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, 2000
// 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, 2000: 2,178,830<PAGE>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 2000 and December 31, 1999 2
Consolidated Statements of Income
and Comprehensive Income for Three
Months Ended June 30, 2000 and 1999
and Six Months Ended June 30, 2000
and 1999 3
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders7
Item 6. Exhibits and Reports on Form 8 - K 8
Signatures 9
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
(Dollars in thousands)
(Unaudited)
Assets 2000 1999
---------- ----------
<S> <C> <C>
Cash and due from banks $ 32,545 $ 31,834
Interest-bearing deposits in banks 399 161
Federal funds sold 5,610 2,940
Securities available-for-sale 60,303 49,143
Securities held-to-maturity (fair value
$32,300 and $31,349) 32,569 31,939
Loans held for sale 342 1,275
Loans 397,231 375,593
Less allowance for loan losses 5,957 5,682
---------- ----------
Loans, net 391,274 369,911
---------- ----------
Premises and equipment 13,754 13,444
Other assets 16,883 15,502
---------- ----------
Total assets $ 553,679 $ 516,149
---------- ----------
Liabilities and Shareholders' Equity
Deposits
Non-interest-bearing demand $ 73,340 $ 65,815
Interest-bearing demand 105,579 99,185
Savings 23,973 20,863
Time, $100,000 and over 89,576 79,925
Other time 186,516 178,268
---------- ----------
Total deposits 478,984 444,056
Federal Home Loan Advances 15,000 15,000
Other borrowings 977 1,054
Other liabilities 10,716 11,237
---------- ----------
Total liabilities 505,677 471,347
---------- ----------
Commitments and contingent liabilities
Redeemable common stock held by ESOP, 382,580
and 380,780 shares outstanding at
June 30,2000 and December 31, 1999 14,048 13,982
-------- --------
Shareholders' equity
Common stock, par value $1; 5,000,000
Shares authorized; 2,178,830
Shares issued and outstanding 2,179 2,179
Capital surplus 6,115 6,115
Retained earnings 26,894 23,853
Accumulated other comprehensive income,
Net of tax (1,234) (1,327)
---------- ----------
Total shareholders' equity 33,954 30,820
---------- ----------
Total liabilities and shareholders' equity $ 553,679 $ 516,149
---------- ----------
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHESIVE INCOME
THREE MONTHS ENDED JUNE 30, 2000 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
2000 1999 2000 1999
----------------- --------- --------
<S> <C> <C> <C> <C>
Interest income
Loans $ 10,154 $ 8,642 $ 19,654 $ 16,778
Taxable securities 737 603 1,391 1,156
Nontaxable securities 532 494 1,041 978
Deposits in banks - 5 8 11
Federal funds sold 192 176 448 437
-------- -------- --------- --------
Total interest income 11,615 9,920 22,542 19,360
-------- -------- --------- --------
Interest expense
Deposits 5,154 4,188 9,996 8,312
Other borrowings 234 82 458 161
-------- -------- --------- --------
Total interest expense 5,388 4,270 10,454 8,473
-------- -------- --------- --------
Net interest income 6,227 5,650 12,088 10,887
Provision for loan losses 352 388 694 657
-------- -------- --------- --------
Net interest income
after provision
for loan losses 5,875 5,262 11,394 10,230
-------- -------- --------- --------
Other income
Service charges on deposit
accounts 864 700 1,613 1,361
Other service charges and fees 206 124 401 264
Gains on sale of loans 51 99 175 156
Trust Department fees 22 22 50 68
Nonbank subsidiary
non-interest income 1,933 1,564 4,006 2,999
Other operating income 185 201 306 379
-------- -------- --------- --------
Total other income 3,261 2,710 6,551 5,227
-------- -------- --------- --------
Other expenses
Salaries and employee benefits 3,541 3,246 7,028 6,199
Occupancy expense 379 346 743 669
Equipment expense 657 655 1,274 1,262
Other operating expenses 2,053 1,801 4,071 3,555
-------- -------- --------- --------
Total other expenses 6,630 6,048 13,116 11,685
-------- -------- --------- --------
Income before income
taxes 2,506 1,924 4,829 3,772
Income tax expense 811 528 1,533 1,044
-------- -------- --------- --------
Net income $ 1,695 $ 1,396 $ 3,296 $ 2,728
-------- -------- --------- --------
Other comprehensive income (loss):
Unrealized gains (losses) on
securities available-
for-sale arising during
the period 45 (609) 94 (881)
-------- -------- --------- --------
Total other comprehensive
income (loss) 45 (609) 94 (881)
-------- -------- --------- --------
Comprehensive income $ 1,740 $ 787 $ 3,390 $ 1,847
======== ======== ========= ========
Basic earnings per common share $ 0.78 $ 0.64 $ 1.51 $ 1.26
-------- -------- --------- --------
Diluted earnings per common share 0.77 0.63 1.50 1.24
-------- -------- -------- ---------
Cash dividends per share of $ .0435 $ .039 $ .087 $ .079
common stock -------- -------- --------- --------
<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, 2000 AND 1999
(Dollars in thousands)
(Unaudited)
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,296 $ 2,728
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,305 1,131
Provision for loan losses 694 657
Provision for other real estate 5 -
Deferred income taxes (121) (319)
Increase (decrease) in loans held for
sale 933 (458)
Net (gains) losses on sale of other real
estate (33) (39)
Increase in interest receivable (654) (428)
Increase (decrease) in interest payable 2,216 (983)
Increase in taxes payable 168 287
Increase (decrease) in accounts
receivable of nonbank subsidiary 141 245
Increase (decrease) in work in
process of nonbank subsidiary (312) (18)
Increase (decrease) in accruals and
payables of nonbank subsidiary (2,841) (1,148)
Other operating activities (551) 39
---------- ----------
Net cash provided by
operating activities 4,246 1,694
---------- ----------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (12,499) (16,488)
Proceeds from maturities of securities
available-for-sale 1,493 10,203
Purchases of securities held-to-maturity (1,737) (448)
Proceeds from maturities of securities
held-to-maturity 1,107 488
Net decrease in Federal funds sold (2,670) 10,730
Net increase in interest-bearing
deposits in banks (238) (29)
Net increase in loans (22,852) (36,532)
Purchase of premises and equipment (1,416) (1,115)
Proceeds from sales of other real estate 615 276
---------- ----------
Net cash used in
investing activities (38,197) (32,915)
---------- ----------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 34,928 30,069
Increase in other borrowings - 400
Repayment of other borrowings (77) (77)
Proceeds from issuance of Common
Stock - 30
Dividends paid (189) (171)
---------- ----------
Net cash provided by
financing activities 34,662 30,251
Net increase (decrease) in cash and
due from banks $ 711 $ (970)
Cash and due from banks at beginning of the
Period 31,834 26,796
---------- ----------
Cash and due from banks at end of the Period $ 32,545 $ 25,826
---------- ----------
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 9,456 $ 9,456
Income taxes $ 1,486 $ 1,076
NONCASH TRANSACTIONS
Unrealized (gains) losses on
securities available-for sale $ (154) $ 1,468
Principal balances on loans and premises
and equipment transferred to other
real estate $ 795 $ 67
<FN>
See Notes to Consolidated Financial Statements
</FN>
</TABLE>
<PAGE>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
NOTES 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 three and six month periods ending June 30,
2000 are not necessarily indicative of the results to be expected for the
full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". The
effective date of this statement has been deferred by SFAS No. 137 until
fiscal years beginning after June 15, 2000. However, the statement permits
early adoption as of the beginning of any fiscal quarter after its issuance.
The Company expects to adopt this statement effective January 1, 2001. SFAS
No. 133 requires the Company to recognize all derivatives as either assets or
liabilities in the balance sheet at fair value. For derivatives that are not
designated as hedges, the gain or loss must be recognized in earnings in the
period of change. For derivatives that are designated as hedges, changes in
the fair value of the hedged assets, liabilities, or firm commitments must be
recognized in earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings, depending on the nature of the hedge.
The ineffective portion of a derivative's change in fair value must be
recognized in earnings immediately. Management has not yet determined what
effect the adoption of SFAS No. 133 will have on the Company's earnings or
financial position.
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>
Six Months Ended June 30, 2000
(Dollars and shares in Thousands,
except per share amounts)
Net Weighted-Average
Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS $1,695 2,179 $0.78
Effect of Dilutive
Securities
Stock options 0 20
---------- ---------- ----------
Diluted EPS $1,695 2,199 $0.77
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30,2000
(Dollars and shares in Thousands,
except per share amounts)
Net Weighted-Average
Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS $1,396 2,172 $0.64
Effect of Dilutive
Securities
Stock options 0 27
---------- ---------- ----------
Diluted EPS $1,396 2,199 $0.63
========== ========== ==========
Six Months Ended June 30, 2000
(Dollars and shares in Thousands,
except per share amounts)
Net Weighted-Average
Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS $3,296 2,179 $1.51
Effect of Dilutive
Securities
Stock options 0 20
---------- ---------- ----------
Diluted EPS $3,296 2,199 $1.50
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
(Dollars and shares in Thousands,
except per share amounts)
Net Weighted-Average
Income Shares Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Basic EPS $2,728 2,171 $1.26
Effect of Dilutive
Securities
Stock options 0 27
---------- ---------- ----------
Diluted EPS $2,728 2,198 $1.24
========== ========== ==========
</TABLE>
NOTE 4 SEGMENT INFORMATION
Selected segment information by industry segment for the three and six month
periods ended June 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Reportable Segments
(Dollars in thousands)
---------------------------------------
For the three month period Financial All
ended June 30, 2000 Banking Supermarkets Other Total
---------------------------- --------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenue from external 12,980 1,781 91 14,852
customers
Intersegment revenues (192) 383 581 772
(expenses)
Segment profit (loss) 1,357 675 (198) 1,834
Segment assets 555,166 16,825 3,011 575,002
</TABLE>
<TABLE>
<CAPTION>
Reportable Segments
(Dollars in thousands)
---------------------------------------
For the three month period Financial All
ended June 30, 1999 Banking Supermarkets Other Total
---------------------------- --------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenue from external $11,181 $1,568 $43 $12,792
customers
Intersegment revenues (121) 154 395 428
(expenses)
Segment profit (loss) 1,319 358 (284) 1,393
Segment assets 499,619 13,429 2,684 515,732
</TABLE>
<TABLE>
<CAPTION>
Reportable Segments
(Dollars in thousands)
---------------------------------------
For the six month period Financial Allr Total
ended June 30, 2000 Banking Supermarkets Other Total
---------------------------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenue from external $25,250 $4,014 $128 $29,392
customers
Intersegment revenues (367) 699 1,163 1,495
Segment profit 2,616 1,378 (466) 3,528
</TABLE>
<TABLE>
<CAPTION>
Reportable Segments
(Dollars in thousands)
---------------------------------------
For the six month period Financial Other Total
ended June 30, 1999 Banking Supermarkets Other Total
---------------------------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenue from external $21,828 $3,062 $85 $24,975
customers
Intersegment revenues (244) 307 789 852
Segment profit 2,489 817 (531) 2,775
</TABLE>
<TABLE>
<CAPTION>
For the three For the six
months months
Ended June, 30 Ended June, 30
------------------- ------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Income
Total profit for $2,032 $1,677 $3,994 $3,306
reportable segments
Non-reportable segment loss (198) (284) (466) (531)
Elimination of (139) 3 (232) (47)
intersegment (gains) losses
Total consolidated $1,695 $1,396 $3,296 $2,728
other income
</TABLE>
<PAGE>
COMMUNITY BANKSHARES, INC.
AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
----------------------------------------------
The following appears in accordance with the Securities Litigation Reform
Act. These financial statements and financial review include forward looking
statements that involve inherent risks and uncertainties. A number of
important factors could cause actual results to differ materially from those
in the forward looking statements. Those factors include fluctuations in
interest rates, inflation, government regulations, economic conditions, Year
2000 issues and competition in the geographic business areas in which the
Company conducts its operations.
Management's Discussion and Analysis
----------------------------------------------
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, 2000, the Company continues to experience growth in total
assets, total loans and total deposits as compared to December 31, 1999.
Total assets, loans, and deposits increased by 7.27%, 5.49% and 7.87%
respectively. The growth in all areas is slightly less than the same period
last 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, 2000, the Liquidity Ratio was 20.16% which is within the
Company's target range of 20 - 25%. 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 uses a simulation model to monitor changes in net interest income
due to changes in market rates. The model of rising, falling and stable
interest rate scenarios allows management to monitor and adjust interest rate
sensitivity to minimize the impact of market rate swings. The analysis of
impact on net interest margins as well as market value of equity over a
twelve month period is subjected to a 200 basis point increase and decrease
in rate. The Company's overall interest rate risk was less than 3% of net
interest income subjected to rising and falling rates of 200 basis points.
The Company's policy is to allow no more than +- 8% change in net interest
income for these scenarios. Therefore, the Company is within its policy
guidelines and is protected from any significant impact due to market rate
changes.
Capital
Banking regulation requires the Company and banks to maintain capital levels
in relation to Company and bank assets. At June 30, 2000, the Company's and
banks' 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, 2000 were as follows:
<TABLE>
<CAPTION>
Actual Regulatory
Minimum
<S> <C> <C>
Leverage 8.44% 4.00%
Risked Based
Capital ratios:
Core Capital 10.98% 4.00%
Total Capital 12.23% 8.00%
</TABLE>
Results of Operation
Net interest income for the six month period ended June 30, 2000 is up 11.03%
over the same period for 1999, from $10,887,000 to $12,088,000, and is up
10.21% for the three month period ending June 30, 2000 from $5,650,000 to
$6,227,000 for 2000. Interest income was up by 16.44% for the six month
period ending June 30, 2000 from $19,360,000 to $22,542,000 and up 17.09% for
the three month period ending June 30, 2000 from $9,920,000 to $11,615,000.
The increase in interest income is due to an increase of 12.39% or
$54,728,000 in earning assets from June 30, 1999 to June 30, 2000.
Investment securities increased by $14,655,000 or 18.74% during the same
period primarily due to slightly less loan growth compared to prior year.
Total loans increased during the last year by $46,681,000 or 13.30%. Interest
expense was up 23.38% or $1,981,000 for the six month period ended June 30,
2000, over the same period in 1999 and up 26.18% or $1,118,000 for the three
month period ending June 30, 2000, as compared to 1999. The increase in
interest expense is due to an increase in interest bearing liabilities of
$53,602,000 or 14.60% from June 30, 1999 to June 30, 2000 as well as an
increase in the Prime rate during the last twelve months which has resulted
in interest bearing deposits repricing at higher rates. Interest bearing
deposits increased by 12.04% or $43,602,000 from June 30, 1999 to June 30,
2000. Federal Home Loan Advances increased by $10,000,000 or 200% from June
30, 1999 to June 30, 2000 to fund growth. 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.
The provision for loan losses was $694,000 for the first six months of 2000.
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
$1,052,318 for its un-guaranteed portion of SBA loans.
The following table furnishes information on the Loan Loss Reserve for the
six month reporting period and the same period for 1999.
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Beginning Balance $ 5,682 $ 4,863
Less Charge Offs:
Real Estate Loans (0) (23)
Commercial Loans (238) (169)
Consumer Loans (303) (186)
Credit Cards (5) 0
-------- --------
(546) (378)
-------- --------
Plus Recoveries
Real Estate Loans 0 4
Commercial Loans 45 33
Consumer Loans 82 141
-------- --------
127 178
-------- --------
Net Charge-offs (419) (200)
-------- --------
Plus Provision 694 657
-------- --------
Ending Balance $ 5,957 $ 5,320
======== ========
</TABLE>
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, 2000
represented 128% of total charge offs for the same period, while the
provision for the first six months of 1999 represented 174% of the charge
offs recorded in that period. The reserve at the end of June 30, 2000
represented 309% of non accrual loans while the reserve at June 30, 1999
represented 414% of non accrual loans. Non accrual loans have increased from
$1,284,000 at June 30, 1999 to $1,918,000 as of June 30, 2000. The total of
past due loans greater than 90 days and non accrual loans has decreased from
$3,462,000 in June 1999, which represents .98% of outstanding loans to
$3,172,000 as of June 30, 2000, which represents .80% of outstanding loans.
Of the $3,172 of non performing loans on June 30, 2000, $795,000 is
guaranteed by the U. S. Government. Our reserve represents 250% of the
remaining portion of non performing loans which is within our guideline of
maintaining a reserve of at least 200% of non performing assets. The Loan
Loss Reserve balance to total loan ratio at June 30, 2000 was 1.49% as
compared to 1.52% at June 30, 1999. 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>
<CAPTION>
June 30, 2000
Non-accrual Past Due Restructured
Loans 90 days Debt
still
accruing
<S> <C> <C> <C>
Real Estate Loans $0 $0 $0
Commercial Loans 1,272 853 765
Consumer Loans 646 401 0
-------- -------- --------
Total $1,918 $1,254 $765
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
Non-accrual Past Due Restructured
Loans 90 days Debt
still
accruing
<S> <C> <C> <C>
Real Estate Loans $0 $0 $0
Commercial Loans 665 1,256 752
Consumer Loans 619 922 0
-------- -------- --------
Total $1,284 $2,178 $752
======== ======== ========
</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 banks place 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 increased by 25.33% or $1,324,000 during the six month period
ended June 30, 2000 as compared to the same period for 1999 and the three
month period ending June 30, 2000 showed a 20.33% or $551,000 increase over
the same three month period of 1999. The majority of these increases,
$1,007,000 and $369,000, respectively, are due to installations of
supermarket bank units associated with the Canadian Imperial Bank of Commerce
agreement which is included in nonbank subsidiary non-interest income. In
addition to the 40 units installed in the fourth quarter of 1999 and the
first half of 2000, on June 30, 2000, CIBC became obligated to purchase 210
supermarket banking units from our subsidiary Financial Supermarkets, Inc.
over the next three years. Service charges on deposit accounts increased by
$252,000 or 18.52% for the six month period ended June 30, 2000, and $164,000
or 23.43% for the three month period ended June 30, 2000, as compared to the
same periods in 1999. The major change was the increase in non-sufficient
funds (NSF) charges of $230,000 and $138,000 for the six month period and the
three month period ended June 30, 2000, respectively, compared to the same
period in 1999. NSF charges increased primarily as a result of the Company's
continued growth in accounts in the totally free checking program.
Other operating expenses increased by 14.51% or $516,000 for the six month
period ended June 30, 2000, and 13.99% or $252,000 for the three month period
ending June 30, 2000 as compared to the same periods in 1999. Salaries and
benefits increased by $829,000 or 13.37% during the six month period ended
June 30, 2000 compared to the same period in 1999. Full time equivalent
employees increased from 303 at the end of June 1999 to 347 at the end of
June 2000. Equipment and occupancy expenses were up by 4.45% or $86,000 for
the six month period ended June 30, 2000, and 3.50% or $35,000 for the three
month period ending June 30, 2000, as compared to the same period in 1999.
The increase in full time equivalent employees as well as equipment and
occupancy expenses was influenced by the addition of three new supermarket
banking centers and two expansions of existing supermarket banking centers
during the past twelve months as well as the overall growth of the Company's
banking operations. In addition, the increase in the equipment and occupancy
expense is a direct result of the depreciation and operating expense
associated with the Company's new data processing system which became fully
operational during the first six months of 2000.
The Company incurred income tax expenses of $811,000 which represents
aneffective rate of 32% for the three month period ended June 30, 2000 as
compared to $528,000 which represents an effective tax rate of 27% for the
same period in 1999. In addition, the Company incurred income tax expenses
of $1,533,000 which represents an effective rate of 32% for the six month
period ended June 30, 2000 as compared to $1,044,000 which represents an
effective tax rate of 28% for the same period in 1999. The increase in the
effective tax rate is related to the increased income of Financial
Supermarkets, which does not have a portion of its income tax-free as do the
Community Banking Subsidiaries.
Net income for the six month period ended June 30, 2000, was $3,296,000 or an
increase of 20.82% and for the three month period ended June 30, 2000, was
$1,695,000 or an increase of 21.42% over the same periods for 1999.
Management anticipates income to be in excess of prior years levels due to
the increased sales of supermarket bank units associated with the first phase
of an agreement with Canadian Imperial Bank of Commerce.
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
Based on a review of the Bank's and the Company's business since January 1,
2000, the Company has not experienced any material effects of the Year 2000
problem. Although the Company has not been informed of any material risks
associated with the Year 2000 problem from third parties, there can be no
assurance that the Company will not be impacted in the future. The Company
will continuously monitor its business applications and maintain contact with
its third party vendors and key business partners to resolve any Year 2000
problems that may arise in the future.
<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 12,
2000. Total shares outstanding amounted to 2,178,830. A total of 1,899,964
shares (87.20%) 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>
<CAPTION>
Shares Voted:
For Against Abstain
---------------------------------
<S> <C> <C> <C>
Steven C. Adams 1,899,904 60 0
Edwin B. Burr 1,899,904 60 0
Harry H. Purvis 1,899,904 60 0
H. Calvin Stovall 1,899,904 60 0
Dean C. Swanson 1,899,904 60 0
George D. Telford 1,899,904 60 0
J. Alton Wingate 1,899,904 60 0
Lois M. Wood-Schroyer 1,899,904 60 0
</TABLE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 Consulting Agreement between Canadian Imperial Bank
of Commerce and Financial Supermarkets, Inc., dated
March 2, 1999*
Exhibit 27. Financial Data Schedule
---------------------
* Portions of this exhibit have been omitted pursuant to a Confidential
Treatment Request filed with the Securities and Exchange Commission.
(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 14, 2000 BY: /s/ Harry L. Stephens
Harry L. Stephens,
Executive Vice President and
Chief Financial Officer
<PAGE>
