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 March 31, 2000.
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. 0-22517
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.)
1301 Westwood Ln.-Westfield Village, Wilkesboro, NC 28697
- ------------------------------------------------------------------
(Address of Principal Executive Offices)
(336) 903-0600
- ------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
- ------------------------------------------------------------------
(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 1,467,384 shares issued and
outstanding as of May 9, 2000.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED BALANCE SHEETS
ASSETS
------
March 31, December 31,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
Cash and due from banks $ 7,509,858 $ 14,469,256
Federal funds sold 4,000,000 2,000,000
----------- -----------
Total cash and cash equivalents $ 11,509,858 $ 16,469,256
Securities:
Available-for-sale,
at estimated market values 20,103,711 19,372,280
Held-to-maturity (Estimated market
values of $6,571,656 (03-31-00)
and $1,788,107 (12-31-99) 6,619,079 1,806,490
Loans, net 73,447,574 72,935,601
Property and equipment 2,236,660 2,172,849
Other assets 1,048,782 1,049,054
----------- -----------
Total Assets $114,965,664 $113,805,530
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
- ------------
Deposits
Non-interest bearing deposits $ 7,785,654 $ 7,998,076
Interest bearing deposits 88,134,551 83,944,444
----------- -----------
Total deposits $ 95,920,205 $ 91,942,520
FHLB advances 5,652,205 8,684,919
Other liabilities 874,376 1,042,655
----------- -----------
Total Liabilities $102,446,786 $101,670,094
----------- -----------
Commitments & Contingencies
Shareholders' Equity:
- ---------------------
Common stock - $3.00 par value, 10
million shares authorized; 1,467,384
shares issued and outstanding at
March 31, 2000 December 31, 1999 $ 4,402,152 $ 4,402,152
Paid-in-capital 4,742,143 4,742,143
Retained earnings 3,644,402 3,221,263
Unrealized gain on
securities available-for-sale (269,819) (230,122)
----------- -----------
Total Shareholders' Equity $ 12,518,878 $ 12,135,436
----------- -----------
Total Liabilities
and Shareholders' Equity $114,965,664 $113,805,530
=========== ===========
Refer to notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
For the quarter
ended March 31,
-----------------
2000 1999
---- ----
Interest and fees
on loans and investments $2,516,445 $2,240,746
Interest expense 1,119,509 996,212
--------- ---------
Net interest income $1,396,936 $1,244,534
Provision for possible loan losses 40,000 5,000
--------- ---------
Net interest income after
provision for possible loan losses $1,356,936 $1,239,534
--------- ---------
Other income:
Service fees and other charges $ 90,086 $ 68,651
Gain on sale of assets - - 1,759
Gain (loss) on sale of securities (26,159) 5,184
--------- ---------
Total other income $ 63,927 $ 75,594
--------- ---------
Operating expenses:
Salaries and benefits $ 467,173 $ 377,070
Legal and professional 26,873 69,355
Depreciation 36,338 28,670
Amortization 1,665 1,665
Courier and postage 36,731 27,282
Rent and land lease expense 16,369 12,326
Data processing 49,357 52,071
Other operating expenses 171,501 191,317
--------- ---------
Total operating expenses $ 806,007 $ 759,756
--------- ---------
Net income before taxes $ 614,856 $ 555,372
Income taxes 191,716 216,803
--------- ---------
Net income $ 423,140 $ 338,569
========= =========
Basic income per share $ .29 $ .23
========= =========
Diluted income per share $ .26 $ .20
========= =========
Refer to notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
--------------------
2000 1999
---- ----
Cash flows from operating activities: $ 325,706 $ 338,569
---------- ----------
Cash flows from Investing Activities:
Purchase of fixed assets (100,149) (4,674)
(Increase) in loans (551,973) 563,762
Securities: Available-for-sale
Sale of securities 1,558,740 1,521,600
Purchase of securities (2,497,113) (2,296,313)
Maturity and paydowns 173,009 1,581,568
Securities: Held-to-maturity
Purchase of securities (4,911,663) - -
Maturity and paydowns 99,074 400,344
---------- ----------
Net cash (used in) provided by
investing activities $(6,230,075) $ 1,766,287
---------- ----------
Cash flows from Financing Activities:
(Decrease) in deposits $ 3,977,685 $ (285,089)
Reduction in borrowings (3,032,714) - -
Cancellation of 82,968 stock
warrants and 20,000 stock options - - (1,155,100)
Exercise of warrants/options - - 9,000
---------- ----------
Cash provided by financing activities 944,971 (1,431,189)
---------- ----------
Net (decrease) in cash and cash equivalents $(4,959,398) $ 673,667
Cash and cash equivalents,
beginning of period 16,469,256 3,181,025
---------- ----------
Cash and cash equivalents, end of period $11,509,858 $ 3,854,692
========== ==========
Refer to notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 1999 AND 2000
Accumulated
Common Stock Other
------------------ Paid in Retained Comprehensive
Shares Par Value Capital Earnings Income Total
------ --------- ------- -------- ------ -----
Balance,
Dec 31,
1998 1,446,984 $ 4,340,952 $ 5,769,693 $1,767,794 $ 91,495 $11,969,934
--------- ---------- ---------- --------- -------- ----------
Exercise of
warrants/
options 900 2,700 6,300 - - - - 9,000
Cancellation
of 82,968
stock warrants
and 20,000
stock options - - - - (1,155,100) - - - - (1,155,100)
Comprehensive Income:
- --------------------
Net income,
three-month
period ended
March 31, 1999 - - - - - - 338,569 - - 338,569
Net unrealized
(losses) on
securities,
three- month
period ended
March 31, 1999 - - - - - - - - (65,090) (65,090)
--------- ---------- ---------- --------- -------- ----------
Balance,
March 31,
1999 1,447,884 $ 4,343,652 $ 4,620,893 $2,106,363 $ 26,405 $11,097,313
========= ========== ========== ========= ======== ==========
Balance,
December 31,
1999 1,467,384 $ 4,402,152 $ 4,742,143 $3,221,262 $(230,122) $12,135,436
--------- ---------- ---------- --------- -------- ----------
Comprehensive Income:
- ---------------------
Net income,
three-month
period ended
March 31,
2000 - - - - - - 423,140 - - 423,140
Net unrealized
(losses) on
securities,three-
month period
ended March 31,
2000 - - - - - - - - (39,697) (39,697)
--------- ---------- ---------- --------- -------- ----------
Balance,
March 31,
2000 1,467,384 $ 4,402,152 $ 4,742,143 $3,644,402 $(269,819) $12,518,878
========= ========== ========== ========= ======== ==========
Refer to notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2000
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 three-month period ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000. These statements should be
read in conjunction with the consolidated financial statements and
footnotes thereto included in Form 10-KSB for the year ended December 31,
1999.
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
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. Since then, three banking branches have been
established, bringing the total banking offices to four.
As of March 31, 2000 and December 31, 1999, there were 1,467,384
shares of common stock outstanding.
The Company 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 January 17, 1992. At March 31, 2000 and December 31,
1999, there were 151,168 warrants outstanding. The Company also has a
stock option plan with 180,500 options outstanding at March 31, 2000 and
December 31, 1999.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In March, 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use. SOP 98-
1 provides guidance for capitalizing and expensing the costs of computer
software developed or obtained for internal use. SOP 98-1 is effective for
financial statements for fiscal years beginning after December 15, 1998.
The adoption of SOP 98-1 did not have a material impact on the accompanying
consolidated financial statements.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June, 1998 and is effective for all calendar-year
entities beginning in January, 2000. This Statement applies to all
entities and requires that all derivatives be recognized as assets or
liabilities in the balance sheet, at fair values. Gains and losses of
derivative instruments not designated as hedges will be recognized in the
income statement. Since the Company does not invest in derivative
instruments, the adoption of SFAS No. 133 does not have a material impact
on the financial statements.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained
after the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking Enterprise" amends prior accounting standards, primarily SFAS 65,
with respect to the classification of retained interests, such as mortgage-
backed securities, following a securitization of mortgage loans held for
sale. This statement became effective in the first quarter of 1999. Since
the Company does not securitize mortgage loans, no financial statement
impact has resulted from adopting this statement.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Total assets increased by $1.2 million to $115.0 million during the
three-month period ended March 31, 2000. The increase in assets was
accomplished despite a $3.0 million reduction in borrowings, from $8.7
million at December 31, 1999 to $5.7 million at March 31, 2000. For the
three-month period ended March 31, 2000, cash and cash equivalents
decreased by $5.0 million to $11.5 million, securities increased by $5.5
million to $26.7 million, and loans increased by $.5 million to $73.4
million.
Liquidity and Sources of Capital
- --------------------------------
Liquidity is the Company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of customers. The
March 31, 2000 financial statements evidence a satisfactory liquidity
position as total cash and cash equivalents amounted to $11.5 million,
representing 10.0% of total assets. Investment securities, which amounted
to $26.7 million or 23.2% of total assets, provide a secondary source of
liquidity because they can be converted into cash in a timely manner. The
Bank is a member of the Federal Reserve System and maintains relationships
with several correspondent banks and, thus, could obtain funds from these
banks 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 can provide adequate
funds to meet customer withdrawals and loan demand. The Company knows of
no trends, demands, commitments, events or uncertainties that will result
in or are reasonably likely to result in its liquidity increasing or
decreasing in any material way. 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 Office of the Comptroller of the Currency (the "OCC").
Bank's Minimum required
March 31 2000 by the OCC
------------- ----------------
Leverage ratio 9.2% 4.0%
Risk weighted ratio 13.5% 8.0%
With respect to the leverage ratio, the OCC expects a minimum of 5.0%
to 6.0% ratio for banks that are not rated CAMEL 1. The Bank's leverage
ratio of 9.2% is well above the required minimum.
Results of Operations
- ---------------------
Net income for the three-month period ended March 31, 2000 amounted to
$423,140, or $.26 per diluted share. For the three-month period ended
March 31, 1999, net income amounted to $338,569, or $.20 per diluted share.
The following four items are significant for comparing the March 31, 2000
results to those of March 31, 1999.
a. Net interest income, which represents the difference between interest
received on interest earning assets and interest paid on interest bearing
liabilities, increased from $1,244,534 for the three-month period ended
March 31, 1999 to $1,396,936 for the same period one year later,
representing an increase of $152,402, or 12.2%. This increase was
attained primarily through a $6.6 million increase in average earning
assets, from $100.4 million for the three-month period ended March 31,
1999 to $107.0 million for the three-month period ended March 31, 2000.
b. The net interest yield, defined as net interest income divided by
average interest earning assets, has increased from 4.96% for the three-
month period ended March 31, 1999 to 5.22% for the three-month period
ended March 31, 2000. Both the yield on earning assets as well as the
cost of funds increased during the three month period ended March 31,
2000 when compared to the three-month period ended March 31, 1999.
However, the increase in the yield on earning assets was greater than the
increase in the cost of funds, thus resulting in a net increase in the net
interest yield. Below is pertinent information concerning the yield on
earning assets and the cost of funds for the three-month period ended
March 31, 2000.
(Dollars in '000s)
Avg. Assets/ Interest Yield/
Description Liabilities Income/Expense Cost
- ----------- ----------- -------------- ------
Due from FHLB $ 6,201 $ 116 7.48%
Federal funds 3,125 45 5.76%
Securities 23,164 378 6.53%
Loans 74,494 1,977 10.62%
----------- --------- -----
Total $ 106,984 $ 2,516 9.41%
=========== --------- -----
Transactional
accounts $ 17,202 $ 111 2.58%
Savings 3,595 16 1.78%
CD's 64,654 899 5.56%
Other borrowings 6,985 93 5.33%
----------- --------- -----
Total $ 92,436 $ 1,119 4.84%
=========== --------- -----
Net interest income $ 1,397
=========
Net yield on earning assets 5.22%
=====
c. Total non-interest income decreased from $75,594 for the three month
period ended March 31, 1999 to $63,927 for the three-month period ended
March 31, 2000. Excluding all gains and losses on sales of securities
and other assets, non-interest income for the three-month period ended
March 31, 2000 would have been $90,086, an amount larger than the $68,651
in non-interest income for the same period one year ago. The increase is
attributable primarily to higher volumes and fees with respect to
transactional accounts.
d. For the three-month period ended March 31, 2000, operating expenses
amounted to $806,007, representing an annualized 2.82% of average assets.
By comparison, for the three-month period ended March 31, 1999, operating
expenses amounted to $759,756, representing an annualized 2.91% of average
assets. The reduction in operating expense as a percent of average assets
during the three-month period ended March 31, 2000 is attributed mainly to
cost cutting efforts undertaken by management.
During the three-month period ended March 31, 2000, the allowance for loan
losses has grown by approximately $90,000 to $1,318,470. The allowance for
loan losses as a percentage of gross loans increased from 1.66% at December
31, 1999 to 1.76% at March 31, 2000 mainly due to the Company's continued
maintenance of reasonable provisions for losses and to the unusually high
level of recoveries. 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 it was to be implemented, would have a material
effect on the Company's liquidity, capital resources, or results of
operations.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits.
27.1 - Financial data schedule (for SEC use only).
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
during the quarter ended March 31, 2000.
SIGNATURES
Pursuant to the requirements 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 BANCSHARES, INC.
--------------------------
(Registrant)
Date: May 9, 2000 BY: /s/ Ronald S. Shoemaker
------------ --------------------------------
Ronald S. Shoemaker
President and Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
Financial Data Schedule Submitted Under Item 601(a)(27) of Regulation S-B
This schedule contains summary financial information extracted from
Community Bancshares, Inc. unaudited consolidated financial statements for
the periods ended March 31, 2000 and 1999 and is qualified in its entirety
by reference to such financial statements.
Item Number Item Description Amount
- ----------- ---------------- ------
March 31,
-----------------
2000 1999
---- ----
9-03(1) Cash and due from banks $ 4,287,706 $ 1,654,692
9-03(2) Interest bearing deposits 3,222,152 0
9-03(3) Federal funds sold - purchased
securities for sale 4,000,000 2,200,000
9-03(4) Trading account assets 0 0
9-03(6) Investment and mortgage backed
securities held for sale 20,103,711 23,429,505
9-03(6) Investment and mortgage backed
securities held to maturity -
carrying value 6,619,079 1,984,818
9-03(6) Investment and mortgage backed
securities held to maturity -
market value 6,571,656 2,007,684
9-03(7) Loans 74,766,044 72,668,541
9-03(7)(2) Allowance for losses 1,318,470 1,116,678
9-03(11) Total assets 114,965,664 103,850,184
9-03(12) Deposits 95,920,205 91,021,447
9-03(13) Short-term borrowings 5,652,205 0
9-03(15) Other liabilities 874,376 1,731,425
9-03(16) Long-term debt 0 0
9-03(19) Preferred stock -
mandatory redemption 0 0
9-03(20) Preferred stock -
no mandatory redemption 0 0
9-03(21) Common stock 4,402,152 4,343,652
9-03(22) Other stockholders' equity 8,116,726 6,753,660
9-03(23) Total liabilities and
stockholders' equity 114,965,664 103,850,184
9-04(1) Interest and fees on loans 2,093,849 1,864,098
9-04(2) Interest and dividends
on investments 422,595 376,648
9-04(4) Other interest income 0 0
9-04(5) Total interest income 2,516,445 2,240,746
9-04(6) Interest on deposits 1,027,005 976,920
9-04(9) Total interest expense 1,119,509 996,212
9-04(10) Net interest income 1,396,936 1,244,534
9-04(11) Provision for loan losses 40,000 5,000
9-04(13)(h) Investment securities gains/losses (26,159) 5,184
9-04(14) Other expenses 806,007 759,756
9-04(15) Income/loss before income tax 614,856 555,372
9-04(17) Income/loss before
extraordinary items $ 614,856 $ 555,372
9-04(18) Extraordinary items, less tax 0 0
9-04(19) Cumulative change in
accounting principles 0 0
9-04(20) Net income or loss 423,140 338,569
9-04(21) Earnings per share - basic .29 .23
9-04(21) Earnings per share - diluted .26 .20
I.B.5. Net yield - interest earning
assets - actual 5.22% 4.96%
III.C.1(a) Loans on non-accrual 0 0
III.C.1(b) Accruing loans past due
90 days or more 0 0
III.C.1(c) Troubled debt restructuring 0 0
III.C.2. Potential problem loans 1,440,055 694,731
IV.A.1 Allowance for loan losses -
beginning of period 1,228,895 1,106,830
IV.A.2 Total chargeoffs 16,436 3,669
IV.A.3 Total recoveries 66,011 8,517
IV.A.4 Allowance for loan losses -
end of period 1,318,470 1,116,678
IV.B.1 Loan loss allowance allocated to
domestic loans 1,300,000 1,100,000
IV.B.2 Loan loss allowance allocated to
foreign loans 0 0
IV.B.3 Loan loss allowance - unallocated 18,470 16,678
