SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996 File number: 000-22054
COMMUNITY BANKSHARES, INC.
(Exact Name of Small Business Issuer in its Charter)
South Carolina 57-0966962
(State or Other Jurisdiction (IRS Employer Identification Number)
of Incorporation or Organization)
791 Broughton St., Orangeburg, South Carolina 29115
(Address of Principal Executive Office, Zip Code)
(803) 535-1060
(Issuer's telephone number)
Check whether the issuer (1) has filed all the reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 863,238 shares of common
stock outstanding as of March 31, 1996.
1
<PAGE>
10-QSB TABLE OF CONTENTS
Part I-Financial Statements Page
--------------------------- ----
Item 1 Financial Statements 3
Item 2 Management's Discussion and Analysis 8
Part II-Other Information
-------------------------
Item 6 Exhibits and Reports on Form 8-K 18
2
<PAGE>
<TABLE>
<CAPTION>
Community Bankshares, Inc. Balance Sheets
UNAUDITED
March 31, December 31,
ASSETS 1996 1995
---- ----
Cash and due from other financial institutions:
<S> <C> <C>
Non-interest bearing $ 2,950,000 $ 3,025,000
Federal funds sold
2,340,000 1,510,000
------------ ------------
Total cash and cash equivalents 5,290,000 4,535,000
Interest bearing deposits in other banks
795,000 320,000
Investment securities:
Securities held to maturity
17,044,000 15,610,000
Securities available for sale
10,500,000 9,059,000
Loans held for resale
456,000 -
Loans
53,304,000 52,323,000
Less, allowance for loan losses (727,000) (706,000)
------------ ------------
Net loans 52,577,000 51,617,000
------------ ------------
Premises and equipment 1,889,000 1,708,000
Accrued interest receivable 812,000 716,000
Deferred income taxes 212,000 181,000
Other assets 234,000 151,000
------------ ------------
Total assets $ 89,809,000 $ 83,897,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 9,517,000 $ 9,095,000
Interest bearing 66,038,000 63,455,000
------------ ------------
Total deposits 75,555,000 72,550,000
Federal funds purchased and securities
sold under agreements to repurchase 2,274,000 2,570,000
Notes payable 413,000 240,000
Federal Home Loan Bank advances 1,200,000 700,000
Other liabilities 526,000 491,000
------------ ------------
Total liabilities 79,968,000 76,551,000
------------ ------------
Shareholders' equity:
Common stock
No par, authorized shares 3,000,000, issued and
outstanding 863,238 in 1996 and 1995 4,584,000 4,617,000
Common stock subscribed 2,585,000 98,000
Retained earnings 2,705,000 2,607,000
Unrealized gain (loss) on securities available for sale (33,000) 24,000
------------ ------------
Total shareholders' equity 9,841,000 7,346,000
------------ ------------
Total liabilities and shareholders' equity $ 89,809,000 $ 83,897,000
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
3
<PAGE>
<TABLE>
<CAPTION>
Community Bankshares, Inc. - Statements of Income
Three months ended March 31,
1996 1995
UNAUDITED UNAUDITED
--------- ---------
Interest and dividend income:
<S> <C> <C>
Interest and fees on loans $ 1,226,000 $ 1,180,000
Deposits with other financial institutions 28,000 2,000
Investment securities:
Interest - U. S. Treasury and
U. S. Government Agencies 363,000 307,000
Dividends 6,000 7,000
--------------- ---------------
Total investment securities 369,000 314,000
--------------- ---------------
Federal funds sold and securities
purchased under agreements to resell 22,000 12,000
--------------- ---------------
Total interest and dividend income 1,645,000 1,508,000
--------------- ---------------
Interest expense:
Deposits:
Certificates of deposit of $100,000 or more 177,000 150,000
Other 559,000 464,000
--------------- ---------------
Total deposits 736,000 614,000
Federal funds purchased and securities
sold under agreements to repurchase 21,000 31,000
Federal Home Loan Bank advances 18,000
-
--------------- ---------------
Total interest expense 775,000 645,000
--------------- ---------------
Net interest income 870,000 863,000
Provision for loan losses 30,000 45,000
--------------- ---------------
Net interest income after provision for loan losses 840,000 818,000
--------------- ---------------
Non-interest income:
Service charges on deposit accounts 81,000 74,000
Other 26,000 23,000
--------------- ---------------
Total non-interest income 107,000 97,000
--------------- ---------------
Non-interest expense:
Salaries and employee benefits 378,000 284,000
Premises and equipment 69,000 62,000
Other 164,000 177,000
--------------- ---------------
Total non-interest expense 611,000 523,000
--------------- ---------------
Net income before taxes 336,000 392,000
Provision for income taxes 118,000 137,000
--------------- ---------------
Net income after taxes $ 218,000 $ 255,000
=============== ===============
Per common share:
Weighted average shares outstanding 1,018,937 863,238
=============== ===============
Net income per common share $ 0.21 $ 0.30
=============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
Community Bankshares, Inc. - Statements of Cash Flows
Three months ended March 31,
1996 1995
UNAUDITED UNAUDITED
--------- ---------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 218,000 $ 255,000
Adjustments to reconcile net income
to net cash (provided) used by operating activities
Depreciation and amortization 38,000 32,000
Provision for loan losses 30,000 45,000
Accretion of discounts and amortization of premiums -
investment securities - net (3,000) -
Deferred income taxes (31,000) -
(Increase) decrease in loans held for resale (456,000) 40,000
Changes in operating assets and liabilities:
(Increase) decrease in interest receivable (96,000) 2,000
(Increase) decrease in other assets (83,000) 59,000
Increase in other liabilities 35,000 172,000
------------ ----------
Net cash provided (used) by operating activities (348,000) 605,000
------------ ----------
Cash flows from investing activities:
Net (increase) decrease in interest bearing deposits
with other banks (475,000) 100,000
Purchases of held to maturity securities (4,229,000) (2,316,000)
Proceeds from maturities of held to maturity securities 2,808,000 2,178,000
Purchases of available for sale securities (2,624,000) (173,000)
Proceeds from maturities of available for sale securities 1,116,000 609,000
Net (increase) in loans to customers (990,000) (1,042,000)
Purchase of premises and equipment (219,000) (21,000)
------------ -----------
Net cash (used) in investing activities (4,613,000) (665,000)
------------ -----------
Cash flows from financing activities:
Net increase in demand, savings, & time deposits 3,005,000 2,233,000
Net (decrease) in federal funds purchased
and securities sold under agreements to re-
purchase (296,000) (934,000)
Increase in notes payable 173,000 -
Increase in Federal Home Loan Bank advances 500,000 -
Sale of common stock subscriptions 2,487,000 -
Stock issuance costs (32,000) -
Dividend payments (121,000) (121,000)
------------- -----------
Net cash provided by financing activities 5,716,000 1,178,000
------------- -----------
Net increase in cash and cash equivalents 755,000 1,118,000
Cash and cash equivalents - beginning of period 4,535,000 3,053,000
------------- -----------
Cash and cash equivalents - end of period $ 5,290,000 $ 4,171,000
============= ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
5
<PAGE>
Community Bankshares, Inc. - Notes to Financial Statements
Summary of Significant Accounting Principles
A summary of significant accounting policies is included in the 1995
Annual Report of Community Bankshares, Inc. to the Shareholders, which also
contains the Company's audited financial statements for 1995.
Principles of Consolidation
The consolidated financial statements include the accounts of Community
Bankshares, Inc. (CBI), the parent company, and Orangeburg National Bank (the
Bank), its wholly owned subsidiary. All significant intercompany items have been
eliminated in the consolidated statements.
Management Opinion
The financial statements in this report are unaudited. In the opinion of
management, all the adjustments necessary to present a fair statement of the
results for the interim period have been made. Such adjustments are of a normal
and recurring nature.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for an entire year. These interim
financial statements should be read in conjunction with the annual financial
statements and notes thereto contained in the 1995 Annual Report.
6
<PAGE>
<TABLE>
<CAPTION>
Community Bankshares, Inc. - Comparative Average Balances, Yields, and Rates for the
quarters ended March 31,
Dollar amounts in thousands 1996 1995
--------------------------- ---- ----
Interest Interest
Average Income/ Yields/ Average Income/ Yields/
Assets Balance Expense Rates Balance Expense Rates
----------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits $ 2,255 $ 28 4.97% $ 165 $ 3 7.25%
Investment securities taxable 25,323 365 5.76% 22,669 312 5.51%
Investment securities--tax exempt 414 4 6.33% 99 1 3.21%
Federal funds sold 1,807 22 4.98% 861 12 5.47%
Loans, net of unearned income 52,380 1,226 9.36% 49,095 1,180 9.61%
-------- ------ ----- --------- ------- ----
Total interest earning assets 82,179 1,645 8.01% 72,889 1,508 8.27%
Cash and due from banks 3,209 3,096
Allowance for loan losses (712) (629)
Premises and equipment 1,683 1,342
Other assets 1,070 1,069
-------- ---------
Total assets $ 87,429 $ 77,767
======== =========
Liabilities and Shareholders' Equity
Interest bearing deposits
Savings $ 12,922 $ 82 2.53% $ 15,865 $ 122 3.07%
Interest bearing transaction accounts 7,617 39 2.05% 5,517 31 2.23%
Time deposits 44,993 615 5.47% 37,561 462 4.92%
-------- ------ ---- --------- ------- ----
Total interest bearing deposits 65,532 736 4.49% 58,943 615 4.17%
Short term borrowing 1,940 21 4.31% 2,511 30 4.78%
FHLB advances 1,103 18 6.64% - -
-------- ------ ---- --------- ------- ----
Total interest bearing liabilities 68,575 775 4.52% 61,454 645 4.20%
Noninterest bearing demand deposits 9,544 9,395
Other liabilities 532 440
Shareholders' equity 8,778 6,478
-------- ---------
Total liabilities and shareholders' equity $ 87,429 $ 77,767
======== =========
Interest rate spread 3.49% 4.08%
Net interest income and net yield on earning
assets $ 870 4.24% $ 863 4.74%
======= ==== ======= ====
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Net Income
For the first quarter of 1996, CBI earned a profit of $218,000, compared
to $255,000 for the first quarter of 1995, a decrease of 14.5% or $37,000.
Earnings per share were $.21 in the 1996 period, compared to $.30 for the 1995
period, a decrease of 30%.
Primary earnings per share were calculated by dividing net income by the
weighted average number of common shares outstanding during the period,
increased by dilutive common stock equivalents using the treasury stock method.
Fully diluted earnings per share was substantially the same as primary earnings
per share. The dilutive effect of the common stock subscribed has been included
in the weighted average number of shares outstanding for the three months ended
March 31, 1996.
Net income for the period ended March 31, 1996, decreased from the prior
year primarily because of a decrease in the net interest margin and an increase
in non-interest expenses, mostly associated with the start up of the new Sumter
National Bank (in organization). Net interest income before provision for loan
losses for the three months ended March 31, 1996, increased slightly to
$870,000, compared to $863,000 for the same period in 1995, an increase of .8%
or $7,000. For the period ended March 31,1996, the provision for loan losses was
$30,000, compared to $45,000 for the 1995 period, a decrease of 33% or $15,000.
Non-interest income for the 1996 period increased to $107,000 from $97,000 for
the 1995 period, a 10.3% or $10,000 increase. Non-interest expense increased to
$611,000 from $523,000, a 16.8% or $88,000 increase.
Profitability
One of the best ways to review earnings is through the ROA (return on
average assets) and the ROE (return on average equity). Return on assets is the
income for the period divided by the average assets for the period, annualized.
Return on equity is the income for the period divided by the average equity for
the period, annualized. Based on operating results for the quarters ended March
31, 1996 and 1995, the following table is presented.
8
<PAGE>
<TABLE>
<CAPTION>
March 31,
1996 1995
---- ----
(dollars in thousands)
<S> <C> <C>
Average assets $ 87,429 77,767
ROA 1.00% 1.31%
Average equity $ 8,778 6,478
ROE 9.93% 15.75%
Net income $ 218 255
</TABLE>
Net interest income
Net interest income, the major component of CBI's income, is the amount
by which interest and fees on interest earning assets exceeds the interest paid
on interest bearing deposits and other interest bearing funds. During the first
quarter of 1996, net interest income after provision for loan losses increased
to $840,000 from $818,000, a 2.7% or $22,000 increase over the first quarter of
1995. This improvement was the result of an increase in the volume of earning
assets and a decrease in the provision expense for loan losses. The average
yield on earning assets decreased to 8.01% for the 1996 period from 8.27% for
the 1995 period. This decrease was the result of three prime interest rate
decreases over the past year, moving the prime rate from 9% to 8.25%. Even
though yields on earning assets fell, the cost of funds increased as many
customers moved deposits to fixed rate certificates of deposit to lock in higher
rates. For the first quarter of 1996 the cost of funds averaged 4.52%, compared
to 4.20% for first quarter of 1995. Most of this increase was due to an increase
in the volume and cost of time deposits.
The decrease in the yield on earning assets and the increase in the cost
of funds has reduced the spread and the net interest margin. The net effect of
these changes was a net interest spread (yield on earning assets less cost of
interest bearing liabilities) of 3.49% for the first quarter of 1996, down from
4.08% during the first quarter of 1995. CBI's net interest margin (net interest
income divided by total earning assets) was 4.24% for the first quarter of 1996,
down from 4.74% for the first quarter of 1995.
Interest Income
On page 5 of this report is a table comparing the average balances,
yields, and rates for the interest rate sensitive segments of the Bank's balance
sheet for the quarters ended March 31, 1996 and 1995. A discussion of that table
follows.
Total interest income for the first quarter 1996 was $1,645,000 compared
with $1,508,000 for the same period in 1995, a 9% or $137,000 increase. The
yield on earning assets for the 1996 period was 8.01%, down from 8.27% for the
1995 period. Total average interest earning assets for the quarter ended March
31, 1996, were $82,179,000, up from $72,889,000 for the quarter ended March 31,
1995, an increase of 12.7% or $9,290,000.
9
<PAGE>
The loan portfolio earned $1,226,000 for the first quarter in 1996, up
from $1,180,000 for the same period of 1995, a 3.9% or $46,000 increase. The
first quarter 1996 yield decreased to 9.36% from 9.61% for the first quarter in
1995. The average size of the loan portfolio was $52,380,000 for the 1996
quarter, up from $49,095,000 for the same period of 1995, an increase of 6.7% or
$3,285,000.
The investment portfolio earned $365,000 for the first quarter in 1996,
up from $312,000 for the 1995 period, a 17% or $53,000 increase. The yield
increased to 5.76% in the 1996 quarter from 5.51% in the 1995 quarter. The size
of the average portfolio grew to $25,323,000 in the 1996 quarter from
$22,669,000 in the 1995 quarter, an increase of 11.7% or $2,654,000.
The tax exempt investment portfolio earned $4,000 for the first quarter
in 1996, up from $1,000 in the 1995 period, an increase of 300% or $3,000. The
yield on the portfolio increased to 6.33% in the first quarter of 1996 (fully
taxable equivalent) from 3.21% for the first quarter of 1995. The average size
of the portfolio increased to $414,000 for the 1996 period from $99,000 in the
1995 period, an increase of 331% or $315,000.
Interest bearing deposits from other banks contributed $28,000 for the
first quarter 1996, compared to $3,000 during the prior year, an increase of
833% or $25,000. The yield on these deposits decreased to 4.97% for the 1996
period from 7.25% in the 1995 period. CBI averaged $2,255,000 in interest
bearing balances in the first quarter 1996 compared to $165,000 the first
quarter of the prior year, an increase of 1266% or $2,090,000. Virtually all of
this growth was due to stock subscriptions sold by CBI in connection with its
Sumter bank project. These sales proceeds have been held in escrow by Orangeburg
National Bank and invested in short term time deposits in Orangeburg National
Bank, pending termination of the offering.
Federal funds sold earned $22,000 the first quarter of 1996 compared to
$12,000 the prior year, an increase of 83% or $10,000. Yields decreased to 4.98%
for the first quarter in 1996 from 5.47% for the first quarter in 1995. For the
first quarter of 1996, CBI increased its average volume in funds to $1,807,000
from $861,000 for the first quarter of 1995, a 110% or $946,000 increase.
Interest expense
Interest expense increased for the first quarter 1996 to $775,000 from
the prior year's $645,000, a 20.2% or $130,000 increase. The volume of interest
sensitive liabilities increased to $68,575,000 for the first quarter in 1996
from $61,454,000 for the first quarter of 1995, an 11.6% or $7,121,000 increase.
The average rate CBI paid for interest bearing liabilities during the 1996
quarter was 4.52% up from 4.20% for the 1995 period. This change was primarily
due to the increased cost of time deposits.
The cost of savings accounts decreased to $82,000 in the first quarter
in 1996 from $122,000 in the first quarter of 1995, a 32.8% or $40,000 decline.
Average savings deposit balances declined to $12,922,000 for the first quarter
in 1996 from $15,865,000 for the first quarter of 1995, a decline of 18.5% or
$2,943,000. The average rate paid on these funds decreased to 2.53% from 3.07%.
10
<PAGE>
Interest bearing transaction accounts cost $39,000 for the first quarter
in 1996, up from the first quarter of the prior year's $31,000, an increase of
25.8% or $8,000. The volume of these deposits increased to $7,617,000 for the
first quarter in 1996 from $5,517,000 for the first quarter of 1995, a 38% or
$2,100,000 increase. The average rate paid on these funds for the first quarter
in 1996 decreased to 2.05% from 2.23% for the first quarter of 1995.
Time deposits cost $615,000 for the first quarter of 1996, up from
$462,000 the first quarter of the prior year, an increase of 33% or $153,000.
The volume increased to $44,993,000 for the first quarter in 1996 from
$37,561,000 for the first quarter of 1995, a 19.8% or $7,432,000 increase. The
average rate paid on these funds increased to 5.47% for the first quarter in
1996 from 4.92% for the first quarter in 1995. The increase is attributable to
customers moving funds into fixed rate certificates of deposit with longer
maturities and higher yields than shorter term certificates. This was the
largest single component contributing to the decline in the net interest margin.
However, certificates of deposit totaling over $42 million will mature within
twelve months of March 31, 1996. Most of these certificates are expected to be
reinvested automatically with Orangeburg National Bank at rates significantly
lower than the current average cost of time deposits, 5.47%.
Short term borrowing consists of federal funds sold and securities sold
under agreements to repurchase, as well as notes payable made in conjunction
with the Sumter National Bank (in organization) project. This is a relatively
small and relatively volatile part of the balance sheet. It cost $21,000 for the
first quarter in 1996 down from $30,000 for the first quarter of 1995, a 30% or
$9,000 decrease. The volume of these funds decreased to $1,940,000 in the first
quarter in 1996 from $2,511,000 in the first quarter of 1995, a decrease of
22.7% or $571,000. The average rate paid on these funds decreased to 4.31% from
4.78%.
Borrowings from the Federal Home Loan Bank cost $18,000 for the first
quarter in 1996, there were no such borrowings in the 1995 period. The advances
averaged $1,103,000 during the quarter at an average cost of 6.64%.
Non-Interest Income
Non-interest income for the first quarter of 1996 grew to $107,000 from
$97,000 in the first quarter of 1995, a 10.3% or $10,000 increase. This increase
was mostly the result of increases in return check fee volume.
Non-Interest Expense
For the first quarter of 1996 non-interest expenses increased to
$611,000 from $523,000 for the first quarter of 1995, a 16.8% or $88,000
increase.
11
<PAGE>
For the three months ended March 31, 1996, personnel costs were $378,000
compared to $284,000 for the first quarter of 1995 , a 33% or $94,000 increase.
This increase was due to salary increases at the beginning of the year and the
addition of two new officers. It also includes $35,000 in personnel costs for
one officer and one employee at Sumter National Bank (in organization).
Premises and equipment expense for the 1996 period were $69,000
compared to $62,000 for the 1995 period, an increase of 11.2% or $7,000.
Other costs were for the first quarter 1996 were $164,000 compared to
$177,000 for the first quarter of 1995, a decrease of 7.3% or $13,000. The
largest component of this decline was a decrease in the FDIC insurance premium.
For the first quarter of 1996 the Bank paid a deposit premium of $1,000,
compared to $38,000 for the first quarter of 1995, a 97% or $37,000 decrease.
Expenses for the first quarter of 1996 also include $18,000 in start up expenses
related to the formation of the new bank in Sumter. There were no comparable
expenses in 1995.
Income Taxes
CBI provided $118,000 for federal and state income taxes during the
first quarter of 1996, compared to $137,000 for the same period in 1995, a 13.8%
or $19,000 decrease.
CHANGES IN FINANCIAL POSITION
Investment portfolio
The investment portfolio is comprised of a hold to maturity and an
available for sale portion. CBI usually purchases short term U. S Treasury and
government agencies for investment purposes. At March 31, 1996, the hold to
maturity portfolio totaled $17,044,000 compared to $15,610,000 at December 31,
1995, an increase of 9.2% or $1,434000. At March 31, 1996, the available for
sale portfolio totaled $10,500,000 compared to $9,059,000 at December 31, 1995,
an increase of 15.9% or $1,441,000. The following chart summarizes the
investment portfolios at March 31, 1996, and December 31, 1995.
<TABLE>
<CAPTION>
March 31, 1996
-------------------------------------------------------------------------------------------
Hold to maturity Available for sale
-------------------------------------------- ----------------------------------------------
Amortized cost Fair value Amortized cost Fair value
(dollars in thousands)
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 3,097 $ 3,118 $ 2,994 $ 3,010
U. S. Government agencies 13,527 13,431 7,169 7,100
Tax exempt securities 420 420
- -
Other equity securities - - 390 390
============= ============ ========= ==========
Total $ 17,044 $ 16,969 $ 10,553 $ 10,500
============= ============ ========= ==========
Unrealized gain or (loss) $ (75) $ (53)
============= =========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Dec. 31, 1995
-------------------------------------------------------------------------------------------
Hold to maturity Available for sale
-------------------------------------------- ----------------------------------------------
Amortized cost Fair value Amortized cost Fair value
(dollars in thousands)
<S> <C> <C> <C> <C>
U. S. Treasury securities $ 2,603 $ 2,633 $ 2,992 $ 3,019
U. S. Government agencies 12,684 12,633 5,659 5,669
Tax exempt securities 323 324 - -
Other equity securities - - 371 371
========== ============= ============= ===========
Total $ 15,610 $ 15,620 $ 9,022 $ 9,059
========== ============= ============= ===========
Unrealized gain or (loss) $ 10 $ 37
========== =============
</TABLE>
Loans held for resale
Orangeburg National Bank originates many residential mortgage loans for
sale into the secondary mortgage market. Generally the Bank realizes fee income
from these loans and they are sold and off the books within a few weeks. During
the first quarter of 1996 the Bank originated $1,198,000 in such loans and sold
$742,000. The balance outstanding at March 31, 1996, was $456,000, compared to
$0 at December 31, 1995.
Loan portfolio
The loan portfolio is primarily consumer and small business oriented. At
March 31, 1996, the loan portfolio was $53,304,000, compared to $52,323,000 at
December 31, 1995, a 1.9% or $981,000 increase. The following chart summarizes
the loan portfolio at March 31, 1996, and December 31, 1995.
<TABLE>
<CAPTION>
Mar. 31, 1996 Dec. 31, 1995
(dollars in thousands)
<S> <C> <C>
Real estate $ 33,107 $ 31,477
Commercial 11,915 12,485
Loans to individuals 8,282 8,360
==================== ===================
Total $ 53,304 $ 52,323
==================== ===================
</TABLE>
Past Due and Non-Performing Assets and the Allowance for Loan Losses
CBI closely monitors past due loans and loans that are in non-accrual
status and other real estate owned. Below is a summary of the bank's past due
and non-performing assets at March 31, 1996, December 31, 1995, and March 31,
1995.
13
<PAGE>
<TABLE>
<CAPTION>
Mar. 31, 1996 Dec. 31, 1995 Mar. 31, 1995
<S> <C> <C> <C> <C>
Past due 90 days + accruing loans $ - $ 76,000 $ 5,000
Non-accrual loans $ 271,000 $ 348,000 120,000
Impaired loans (included in nonaccrual) $ 108,000 $ 108,000 -
Other real estate owned - - 100,000
</TABLE>
Management considers the past due and non-accrual amounts in March 1996
to be reasonable and manageable in the normal course of business.
CBI had no restructured loans during any of the above listed periods.
CBI's activity with its allowance for loan losses reserve is summarized
below.
<TABLE>
<CAPTION>
Mar. 31, 1996 Dec. 31, 1995 Mar. 31, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Allowance at beginning of year $ 707,000 $ 616,000 $ 616,000
Provision expense 30,000 160,000 45,000
Net charge-offs 10,000 69,000 8,000
============= ============= ==============
Allowance at end of period $ 727,000 $ 707,000 $ 653,000
============= ============= ==============
Allowance as a percent of 1.36% 1.35% 1.31%
outstanding loans
</TABLE>
In reviewing the adequacy of the allowance for loan losses at the end of
each period, management considers historical loan loss experience, current
economic condition, loans outstanding, trends in non-performing and delinquent
loans, and the quality of collateral securing problem loans. After charging off
all known losses, management considers the allowance adequate to provide for
estimated future losses inherent in the loan portfolio at March 31, 1996.
Premises and Equipment
Premises and equipment were $1,889,000 at March 31, 1996, up from
$1,708,000 at December 31, 1995, an increase of 10.6% or $181,000.. Most of this
increase was associated with the construction and equipping of Sumter National
Bank (in organization).
Deposits
Deposits were $75,555,000 at March 31, 1996, compared to $72,550,000 at
December 31, 1995, an increase of 4.1% or $3,005,000.
Time deposits greater than $100,000 were $15,323,000 at March 31, 1996,
compared to $12,838,000 at December 31, 1995, an increase of 18.9% or
$2,485,000.
14
<PAGE>
Note payable
CBI arranged $1,250,000 in credit lines with United Carolina Bank. The
interest rate on the lines is prime. The maturity date is August 5, 1996. The
lines are intended to help finance the construction and pre-opening phase of the
Sumter National Bank (In organization) project. At March 31, 1996, CBI had a
balance of $413,000 on these lines. The loans will be paid off from the proceeds
of CBI's stock sale.
Federal Home Loan Bank advances
Orangeburg National Bank is a member of the Federal Home Loan Bank system
and, as such, is entitled to borrow from the system. The Bank has $1.2 million
in such loans outstanding at March 31, 1996, compared to $700,000 for the
comparable period in 1995, an increase of 71% or $500,000. $120,000 of the
advances matures within the next year, the remainder matures in greater than one
year. The collateral for these loans is a blanket lien on the Bank's one to four
family residential mortgage loan portfolio.
Liquidity
Liquidity is the ability to meet current and future obligations through
liquidation or maturity of existing assets or the acquisition of additional
liabilities. Adequate liquidity is necessary to meet the requirements of
customers for loans and deposit withdrawals in a timely and economical manner.
The most manageable sources of liquidity are composed of liabilities, with the
primary focus of liquidity management being the ability to attract deposits
within the Orangeburg National Bank service area. Core deposits (total deposits
less certificates of deposit of $100,000 or more) provide a relatively stable
funding base. Certificates of deposit of $100,000 or more are generally more
sensitive to changes in rates, so they must be monitored carefully. Asset
liquidity is provided by several sources, including amounts due from banks,
federal funds sold, and investments available for sale.
CBI maintains an available for sale investment portfolio. While
investment securities are purchased with the intent to be held to maturity, such
securities are marketable and occasional sales may occur prior to maturity as
part of the process of asset/liability and liquidity management. Management
deliberately maintains a short-term maturity schedule for its investments so
that there is a continuing stream of maturing investments. At March 31, 1996,
the average life of the investment portfolio was twenty-six months. CBI intends
to maintain a short-term investment portfolio in order to continue to be able to
supply liquidity to its loan portfolio and for customer withdrawals.
CBI has substantially more liabilities (mostly deposits, which may be
withdrawn) which mature in the next 12 months than it has assets maturing in the
same period. However, based on its historical experience, and that of similar
financial institutions, CBI believes that it is unlikely that so many deposits
would be withdrawn, without being replaced by other deposits, that CBI would be
unable to meet its liquidity needs with the proceeds of maturing assets.
15
<PAGE>
CBI also maintains two federal funds lines of credit with correspondent
banks, is able to borrow from the Federal Home Loan Bank, and is also able to
borrow from the Federal Reserve's discount window.
CBI has a demonstrated ability to attract deposits from its market.
Deposits have grown from $30 million in 1989 to over $72 million in 1996. This
stable, growing base of deposits is the major source of operating liquidity.
During this same period CBI's loan to deposit ratio (net of public deposits),
another indicator of liquidity, has gone from 80% to 75%.
CBI's long term liquidity needs are expected to be primarily affected by
the maturing of long term certificates of deposit. At March 31, 1996, CBI had
approximately $5,936,000 and $600,000 in certificates of deposit and FHLB
advances maturing in one to five years and over five years, respectively. CBI's
assets maturing or repricing in the same periods were $36,847,000 and
$6,315,000, respectively. CBI expects to be able to manage its current balance
sheet structure without experiencing any unusual liquidity problems.
In the opinion of management, CBI's current and projected liquidity
position is adequate.
Capital resources
As summarized in the table below, CBI's banking subsidiary maintained a
strong capital position.
<TABLE>
<CAPTION>
Mar. 31, 1996 Dec. 31, 1995 Mar. 31, 1995
<S> <C> <C> <C>
Tier 1 / total assets 7.80% 8.34% 8.26%
Total capital / total assets 8.58% 9.04% 8.97%
Risk weighted capital ratio 13.69% 14.90% 14.56%
</TABLE>
Banks are required to maintain a minimum risk weighted capital ratio of
8%.
In the opinion of management, the Company's current and projected
capital positions are adequate.
Dividends
CBI declared and paid a semi-annual cash dividend of 14 cents per share
during the first quarter of 1996. The total cost of this dividend was $121,000.
Common Stock Subscribed
In December 1995 CBI began offering up to 450,000 shares of its no par
common stock at $10 per share. The primary purpose of the offering is to acquire
all the stock of the Sumter National Bank (in organization). Proceeds of this
sale are being held in escrow by Orangeburg National Bank and invested in short
term time deposits in Orangeburg National Bank, pending receipt of all
16
<PAGE>
regulatory approvals required for the Sumter National Bank to commence
operations. Management expects that operations will begin during June 1996. At
March 31, 1996, CBI had received subscriptions for 258,468 shares or $2,584,680,
compared to 9,800 shares or $98,000 at December 31, 1995.
The Common Stock account of the Corporation was $4,584,000 at March 31,
1996, compared to $4,617,000 at December 31, 1995. The Common Stock account has
been reduced by $33,000 in expenses during the first quarter directly associated
with the raising of capital, including legal and accounting fees, printing,
postage, and advertising.
Sumter National Bank (in organization)
On May 5, 1995, CBI entered into an agreement to sponsor the
organization of Sumter National Bank, a national bank that is being organized by
a group of local businessmen in Sumter, South Carolina to become a wholly-owned
subsidiary of CBI. CBI has also agreed to pay a portion of the expenses of the
organization of the bank and to furnish the funds necessary to capitalize the
bank. The funds to capitalize Sumter National Bank and to pay certain expenses
of organization of the bank are expected to be provided by CBI from the proceeds
of a stock offering. Completion of the organization of Sumter National Bank and
acquisition of the bank by CBI are subject to approval of the Office of the
Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation
(FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve),
and the South Carolina State Board of Financial Institutions (State Board). On
July 12, 1995, an application for a national bank charter for the proposed
Sumter National Bank was filed with the OCC and an application for deposit
insurance was filed with the FDIC. During December 1995 preliminary approval was
obtained from the OCC and the FDIC. Federal Reserve approval was obtained in
March 1996 and State Board approval was obtained in May 1996. The construction
of the bank building began in January 1996 and is expected to be completed on or
about June 1, 1996.
CBI is in the process of raising up to $4.5 million by selling 450,000
shares of its no par common stock at $10 per share. $3.5 million of the proceeds
will be used to capitalize the Sumter bank. Any remainder will be used to repay
CBI for organizational and preopening expenses of the Sumter bank and for
general corporate purposes. Through May 4, 1996, CBI has sold approximately $3.8
million in stock subscriptions. Proceeds of the stock sale are held in escrow
pending the opening of the Sumter bank, which is expected in June 1996.
Part II--Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
17
<PAGE>
Exhibit No.(from Description Page no.
item 601 of SB)
(27) Financial Data Schedule
b) Reports on Form 8-K. None.
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATED: May 14, 1996
COMMUNITY BANKSHARES, INC.
By: s/ Hugo S. Sims, Jr.,
-----------------------------
Hugo S. Sims, Jr.,
Chief Executive Officer
By: s/ William W. Traynham
-----------------------------
William W. Traynham
President and Chief Financial Officer
(Principal Accounting Officer)
By: s/ Michael A. Wolfe
-----------------------------
Michael A. Wolfe
Sr. Vice President
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1996 (Unaudited) and the Consolidated
Statement of Income for the Three Months Ended March 31, 1996 (Unaudited) and is
qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,950
<INT-BEARING-DEPOSITS> 795
<FED-FUNDS-SOLD> 2,340
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,500
<INVESTMENTS-CARRYING> 10,500
<INVESTMENTS-MARKET> 10,500
<LOANS> 53,304
<ALLOWANCE> (727)
<TOTAL-ASSETS> 89,809
<DEPOSITS> 75,555
<SHORT-TERM> 2,687
<LIABILITIES-OTHER> 526
<LONG-TERM> 1,200
0
0
<COMMON> 7,169
<OTHER-SE> 2,672
<TOTAL-LIABILITIES-AND-EQUITY> 89,809
<INTEREST-LOAN> 1,226
<INTEREST-INVEST> 369
<INTEREST-OTHER> 50
<INTEREST-TOTAL> 1,645
<INTEREST-DEPOSIT> 736
<INTEREST-EXPENSE> 775
<INTEREST-INCOME-NET> 870
<LOAN-LOSSES> 30
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 611
<INCOME-PRETAX> 336
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
<YIELD-ACTUAL> 4.24
<LOANS-NON> 271
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 379
<ALLOWANCE-OPEN> 707
<CHARGE-OFFS> 14
<RECOVERIES> 4
<ALLOWANCE-CLOSE> 727
<ALLOWANCE-DOMESTIC> 727
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
