<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 September 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) 903-0600
- --------------------------------------------------------------------------------
(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 1,283,886 shares issued and
outstanding as of November 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
Sept. 30, December 31,
--------- ------------
1996 1995
---- ----
(Unaudited) (Unaudited)
----------- -----------
<S> <C>
Cash and due from banks $ 3,051,830 $ 1,881,264
Federal funds sold 4,150,000 67,922
----------- -----------
Total cash and cash equivalents $ 7,201,830 $ 1,949,186
Securities:
Available-for-sale,
at estimated market values 8,645,523 7,013,048
Held-to-maturity (Estimated market
values of $5,503,339 (9-30-96)
and $6,835,210 (12-31-95) 5,583,791 6,809,508
Loans, net 47,451,753 36,313,575
Investment in Community Mortgage 7,526 16,954
Property and equipment 222,319 225,597
Other assets 665,922 593,389
----------- -----------
Total Assets $69,778,664 $52,921,257
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 3,682,185 $ 4,026,059
Interest bearing deposits 56,109,839 44,157,107
----------- -----------
Total deposits $59,792,024 $48,183,166
Other liabilities 827,131 694,965
----------- -----------
Total Liabilities $60,619,155 $48,878,131
----------- -----------
Commitments & Contingencies
Shareholders' Equity:
Common stock - $3.00 par value,
10,000,000 shares authorized;
1,283,886 (9-30-96) and 781,786
(12-31-95) shares issued
and outstanding $ 3,851,658 $ 2,345,358
Paid-in-capital 5,307,078 1,868,236
Retained earnings (deficit) 46,345 (187,710)
Unrealized (loss) on
securities available-for-sale (45,572) 17,242
----------- -----------
Total Shareholders' Equity $ 9,159,509 $ 4,043,126
----------- -----------
Total Liabilities
and Shareholders' Equity $69,778,664 $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 nine months
ended September 30,
--------------------
1996 1995
---------- ---------
<S> <C> <C>
Interest income $3,684,720 $2,884,315
Interest expense 2,013,354 1,560,950
---------- ----------
Net interest income $1,671,366 $1,323,365
Provision for possible loan losses 152,500 103,213
---------- ----------
Net interest income (loss) after
provision for possible loan losses $1,518,866 $1,220,152
---------- ----------
Other income:
Service fees and other charges $ 99,360 $ (7,875)
Gain on sale of securities 1,089 73,536
---------- ----------
Total other income $ 100,449 $ 65,661
---------- ----------
Operating expenses:
Salaries and benefits $ 623,143 $ 465,828
Legal and professional 46,024 53,556
Depreciation 47,431 31,808
Amortization 18,053 18,052
Courier and postage 45,292 36,656
Rent expense 63,635 53,347
Data processing 78,219 62,432
Regulatory assessments 41,380 50,547
Other operating expenses 296,030 198,173
---------- ----------
Total Expenses $1,259,207 $ 970,399
---------- ----------
Income before taxes $ 360,108 $ 315,414
Income tax 126,053 134,292
---------- ----------
Net Income $ 234,055 $ 181,122
========== ==========
Income per share $ .15 $ .19
========== ==========
Weighted average
common stock equivalents 1,518,401 938,143
========== ==========
</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 September 30,
--------------------
1996 1995
---- ----
<S> <C> <C>
Interest income $1,341,135 $1,049,803
Interest expense 722,733 610,838
---------- ----------
Net interest income $ 618,402 $ 438,965
Provision for possible loan losses 70,000 37,000
---------- ----------
Net interest income after
provision for possible loan losses $ 548,402 $ 401,965
---------- ----------
Other income:
Service fees and other charges $ 41,069 $ 35,507
Gain/(loss) on sale of securities -- (7,875)
---------- ----------
Total other income $ 41,069 $ 27,632
---------- ----------
Operating expenses:
Salaries and benefits $ 223,522 $ 158,621
Legal and professional 19,494 17,447
Depreciation 15,579 11,935
Amortization 6,018 6,017
Courier and postage 14,102 13,065
Rent expense 21,527 18,718
Data processing 27,442 21,960
Regulatory assessments 5,480 (2,909)
Other operating expenses 102,794 67,657
---------- ----------
Total Expenses $ 435,958 $ 312,510
---------- ----------
Income before taxes $ 153,513 $ 117,087
Income tax 49,665 47,745
---------- ----------
Net Income $ 103,848 $ 69,342
========= ==========
Income per share $ .07 $ .07
========== ==========
Weighted average
common stock equivalents 1,580,425 938,143
========== ==========
</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>
Nine months ended
September 30,
-----------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities: $ 505,047 $ 505,233
------------ ------------
Cash flows from investing activities
Purchase of equipment (44,153) (96,382)
(Increase) in loans, net (11,290,678) (7,045,249)
Securities, available-for-sale
Sale of securities 1,616,300 1,243,547
Purchase of securities (4,476,695) (2,596,232)
Maturities and pay-downs 1,163,106 1,560,700
Securities, held-to-maturity
Purchase of securities (775,413) (4,404,928)
Maturities and pay-downs 2,001,130 915,925
------------ ------------
Net cash used in investing activities $(11,806,403) $(10,422,619)
------------ ------------
Cash flows from financing activities
Increase in deposits $ 11,608,858 $ 8,320,134
Proceeds from sale of stock 4,945,142 62,020
------------ ------------
Net cash provided from financing activities $ 16,554,000 $ 8,382,154
------------ ------------
Net increase in cash and cash equivalents $ 5,252,644 $ (1,535,232)
Cash and cash equivalents
at beginning of period 1,949,186 4,613,843
------------ ------------
Cash and cash equivalents at end of period $ 7,201,830 $ 3,078,611
============ ============
</TABLE>
Refer to notes to the consolidated financial statements.
5
<PAGE> 6
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 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
nine-month period ended September 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. An
additional $1,620,000 was injected into the Bank's capital accounts during
1996.
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 September 30, 1996, 500,000 shares of the Company's common
stock were sold for an aggregate net proceeds of $4,934,243. As of September
30, 1996 and December 31, 1995, there were 1,283,886 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
6
<PAGE> 7
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
into one share of common stock. The warrants expire ten years from
January 17, 1992. At September 30, 1996 and December 31, 1995, there were
385,114 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)
SEPTEMBER 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)
SEPTEMBER 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 September 30, 1996 and December 31, 1995, total organizational costs, net
of amortization, amounted to $8,023 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)
SEPTEMBER 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 $16.7 million to $69.8 million during the nine-month
period ended September 30, 1996. The increase was generated primarily through
an $11.6 million increase in deposits and a $5.0 million increase in equity
from the sale of common stock. These funds were primarily utilized to expand
the loan portfolio by $11.1 million, and cash and cash equivalents by $5.3
million. 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 September 30, 1996
financial statements evidence a strong liquidity position as total cash and
cash equivalents amounted to $7.2 million, representing 10.3% of total assets.
Investment securities amounted to $14.2 million, representing 20.4% 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 nine-month period ended September 30, 1996, the Company injected
$1,620,000 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
11
<PAGE> 12
requirements by the Bank's primary regulator, the OCC.
<TABLE>
<CAPTION>
Bank's Minimum required
Sept. 30, 1996 by regulator
-------------- ------------
<S> <C> <C>
Leverage ratio 8.0% 4.0%
Risk weighted ratio 12.4% 8.0%
</TABLE>
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 12.4% 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
September 30, 1996, the Company successfully completed the sale of 500,000
shares of common stock for a net proceeds of $4,934,243. As discussed earlier,
$1,620,000 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 September 30, 1996 and 1995, net income
amounted to $103,848 and $69,342, respectively. On a per-share basis, net
income amounted to $.07 for each of the above periods. The improvement in net
income is due to a higher net interest income and higher service fees and
charges.
Net income for the nine-month period ended September 30, 1996 amounted to
$234,055. These results compare favorably with the September 30, 1995 net
income of $181,122. On a per share basis, net income for the nine-month
periods ended September 30, 1996 and 1995 amounted to $.15 and $.19,
respectively. Four major items are of a particular interest when one compares
the September 30, 1996 results to those of September 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 $1,323,365 for the nine-month
period ended September 30, 1995 to $1,671,366 for the same period one
year later, representing an increase of $348,001, or 26.3%. This
increase was attained primarily because of a $17.9 million increase in
earning assets, from $47.9 million at September 30, 1995 to $65.8
million at September 30, 1996. For the three-month periods ended
September 30, 1995 and 1996, net interest income rose from $438,965 to
$618,402 representing an increase of $179,437, or 54.5%.
12
<PAGE> 13
b. The net interest yield, defined as net interest income divided by
average interest earning assets, has decreased from 4.10% for the
nine-month period ended September 30, 1995 to 3.97% for the nine-month
period ended September 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 September 30, 1996.
<TABLE>
<CAPTION>
Avg. Assets/ Interest Yield/
Description Liabilities Income/Expense Cost
- ----------- ----------- -------------- ------
<S> <C> <C> <C>
Federal funds $ 1,341,922 $ 48,180 4.79%
Securities 13,259,799 622,174 6.26%
Loans 41,494,179 3,014,366 9.69%
----------- ---------- ----
Total $56,095,900 $3,684,720 8.76%
=========== ---------- ----
Transactional
accounts $ 9,462,208 $ 241,712 3.41%
Savings 1,786,694 79,327 5.92%
CD's 37,603,697 1,673,805 5.93%
Reverse repos 453,927 18,510 5.45%
----------- ---------- ----
Total $49,306,226 $2,013,354 5.44%
=========== ---------- ----
Net interest income $1,671,366
==========
Net yield on earning assets 3.97%
====
</TABLE>
For the three-month period ended September 30, 1996, net interest yield
rose from 3.94% to 3.97%
c. Total non-interest income has increased from $65,661 for the nine-month
period ended September 30, 1995 to $100,449 for the nine-month period
ended September 30, 1996. The above increase of 53.0% is attributed to
higher volume in transactional accounts, and a higher fee schedule. For
the three-month periods ended September 30, 1995 and 1996, non-interest
income rose from $27,632 to $41,069, an increase of 48.6%.
d. Management was better able to control expenses. For the nine-month
period ended September 30, 1996, operating expenses amounted to
$1,259,207, representing an annualized 2.88% of average assets. By
comparison, for the nine-month period ended September 30, 1995,
operating expenses amounted to $970,399, representing an annualized
2.91% of average assets.
13
<PAGE> 14
The following table presents information with respect to loans and the
allocations to the allowance for loan losses as of September 30, 1996:
<TABLE>
<CAPTION>
Percent of Allocation to
Loan category Amount total allowance
- ------------- ------ ---------- -------------
<S> <C> <C> <C>
Commercial, financial
agricultural $20,686,504 43.1% $216,000
Real estate - construction 4,223,454 8.8% 48,000
Real estate - mortgage 13,706,315 28.6% 120,000
Consumer loans 9,329,145 19.5% 96,000
----------- ----- --------
Total $47,945,418 100.0% $480,000
=========== ===== ========
Unallocated portion of allowance $13,665
=======
</TABLE>
As of September 30, 1996, loans aggregating $545,000 were accounted for on a
non-accrual basis. Additionally, loans aggregating $423,000 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 nine-month period ended September 30, 1996, the allowance for loan
losses has grown from $418,620 to $493,665. The allowance for loan losses as a
percentage of gross loans, however, decreased from 1.14% at December 31, 1995
to 1.03% at September 30, 1996. The decline is due to increased loan volume.
For the nine-month period ended September 30, 1996, the allowance for loan
losses increased $152,500 through provisions and $3,137 through recoveries; the
allowance decreased $80,592 due to charge-offs. The ratio of net charge-off to
average loans outstanding at September 30, 1996 was .19%.
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 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 September 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: November 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
BANCSHARES, INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD
ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,051,830
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,150,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,645,523
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 47,945,418
<ALLOWANCE> 493,665
<TOTAL-ASSETS> 69,778,664
<DEPOSITS> 59,792,024
<SHORT-TERM> 0
<LIABILITIES-OTHER> 827,131
<LONG-TERM> 0
0
0
<COMMON> 4,896,225
<OTHER-SE> 4,253,284
<TOTAL-LIABILITIES-AND-EQUITY> 69,778,664
<INTEREST-LOAN> 3,014,294
<INTEREST-INVEST> 670,426
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 3,684,720
<INTEREST-DEPOSIT> 1,994,844
<INTEREST-EXPENSE> 2,013,354
<INTEREST-INCOME-NET> 1,671,366
<LOAN-LOSSES> 152,500
<SECURITIES-GAINS> 1,089
<EXPENSE-OTHER> 1,259,207
<INCOME-PRETAX> 360,108
<INCOME-PRE-EXTRAORDINARY> 360,108
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 234,055
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
<YIELD-ACTUAL> 3.97
<LOANS-NON> 545,000
<LOANS-PAST> 423,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 968,000
<ALLOWANCE-OPEN> 418,620
<CHARGE-OFFS> 80,592
<RECOVERIES> 3,137
<ALLOWANCE-CLOSE> 493,665
<ALLOWANCE-DOMESTIC> 480,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 13,665
</TABLE>
