 $ 0.42 $ 0.46
======= ======= ======= =======
FISCAL YEAR ENDED JUNE 30, 1994
Interest and dividend income................................. $ 6,715 $ 6,728 $ 6,665 $ 7,096
Interest expense............................................. 2,986 2,928 2,875 2,979
------- ------- ------- -------
Net interest and dividend income........................... 3,729 3,800 3,790 4,117
Provision for possible loan losses........................... 529 130 133 133
------- ------- ------- -------
Net interest and dividend income after provision for
possible loan losses..................................... 3,200 3,670 3,657 3,984
Non-interest income.......................................... 886 733 655 544
Non-interest expense......................................... (3,121) (3,210) (3,196) (3,284)
------- ------- ------- -------
Income before income taxes................................. 965 1,193 1,116 1,244
Income taxes................................................. 218 229 239 211
------- ------- ------- -------
Net income after taxes..................................... 747 964 877 1,033
Dividends on preferred stock................................. 8 7 4 --
------- ------- ------- -------
Net income available to common stock....................... $ 739 $ 957 $ 873 $ 1,033
======= ======= ======= =======
Earnings per common and common equivalent share.............. $ 0.29 $ 0.41 $ 0.37 $ 0.42
======= ======= ======= =======
</TABLE>
Aggregate quarterly earnings per share may not equal earnings per share for the
full year due to rounding.
58
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
As indicated in Note 1, the Company adopted SFAS No. 122 effective July 1,
1994 with the effect of increasing gains on sale of loans by approximately
$170,000 for fiscal 1995. In so doing, the Company has herein revised the
previously reported quarterly operating results for the first three quarters of
fiscal 1995. As a result of such revisions, gains on sale of loans, net income,
and earnings per common and common equivalent share were increased as follows:
<TABLE>
<CAPTION>
GAINS ON NET EARNINGS
FISCAL 1995 QUARTER ENDED -------- --- ---------
- ---------------------------------- SALE OF LOANS INCOME PER SHARE
-------------- ------ ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
September 30, 1994................. $ 58 $ 39 $ 0.02
December 31, 1994.................. 46 31 0.01
March 31, 1995..................... 47 32 0.01
</TABLE>
INCOME STATEMENT FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
1994
----
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C>
Interest and dividend income.............................. $15,611
Interest expense.......................................... 6,895
-------
Net interest and dividend income........................ 8,716
Provision for possible loan losses........................ 352
-------
Net interest and dividend income after provision for
possible loan losses.................................. 8,364
Non-interest income....................................... 1,028
Non-interest expense...................................... (6,565)
-------
Income before income taxes.............................. 2,827
Income taxes.............................................. 814
-------
Net income.............................................. $ 2,013
=======
Earnings per common and common equivalent share........... $ .83
=======
</TABLE>
59
<PAGE>
COMMUNITY BANKSHARES, INC. AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(17) ACQUISITION OF CENTERPOINT BANK
On March 20, 1996 the Company completed its acquisition of Centerpoint Bank
through the issuance of 657,587 shares of common stock. The acquisition was
accounted for as a pooling-of-interests and, accordingly, the financial
information for all periods presented has been restated to present the combined
financial condition and results of operations of both companies as if the
acquisition had been in effect for all periods presented.
The following table presents net interest income, net income and earnings per
share reported by each of the companies and on a combined basis:
<TABLE>
<CAPTION>
Six Months
Ended
December 31, Year Ended June 30,
------------------
1995 1995 1994 1993
---- ---- ---- ----
(Dollars in Thousands, Except Per Share Amount)
(Unaudited)
<S> <C> <C> <C> <C>
Total interest and dividend income:
Community Bankshares, Inc......... $ 16,124 $ 28,241 $ 23,218 $ 24,636
Centerpoint Bank.................. 3,680 5,632 3,986 3,060
Combined.......................... 19,804 33,873 27,204 27,696
Net income:
Community Bankshares, Inc......... $ 1,371 $ 3,287 $ 3,090 $ 2,221
Centerpoint Bank.................. 403 888 531 239
Combined.......................... 1,774 4,175 3,621 2,460
Earnings per common share:
Community Bankshares, Inc......... $ 0.77 $ 1.84 $ 1.73 $ 1.28
Centerpoint Bank.................. 0.65 1.51 0.90 0.40
Combined.......................... 0.73 1.70 1.49 1.09
</TABLE>
60
