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 September 30, 1997 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
past 12 months (or for such 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: 2,626,476 shares of common
stock outstanding as of October 31, 1997.
<PAGE>
10-QSB TABLE OF CONTENTS
Part I-Financial Statements Page
- --------------------------------------------------------------------------------
Item 1 Financial Statements .............................. 3
Item 2 Management's Discussion and Analysis of
Financial Condition and ........................... 9
Results of Operations
Part II-Other Information
- --------------------------------------------------------------------------------
Item 6 Exhibits and Reports on Form 8-K .................. 19
2
<PAGE>
COMMUNITY BANKSHARES, INC. - BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
September 30, December 31,
ASSETS 1997 1996
---- ----
Cash and due from other financial institutions:
<S> <C> <C>
Non-interest bearing ....................................................... $ 6,011,000 $ 5,349,000
Federal funds sold ......................................................... 8,405,000 1,300,000
------------- -------------
Total cash and cash equivalents ........................................ 14,416,000 6,649,000
Interest bearing deposits in other banks ....................................... 1,341,000 431,000
Investment securities:
Securities held to maturity ................................................ 17,407,000 15,027,000
Securities available for sale .............................................. 13,834,000 10,761,000
Loans held for resale .......................................................... 101,000 295,000
Loans .......................................................................... 86,710,000 68,829,000
Less, allowance for loan losses ............................................ (1,091,000) (876,000)
------------- -------------
Net loans .............................................................. 85,619,000 67,953,000
------------- -------------
Premises and equipment ......................................................... 2,797,000 2,837,000
Accrued interest receivable ................................................... 1,141,000 855,000
Deferred income taxes .......................................................... 332,000 283,000
Other assets ................................................................... 166,000 370,000
------------- -------------
Total assets ........................................................... $ 137,154,000 $ 105,461,000
============= =============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
Non-interest bearing ....................................................... $ 15,836,000 $ 13,337,000
Interest bearing ........................................................... 98,988,000 76,514,000
------------- -------------
Total deposits ......................................................... 114,824,000 89,851,000
Federal funds purchased and securities
sold under agreements to repurchase ........................................ 7,960,000 1,744,000
Federal Home Loan Bank advances ................................................ 1,060,000 1,130,000
Other liabilities .............................................................. 733,000 632,000
------------- -------------
Total liabilities ...................................................... 124,577,000 93,357,000
------------- -------------
Shareholders' equity:
Common stock
No par, authorized shares 12,000,000, issued
and outstanding 2,626,476 in 1997 and 1996 ............................. 9,055,000 9,064,000
Retained earnings .......................................................... 3,517,000 3,040,000
Unrealized gain (loss) on securities available for sale..................... 5,000 -
------------- -------------
Total shareholders' equity ............................................. 12,577,000 12,104,000
------------- -------------
Total liabilities and shareholders' equity ............................. $ 137,154,000 $ 105,461,000
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
3
<PAGE>
COMMUNITY BANKSHARES, INC. - STATEMENTS OF INCOME
Nine months ended September 30,
<TABLE>
<CAPTION>
1997 1996
UNAUDITED UNAUDITED
--------- ---------
Interest and dividend income:
<S> <C> <C>
Interest and fees on loans ................................................. $ 5,544,000 $ 3,874,000
Deposits with other financial institutions ................................. 54,000 43,000
Investment securities:
Interest - U. S. Treasury and
U. S. Government Agencies .............................................. 1,269,000 1,172,000
Dividends ................................................................ 32,000 22,000
------------- -------------
Total investment securities ........................................... 1,301,000 1,194,000
------------- -------------
Federal funds sold and securities
purchased under agreements to resell ..................................... 183,000 120,000
------------- -------------
Total interest and dividend income .................................... 7,082,000 5,231,000
------------- -------------
Interest expense:
Deposits:
Certificates of deposit of $100,000 or more .............................. 624,000 580,000
Other .................................................................... 2,338,000 1,698,000
------------- -------------
Total deposits ........................................................ 2,962,000 2,278,000
------------- -------------
Federal funds purchased and securities
sold under agreements to repurchase ...................................... 118,000 65,000
Federal Home Loan Bank advances ............................................ 55,000 57,000
------------- -------------
Total interest expense ................................................ 3,135,000 2,400,000
------------- -------------
Net interest income ............................................................ 3,947,000 2,831,000
Provision for loan losses ...................................................... 258,000 140,000
------------- -------------
Net interest income after provision for loan losses ............................ 3,689,000 2,691,000
------------- -------------
Non-interest income:
Service charges on deposit accounts ........................................ 399,000 263,000
Other ...................................................................... 160,000 92,000
------------- -------------
Total non-interest income ............................................. 559,000 355,000
------------- -------------
Non-interest expense:
Salaries and employee benefits ............................................. 1,738,000 1,329,000
Premises and equipment ..................................................... 384,000 270,000
Other ...................................................................... 826,000 579,000
------------- -------------
Total non-interest expense ............................................ 2,948,000 2,178,000
------------- -------------
Net income before taxes ........................................................ 1,300,000 868,000
Provision for income taxes ..................................................... 428,000 364,000
------------- -------------
Net income after taxes ......................................................... $ 872,000 $ 504,000
============= =============
Per common share:
Weighted average shares outstanding ........................................ 2,626,476 2,397,220
============= =============
Net income per common share ................................................ $ 0.33 $ 0.21
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
4
<PAGE>
COMMUNITY BANKSHARES, INC. - STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Quarter ended September 30,
1997 1996
UNAUDITED UNAUDITED
--------- ---------
Interest and dividend income:
<S> <C> <C>
Interest and fees on loans ................................................. $ 1,998,000 $ 1,371,000
Deposits with other financial institutions ................................. 20,000 5,000
Investment securities:
Interest - U. S. Treasury and
U. S. Government Agencies .............................................. 478,000 410,000
Dividends ................................................................ 10,000 9,000
------------- -------------
Total investment securities ........................................... 488,000 419,000
------------- -------------
Federal funds sold and securities
purchased under agreements to resell ..................................... 89,000 72,000
------------- -------------
Total interest and dividend income .................................... 2,595,000 1,867,000
------------- -------------
Interest expense:
Deposits:
Certificates of deposit of $100,000 or more .............................. 251,000 188,000
Other .................................................................... 858,000 624,000
------------- -------------
Total deposits ........................................................ 1,109,000 812,000
Federal funds purchased and securities
sold under agreements to repurchase ...................................... 57,000 22,000
Federal Home Loan Bank advances ............................................ 18,000 19,000
------------- -------------
Total interest expense ................................................ 1,184,000 853,000
------------- -------------
Net interest income ............................................................ 1,411,000 1,014,000
Provision for loan losses ...................................................... 81,000 77,000
------------- -------------
Net interest income after provision for loan losses ............................ 1,330,000 937,000
------------- -------------
Non-interest income:
Service charges on deposit accounts ........................................ 146,000 91,000
Other ...................................................................... 50,000 29,000
------------- -------------
Total non-interest income ............................................. 196,000 120,000
------------- -------------
Non-interest expense:
Salaries and employee benefits ............................................. 605,000 523,000
Premises and equipment ..................................................... 135,000 115,000
Other ...................................................................... 283,000 229,000
------------- -------------
Total non-interest expense ............................................ 1,023,000 867,000
------------- -------------
Net income before taxes ........................................................ 503,000 190,000
Provision for income taxes ..................................................... 178,000 80,000
------------- -------------
Net income after taxes ......................................................... $ 325,000 $ 110,000
============= =============
Per common share:
Weighted average shares outstanding ........................................ 2,626,476 2,337,968
============= =============
Net income per common share ................................................ $ 0.12 $ 0.05
============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
5
<PAGE>
COMMUNITY BANKSHARES, INC. - STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
UNAUDITED
Nine months ended September 30,
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income ..................................................................... $ 872,000 $ 504,000
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation ........................................................... 227,000 134,000
Provision for loan losses .............................................. 258,000 140,000
Accretion of discounts and amortization of premiums -
investment securities - net .......................................... (86,000) (28,000)
Changes in assets and liabilities:
Proceeds of sale of loans held for resale .............................. 3,614,000 2,877,000
Origination of loans held for resale ................................... (3,420,000) (2,937,000)
(Increase) in interest receivable ...................................... (286,000) (168,000)
(Increase) decrease in other assets .................................... 131,000 (70,000)
Decrease in other liabilities .......................................... 101,000 16,000
------------ ------------
Net cash provided by operating activities ...................................... 1,411,000 468,000
------------ ------------
Cash flows from investing activities:
Proceeds from maturities and sales of
investment securities - held to maturity ............................. 5,036,000 5,814,000
Purchases of investment securities - held to maturity .................. (7,381,000) (8,049,000)
Proceeds from maturities and sales of
investment securities - available for sale ........................... 3,724,000 3,068,000
Purchases of investment securities - available for sale ................ (6,741,000) (5,411,000)
Net (increase) in interest bearing deposits ............................ (910,000) (226,000)
Net (increase) in loans to customers ................................... (17,924,000) (9,731,000)
Purchase of premises and equipment ..................................... (163,000) (1,120,000)
Net (increase) in other real estate .................................... - (11,000)
------------ ------------
Net cash (used) in investing activities .............................. (24,759,000) (15,655,000)
------------ ------------
Cash flows from financing activities:
Net increase in demand, savings, & time deposits ....................... 24,973,000 14,843,000
Net increase in federal funds purchased
and securities sold under agreements to repurchase ..................... 6,216,000 245,000
Sale of common stock ................................................... - 4,402,000
Cost of stock sale & dividend reinvestment program ..................... (9,000) (44,000)
Proceeds of FHLB advances .............................................. (70,000) 430,000
Dividends paid.......................................................... (395,000) (317,000)
Notes payable .......................................................... - (240,000)
------------ ------------
Net cash provided by financing activities ............................ 30,715,000 19,319,000
------------ ------------
Net increase in cash and due from other financial institutions ................. 7,367,000 4,132,000
Cash and due from other financial institutions - beginning ..................... 6,649,000 4,535,000
------------ ------------
Cash and due from other financial institutions - end ........................... $ 14,416,000 $ 8,667,000
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS
6
<PAGE>
Summary of Significant Accounting Principles
A summary of significant accounting policies is included in the 1996 Annual
Report of Community Bankshares, Inc. to the Shareholders, which also contains
the Company's audited financial statements for 1996.
Principles of Consolidation
The consolidated financial statements include the accounts of Community
Bankshares, Inc. (CBI), the parent company, and Orangeburg National Bank and
Sumter National Bank, its wholly owned subsidiaries. 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 1996 Annual Report.
7
<PAGE>
COMMUNITY BANKSHARES, INC. - AVERAGE BALANCE SHEETS, YIELDS AND RATES
<TABLE>
<CAPTION>
Nine months ended September 30, 1997 1996
Interest Interest
Average Income/ Yields/ Average Income/ Yields/
Assets Balance Expense Rates(1) Balance Expense Rates(1)
------- ------- ----- ------- ------- -----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest bearing deposits ............ $ 1,251 $ 54 5.76% $ 1,124 $ 44 5.22%
Investment securities--taxable ....... 27,612 1,288 6.22% 26,706 1,180 5.89%
Investment securities--tax exempt .... 411 13 6.39% 417 13 6.30%
Federal funds sold ................... 4,543 183 5.37% 3,074 120 5.20%
Loans, net of unearned income ........ 78,252 5,544 9.45% 55,266 3,874 9.35%
-------- ------ ---- ------ ------ ----
Total interest earning assets ........ 112,069 7,082 8.43% 86,587 5,231 8.06%
Cash and due from banks .............. 4,929 3,613
Allowance for loan losses ............ (978) (733)
Premises and equipment ............... 2,831 2,205
Other assets ......................... 1,543 1,230
-------- -------
Total assets ............................. $120,394 $92,902
======== =======
Liabilities and Shareholders' Equity
Interest bearing deposits
Savings .............................. $ 19,267 $ 495 3.43% $12,600 $ 218 2.31%
Interest bearing transaction accounts 11,623 164 1.88% 8,478 129 2.03%
Time deposits ........................ 56,849 2,303 5.40% 47,224 1,930 5.45%
-------- ------ ---- ------- ------ ----
Total interest bearing deposits ...... 87,739 2,962 4.50% 68,302 2,277 4.44%
Short term borrowing ................. 3,969 118 3.96% 2,187 65 3.96%
FHLB advances ........................ 1,114 55 6.58% 1,123 58 6.89%
-------- ------ ---- ------- ------ ----
Total interest bearing liabilities ... 92,822 3,135 4.50% 71,612 2,400 4.47%
Noninterest bearing demand deposits .. 14,500 10,068
Other liabilities .................... 797 591
Shareholders' equity ................. 12,275 10,631
-------- -------
Total liabilities and shareholders' equity $120,394 $92,902
======== =======
Interest rate spread ................. 3.92% 3.59%
Net interest income and net yield on earning assets $3,947 4.70% $2,831 4.36%
====== ==== ====== ====
</TABLE>
(1) Computed on a fully tax equivalent basis using a 34% federal tax rate.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as `forward looking statements' for
purposes of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934, as amended. The Corporation cautions readers that forward looking
statements, including without limitation, those relating to the Corporation's
future business prospects, revenues, working capital, liquidity, capital needs,
interest costs, and income, are subject to certain risks and uncertainties that
could cause actual results to differ materially from those indicated in the
forward looking statements, due to several important factors herein identified,
among others, and other risks and factors identified from time to time in the
Corporation's reports filed with the Securities and Exchange Commission.
Stock Split
The Corporation effected a two-for-one stock split of its common shares at
July 21, 1997. This increased the number of shares outstanding from 1,313,238 to
2,626,476. All information contained within Management's Discussion and Analysis
has been retroactively adjusted to reflect the split.
Florence National Bank (proposed)
On September 15, 1997 CBI entered into an Organizational Agreement pursuant
to which it agreed to sponsor the organization of Florence National Bank
(proposed), a national bank that is being organized by a group of local
businessmen in Florence, South Carolina to become a wholly-owned subsidiary of
CBI. CBI has also agreed to finance the expenses of the organization of the bank
and to furnish the funds necessary to capitalize the bank. The funds to
capitalize Florence National Bank and to finance expenses of organization of the
bank are expected to be provided by CBI from the proceeds of a stock offering or
borrowed funds or some combination of debt and equity. Completion of the
organization of Florence National Bank and acquisition of the bank by CBI are
subject to approval of the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System, and the South Carolina State Board of Financial Institutions. On
September 15, 1997 an application for a national bank charter for the proposed
Florence National Bank was filed with the Office of the Comptroller of the
Currency and an application for deposit insurance was filed with the Federal
Deposit Insurance Corporation.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net Income
For the nine months ended September 30, 1997, CBI earned a consolidated
profit of $872,000, compared to $504,000 for the comparable period of 1996, an
increase of 73% or $368,000. Earnings per share were $.33 in the 1997 period,
compared to $.21 for the 1996 period, an increase of 57.1%.
For the nine months ended September 30, 1997, Orangeburg National Bank
reported a profit of $1,028,000, compared to $836,000 for the comparable period
of 1996, an increase of 22.9% or $192,000.
For the nine months ended September 30, 1997, Sumter National Bank reported
an after tax loss of $169,000, compared to a loss of $238,000 for the comparable
period of 1996, an improvement of 29% or $69,000. The 1997 amount represents
nine full months of operation, whereas the 1996 amount represents less than four
months of operation.
9
<PAGE>
For the nine months ended September 30, 1997, the holding company's parent
only net income after taxes was $13,000 compared to a net after tax loss of
$94,000 for the same period in 1996. This is an improvement of $107,000 or 114%.
Operations in 1996 included $112,000 in pre-opening expenses associated with the
new Sumter bank.
As noted above, consolidated net income for the nine months ended September
30, 1997, increased from the prior year by 73% or $368,000. Net interest income
before provision for loan losses for the nine months ended September 30, 1997,
increased to $3,947,000, compared to $2,831,000 for the same period in 1996, an
increase of 39.4% or $1,116,000. For the 1997 period, the provision for loan
losses was $258,000, compared to $140,000 for the 1996 period, an increase of
84.3% or $118,000. Non-interest income for the 1997 period increased to $559,000
from $355,000 for the 1996 period, a 57.5% or $204,000 increase. Non-interest
expense increased to $2,948,000 from $2,178,000, a 35.4% or $770,000 increase.
Results for the first nine months of 1997 include results of operations for
Sumter National Bank for the entire period, however the Sumter bank was in
operation for less than four months during the 1996 period. Accordingly, many of
the dollar and percentage comparisons and changes between periods discussed in
this report are unusually large.
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 nine months ended
September 30, 1997 and 1996, the following table is presented.
Period ended Sept. 30,
1997 1996
---- ----
(dollars in thousands)
Average assets $120,394 $92,902
ROA 0.97% 0.72%
Average equity $12,275 $10,631
ROE 9.47% 6.32%
Net income $872 $504
Average equity and average assets were substantially greater in 1997 than
they were in 1996, primarily as the result of the sale of stock to capitalize
the Sumter bank and the deposit taking activities of the Sumter bank.
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 exceed the interest paid on
interest bearing deposits and other interest bearing funds. During the first
nine months of 1997, net interest income after provision for loan losses
increased to $3,689,000 from $2,691,000, a 39% or $998,000 increase over the
comparable period of 1996. This improvement was the result of an increase in the
volume of earning assets at both banks, but was mostly associated with the
operation of the new bank in Sumter, which had net interest income for the first
nine months of 1997 of $598,000, or 60% of the total increase.
10
<PAGE>
Interest Income
Elsewhere in this report is a table comparing the average balances, yields,
and rates for the interest rate sensitive segments of the company's balance
sheet for the periods ended September 30, 1997 and 1996. A discussion of that
table follows.
Total interest income for the nine months ended September 30, 1997, was
$7,082,000 compared with $5,231,000 for the same period in 1996, a 35.4% or
$1,851,000 increase. The yield on earning assets for the 1997 period was 8.43%,
up from 8.06% for the 1996 period. Total average interest earning assets for the
nine months ended September 30, 1997, were $112,069,000, up from $86,587,000 for
the same period in 1996, an increase of 29.4% or $25,482,000. Sumter National
Bank averaged $18,729,000 in earning assets, or about 73% of the total increase.
The loan portfolio earned $5,544,000 for the nine months ended September
30, 1997, up from $3,874,000 for the same period of 1996, a 43.1% or $1,670,000
increase. The 1997 yield increased to 9.45% from 9.35% for the 1996 period. The
average size of the loan portfolio was $78,252,000 for the 1997 period, up from
$55,266,000 for the same period of 1996, an increase of 41.6% or $22,986,000.
The taxable investment portfolio earned $1,288,000 for the nine months
ended September 30, 1997, up from $1,180,000 for the 1996 period, a 9.2% or
$108,000 increase. The yield increased to 6.22% in the 1997 period from 5.89% in
the 1996 period. The average size of the portfolio increased to $27,612,000 in
the 1997 period from $26,706,000 in the 1996 period, an increase of 3.4% or
$906,000.
The tax exempt investment portfolio continues to be a relatively small part
of the portfolio. It earned $13,000 for the nine months ended September 30,
1997, unchanged from the prior year. The yield on the portfolio was 6.39% (on a
fully taxable equivalent basis), up from the prior year's 6.30%. The average
size of the portfolio decreased to $411,000 for the 1997 period from $417,000 in
the 1996 period, a decrease of 1.4% or $6,000.
Interest bearing deposits in other banks contributed $54,000 for the nine
months ended September 30, 1997, compared to $44,000 during the prior year, an
increase of 22.7% or $10,000. The yield on these deposits increased to 5.76% for
the 1997 period from 5.22% in the 1996 period. CBI averaged $1,251,000 in
interest bearing balances in the 1997 period compared to $1,124,000 in the 1996
period, an increase of 11.3% or $127,000.
Federal funds sold earned $183,000 for the nine months ended September 30,
1997, compared to $120,000 the prior year, an increase of 52.5% or $63,000.
Yields increased to 5.37% for the period ended September 30, 1997, from 5.20%
for the 1996 period. For the 1997 period, CBI increased its average volume in
federal funds sold to $4,543,000 from $3,074,000 for the 1996 period, a 47.8% or
$1,469,000 increase.
Interest expense
Interest expense increased for the nine months ended September 30, 1997 to
$3,135,000 from the prior year's $2,400,000, a 30.6% or $735,000 increase. The
volume of interest bearing liabilities increased to $92,822,000 for the period
ended September 30, 1997, from $71,612,000 for the 1996 period, a 29.6% or
$21,210,000 increase. Sumter National Bank averaged $14,749,000 in interest
bearing liabilities, or about 70% of the total increase. The average rate CBI
paid for interest bearing liabilities during the 1997 period was 4.50%, slightly
up from 4.47% for the 1996 period.
11
<PAGE>
The cost of savings accounts increased to $495,000 for the nine months
ended September 30, 1997 from $218,000 in the 1996 period, a 127% or $277,000
increase. Average savings deposit balances increased to $19,267,000 for the
period ended September 30, 1997, from $12,600,000 for the 1996 period, an
increase of 52.9% or $6,667,000. The average rate paid on these funds increased
to 3.43% from 2.31%. Most of this increase was due to growth in money market
accounts at the Sumter Bank.
Interest bearing transaction accounts cost $164,000 for the nine months
ended September 30, 1997, up from the prior year's $129,000, an increase of
27.1% or $35,000. The volume of these deposits increased to $11,623,000 for the
period ended September 30, 1997, from $8,478,000 for the 1996 period, a 37.1% or
$3,145,000 increase. The average rate paid on these funds for the period ended
September 30, 1997, decreased to 1.88% from 2.03% for the 1996 period.
Time deposits cost $2,303,000 for the nine months ended September 30, 1997,
up from $1,930,000 in the 1996 period, an increase of 19.3% or $373,000. The
volume increased to $56,849,000 for the period ended September 30, 1997, from
$47,224,000 for the 1996 period, a 20.4% or $9,625,000 increase. The average
rate paid on these funds decreased to 5.40% for the period ended September 30,
1997, from 5.45% for the 1996 period.
Short term borrowing consists of federal funds purchased and securities
sold under agreements to repurchase. This is a relatively small and volatile
part of the balance sheet. It cost $118,000 for the nine months ended September
30, 1997, up from $65,000 for the 1996 period, an 81.5% or $53,000 increase. The
volume of these funds increased to $3,969,000 in the 1997 period from $2,187,000
in the 1996 period, an increase of 81.5% or $1,782,000. The average rate paid on
these funds was 3.96% for both periods.
Borrowings from the Federal Home Loan Bank cost $55,000 for the nine months
ended September 30, 1997, compared to $58,000 for the 1996 period, a 5.5% or
$3,000 decline. The advances averaged $1,114,000 during the 1997 period,
compared to $1,123,000 for the prior year period, a .8% or $9,000 decrease. All
these balances were attributable to Orangeburg National Bank. The average rate
paid on these funds decreased to 6.58% from 6.89%.
Non-Interest Income
Non-interest income for the nine months ended September 30, 1997 grew to
$559,000 from $355,000 in the 1996 period, a 57.5% or $204,0000 increase. This
increase was mostly the result of the operation of the new Sumter bank, which
accounted for $118,000 or 58% of the total increase in non-interest income for
the 1997 period. Most of the remainder of the increase was attributable to
increased credit life and accident and health insurance sales in the Orangeburg
bank.
12
<PAGE>
Non-Interest Expense
For the nine months ended September 30, 1997 non-interest expenses
increased to $2,948,000 from $2,178,000 for the 1996 period, a 35.3% or $770,000
increase. Approximately $454,000 (59%) of this increase is related to the
operation of Sumter National Bank.
For the nine months ended September 30, 1997 personnel costs were
$1,738,000 compared to $1,329,000 for the 1996 period, a 30.8% or $409,000
increase.
Premises and equipment expense for the 1997 period were $384,000 compared
to $270,000 for the 1996 period, an increase of 42.2% or $114,000.
Other costs for the 1997 period were $826,000 compared to $579,000 for the
1996 period, an increase of 42.7% or $193,000.
Income Taxes
CBI provided $428,000 for federal and state income taxes during the nine
months ended September 30, 1997, compared to $364,000 for the same period in
1996, a 17.6% or $64,000 increase.
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996
Net Income
For the quarter ended September 30, 1997, CBI earned a consolidated profit
of $325,000, compared to $110,000 for the comparable period of 1996, an increase
of 195% or $215,000. Earnings per share were $.12 in the 1997 period, compared
to $.05 for the 1996 period, an increase of 140%.
Net interest income before provision for loan losses for the quarter ended
September 30, 1997, increased to $1,411,000, compared to $1,014,000 for the same
period in 1996, an increase of 39.2% or $397,000. For the same period, the
provision for loan losses was $81,000, compared to $77,000 for the 1996 period,
an increase of 5.2% or $4,000. Non-interest income for the 1997 period increased
to $196,000 from $120,000 for the 1996 period, a 63.3% or $76,000 increase.
Non-interest expense increased to $1,023,000 from $867,000, an 18% or $156,000
increase.
The third quarter of 1996 was the first full quarter of operation for the
Sumter bank. Sumter National Bank's net loss for the quarter ended September 30,
1997, was $25,000, an improvement of 86% over its net loss of $184,000 for the
quarter ended September 30, 1996. Many of the dollar and percentage comparisons
and changes between quarters discussed are unusually large because the Sumter
bank's ratio of non-interest expense to earning assets was so much greater,
17.6% in the 1996 quarter, than in the 1997 quarter, 5.8%.
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 quarter
ended September 30, 1997, net interest income after provision for loan losses
increased to $1,330,000 from $937,000, a 41.9% or $393,000 increase over the
comparable period of 1996. This improvement was the result of an increase in the
volume of earning assets at both banks.
13
<PAGE>
Interest Income
Total interest income for the third quarter 1997 was $2,595,000 compared
with $1,867,000 for the same period in 1996, a 39% or $1,092,000 increase.
The loan portfolio earned $1,998,000 for the third quarter in 1997, up from
$1,371,000 for the same period of 1996, a 45.7% or $627,000 increase.
The investment portfolio earned $488,000 for the third quarter in 1997, up
from $419,000 for the 1996 period, a 16.5% or $69,000 increase.
Interest bearing deposits in other banks contributed $20,000 for the third
quarter 1997, compared to $5,000 during the prior year, an increase of 300% or
$15,000.
Federal funds sold earned $89,000 the third quarter of 1997 compared to
$72,000 the prior year, an increase of 23.6% or $17,000.
Interest expense
Interest expense increased for the third quarter of 1997 to $1,184,000 from
the prior year's $853,000, a 38.8% or $331,000 increase.
Non-Interest Income
Non-interest income for the third quarter 1997 grew to $196,000 from
$120,000 in the third quarter of 1996, a 63.3% or $76,000 increase.
Non-Interest Expense
For the third quarter of 1997 non-interest expenses increased to $1,023,000
from $867,000 for the third quarter of 1996, an 18% or $156,000 increase.
For the three months ended September 30, 1997, personnel costs were
$605,000 compared to $523,000 for the third quarter of 1996, a 15.7% or $82,000
increase.
Premises and equipment expense for the 1997 period were $135,000 compared
to $115,000 for the 1996 period, an increase of 17.4% or $20,000.
Other costs for the third quarter 1997 were $283,000 compared to $229,000
for the third quarter of 1996, an increase of 23.5% or $54,000.
Income Taxes
CBI provided $178,000 for federal and state income taxes during the third
quarter of 1997, compared to $80,000 for the same period in 1996, a 122% or
$98,000 decrease.
14
<PAGE>
CHANGES IN FINANCIAL POSITION
Investment portfolio
The investment portfolio is comprised of a held to maturity and an
available for sale portion. CBI and its two banks usually purchase short term
issues of U. S Treasury and U. S. Government agency securities for investment
purposes. At September 30, 1997, the held to maturity portfolio totaled
$17,407,000 compared to $15,027,000 at December 31, 1996, an increase of 15.8%
or $2,380,000. At September 30, 1997, the available for sale portfolio totaled
$13,834,000 compared to $10,761,000 at December 31, 1996, an increase of 28.6%
or $3,073,000. The following chart summarizes the investment portfolios at
September 30, 1997, and December 31, 1996.
<TABLE>
<CAPTION>
September 30, 1997
---------------------------------------------------------------------------
Held to maturity Available for sale
--------------------------------------- -----------------------------------
Amortized cost Fair value Amortized cost Fair value
-------------- ---------- -------------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
U. S. Government and
federal agencies ............... $17,000 $16,989 $13,114 $13,122
Tax exempt securities .......... 407 410 - -
Other equity securities ........ - - 712 712
======= ======= ======= =======
Total .......................... $17,407 $17,399 $13,826 $13,834
======= ======= ======= =======
Unrealized gain or (loss) ...... $ (8) $ 8
======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31,1996
---------------------------------------------------------------------------
Held to maturity Available for sale
--------------------------------------- -----------------------------------
Amortized cost Fair value Amortized cost Fair value
-------------- ---------- -------------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C>
U. S. Government and
federal agencies ............... $14,613 $14,612 $10,175 $10,175
Tax exempt securities .......... 414 417 - -
Other equity securities ........ - - 586 586
======= ======= ======= =======
Total .......................... $15,027 $15,029 $10,761 $10,761
======= ======= ======= =======
Unrealized gain or (loss) ...... $ 2 $ -
======= =======
</TABLE>
Orangeburg National Bank owns approximately 91% of the held to maturity and
the available for sale investment portfolios.
15
<PAGE>
Loan portfolio
The loan portfolio is primarily consumer and small business oriented. At
September 30, 1997, the loan portfolio was $86,710,000, compared to $68,829,000
at December 31, 1996, a 25.9% or $17,881,000 increase. The following chart
summarizes the loan portfolio at September 30, 1997, and December 31, 1996.
Sep. 30, 1997 Dec. 31, 1996
------------- -------------
(dollars in thousands)
Real estate ................................ $51,218 $41,164
Commercial ................................. 19,582 16,644
Loans to individuals ....................... 15,910 11,021
======= =======
Total ...................................... $86,710 $68,829
======= =======
At September 30, 1997, Orangeburg National Bank's loan portfolio totaled
$65,963,000 (including loans held for resale) compared to $59,877,000 at
December 31, 1996, an increase of $6,086,000 or 10.2%.
At September 30, 1997, Sumter National Bank's loan portfolio totaled
$20,849,000, compared to $8,952,000 at December 31, 1996, an increase of
$11,897,000 or 133%.
Past Due and Non-Performing Assets and the Allowance for Loan Losses
CBI closely monitors past due loans, non-accrual loans and other real
estate owned. Below is a summary of past due and non-performing assets at
September 30, 1997 and December 31, 1996.
Sept. 30, 1997 Dec. 31, 1996
-------------- -------------
Past due 90 days + accruing loans .......... $104,000 $ 93,000
Non-accrual loans .......................... $365,000 $431,000
Impaired loans (included in nonaccrual) .... $ 12,000 $ 12,000
Other real estate owned .................... $ - $ -
Management considers the past due and non-accrual amounts in September 1997
to be reasonable and manageable in the normal course of business. All loans
shown in the above table are attributable to Orangeburg National Bank.
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.
Sept. 30, 1997 Dec. 31, 1996
-------------- -------------
Allowance at beginning of period ............ $ 876,000 $707,000
Provision expense ........................... 258,000 227,000
Net charge-offs ............................. (43,000) (58,000)
========== ========
Allowance at end of period .................. $1,091,000 $876,000
========== ========
Allowance as a percent of outstanding loans . 1.26% 1.27%
16
<PAGE>
At December 31, 1996, the Sumter National Bank allowance for loan losses
was $97,000. The bank increased the allowance with a provision expense of
$123,000 as it continued to establish its allowance for loan losses. Net
charge-offs during the period were $1,000. The allowance at September 30, 1997,
was $219,000.
At December 31, 1996, the Orangeburg National Bank allowance for loan
losses was $779,000. The bank increased the allowance with a provision expense
of $135,000. Net chargeoffs during the period were $42,000. The allowance at
September 30, 1997 was $872,000.
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 September 30, 1997.
Deposits
Deposits were $114,824,000 at September 30, 1997, compared to $89,851,000
at December 31, 1996, an increase of 27.8% or $24,973,000.
Time deposits greater than $100,000 were $20,484,000 at September 30, 1997,
compared to $13,640,000 at December 31, 1996, an increase of 50.2% or
$6,844,000.
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 and Sumter National Bank service areas. 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 and its banks maintain an available-for-sale investment and a held to
maturity investment portfolio. While all these 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. Such sales will generally be from the
available for sale portfolio. Management deliberately maintains a short-term
maturity schedule for its investments so that there is a continuing stream of
maturing investments. 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.
17
<PAGE>
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.
CBI through its banking subsidiaries also maintains federal funds lines of
credit with correspondent banks, and is able to borrow from the Federal Home
Loan Bank and from the Federal Reserve's discount window.
CBI through its banking subsidiaries has a demonstrated ability to attract
deposits from its markets. Deposits have grown from $30 million in 1989 to over
$114 million in 1997. This stable, growing base of deposits is the major source
of operating liquidity.
CBI's long term liquidity needs are expected to be primarily affected by
the maturing of long term certificates of deposit. At September 30, 1997, CBI
had approximately $9.1 million and $1.2 million in certificates of deposit
maturing in one to five years and over five years, respectively. CBI's assets
maturing or repricing in the same periods were $58.7 million and $11 million,
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 maintained a strong capital position.
Sept. 30, 1997 Dec. 31, 1996
-------------- -------------
Tier 1 capital to average total assets 11.31% 11.50%
Tier 1 capital to risk weighted assets 14.17% 17.50%
Total capital to risk weighted assets 15.41% 18.70%
The moderate decline in the risk weighted capital ratios is the anticipated
effect of the asset growth resulting from the operation of the new bank in
Sumter, combined with asset growth of the Orangeburg bank.
In the opinion of management, the Company's current and projected
capital positions are adequate.
Shareholders' equity
At September 30, 1997 the common stock account totaled $9,055,000, compared
to $9,064,000 at December 31, 1996. This $9,000 reduction was for costs
associated with the establishment of a dividend reinvestment plan, although no
stock was sold by CBI during the period. Ongoing costs of the reinvestment plan
will be charged to expense. Total shareholders' equity increased from
$12,104,000 at December 31, 1996 to $12,577,000 at September 30, 1997, a 3.9%
increase.
ACCOUNTING AND REPORTING MATTERS
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share."
SFAS No. 128 simplifies the current computation of earnings per share and makes
the United States standards for the computation more compatible with
international earnings per share standards. The statement requires dual
presentation of earnings per share for all entities with complex capital
structures. It also replaces the presentation of primary earnings per share with
a presentation of basic earnings per share. The Statement is effective for the
Company for the year ended December 31, 1997. The Company does not anticipate
that adoption of this Statement will have a material effect on its financial
statements.
18
<PAGE>
Part II--Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.(from Description
item 601 of S-B)
(3) Articles of Incorporation, as amended.
(10) Organizational Agreement among Community Bankshares,
Inc. and the Organizers of Florence National Bank,
dated as of September 15, 1997.
(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: November 10, 1997
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)
19
<PAGE>
Exhibit Index
Exhibit No.(from Description
item 601 of S-B)
(3) Articles of Incorporation, as amended.
(10) Organizational Agreement among Community Bankshares,
Inc. and the Organizers of Florence National Bank,
dated as of September 15, 1997.
(27) Financial Data Schedule
Jim Miles
Secretary of State
Filed
Jun 19, 1997
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as amended,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation is Community Bankshares, Inc.
2. On June 16, 1997, the corporation adopted the following Amendment(s) of its
Articles of Incorporation.
RESOLVED, that pursuant to a two-for-one split of the authorized shares of
the Corporation's common stock (no par value), the total number of
authorized shares of the Corporation's common stock shall be increased from
6,000,000 shares to 12,000,000 shares (no par value).
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable, insert "not
applicable" or "NA").
Shareholders of record on July 2, 1997 will be issued additional stock
certificates representing one additional share of the Corporation's Common
Stock for every one share currently held.
4. Complete either a or b, whichever is applicable.
a. [ ] Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of outstanding
shares of each voting group entitled to vote separately on the
Amendment, and the vote of such shares was:
Number of Number of Number of Number of
out- Votes Shares Undisputed*
Voting standing Entitled Represented Shares Voted
Group Shares To be Cast at the meeting For Against
b. [x] The amendment(s) was duly adopted by the Incorporators or
board of directors without shareholder approval pursuant to
Sections 33-6-102(d), 33-10-102 and 33-10-105 of the 1976
South Carolina Code as amended, and shareholder action was
not required.
5. Unless a delayed date is specified, the effective date of these Articles of
Amendments shall be the date of acceptance for filing by the Secretary of
State (See Section 33-1-230(b)) Effective July 21, 1997.
DATE: June 16, 1997 COMMUNITY BANKSHARES, INC.
(Name of Corporation)
By: s/William W. Traynham
(Signature)
William W. Traynham, President
(Type or Print Name and Office)
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation can
alternatively state the total number of votes cast for
and against the amendment by each voting group entitled
to vote separately on the amendment or the total number
of undisputed votes cast for the amendment by each voting
group together with a statement that the number cast for
the amendment by each voting group was sufficient for
approval by that voting group.
<PAGE>
Jim Miles
Secretary of State
Filed
Mar 15, 1995
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant to Section 33-10-106 of the 1976 South Carolina Code, as amended,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation is Community Bankshares, Inc.
2. On December 13, 1994, the corporation adopted the following Amendment(s) of
its Articles of Incorporation.
RESOLVED, that pursuant to a two-for-one split of the authorized shares of
the Corporation's common stock (no par value), the total number of
authorized shares of the Corporation's common stock shall be increased from
3,000,000 shares to 6,000,000 shares (no par value).
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable, insert "not
applicable" or "NA").
Shareholders of record on January 1, 1995 will be issued additional stock
certificates representing one additional share of the Corporation's Common
Stock for every one share currently held.
4. Complete either a or b, whichever is applicable.
a. [ ] Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of outstanding
shares of each voting group entitled to vote separately on the
Amendment, and the vote of such shares was:
Number of Number of Number of Number of
out- Votes Shares Undisputed*
Voting standing Entitled Represented Shares Voted
Group Shares To be Cast at the meeting For Against
b. [x] The amendment(s) was duly adopted by the Incorporators or board of
directors without shareholder approval pursuant to '33-6-102(d),
33-10-102 and 33-10-105 of the 1976 South Carolina Code as amended,
and shareholder action was not required.
5. Unless a delayed date is specified, the effective date of these Articles of
Amendments shall be the date of acceptance for filing by the Secretary of
State (See Section 33-1-230(b))_______________________.
DATE: December 13, 1994 COMMUNITY BANKSHARES, INC.
(Name of Corporation)
By: s/William W. Traynham
(Signature)
William W. Traynham, President
(Type or Print Name and Office)
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation can
alternatively state the total number of votes cast for and against
the amendment by each voting group entitled to vote separately on
the amendment or the total number of undisputed votes cast for the
amendment by each voting group together with a statement that the
number cast for the amendment by each voting group was sufficient
for approval by that voting group.
<PAGE>
Jim Miles
Secretary of State
Filed
November 30, 1992
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF INCORPORATION
1. The name of the proposed corporation is Community Bankshares, Inc.
2. The initial registered office of the corporation is 1820 Columbia Road,
N.E., Orangeburg, South Carolina 29115.
and the initial registered agent at such address is William W. Traynham.
3. The corporation is authorized to issue shares of stock as follows: Complete
a or b, whichever is applicable:
a. [x] If the corporation is authorized to issue a single class of
shares, the total number of shares authorized is 3,000,000.
B. [ ] The corporation is authorized to issue more than one class of
shares:
Class of Shares Authorized No. of Each Class
-------------------- -----------------------
-------------------- -----------------------
The relative rights, preferences, and limitations of the shares of each
class, and of each series within a class, are as follows:
Common Stock - Shares of this class shall have unlimited voting rights
and shall be entitled, together with any other class having such
rights, to receive the net assets of the Corporation upon dissolution.
4. The existence of the corporation shall begin when these articles are filed
with the Secretary of State unless a delayed date is indicated (See Section
33-1-230(b)):___________________________
5. The optional provisions which the corporation elects to include in the
articles of incorporation are as follows (See Section 33-2-102 and the
applicable comments thereto; and Sections 35-2-105 and 35-2-221 of the 1976
South Carolina Code):
A. Quorum. One-third of the shares entitled to vote thereat shall
constitute a quorum at a meeting of shareholders for the transaction
of any business.
B. Mergers, Consolidations, Exchanges, Sales of Assets or Dissolution.
With respect to any plan of merger, consolidation or exchange or any
plan for the sale of all, or substantially all, the property and
assets, with or without the good will, of the Corporation or any
resolution to dissolve the Corporation, which plan or resolution shall
not have been adopted by the affirmative vote of at least two-thirds
of the full board of directors, such plan or resolution must be
approved by the affirmative vote of holders of 80% of the outstanding
shares of the Corporation.
<PAGE>
C. Classified Board of Directors. There shall be not less than nine nor
more than 24 directors who shall be divided into three classes, each
class to be as nearly equal in number as possible and the election and
terms of directors shall be as provided in Sections 33-8-104 and -106
of the South Carolina Business Corporation Act.
D. Nomination of Directors. No person shall be eligible to be elected a
director of the Corporation at a meeting of shareholders unless that
person has been nominated by a shareholder entitled to vote at such
meeting by giving written notice of such nomination to the secretary
of the Corporation at least thirty days prior to the date of the
meeting.
E. Removal of Directors. An affirmative vote of 80% of the outstanding
shares of the Corporation shall be required to remove any or all of
the directors without cause.
F. Duty of Directors. When evaluating any proposed plan of merger,
consolidation, exchange or sale of all, or substantially all, of the
assets of the corporation, the board of directors shall consider the
interests of the employees of the Corporation and the community or
communities in which the Corporation and its subsidiaries, if any, do
business in addition to the interests of the Corporation's
shareholders.
G. No Preemptive Rights. Shareholders of the Corporation shall not have
preemptive rights with respect to shares, options or rights of the
Corporation.
H. No Cumulative Voting. Cumulative voting with respect to shares of the
Corporation shall not be permitted.
I. Amendment to Articles of Incorporation. Any amendment to the Articles
of Incorporation of the Corporation which amends, alters, repeals or
is inconsistent with any of provisions B, C, D, E, F, G or H above,
unless such amendment shall have been approved by the affirmative vote
of at least two-thirds of the full board of directors, shall not be
effective unless it is approved by the affirmative vote of 80% of the
outstanding shares of the Corporation.
6. The name and address of each incorporator is as follows (only one is
required):
Name Address Signature
William W. Traynham 1820 Columbia Road, N.E.
Orangeburg, SC 29115
E. J. Ayers, Jr. See above
J. Robert Bryant See above s/ J. Robert Bryant
Martha Rose C. Carson See above
J. M. Guthrie See above s/ J. M. Guthrie
Hugo S. Sims, Jr. See above s/ Hugo S. Sims, Jr.
J. Otto Warren See above s/ J. Otto Warren
Kenneth O. Westbury See above s/ Kenneth O. Westbury
Michael A. Wolfe See above s/ Michael A. Wolfe
Russell S. Wolfe, II See above s/ Russell S. Wolfe, II
<PAGE>
7. I, Suzanne Hulst Clawson, an attorney licensed to practice in the
State of South Carolina, certify that the corporation, to whose
articles of incorporation this certificate is attached, has complied
with the requirements Section 33-2-102 of the 1976 South Carolina
Code.
Date: November 25, 1992 s/Suzanne Hulst Clawson
(Signature)
Suzanne Hulst Clawson
P. O. Box 11889
Columbia, South Carolina 29211
ORGANIZATIONAL AGREEMENT
This Organizational Agreement is entered into as of the 15th day of
September, 1997 by and among the persons signing this Agreement as Organizers
(the "Organizers") and Community Bankshares, Inc., a South Carolina corporation,
(the "Sponsor").
Whereas, the Organizers and the Sponsor wish to organize a national bank in
Florence, South Carolina (the "Bank"); and
Whereas, the Organizers and the Sponsor wish to memorialize their
understandings with respect to the organization of the Bank.
Now, therefore, for and in consideration of the premises and the agreements
contained herein the Organizers and Sponsor agree as follows:
1. Each of the Organizers agrees to serve as an Organizer of the Bank, and to
participate in the organizational process in the manner and to the extent
required by the National Bank Act and the rules, regulations and policies
of the Office of the Comptroller of the Currency (the "OCC"). Each
Organizer also agrees that he will serve as a director of the Bank upon its
organization and will endeavor to the best of his ability to fully
discharge the obligations of a director of a national bank.
Each Organizer acknowledges that he understands that he will be required to
provide certain information concerning his background and financial standing to
the OCC in connection with the Application to Organize the Bank and agrees to
promptly furnish such information as may be required. Each Organizer further
understands that continued participation as an Organizer and, ultimately, as a
director of the Bank is subject to the approval of the OCC and agrees that, if
the approval of the OCC for his participation can not be obtained or is delayed
in a way that will substantially delay the opening of the Bank, he will withdraw
from participation as an Organizer and as a prospective director of the Bank.
Each Organizer further acknowledges and agrees that the Sponsor may
designate two or more persons affiliated with the Sponsor to serve as additional
organizers of the Bank and/or to serve as additional directors of the Bank.
2. Each Organizer agrees that he will purchase at least $100,000 worth of
stock of the Sponsor when called on by the Sponsor to purchase said stock;
provided, however, that if the Organizer is provided with a preliminary
prospectus relating to such sale of stock and if such Organizer notifies
the Company prior to the effectiveness of the prospectus that he will not
subscribe for and purchase such stock and resigns as an Organizer and
prospective director of the Bank, then such Organizer shall be relieved of
any obligation to purchase the stock. Each Organizer acknowledges that this
obligation is independent of the obligations of the other Organizers. Each
Organizer further understands that affiliates of Sponsor (including the
proposed President of the Bank) who may be organizers of the Bank will not
be required to purchase stock in the same amount but may be subject to
separate agreements with respect to stock ownership.
26
<PAGE>
3. The Sponsor agrees to be responsible for the cost of preparing and filing
an application to organize a national bank with the OCC, the pre-opening
expenses associated with the organization of the Bank and related items.
However, the Sponsor reserves the right to require the repayment of such
items from the proceeds of capitalization of the Bank. Sponsor agrees to
buy all of the Bank's stock necessary to capitalize the Bank and the
Organizers agree to sell such stock to the Sponsor.
4. The Organizers agree that, promptly after this Agreement is signed by the
Sponsor, they will meet and elect a Chairman who will be the spokesperson
for the Organizers and they will designate Jesse A. Nance as the person to
be the President of the Bank.
5. Each Organizer agrees to promptly notify the Sponsor of any communication
he receives from the OCC or any other governmental agency regarding the
Bank. The Organizers will give at least two days notice to the Sponsor of
any meeting of Organizers.
6. With the exception of Mr. Nance, no Organizer shall receive any
compensation for his service as an Organizer or as a director of the Bank
until the Bank becomes profitable. Mr. Nance shall receive a salary and
benefits from the Sponsor which may, to the extent permitted by applicable
law and regulation, be charged to the organizational expenses of the Bank.
7. The Organizers shall not incur any expense with respect to the Bank without
the prior written consent of the Sponsor.
8. All correspondence or other communications regarding the organization of
the Bank and the other matters contained in this Agreement shall be
directed to the appropriate party at the address set forth by such parties
named below.
9. This Agreement shall be effective as of the date it is signed by the
Sponsor.
10. The Organizers may, with the approval of the Sponsor, bring in additional
Organizers or replace Organizers who leave the group. Any such additional
or replacement Organizer shall sign this Agreement and thereby be bound by
its terms.
11. This Agreement shall be governed by the laws of the State of South Carolina
and shall inure to the benefit of and be enforceable against the parties
hereto their respective heirs, successors and assigns.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Organizational
Agreement as of the effective date.
ORGANIZERS:
s/Phillip D. Lowe s/James (Jim) R. Livingston
- ----------------------------- ----------------------------------------
(Name) (Name)
507 W. Cheves Street 1801 E. Palmetto Street
- ----------------------------- ----------------------------------------
(Address) (Address)
Florence, SC 29501 Florence, SC 29501
- ----------------------------- ----------------------------------------
(City) (State) (City) (State)
s/Murray L. Garber s/Wm. Reynolds Williams
- ----------------------------- ----------------------------------------
(Name) (Name)
516 S. Edisto Drive PO Box 1909
- ----------------------------- ----------------------------------------
(Address) (Address)
Florence, SC 29501 Florence, SC 29503-1909
- ----------------------------- ----------------------------------------
(City) (State) (City) (State)
s/Robert Johnson, Sr. s/J. Erwin Paxton
- ----------------------------- ----------------------------------------
(Name) (Name)
2620 Mellon Street 600 North Coit Street
- ----------------------------- ----------------------------------------
(Address) (Address)
Florence, SC 29501 Florence, SC 29501
- ----------------------------- ----------------------------------------
(City) (State) (City) (State)
s/Richard L. Havekost s/William W. Traynham
- ----------------------------- ----------------------------------------
(Name) (Name)
1315 Place DeJulian PO Box 2086
- ----------------------------- ----------------------------------------
(Address) (Address)
Florence, SC 29501 Orangeburg, SC 29116
- ----------------------------- ----------------------------------------
(City) (State) (City) (State)
s/Hugo S. Sims, Jr. s/Jesse A. Nance
- ----------------------------- ----------------------------------------
(Name) (Name)
PO Box 2086 181 E. Evans St., BTC-051
- ----------------------------- ----------------------------------------
(Address) (Address)
Orangeburg, SC 29116 Florence, SC 29506
- ----------------------------- ----------------------------------------
(City) (State) (City) (State)
28
<PAGE>
SPONSOR:
COMMUNITY BANKSHARES, INC.
s/Hugo S. Sims
By:
Hugo S. Sims, Chairman
Post Office Box 2086
Orangeburg, South Carolina 29116
Attn: Hugo S. Sims, Chairman
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at September 30, 1997, (unaudited) and the
Consolidated Statement of Income for the nine months ended September 30, 1997
(unaudited) and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,011
<INT-BEARING-DEPOSITS> 1,341
<FED-FUNDS-SOLD> 8,005
<TRADING-ASSETS> 101
<INVESTMENTS-HELD-FOR-SALE> 13,826
<INVESTMENTS-CARRYING> 13,834
<INVESTMENTS-MARKET> 17,407
<LOANS> 86,710
<ALLOWANCE> 1,091
<TOTAL-ASSETS> 137,154
<DEPOSITS> 114,824
<SHORT-TERM> 7,960
<LIABILITIES-OTHER> 733
<LONG-TERM> 1,060
0
0
<COMMON> 9,055
<OTHER-SE> 3,522
<TOTAL-LIABILITIES-AND-EQUITY> 137,154
<INTEREST-LOAN> 5,544
<INTEREST-INVEST> 1,301
<INTEREST-OTHER> 237
<INTEREST-TOTAL> 7,082
<INTEREST-DEPOSIT> 2,962
<INTEREST-EXPENSE> 3,135
<INTEREST-INCOME-NET> 3,947
<LOAN-LOSSES> 258
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,948
<INCOME-PRETAX> 1,300
<INCOME-PRE-EXTRAORDINARY> 1,300
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 872
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
<YIELD-ACTUAL> 4.70
<LOANS-NON> 365
<LOANS-PAST> 104
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 469
<ALLOWANCE-OPEN> 876
<CHARGE-OFFS> 74
<RECOVERIES> 31
<ALLOWANCE-CLOSE> 1,091
<ALLOWANCE-DOMESTIC> 1,091
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
