UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
Mark One
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarter period ended June 30, 1998
// TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from _______ to _______
Commission File Number: 33-81890
Community Bankshares, Inc.
__________________________________
(Exact name of registrant as specified in its charter)
Georgia 58-1415887
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
448 North Main Street,
Cornelia, Georgia 30531
(Address of principal executive offices)
(Zip Code)
(706) 778-2265
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant has (1) has
filed all reports required to be filed by Section 13 or
15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period
that the registrant was required to file such reports)
and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of
August 1, 1998: 2,169,830
<PAGE>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Operations
and Comprehensive Income for Three
Months Ended June 30, 1998 and 1997
and Six Months Ended June 30, 1998
and 1997 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 8
Item 6. Exhibits and Reports on Form 8 - K 9
Signatures 10
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
(Dollars in thousands)
(Unaudited)
Assets 1998 1997
<S> <C> <C>
Cash and due from banks $ 21,702 $ 23,957
Interest-bearing deposits in banks 829 769
Federal funds sold 5,780 5,960
Securities available-for-sale 44,314 53,282
Securities held-to-maturity (fair value
$30,972 and $29,558) 30,098 28,719
Loans held for sale 2,751 2,561
Loans 287,880 242,660
Less allowance for loan losses 4,439 4,024
Loans, net 283,441 238,636
Premises and equipment 13,605 12,115
Other assets 13,995 11,080
Total assets $ 416,515 $ 377,079
Liabilities, Reedemable Common Stock and Stockholders' Equity
Deposits
Noninterest-bearing demand $ 60,905 $ 50,768
Interest-bearing demand 79,302 72,854
Savings 18,798 16,276
Time, $100,000 and over 64,744 55,849
Other time 148,977 139,798
Total deposits 372,726 335,545
Other borrowings 386 462
Other liabilities 6,803 7,331
Total liabilities 379,915 343,338
Commitments and contingent liabilities
Redeemable common stock held by ESOP, 344,531
shares outstanding, at fair value 10,622 10,622
Stockholders' equity
Common stock, par value $1; 5,000,000
shares authorized; 2,169,830
shares issued and outstanding 2,170 2,170
Capital surplus 6,036 6,036
Retained earnings 17,661 14,783
Accumulated other comprehensive income,
net of tax 111 130
Total stockholders' equity 25,978 23,119
Total liabilities and stockholders' equity $ 416,515 $ 377,079
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHESIVE INCOME
THREE MONTHS ENDED JUNE 30, 1998 AND 1997 AND
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Interest income
Loans $7,349 $5,691 $14,033 $11,062
Taxable securities 655 809 1,410 1,562
Nontaxable securities 418 326 808 611
Deposits in banks 7 9 18 17
Federal funds sold 97 161 219 365
Total interest income 8,526 6,996 16,488 13,617
Interest expense on deposits
Deposits 3,911 3,253 7,603 6,344
Other borrowings 9 11 17 22
Total interest expense 3,920 3,264 7,620 6,366
Net interest income 4,606 3,732 8,868 7,251
Provision for loan losses 350 199 540 389
Net interest income
after provision for
loan losses 4,256 3,533 8,328 6,862
Other income
Service charges on deposit
accounts 614 506 1,216 968
Other service charges and
fees 173 120 256 286
Gains on sale of loans 154 120 215 278
Trust Department fees 27 28 54 45
Net realized gains on sales
of securities 2 (6) 11 (6)
Nonbank subsidiary non-
interest income 1,980 2,492 3,639 4,950
Other operating income 86 232 245 295
Total other income 3,036 3,492 5,636 6,816
Other expenses
Salaries and employee
benefits 2,550 2,425 4,900 4,967
Occupancy expense 311 254 614 501
Equipment expense 459 269 904 605
Other operating expenses 1,560 1,629 3,069 2,915
Total other expenses 4,880 4,577 9,487 8,988
Income before income
taxes 2,412 2,448 4,477 4,690
Income tax expense 793 799 1,439 1,521
Net income $1,619 $1,649 $3,038 $3,169
Other comprehensive income
(loss):
Unrealized gains (losses)
on secutities avaliable-
for-sale arising during
the period 70 352 (32) 2
Less:
reclassification adjustment
for gains included in net
income 2 (6) 11 (6)
Total other comprehensive
income 72 346 (21) (4)
Comprehensive income $1,691 $1,995 $3,107 $3,165
Basic earnings per common share $ 0.75 $ 0.82 $ 1.40 $ 1.58
Diluted earnings per common share 0.74 0.76 1.38 1.48
Cash dividends per share of
common stock $0.037 $0.035 $0.073 $0.070
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Dollars in thousands)
(Unaudited)
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,038 $ 3,169
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 928 504
Provision for loan losses 540 389
Provision for other real estate 10 35
Deferred income taxes (141) (107)
Increase in loans held for sale (190) 21
Net realized (gains) losses on
securities available-for-sale (11) 6
Net losses on sale of other real estate - 40
Increase in interest receivable (552) (444)
Increase in interest payable 273 190
Increase (decrease) in taxes payable 573 745
Increase (decrease) in accounts
receivable of nonbank subsidiary (1,617) 665
Increase (decrease) in work in
process of nonbank subsidiary (24) 905
Increase (decrease) in accruals and
payables of nonbank subsidiary (860) (1,012)
Other operating activities (1,384) (1,022)
Net cash provided by
operating activities 585 4,084
INVESTING ACTIVITIES
Purchases of securities available-for-sale (5,867) (12,411)
Proceeds from sales of securities
available-for-sale 1,875 4,413
Proceeds from maturities of securities
available-for-sale 12,939 2,863
Purchases of securities held-to-maturity (2,209) (5,955)
Proceeds from maturities of securities
held-to-maturity 830 690
Net decrease in Federal funds sold 180 1,160
Net increase in interest-bearing
deposits in banks (60) (92)
Net increase in loans (45,374) (17,620)
Purchase of premises and equipment (2,285) (1,851)
Net cash acquired in branch acquisition 171 -
Proceeds from sales of other real estate 16 242
Net cash used in
investing activities (39,786) (28,561)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 37,181 26,620
Repayment of other borrowings (76) (77)
Proceeds from issuance of Common
Stock - 143
Dividends paid (159) (140)
Net cash provided by
financing activities 36,946 26,546
Net increase (decrease) in cash and
due from banks $ (2,255) $ 2,069
Cash and due from banks at beginning of the
Year 23,957 19,480
Cash and due from banks at end of the Year $ 21,702 $ 21,549
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 7,347 $ 6,176
Income taxes $ 1,007 $ 883
NONCASH TRANSACTIONS
Unrealized (gains) losses on
securities available-for sale $ 32 $ (2)
Principal balances on loans and premises
and equipment transferred to other
real estate $ 29 $ 220
BRANCH ACQUISITION
Net cash acquired $ 171 $ -
Loans $ 2,981 -
Premises and equipment 10 -
Other assets 14 -
Core deposit intangible 759 -
Deposits (5,838) -
Other liabilities (25) -
Net liabilities assumed, net of
cash and due from banks of $171 $ (2,099) $ -
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The consolidated financial information included herein is
unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in
opinion of management, necessary for a fair statement of results
for the interim periods.
The results of operations for the six month period ending June 30,
1998 are not necessarily indicative of the results to be expected
for the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board (FASB) has issued, and
the Company has adopted, Statement of Financial Accounting
Standards (SFAS) No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities". This
statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-
components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that
are secured borrowings. The adoption of this statement did not
have a material effect on the company's financial statements.
The FASB has issued, and the Company has adopted, SFAS No. 128,
"Earnings Per Share". SFAS No. 128 supersedes Accounting
Principals Board Opinion No. 15 "Earnings Per Share" and specifies
the computation, presentation, and disclosure requirements for
earnings per share (EPS) for entities with publicly held common
stock or potential issuable common stock. SFAS No. 128 replaced
the presentation of primary EPS with a presentation of basic EPS
and fully diluted EPS with diluted EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator for the
basic EPS computation to the numerator and denominator of the
diluted EPS computation. SFAS No. 128 is effective for financial
statements for both interim and annual periods ending after
December 15, 1997. The adoption of this statement did not have a
material effect on the Company's financial statements.
The FASB has issued, and the Company has adopted, SFAS No. 130,
"Reporting Comprehensive Income". This statement establishes
standards for reporting and display of comprehensive income and
its components in the financial statements. SFAS No. 130 requires
all items that are required to be recognized under accounting
standards as components of comprehensive income to be reported in
a financial statement that is displayed in equal prominence with
the other financial statements. The term "comprehensive income"
is used in the SFAS to describe the total of all components of
comprehensive income including net income. "Other comprehensive
income" refers to revenues, expenses, gains and losses that are
included in comprehensive income but excluded from earnings under
current accounting standards. Currently, "other comprehensive
income" for the Company consists of items previously recorded
directly in equity under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". SFAS No. 130 is
effective for fiscal years and interim periods beginning after
December 15, 1997.
NOTE 3 EARNINGS PER COMMON SHARE
The following is a reconciliation of net income (the numerator)
and weighted-average shares outstanding (the denominator) used in
determining basic and diluted earnings per common share (EPS).
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
( Dollars in Thousands, except per share amounts)
Net Weighted- Per
Income Average Shares Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS 1,619 2,170 0.75
Effect of Dilutive
Securities:
Stock options 0 26
Diluted EPS 1,619 2,196 0.74
Three Months Ended June 30, 1997
(Dollars in Thousands, except per share amounts)
Net Weighted- Per
Income Average Shares Share
(Numerator) (Denominator) Amount
Basic EPS 1,649 2,018 0.82
Effect of Dilutive
Securities:
Stock options 0 149
Diluted EPS 1,649 2,167 0.76
Six Months Ended June 30, 1998
(Dollars in Thousands, except per share amounts)
Net Weighted- Per
Income Average Shares Share
(Numerator) (Denominator) Amount
Basic EPS 3,038 2,170 1.40
Effect of Dilutive
Securities:
Stock options 0 26
Diluted EPS 3,038 2,196 1.38
Six Months Ended June 30, 1997
(Dollars in Thousands, except per share amounts)
Net Weighted- Per
Income Average Shares Share
(Numerator) (Denominator) Amount
Basic EPS 3,169 2,011 1.58
Effect of Dilutive
Securities:
Stock options 0 137
Diluted EPS 3,169 2,148 1.48
</TABLE>
<PAGE>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
position and operating results during the periods included in the
accompanying consolidated financial statements.
Financial Condition
As of June 30, 1998, the Company continues to experience growth in
total assets, total loans and total deposits as compared to
December 31, 1997. Total assets, loans, and deposits increased by
10.46%, 18.52% and 11.08% respectively. The growth in deposits
and loans is higher than prior year, but consistent with
management's expectations. The growth in assets is attributable
to growth in deposits and retention of earnings. Management
expects the growth to continue in the future.
Liquidity
As of June 30, 1998, the Liquidity Ratio was 20.68% which is on
the low side of the Company's target range of 20 - 25%. This
lower than normal level of liquidity is due to the increased loan
demand currently being experienced in the Company's markets.
However, the Banks have available lines of credit to meet
liquidity needs. Liquidity is measured by the ratio of net cash,
short term and marketable securities to net deposits and short
term Liabilities.
Interest Rate Risk
The Company's overall interest rate risk was less than 7% of net
interest income subjected to rising and falling rates of 200 basis
points.
Capital
Banking regulation requires the Company to maintain capital levels
in relation to Company assets. At June 30, 1998, the company's
capital ratios were considered satisfactory based on regulatory
minimum capital requirements. The minimum capital requirements
and the actual capital ratios for the Company at June 30, 1998
were as follows:
<TABLE>
Actual Regulatory
Minimum
<S> <C> <C>
Leverage 8.21% 4.00%
Risked Based
Capital ratios:
Core Capital 10.82% 4.00%
Total Capital 12.08% 8.00%
</TABLE>
Results of Operation
Net interest income for the six month period ended June 30, 1998
is up 22.30% over the same period for 1997, from $7,251,000 to
$8,868,000, and is up 23.42% for the three month period ending
June 30, 1998 from $3,732,000 to $4,606,000 for 1998. Interest
income was up by 21.08% for the six month period ending June 30,
1998 from $13,617,000 to $16,488,000 and up 21.86% for the three
month period ending June 30, 1998 from $6,996,000 to $8,526,000.
Interest expense was up 19.70% or $1,254,000 for the six month
period ended June 30, 1998, over the same period in 1997 and up
20.10% or $656,000 for the three month period ending June 30,
1998, as compared to 1997. The increase in interest income is due
to an increase of 20.05% or $64,636,000 in earning assets from
June 30, 1997 to June 30, 1998. Investment securities decreased
by $2,056,000 or 2.69% during the period primarily to meet the
loan demand. Total loans increased during the last year by
$67,568,000 or 30.29%. The increase in interest income, interest
expense, and net interest income were consistent with the budget
projections made by management and are on target to be consistent
with annual projections. Included in the above are $7,339,000 and
$18,225,000 in loans and deposits, respectively, which were
assumed through the purchase of two bank branches during the past
year.
The provision for loan losses was $350,000 for the first six
months of 1998. This provision will fluctuate based on Small
Business Administration (SBA) loans closed, as we have a policy of
reserving 5% of the un-guaranteed portion of any SBA loans. The
Company currently has reserves totaling $900,812 for its un-
guaranteed portion of SBA loans.
The following table furnishes information on the Loan Loss Reserve
for the current three month reporting period and the same period
for 1997.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Beginning Balance $ 4,024 $ 3,592
Less Charge Offs:
Real Estate Loans (7) (24)
Commercial Loans (34) (43)
Consumer Loans (165) (84)
Credit Cards 0 (1)
Plus Recoveries
Real Estate Loans 18 23
Commercial Loans 10 6
Consumer Loans 53 21
Credit Cards 0 0
Plus Provision 540 389
Ending Balance $ 4,439 $ 3,879
The loan loss reserve for the company is evaluated monthly and
adjusted to reflect the risk in the portfolio in the following
manner. We use four different methods of measuring risk in the
portfolio: (a) Risk in our watch list of loans and past due
ratios; (b) Historical charge offs; ( c) Peer group comparisons;
and (d) Percentage of classified loans. We then compare results
to reserve balances to assure any and all identified risk are
covered.
The Provision for Loan Losses for the six month period ended June
30, 1998 represented 262% of charge offs for the same period, while
the provision for the first six months of 1997 represented 255% of
the charge offs recorded in that period. The reserve at the end
of June 30, 1998 represented 383% of non accrual loans while the
reserve at June 30, 1996 represented 500% of non accrual loans.
Non accrual loans have increased from $775,000 at June 30, 1997 to
$1,158,000 as of June 30, 1998, due mainly to the addition of one
large line that has been returned to current status after the end
of the quarter. The Company is well within its policy limit of
maintaining a loan loss reserve of at least 200% of non-performing
assets. The Loan Loss Reserve balance to total loan ratio at June
30, 1998 was 1.53% as compared to 1.74% at June 30, 1997. The
decrease in this ratio is due to the strong loan demand experienced
in all the Company's market areas. Management considered the Loan
Loss Reserve to be adequate to absorb any losses that may be
incurred.
The following table is a summary of Non Accrual, Past due and
Restructured Debt
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998
Non-accrual Past Due Restructured
Loans 90 days Debt
still
accruing
<S> <C> <C> <C>
Real Estate Loans 7 44 0
Commercial Loans 473 133 808
Consumer Loans 678 194 0
Total 1,158 371 808
</TABLE>
June 30, 1997
<TABLE>
<CAPTION>
Non-accrual Past Due Restructured
Loans 90 days Debt
still
accruing
<S> <C> <C> <C>
Real Estate Loans 198 0 0
Commercial Loans 264 277 606
Consumer Loans 313 128 0
Total 775 405 606
</TABLE>
Loans classified for regulatory purposes as loss, doubtful,
substandard, or special mention that have not been included in the
table above do not represent or result from trends or uncertainties
which management reasonably expects will materially impact future
operating results, liquidity or capital resources. These
classified loans do not represent material credits about which
management is aware of any information which causes management to
have serious doubts as to the ability of such borrows to comply
with the loan payment terms.
The bank places loans on non-accrual at such a time it is apparent
that the collection of all principal and interest is questionable
and the loan is either past due 90 days or bankruptcy has been
filed.
Other income decreased by 17.31% or $1,180,000 during the six month
period ended June 30, 1998 as compared to the same period for 1997
and the three month period ending June 30, 1998 showed an 13.09% or
$457,000 decrease over the same three month period of 1997. The
majority of these decreases, $1,311,000 and $513,000,
respectively, are due to fewer installations of supermarket bank
units in the first half of 1998 compared to 1997. Service charges
on deposit accounts increased by $248,000 or 25.62% for the six
month period ended June 30, 1998, and $109,000 or 21.54% for the
three month period ended June 30, 1998, as compared to the same
periods in 1997. The major increase was the increase in non-
sufficient funds (NSF) charges of $238,000 and $105,000 for the six
month period and the three month period ended June 30, 1998,
respectively, compared to the same period in 1997. NSF charges
increased primarily as a result of the Company's continued growth
in accounts in the totally free checking program. The gains on
sale of loans decreased by $64,000 or 23.11% during the six month
period ended June 30, 1998 as compared to the same period for 1997.
This decrease is due to a smaller number of SBA loan originations
during the first half of 1998 compared to 1997. Trust department
income for the first half of 1998 increased to $54,000 compared to
$45,000 for the first half of 1997.
Other operating expenses increased by 5.55% or $499,000 for the six
month period ended June 30, 1998, and 6.62% or $303,000 for the
three month period ending June 30, 1998 as compared to the same
period in 1997. Salaries and benefits decreased by $67,000 or
1.35% during the six month period ended June 30, 1998 compared to
the same period in 1997. Although full time equivalent employees
increased from 228 at the end of June 1997 to 275 at the end of
June 1998, the amount being accrued for incentive compensation
decreased, because or less supermarket banking unit installations
during the first half of 1998 compared to 1997, resulting in an
overall net decrease in salaries and benefits. Equipment and
occupancy expenses were up by 37.25% or $412,000 for the six month
period ended June 30, 1998, and 47.23% or $247,000 for the three
month period ending June 30, 1998, as compared to the same period
in 1997. The increase in full time equivalent employees as well as
equipment and occupancy expenses was influenced by the addition of
four brick and mortar facilities and one supermarket banking center
during the past twelve months. In addition, the increase in the
equipment and occupancy expense has increased even more in the past
quarter due to the installation of a new data processing system.
Management anticipates equipment and occupancy expenses to continue
to increase during the third and forth quarters as the installation
of the new data processing system is completed.
Net income for the six month period ended June 31, 1998, was
$3,038,000 or a decrease of 4.13% and for the three month period
ended June 31, 1998, was $1,619,000 or a decrease of 1.82% over the
same periods for 1997. The net income was more than budgeted
numbers for both periods and is consistent with management's
expectations.
The company is not aware of any other known trends, events or
uncertainties, other than the effect of events as described above,
that will have or that are reasonably likely to have a material
effect on its liquidity, capital resources or operations. The
Company is also not aware of any current recommendations by the
regulatory authorities which, if they were implemented, would have
such an effect.
YEAR 2000 COMPLIANCE
The "year 2000 issue" arises from the widespread use of computer
programs that rely on two-digit codes to perform computations or
decision-making functions. Many of these programs may fail due to
an inability to properly interpret date codes beginning January 1,
2000. For example, such programs may misinterpret "00" as the year
1900 rather than 2000. In addition, some equipment, being
controlled by microprocessor chips, may not deal appropriately with
the year "00". The Bank is evaluating its computer systems to
determine which modifications and expenditures will be necessary to
make its systems compatible with year 2000 requirements. The
Company believes that their systems will be year 2000-compliant
upon implementation of such modifications.
Prior to the emergence of the year 2000 issue, management had made
a decision to install a new data processing system along with a
wide area network. Currently the installation is under way with an
estimated conversion date of November 1998. This new data
processing system along with a wide area network are both certified
year 2000 compliant. In addition to the $1,500,000 estimated cost
of this installation, the Company anticipates expenses of
approximately $500,000 will be necessary to modify other data
systems prior to the Year 2000. However, there can be no assurance
that all necessary modifications will be identified and corrected
or that unforeseen difficulties or costs will not arise. In
addition, there can be no assurance that the systems of other
companies on which the Company depends will be modified on a timely
basis, or that the failure by another company to properly modify
its systems will not negatively impact the systems or operations of
the Banks.
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Shareholders of the Company was held on
April 8, 1998. Total shares outstanding amounted to 2,169,830. A
total of 1,969,865 shares (90.78%) were represented by
shareholders in attendance or by proxy. The following directors
were re-elected to serve for a one-year term. The results of the
election were as follows:
<TABLE>
Shares Voted:
For Against Abstain
<S> <C> <C> <C>
Steven C. Adams 1,969,865 0 0
Edwin B. Burr 1,969,865 0 0
Harry H. Purvis 1,969,865 0 0
H. Calvin Stovall 1,969,865 0 0
Dean C. Swanson 1,969,865 0 0
George D. Telford 1,969,865 0 0
J. Alton Wingate 1,969,865 0 0
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
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.
COMMUNITY BANKSHARES, INC.
DATE: August 12, 1998 BY: /s/ Harry L. Stephens
Harry L. Stephens,
Executive Vice President and
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 21,702
<INT-BEARING-DEPOSITS> 829
<FED-FUNDS-SOLD> 5,780
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,314
<INVESTMENTS-CARRYING> 30,098
<INVESTMENTS-MARKET> 30,972
<LOANS> 290,631
<ALLOWANCE> 4,439
<TOTAL-ASSETS> 416,515
<DEPOSITS> 372,726
<SHORT-TERM> 386
<LIABILITIES-OTHER> 6,803
<LONG-TERM> 0
<COMMON> 2,170
10,622
0
<OTHER-SE> 23,808
<TOTAL-LIABILITIES-AND-EQUITY> 416,515
<INTEREST-LOAN> 14,033
<INTEREST-INVEST> 2,437
<INTEREST-OTHER> 18
<INTEREST-TOTAL> 16,488
<INTEREST-DEPOSIT> 7,603
<INTEREST-EXPENSE> 7,620
<INTEREST-INCOME-NET> 8,868
<LOAN-LOSSES> 540
<SECURITIES-GAINS> 11
<EXPENSE-OTHER> 9,487
<INCOME-PRETAX> 4,477
<INCOME-PRE-EXTRAORDINARY> 4,477
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,038
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.38
<YIELD-ACTUAL> 2.39
<LOANS-NON> 1,158
<LOANS-PAST> 371
<LOANS-TROUBLED> 808
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,024
<CHARGE-OFFS> 206
<RECOVERIES> 81
<ALLOWANCE-CLOSE> 4,439
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 4,439
</TABLE>
