<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996.
OR
- ----- TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________
Commission File No. 33-19735-A
COMMUNITY BANCSHARES, INC.
- ------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
North Carolina 56-1693841
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1600 Curtis Bridge Road Wilkesboro, North Carolina 28679
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices)
(910) 838-4100
- ------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Not Applicable
- ------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common equity as of the latest
practicable date.
Common stock, $3.00 par value per share 946,171 shares issued and
outstanding as of August 9, 1996.
(Page 1 of 15)
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
---- ----
(Unaudited) (Unaudited)
----------- ------------
<S> <C>
Cash and due from banks $ 1,348,671 $ 1,881,264
Federal funds sold -- 67,922
---------- ----------
Total cash and cash equivalents $ 1,348,671 $ 1,949,186
Securities:
Available-for-sale,
at estimated market values 7,631,563 7,013,048
Held-to-maturity (Estimated market
values of $5,059,199 (6-30-96)
and $6,835,210 (12-31-95) 5,177,068 6,809,508
Loans, net 44,464,306 36,313,575
Investment in Community Mortgage 17,037 16,954
Property and equipment 235,461 225,597
Other assets 721,498 593,389
---------- ----------
Total Assets $59,595,604 $52,921,257
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 3,186,261 $ 4,026,059
Interest bearing deposits 49,289,786 44,157,107
---------- ----------
Total deposits $52,476,047 $48,183,166
Other liabilities 1,486,610 694,965
---------- ----------
Total Liabilities $53,962,657 $48,878,131
---------- ----------
Commitments & Contingencies
Shareholders' Equity:
Common stock - $3.00 par value,
10,000,000 shares authorized;
935,297 (6-30-96) and 781,786
(12-31-95) shares issued
and outstanding $ 2,805,891 $ 2,345,358
Paid-in-capital 2,936,513 1,868,236
Retained earnings (deficit) (57,503) (187,710)
Unrealized (loss) on
securities available-for-sale (51,954) 17,242
---------- ----------
Total Shareholders' Equity $ 5,632,947 $ 4,043,126
---------- ----------
Total Liabilities
and Shareholders' Equity $59,595,604 $52,921,257
========== ==========
</TABLE>
Refer to notes to the consolidated financial statements.
2
<PAGE> 3
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
For the six months
ended June 30,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
Interest income $2,343,585 $1,834,512
Interest expense 1,290,621 950,112
--------- ---------
Net interest income $1,052,964 $ 884,400
Provision for possible loan losses 82,500 66,213
--------- ---------
Net interest income (loss) after
provision for possible loan losses $ 970,464 $ 818,187
--------- ---------
Other income:
Service fees and other charges $ 58,291 $ 38,029
Gain on sale of securities 1,089 - -
--------- ---------
Total other income $ 59,380 $ 38,029
--------- ---------
Operating expenses:
Salaries and benefits $ 399,621 $ 307,207
Legal and professional 26,530 36,109
Depreciation 31,852 19,873
Amortization 12,035 12,035
Courier and postage 31,190 23,591
Rent expense 42,108 34,629
Data processing 50,777 40,472
Regulatory assessments 35,900 53,456
Other operating expenses 193,236 130,517
--------- ---------
Total Expenses $ 823,249 $ 657,889
--------- ---------
Income before taxes
and extraordinary item $ 206,595 $ 198,327
Income tax 76,388 86,547
--------- ---------
Net Income $ 130,207 $ 111,780
========= =========
Income per share $ .12 $ .12
========= =========
Weighted average
common stock equivalents 1,101,875 929,408
========= =========
</TABLE>
Refer to notes to the consolidated financial statements.
3
<PAGE> 4
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months
ended June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Interest income $1,217,249 $ 971,528
Interest expense 644,153 520,059
--------- --------
Net interest income $ 573,096 $ 451,469
Provision for possible loan losses 45,000 34,795
--------- --------
Net interest income after
provision for possible loan losses $ 528,096 $ 416,674
--------- --------
Other income:
Service fees and other charges $ 24,251 $ 17,131
Gain on sale of securities 5,586 - -
--------- --------
Total other income $ 29,837 $ 17,131
--------- --------
Operating expenses:
Salaries and benefits $ 209,086 $ 157,390
Legal and professional 12,104 23,334
Depreciation 16,447 10,588
Amortization 6,018 6,018
Courier and postage 17,425 11,365
Rent expense 20,243 17,645
Data processing 26,389 20,742
Regulatory assessments 16,925 26,728
Other operating expenses 92,172 63,517
--------- --------
Total Expenses $ 416,809 $ 337,327
--------- --------
Income before taxes $ 141,124 $ 96,478
Income tax 52,750 45,646
--------- --------
Net Income $ 88,374 $ 50,832
========= ========
Income per share $ .08 $ .06
========= ========
Weighted average
common stock equivalents 1,136,287 929,408
========= ========
</TABLE>
Refer to notes to the consolidated financial statements.
4
<PAGE> 5
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities: $ 167,867 $ 387,803
---------- ----------
Cash flows from investing activities
Purchase of equipment (41,716) (75,563)
(Increase) in loans, net (8,233,231) (5,799,709)
Securities, available-for-sale
Sale of securities 1,616,300 1,243,547
Purchase of securities (2,768,638) (1,106,401)
Maturities and pay-downs 463,106 687,769
Securities, held-to-maturity
Purchase of securities (275,591) (1,903,538)
Maturities and pay-downs 1,908,031 702,262
---------- ----------
Net cash used in investing activities $(7,331,739) $(6,251,633)
---------- ----------
Cash flows from financing activities
Increase in repurchase agreements $ 741,666 $ --
Increase in deposits 4,292,881 5,285,954
Proceeds from sale of stock 1,528,810 62,020
---------- ----------
Net cash provided from financing activities $ 6,563,357 $ 5,347,974
---------- ----------
Net (decrease) in cash and cash equivalents $ (600,515) $ (515,856)
Cash and cash equivalents
at beginning of period 1,949,186 4,613,843
---------- ----------
Cash and cash equivalents at end of period $ 1,348,671 $ 4,097,987
========== ==========
</TABLE>
Refer to notes to the consolidated financial statements.
5
<PAGE> 6
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the
six-month period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. For
further information, refer to the financial statements and footnotes thereto
included in Form 10-KSB for the year ended December 31, 1995.
NOTE 2 - SUMMARY OF ORGANIZATION
Community Bancshares, Inc., Wilkesboro, North Carolina (the
"Company"), was incorporated under the laws of the State of North Carolina on
June 11, 1990, for the purpose of becoming a bank holding company with respect
to a proposed national bank, Wilkes National Bank (the "Bank"), located in
Wilkesboro, North Carolina. Upon commencement of the Bank's planned principal
operations on January 17, 1992, the Company acquired 100 percent of the voting
stock of the Bank by injecting $3,750,000 into the Bank's capital accounts.
In 1990 during its initial stages, the Company filed a Registration
Statement on a Form S-1 with the Securities and Exchange Commission offering
for sale a minimum of 365,000 and a maximum of 660,000 shares of its common
stock, $6.00 par value per share. During 1995, the Company's common stock was
split two-for-one and its par value was adjusted to $3.00 per share. On March
8, 1996, the Company offered for sale up to 500,000 of its $3.00 par value
common stock. As of June 30, 1996, 152,011 shares of the Company's common
stock were sold for an aggregate price of $1,520,110. As of June 30, 1996 and
December 31, 1995, there were 935,297 and 781,786 outstanding shares of common
stock, respectively.
At the time the Company was organized, it offered warrants to its
organizers and to a group of initial subscribers. Each warrant, when
surrendered with $5.50 to the Company, is convertible into one share of common
stock. The warrants expire ten years from
6
<PAGE> 7
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
January 17, 1992. At June 30, 1996 and December 31, 1995, there were 385,514
and 386,914 outstanding warrants, respectively.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Reclassification. The consolidated
financial statements include the accounts of the Company and the Bank. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform
to the current year presentation.
Basis of Accounting. The accounting and reporting policies of the
Company conform to generally accepted accounting principles and to general
practices in the banking industry. The Company uses the accrual basis of
accounting by recognizing revenues when earned and expenses when incurred,
without regarding the time of receipt or payment of cash.
Investment Securities. The Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investment in Debt and
Equity Securities" ("SFAS 115") on January 1, 1994. SFAS 115 requires
investments in equity and debt securities to be classified into three
categories:
1. Held-to-maturity securities: These are securities which the
Company has the ability and intent to hold until maturity.
These securities are stated at cost, adjusted for amortization
of premiums and the accretion of discounts.
2. Trading securities: These are securities which are bought and
held principally for the purpose of selling in the near
future. Trading securities are reported at fair market value,
and related unrealized gains and losses are recognized in the
income statement.
3. Available-for-sale securities: These are securities which are
not classified as either held-to- maturity or as trading
securities. These securities are reported at estimated market
value. Unrealized gains and losses are reported, net of tax,
as separate components of shareholders' equity. Unrealized
gains and losses are excluded from the income statement.
7
<PAGE> 8
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
Loans, Interest and Fee Income on Loans. Loans are stated at the
principal balance outstanding. Unearned discount, unamortized loan fees and
the allowance for possible loan losses are deducted from total loans in the
statement of condition. Interest income is recognized over the term of the
loan based on the principal amount outstanding. Points on real estate loans
are taken into income to the extent they represent the direct cost of
initiating a loan. The amount in excess of direct costs is deferred and
amortized over the expected life of the loan.
Loans are generally placed on non-accrual status when principal or
interest becomes ninety days past due, or when payment in full is not
anticipated. When a loan is placed on non-accrual status, interest accrued but
not received is generally reversed against interest income. If collectibility
is in doubt, cash receipts on non-accrual loans are not recorded as interest
income, but are used to reduce principal.
Allowance for Possible Loan Losses. The provisions for loan losses
charged to operating expense reflect the amount deemed appropriate by
management to establish an adequate reserve to meet the present and
foreseeable risk characteristics of the current loan portfolio. Management's
judgement is based on periodic and regular evaluation of individual loans, the
overall risk characteristics of the various portfolio segments, past
experience with losses and prevailing and anticipated economic conditions.
Loans which are determined to be uncollectible are charged against the
allowance. Provisions for loan losses and recoveries on loans previously
charged-off are added to the allowance.
The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," ("SFAS 114") on
January 1, 1995. Under the new standard, a loan is considered impaired, based
on current information and events, if it is probable that the Company will be
unable to collect the scheduled payments of principal or interest when due
according to the contractual terms of the loan agreement. The measurement of
impaired loans is generally based on the present value of expected future cash
flows discounted at the historical effective interest rate, except that all
collateral-dependent loans are measured for impairment based on the fair value
of the collateral. The adoption of SFAS 114 resulted in no change to the
allowance for credit losses at January 1, 1995.
8
<PAGE> 9
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
In October, 1994, FASB issued Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure" ("SFAS 118"). SFAS 118 amends SFAS 114 to allow a
creditor to use existing methods for recognizing interest income on an impaired
loan, rather than the methods prescribed in SFAS 114.
Property and Equipment. Furniture, equipment and leasehold
improvements are stated at cost, net of accumulated depreciation. Depreciation
is computed using the straight line method over the estimated useful lives of
the related assets. Maintenance and repairs are charged to operations, while
major improvements are capitalized. Upon retirement, sale or other disposition
of property and equipment, the cost and accumulated depreciation are eliminated
from the accounts, and gains or losses are included in income from operations.
Organizational Costs. In accordance with FASB Statement No. 7, the
Company and the Bank capitalized all direct organizational costs that were
incurred in the expectation that they would generate future revenues or
otherwise be of benefit after the Bank commenced operations. These capitalized
costs are amortized over a sixty-month period using the straight line method.
As of June 30, 1996 and December 31, 1995, total organizational costs, net of
amortization, amounted to $14,042 and $26,076, respectively.
Income Taxes. The consolidated financial statements have been
prepared on the accrual basis. When income and expenses are recognized in
different periods for financial reporting purposes and for purposes of
computing income taxes currently payable, deferred taxes are provided on such
temporary differences.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Under SFAS 109, deferred tax assets and liabilities are recognized for the
expected future tax consequences of events that have been recognized in the
financial statements or tax return. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be realized or
settled.
9
<PAGE> 10
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1996
Statement of Cash Flows. For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, amounts due from banks and federal
funds sold. Generally, federal funds are purchased or sold for one-day periods.
Income Per Share. The weighted average number of shares outstanding
as well as all common stock equivalents must be considered for purposes of
computing earnings per share. Note that common stock equivalents are
securities that enable their holders to obtain additional shares of common
stock. Options and warrants are common stock equivalents. They are used in
the computation of earnings per share only if, upon exercise, they dilute
earnings per share by 3% or more. To compute earnings per share, adjusted net
income is divided by the sum of weighted average common stock outstanding and
common stock equivalents.
10
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Sources of Capital
The Company commenced its planned principal operations on January 17, 1992 when
its subsidiary Bank opened for business. During the period from February 1,
1990 to January 17, 1992, the Company was in the development stage as it
devoted most of its efforts to organizing, incorporating, planning, raising
capital and recruiting personnel. During the development stage, the Company
funded its operations principally through borrowings. However, by December 31,
1991, all outstanding loans were paid-off with funds raised through the sale of
the Company's common stock.
Total assets increased by $6.7 million to $59.6 million during the six-month
period ended June 30, 1996. The increase was generated primarily through a
$4.3 million increase in deposits, a $.8 million increase in repurchase
agreements and a $1.5 million increase in equity. These funds were utilized to
expand the loan portfolio. The opening of the second branch at Miller's Creek
has contributed, and will continue to contribute, to the increase in deposits
and loan demand.
Liquidity is the Company's ability to meet all deposit withdrawals immediately,
while also providing for the credit needs of customers. The June 30, 1996
financial statements evidence a fair liquidity position as total cash and cash
equivalents amounted to $1.3 million, representing 2.3% of total assets.
Investment securities amounted to $12.8 million, representing 21.5% of total
assets. These securities provide a secondary source of liquidity because they
can be converted into cash in a timely manner. The subsidiary Bank is a member
of the Federal Reserve System and is maintaining relationships with several
correspondent banks and, thus, could obtain funds on short notice. The
Company's management closely monitors and maintains appropriate levels of
interest earning assets and interest bearing liabilities, so that maturities of
assets are such that adequate funds are provided to meet customer withdrawals
and loan demand. There are no trends, demands, commitments, events or
uncertainties that will result in or are reasonably likely to result in the
Company's liquidity increasing or decreasing in any material way.
During the three-month period ended June 30, 1996, the Company injected
$1,230,000 into the Bank's capital accounts. The Bank maintains an adequate
level of capitalization as measured by the following capital ratios and the
respective minimum capital requirements by the Bank's primary regulator, the
OCC.
<TABLE>
<CAPTION>
Bank's Minimum required
June 30, 1996 by regulator
-------------- ------------
<S> <C> <C>
Leverage ratio 8.5% 4.0%
Risk weighted ratio 12.2% 8.0%
</TABLE>
11
<PAGE> 12
With respect to the leverage ratio, the regulator expects a minimum of 5.0
percent to 6.0 percent ratio for banks that are not rated CAMEL 1. Although
the Bank is not rated CAMEL 1, its leverage ratio of 8.5% is above the required
minimum.
The Company filed a Registration Statement on Form S-2 with the Securities and
Exchange Commission, to sell a maximum of 500,000 shares at $10 per share. The
Registration Statement was declared effective on March 8, 1996. As of June 30,
1996, 152,011 shares of the Company's common stock were sold for $1,520,110.
As discussed earlier, $1,230,000 of the above funds were contributed to the
Bank's capital accounts in order to support growth.
Results of Operations
For the three-month periods ended June 30, 1996 and 1995, net income amounted
to $88,374 and $50,832, respectively. On a per-share basis, net income
amounted to $.08 (6-30-96) and $.06 (6-30-95). The improvement in net income
is due to a higher net interest income and higher service fees and charges.
Net income for the six-month period ended June 30, 1996 amounted to $130,207.
These results compare favorably with the June 30, 1995 net income of $111,780.
On a per share basis, net income amounted to $.12 during each of the above
periods. Four major items are of a particular interest when one compares the
June 30, 1996 results to those of June 30, 1995.
a. Net interest income, which represents the difference between interest
received on interest earning assets and interest paid on interest
bearing liabilities, has increased from $884,400 for the six-month
period ended June 30, 1995 to $1,052,964 for the same period one year
later, representing an increase of $168,564, or 19.1%. This increase
was attained primarily because of a $12.6 million increase in earning
assets, from $44.7 million at June 30, 1995 to $57.3 million at June
30, 1996. For the three-month periods ended June 30, 1995 and 1996,
net interest income rose from $451,469 to $573,096 representing an
increase of $121,267, or 26.9%.
b. The net interest yield, defined as net interest income divided by
average interest earning assets, has decreased from 4.25% for the
six-month period ended June 30, 1995 to 3.94% for the six-month period
ended June 30, 1996. This decline is attributed to a significant
increase in the cost of funds. Below is pertinent information
concerning the yield on earning assets and the cost of funds as of
June 30, 1996.
12
<PAGE> 13
<TABLE>
<CAPTION>
Avg. Assets/ Interest Yield/
Description Liabilities Income/Expense Cost
- ----------- ----------- -------------- ------
<S> <C> <C>
Federal funds $ 580,559 $ 14,536 5.01%
Securities 13,474,072 415,854 6.17%
Loans 39,344,001 1,913,195 9.73%
---------- --------- ----
Total $53,398,632 $2,343,585 8.78%
========== --------- ----
Transactional
accounts $ 9,651,955 $ 155,869 3.23%
Savings 1,712,563 48,565 5.67%
CD's 35,755,411 1,071,704 5.99%
Reverse repos 620,772 14,483 4.66%
---------- --------- ----
Total $47,740,701 $1,290,621 5.41%
========== --------- ----
Net interest
income $1,052,964
=========
Net yield on earning assets 3.94%
====
</TABLE>
For the three-month period ended June 30, 1996, net interest yield
rose from 3.72% to 3.94%
c. Total non-interest income has increased from $38,029 for the six-month
period ended June 30, 1995 to $59,380 for the six-month period ended
June 30, 1996. The above increase of 56.1% is attributed to higher
volume in transactional accounts, and a higher fee schedule. For the
three-month periods ended June 30, 1995 and 1996, non-interest income
rose from $17,131 to $29,837, when net gains on sales of securities in
the amount of $5,586 were recognized.
d. Management was better able to control expenses. For the six-month
period ended June 30, 1996, operating expenses amounted to $823,249,
representing an annualized 2.98% of average assets. By comparison,
for the six- month period ended June 30, 1995, operating expenses
amounted to $657,889, representing an annualized 3.05% of average
assets.
The following table presents information with respect to loans and the
allocations to the allowance for loan losses as of June 30, 1996:
<TABLE>
<CAPTION>
Percent of Allocation to
Loan category Amount total allowance
- ------------- ------ ---------- -------------
<S> <C> <C> <C>
Commercial, financial
agricultural $19,198,678 42.7% $219,100
Real estate - construction 2,847,031 6.3% 38,800
Real estate - mortgage 12,454,537 27.7% 114,400
Consumer loans 10,459,521 23.3% 110,161
---------- ----- -------
Total $44,959,767 100.0% $482,461
========== ===== =======
Unallocated portion of
allowance $ 13,000
=======
</TABLE>
13
<PAGE> 14
As of June 30, 1996, loans aggregating $236,000 were accounted for on a
non-accrual basis. Additionally, loans aggregating $45,000 were contractually
past due 90 days or more as to principal and/or interest. There were no loans
defined as "troubled debt restructuring.
During the six-month period ended June 30, 1996, the allowance for loan losses
has grown from $418,620 to $495,461. The allowance for loan losses as a
percentage of gross loans, however, decreased from 1.14% at December 31, 1995
to 1.10% at June 30, 1996. The decline is due to increased loan volume. For
the six-month period ended June 30, 1996, the allowance for loan losses
increased $82,500 through provisions and $2,829 through recoveries; the
allowance decreased $8,488 due to charge-offs. The ratio of net charge-off to
average loans outstanding at June 30, 1996 was .03%.
Management considers the allowance for loan losses to be adequate and
sufficient to absorb possible future losses; however, there can be no assurance
that charge-offs in future periods will not exceed the allowance for loan
losses or that additional provisions to the allowance will not be required.
The Company is not aware of any current recommendation by the regulatory
authorities which, if they were to be implemented, would have a material effect
on the Company's liquidity, capital resources, or results of operations.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On May 31, 1996, the Company held its 1996 Annual Meeting of
Shareholders. At the meeting, the following persons were elected to serve on
the Company's Board of Directors for a term of three years and until their
successors are elected and have qualified. The number of votes cast for and
against the election of each nominee for director was as follows:
<TABLE>
<CAPTION>
Director For Against
-------- --- -------
<S> <C> <C>
Brent F. Eller . . . . . 570,093 0
Jack Ray Ferguson . . . . 570,093 0
Edward F. Greene . . . . 570,093 0
Robert F. Ricketts . . . 570,093 0
Ronald S. Shoemaker . . . 570,093 0
</TABLE>
No other matters were presented or voted upon at the 1996 Annual
Meeting of Shareholders.
The following persons did not stand for reelection to the Board at the
1996 Annual Meeting of Shareholders as their term of office continued after the
Annual Meeting: Stephen P. Greene, Gilbert R. Miller, Dwight E. Pardue, E.
Byron Richardson, Rebecca Ann Sebastian, Joe D. Severt and R. Colin Shoemaker.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit. The following exhibit is filed with this report.
27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. No report on Form 8-K was filed during the
quarter ended June 30, 1996.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COMMUNITY BANCSHARES, INC.
Dated: August 9, 1996 By: /s/Ronald S. Shoemaker
-------------- ----------------------
Ronald S. Shoemaker President
and Chief Executive Officer
(chief executive and financial
officer)
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COMMUNITY
BANCHARES, INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,348,671
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,631,563
<INVESTMENTS-CARRYING> 5,177,068
<INVESTMENTS-MARKET> 5,059,199
<LOANS> 44,959,767
<ALLOWANCE> 495,461
<TOTAL-ASSETS> 59,595,604
<DEPOSITS> 52,476,047
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,486,610
<LONG-TERM> 0
0
0
<COMMON> 2,805,891
<OTHER-SE> 2,827,056
<TOTAL-LIABILITIES-AND-EQUITY> 59,595,604
<INTEREST-LOAN> 1,912,955
<INTEREST-INVEST> 430,630
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 2,343,585
<INTEREST-DEPOSIT> 1,275,720
<INTEREST-EXPENSE> 1,290,621
<INTEREST-INCOME-NET> 1,052,964
<LOAN-LOSSES> 82,500
<SECURITIES-GAINS> 1,089
<EXPENSE-OTHER> 823,249
<INCOME-PRETAX> 206,595
<INCOME-PRE-EXTRAORDINARY> 206,595
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130,207
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
<YIELD-ACTUAL> 3.94
<LOANS-NON> 236,000
<LOANS-PAST> 45,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 418,620
<CHARGE-OFFS> 8,488
<RECOVERIES> 2,829
<ALLOWANCE-CLOSE> 495,461
<ALLOWANCE-DOMESTIC> 482,461
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 13,000
</TABLE>
