UNITED STATES
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 Quarterly Period Ended Commission File Number:
June 30, 2002 0-22517
COMMUNITY BANCSHARES, INC.
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(Exact name of small business issuer as specified in its charter)
North Carolina 58-1693841
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1301 Westwood Lane, Westfield Village, Wilkesboro, NC 28697 30013
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (336) 903-0600
-------------------------
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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:
Common Stock, $3.00 Par Value 1,631,702
----------------------------- --------------
Class Outstanding as of August 9, 2002
Transitional Small Business Disclosure Format:
Yes No X
----- -----
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS
- ------
June 30, 2002 December 31, 2001
-------------- -----------------
Cash and due from banks $ 3,951,132 $ 4,022,530
Interest bearing deposits
in other banks 989,362 1,713,466
Federal funds sold 1,000,000 - -
----------- -----------
Total cash and cash equivalents $ 5,940,494 $ 5,735,996
Securities:
Available-for-sale,
at fair value 24,527,526 32,786,293
Held-to-maturity (Estimated market
values of $1,434,517 (06/30/02)
and $2,781,000 (12/31/01) 1,393,582 2,731,031
Loans, net 101,053,582 91,536,336
Property and equipment, net 3,789,105 2,995,830
Other assets 1,258,902 944,845
----------- -----------
Total Assets $137,963,191 $136,730,331
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
- ------------
Deposits
Non-interest bearing deposits $ 8,810,545 $ 8,600,031
Interest bearing deposits 105,630,534 100,678,394
----------- -----------
Total deposits $114,441,079 $109,278,425
FHLB borrowing 5,640,074 10,649,548
Other liabilities 997,796 1,006,045
----------- -----------
Total Liabilities $121,078,949 $120,934,018
----------- -----------
Commitments & Contingencies
Shareholders' Equity:
- ---------------------
Common stock - $3.00 par value,
10,000,000 shares authorized; 1,631,702
and 1,512,882 shares issued and
outstanding at June 30, 2002 and
December 31, 2001, respectively $ 4,895,106 $ 4,538,646
Paid-in-capital 5,219,563 4,828,013
Retained earnings 6,381,009 6,079,520
Accumulated other
comprehensive income 388,564 350,134
----------- -----------
Total Shareholders' Equity $ 16,884,242 $ 15,796,313
----------- -----------
Total Liabilities
and Shareholders' Equity $137,963,191 $136,730,331
=========== ===========
See notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
Six months Ended June 30,
----------------------------
2002 2001
---- ----
Interest income $4,163,832 $4,811,910
Interest expense 1,736,951 2,488,860
--------- ---------
Net interest income $2,426,881 $2,323,050
Provision for loan losses 130,000 60,000
--------- ---------
Net interest income after
provision for loan losses $2,296,881 $2,263,050
--------- ---------
Other income:
Service fees and other charges $ 259,522 $ 170,303
Gain on sale of securities, net 137,008 188,020
--------- ---------
Total other income $ 396,530 $ 358,323
--------- ---------
Operating expenses:
Salaries and benefits $1,171,013 $ 891,219
Legal and professional 41,144 71,931
Depreciation 108,151 75,6320
Amortization - - 3,331
Courier and postage 60,849 60,607
Rent and land lease expense 62,382 32,000
Data processing 129,570 125,993
Other operating expenses 471,325 387,350
--------- ---------
Total operating expenses $2,044,434 $1,648,051
--------- ---------
Net income before taxes $ 648,977 $ 973,322
Income taxes 225,600 325,000
--------- ---------
Net income $ 423,377 $ 648,322
========= =========
Basic income per share $ 0.26 $ 0.44
========= =========
Diluted income per share $ 0.25 $ 0.41
========= =========
See notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
Three months Ended June 30,
----------------------------
2002 2001
---- ----
Interest income $2,138,375 $2,333,393
Interest expense 845,005 1,240,636
--------- ---------
Net interest income $1,293,370 $1,092,757
Provision for loan losses 64,000 20,000
--------- ---------
Net interest income after
provision for loan losses $1,229,370 $1,072,757
--------- ---------
Other income:
Service fees and other charges $ 110,074 $ 83,049
Gain on sale of securities, net 104,783 91,410
--------- ---------
Total other income $ 214,857 $ 174,459
--------- ---------
Operating expenses:
Salaries and benefits $ 609,950 $ 481,708
Legal and professional 17,422 34,288
Depreciation 54,331 39,762
Amortization - - 1,666
Courier and postage 30,379 30,430
Rent and land lease expense 34,491 15,825
Data processing 61,666 63,558
Other operating expenses 226,914 206,023
--------- ---------
Total operating expenses $1,032,153 $ 873,260
--------- ---------
Net income before taxes $ 412,074 $ 373,956
Income taxes 172,500 128,300
--------- ---------
Net income $ 239,574 $ 245,656
========= =========
Basic income per share $ 0.15 $ 0.17
========= =========
Diluted income per share $ 0.14 $ 0.16
========= =========
See notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
----------------------------
2002 2001
---- ----
Cash flows from Operating Activities: $ 210,089 $ 719,505
---------- ----------
Cash flows from Investing Activities:
Available-for-sale securities:
Proceeds from sale of securities 16,541,214 8,781,310
Proceeds from maturities, calls,
and paydowns 5,530,157 1,713,237
Purchase of securities (12,978,069) (13,065,402)
Held to maturity securities:
Purchase of securities - - - -
Proceeds from maturities, calls,
and paydowns 499,692 1,014,979
Net increase in loans (9,517,246) (4,479,502)
Purchase of property and equipment (901,426) (360,677)
---------- ----------
Net cash provided by investing activities $ (825,678) $(6,396,055)
---------- ----------
Cash flows from Financing Activities:
Proceeds from exercise of options
and warrants $ 781,810 $ 162,750
Purchase and cancellation of common stock (33,800) (112,680)
Cash dividends (81,103) (36,595)
FHLB repayments (5,009,474) (8,768)
Increase in deposits 5,162,654 4,201,176
---------- ----------
Cash used by financing activities 820,087 4,205,883
---------- ----------
Net increase in cash and cash equivalents $ 204,498 $(1,470,667)
Cash and cash equivalents,
beginning of period 5,735,996 7,111,071
---------- ----------
Cash and cash equivalents, end of period $ 5,940,494 $ 5,640,404
========== ==========
See notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
Accumulated
No. Common Other
of Stock Paid in Retained Comprehensive
Shares Par Value Capital Earnings Income Total
------ --------- ------- -------- ------ -----
Balance,
December 31,
2000 1,471,884 $ 4,415,652 $ 4,762,393 $4,831,429 $ 250,763 $14,260,237
--------- ---------- ---------- --------- -------- ----------
Comprehensive Income:
- ---------------------
Net income
for quarter - - - - - - 648,322 - - 648,322
Unrealized
gains,
securities,
net of tax - - - - - - - - 280,135
Reclassification
adjustment - - - - - - - - (106,833)
----------
173,302 173,302
Total comprehensive
income - - - - - - - - - - 821,624
Exercise
of options 16,000 48,000 112,000 - - - - 160,000
Exercise
of warrants 500 1,500 1,250 - - - - 2,750
Purchase and
cancellation
of common
stock (9,390) (28,170) (84,510) - - - - (112,680)
Cash dividends
(.025 per share) - - - - - (36,595) - - (36,595)
--------- ---------- ---------- --------- -------- ----------
Balance,
June 30,
2001 1,478,994 $ 4,436,982 $ 4,791,133 $5,443,156 $ 424,065 $15,095,336
========= ========== ========== ========= ======== ==========
Accumulated
No. Common Other
of Stock Paid in Retained Comprehensive
Shares Par Value Capital Earnings Income Total
------ --------- ------- -------- ------ -----
Balance,
Dec 31,
2001 1,512,882 $ 4,538,646 $ 4,828,013 $6,079,520 $ 350,134 $15,796,313
--------- ---------- ---------- --------- -------- ----------
Comprehensive Income:
- --------------------
Net income
for period - - - - - - 423,377 - - 423,377
Unrealized gain,
securities,
net of tax - - - - - - - - 103,624
Reclassification
adjustment - - - - - - - - (65,194)
----------
38,430 38,430
Total comprehensive
income - - - - - - - - - - 461,807
Exercise
of options 12,000 36,000 144,000 - - - - 180,000
Exercise
of warrants 109,420 328,260 273,550 - - - - 601,810
Purchase and
cancellation
of common
stock (2,600) (7,800) (26,000) - - - - (33,800)
Cash dividends
(.075 per
share) - - - - - - (121,888) - - (121,888)
--------- ---------- ---------- --------- -------- ----------
Balance,
June 30,
2002 1,631,702 $ 4,895,106 $ 5,219,563 $6,381,009 $ 388,564 $16,884,242
========= ========== ========== ========= ======== ==========
See notes to the consolidated financial statements.
COMMUNITY BANCSHARES, INC.
WILKESBORO, NORTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2002
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three-month and six-month periods ended June 30, 2002 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2002. These statements should be read in conjunction
with the consolidated financial statements and footnotes thereto included in
Form 10-KSB for the year ended December 31, 2001.
NOTE 2 - SUMMARY OF ORGANIZATION
Community Bancshares, Inc., Wilkesboro, North Carolina (the
"Company"), was incorporated under the laws of the State of North Carolina
on June 11, 1990, for the purpose of becoming a bank holding company with
respect to a proposed national bank, Northwestern National Bank (the
"Bank"), located in Wilkesboro, North Carolina.
As of June 30, 2002 and December 31, 2001, there were 1,631,702 and
1,512,882 shares of common stock outstanding, respectively.
The Company offered warrants to its organizers and to a group of
initial subscribers. Each warrant, when surrendered with $5.50 to the
Company, was convertible into one share of common stock. The warrants
expired January 17, 2002. On December 31, 2001 there were 109,820 warrants
outstanding, of which 109,420 warrants were exercised and 400 warrants
expired. There are no remaining warrants outstanding. The Company also has
a stock option plan with 170,000 options outstanding at June 30, 2002 and
186,000 options outstanding at December 31, 2001.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 141, "Business
Combinations" ("FASB 141") addresses financial accounting and reporting for
business combinations and supersedes both APB Opinion No. 16, "Business
Combinations" and FASB Statement No. 38, "Accounting for Preacquisition
Contingencies of Purchased Enterprises." All business combinations in the
scope of FASB 141 are to be accounted for using one method - the purchase
method. The provisions of FASB 141 apply to all business combinations
initiated after June 30, 2001. The adoption of FASB 141 is not expected to
have a material impact on the financial position or results of operation of
the Company.
Statement of Financial Accounting Standards No. 142, "Goodwill and
other Intangible Assets" ("FASB 142") address financial accounting and
reporting for acquired goodwill and other intangible assets and supersedes
APB Opinion No. 17, "Intangible Assets." FASB 142 addresses how intangible
assets that are acquired individually or with a group of other assets (but
not those acquired in a business combination) should be accounted for in
financial statements upon their acquisition. FASB 142 also addresses how
goodwill and other intangible assets should be accounted for after they have
been initially recognized in the financial statements. FASB 142 is effective
for fiscal years beginning after December 15, 2001. The adoption of FASB 142
is not expected to have a material impact on the financial position or
results of operation of the Company.
Statement of Financial Accounting Standards No. 143, "Accounting for
Asset Retirement Obligations" ("FASB 143") addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. FASB 143
applies to all entities. FASB 143 also applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of leases. FASB 143 amends
FASB Statement No. 19, "Financial Accounting and Reporting by Oil and Gas
Producing Companies." FASB 143 is effective for fiscal years beginning
after December 15, 2002. The adoption of FASB 143 is not expected to have a
material impact on the financial position or results of operation of the
Company.
Statement of Financial Accounting Standards No. 144, "Accounting for
the Impairment of Disposal of Long-Lived Assets" ("FASB 144") addresses
financial accounting and reporting for the impairment or disposal of long-
lived assets. FASB 144 supersedes both FASB Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operation - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of a Segment of a
business (as previously defined in that opinion). FASB 144 also amends ARB
No. 51, "Consolidated Financial Statements" to eliminate the exception to
consolidation for a subsidiary for which control is likely temporary. The
provisions of FASB 144 are required to be applied with fiscal years beginning
after December 15, 2001. Adoption of FASB 144 is not expected to have a
material impact on the financial position or results of operation of the
Company.
NOTE 4 - OFF-BALANCE SHEET ACTIVITIES
In February 2002, the Company entered into an interest rate swap
transaction in order to hedge its interest rate risk. The Company's
asset/liability management policy permits management to enter into these type
contracts as a means of reducing the Company's exposure to changes in
interest rates. The Company does not engage in trading these derivative
contracts. Interest rate swaps involve the exchange of fixed and floating
interest payments over a prescribed period. These transactions involve both
credit and market risk. The notional amounts are amounts on which
calculations and payments are based and are not the amounts exchanged.
Notional amounts do not represent direct credit exposures. Direct credit
exposure is limited to the net difference between the calculated amounts to
be received and paid, if any.
During the quarter ended June 30, 2002, the Company entered into two
interest rate swap transactions with notional amounts of $10,000,000 and
$5,000,000, respectively. The $10,000,000 swap has a termination date of
June 11, 2004 and the $5,000,000 swap has a termination date of June 11,
2005. Management's objective in entering into these swaps was to hedge the
volatility of interest income from the Company's variable rate loan portfolio
resulting from movements in the prime interest rate. Under the provisions of
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, Management designated these
transactions as a cash flow hedges. As a result, the effective portion of
the gain or loss on the interest rate swap is reported as a component of
other comprehensive income and reclassified into earnings in the same period
during which the hedged transactions affects earnings. At June 30, 2002,
there was no gain or loss on these swap transactions. Concurrent with the
above transactions, the Company terminated a $5,000,000 notional amount swap
entered into in February 2002. This swap had a contractual termination date
of February 2003. There was no gain or loss resulting from this termination.
NOTE 5 - SUBSEQUENT EVENT
On August 2, 2002, the Company signed a definitive agreement which
provides for the acquisition of the Company by United Community Bancorp, Inc.
("UCB") of Hickory, North Carolina for a combination of stock and cash
equal to $21 per share. The Board of Directors of both UCB and the Company
have approved the agreement and plan of merger. The merger is subject to
various regulatory approvals and other conditions as well as approval by the
shareholders of both the Company and UCB.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS.
--------------------------
The total assets of the Company increased by $1.2 million to $138.0
million at June 30, 2002 compared to $136.7 million at December 31, 2001.
For the six-month period ended June 30, 2002, cash and cash equivalents
decreased by $.8 million to $4.9 million, securities decreased by $9.5
million to $25.9 million, loans increased by $9.5 million to $101 million,
and all remaining assets increased by $1.1 million to $5 million. Deposits
grew by $5.2 million to $114.4 million, other liabilities decreased by $5
million to $6.6 million, and the capital accounts increased by $1.1 million
to $16.9 million.
LIQUIDITY AND SOURCES OF CAPITAL
Liquidity is the Company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of customers.
Management believes that the June 30, 2002 financial statements evidence a
satisfactory liquidity position as total cash and cash equivalents amounted
to $5.9 million, representing 4.3% of total assets. Investment securities,
which amounted to $25.9 million or 18.8% of total assets, provide a secondary
source of liquidity because they can be converted into cash in a timely
manner. The Bank is a member of the Federal Reserve System and maintains
relationships with several correspondent banks, and thus, could obtain funds
from these banks on short notice. The Company's management closely monitors
and maintains appropriate levels of interest earning assets and interest
bearing liabilities, so that maturities of assets can provide adequate funds
to meet customer withdrawals and loan demand. The Company knows of no
trends, demands, commitments, events or uncertainties that will result in, or
are reasonably likely to result in its liquidity increasing or decreasing in
any material way. The Bank maintains an adequate level of capitalization as
measured by the following capital ratios and the respective minimum capital
requirements established by the Bank's primary regulator, the Office of the
Comptroller of the Currency (the "OCC").
Bank's ratios at Minimum required
June 30, 2002 by the OCC
------------- ----------
Leverage ratio 9.2% 4.0%
Risk weighted ratio 11.6% 8.4%
RESULTS OF OPERATIONS
For the three-month periods ended June 30, 2002 and 2001, net income
amounted to $239,574 and $245,656, respectively. On a per share basis, basic
and diluted income for the three-month period ended June 30, 2002 amounted to
$.15 and $.14, respectively. For the three-month period ended June 30, 2001,
basic and diluted income per share amounted to $.17 and $.16, respectively.
Below is a brief comparison of selected items for the three-month period
ended June 30, 2002 as compared to the three-month period ended June 30, 2001
which contributed to the decrease in income per share for the three-month
period ended June 30, 2002.
a. Net interest income increased by approximately $200,600 due to an
increase in net yield on earning assets.
b. Non-interest income increased by approximately $40,400. The increase
resulted from loan fees and gains on sales of securities.
c. Operating expenses were approximately $159,000 higher during the three-
month period ended June 30, 2002 compared to the same period in 2001.
The increase resulted from increased personnel and operating costs due
to the opening of two branches during the quarter ended June 30, 2002.
d. The provision for loan losses and the provision for income taxes both
increased by approximately $44,000.
Net income for the six-month period ended June 30, 2002 amounted to
$423,377 or $.25 per diluted share. For the six-month period ended June 30,
2001, net income amounted to $648,322, or $.41 per diluted share. The
following four items which contributed to the decrease in income per share
are of significance when one compares the June 30, 2002 results to those of
June 30, 2001.
a. Net interest income, which represents the difference between interest
received on interest earning assets and interest paid on interest
bearing liabilities, increased from $2,323,050 for the six-month period
ended June 30, 2001 to $2,426,881 for the same period in 2002,
representing an increase of $103,831 or 4.5%. This increase was
primarily the result of a $15.6 million increase in average earning
assets, from $114.4 million for the six-month period ended June 30,
2001 to $130.0 million for the six-month period ended June 30, 2002.
b. The net interest yield, defined as net interest income divided by
average interest earning assets, declined from 4.06% for the six-month
period ended June 30, 2001 to 3.73% for the six-month period ended June
30, 2002. The decline in net interest yield is due to the decline in
the yield on earning assets by 201 basis points from 8.41% for the six-
month period ended June 30, 2001 to 6.40% for the six-month period
ended June 30, 2002. The decreased yield on earning assets is
partially offset by a decrease in the cost of funds by 206 basis
points, from 5.18% for the six-month period ended June 30, 2001 to
3.12% for the six-month period ended June 30, 2002.
Below is pertinent information concerning the yield on earning assets and
the cost of funds for the six-month period ended June 30, 2002.
(Dollars in 000's)
Avg. Assets/ Interest Yield/
Description Liabilities Income/Expense Cost
Due from FHLB $ 818 $ 7 1.71%
Federal funds 1,294 11 1.70%
Securities 31,325 838 5.35%
Loans 96,598 3,308 6.85%
--------- -------- ----
Total $ 130,035 $ 4,164 6.40%
========= -------- ====
Transactional
accounts $ 42,081 $ 472 2.24%
Savings 3,826 24 1.25%
CD's 56,770 1,031 3.63%
Other borrowings 8,675 210 4.84%
--------- -------- ----
Total $ 111,352 $ 1,737 3.12%
========= -------- ====
Net interest income $ 2,427
========
Net yield on earning assets 3.73%
====
c. Total non-interest income increased from $358,323 for the six-month
period ended June 30, 2001 to $396,530 for the six-month period ended
June 30, 2002. Gains on the sale of securities during the six-month
period ended June 30, 2001 were $188,020 compared to $137,008 during
the six-month period ended June 30, 2002. Service fees and other
charges increased from $170,303 for the six-month period ended June 30,
2001 to $259,522 for the six-month period ended June 30, 2002.
d. For the six-month period ended June 30, 2002, operating expenses
amounted to $2,044,434, representing an annualized 2.98% of average
assets. By comparison, for the six-month period ended June 30, 2001,
operating expenses amounted to $1,648,051, representing an annualized
2.76% of average assets. The increase in operating expense as a
percent of average assets during the six-month period ended June 30,
2002 is primarily attributable to the increase in personnel and
operating expenses associated with the opening of two new branches in
the second quarter of 2002.
During the six-month period ended June 30, 2002, the allowance for loan
losses increased by approximately $116,200 to $1,218,765. The allowance for
loan losses as a percentage of gross loans remained unchanged at 1.19% at
December 31, 2001 and June 30, 2002. Management considers the allowance for
loan losses to be adequate and sufficient to absorb possible future losses;
however, there can be no assurance that charge-offs in future periods will
not exceed the allowance for loan losses or that additional provisions to the
allowance will not be required.
The Company is not aware of any current recommendation by the
regulatory authorities which, if it were to be implemented, would have a
material effect on the Company's liquidity, capital resources, or results of
operations.
RECENT DEVELOPMENTS
As previously reported by the Company, on August 2, 2002, the Company
entered into an Agreement and Plan of Merger with United Community Bancorp,
Hickory, North Carolina ("UCB"), whereby Community will be merged with and
into UCB (the "Merger"). Immediately following the Merger, the Bank will be
merged with and into Catawba Valley Bank, a wholly owned subsidiary of UCB.
Shareholders of the Company will receive consideration with a value of $21.00
per share, which a shareholder may elect to be paid in (i) cash, (ii) shares
of common stock of UCB, or (iii) a combination of cash and shares of common
stock of UCB; provided, however, that the shareholders' elections may be
modified, on a pro rata basis, so that 70% of the aggregate consideration
paid by UCB is in shares of UCB common stock, with the remaining 30% paid in
cash. The Merger must be approved by the shareholders of both the Company
and UCB and federal and state banking authorities. For more information
regarding the Merger, please see the Company's Current Report on Form 8-K,
filed with the SEC on August 6, 2002.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
The 2002 Annual Meeting of Shareholders of the Company was held on May
31, 2002. At the meeting the following persons were elected as directors to
serve for a term of three years and until their successors are elected and
qualified.
The number of votes cast in the election of each nominee for director
was as follows:
Votes Votes
FOR WITHHELD
Jack Ray Ferguson 1,279,020 9,120
Ronald S. Shoemaker 1,283,740 4,400
Larry Farthing 1,279,020 9,120
The following persons did not stand for reelection to the Board at the
2002 Annual Meeting of Shareholders as their term of office continued after
the Annual Meeting: Gilbert Miller, Randy Miller, Robert F. Ricketts, DDS,
Dwight E. Pardue, Ann Sebastian, and R. Colin Shoemaker.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
Exhibit No. Description
---------- -----------
2 Agreement and Plan of Merger by and between Community
Bancshares, Inc. and United Community Bancorp
(incorporated by reference from the Company's Current
Report on Form 8-K, filed on August 6, 2002).
99.1 Certification pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
during the quarter ended June 30, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY BANCSHARES, INC.
Date: August 13, 2002 By: /s/ Ronald S. Shoemaker
------------------- ------------------------------------
Ronald S. Shoemaker
President and Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description
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99.1 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.