SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
December 10, 2002
Community Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-16461 63-0868361
(Commission File No.) (IRS Employer Identification No.)
68149 Main Street
Blountsville, Alabama 35631
(Address of principal executive offices)
(Zip Code)
(205) 429-1001
(Registrant's telephone number including area code)
Item 5. Other Events.
Consent Agreement Disclosure
On December 10, 2002, the Board of Directors of Community Bank (the "Bank"), the
bank subsidiary of Community Bancshares, Inc. ("the Company"), entered into an
agreement with the Alabama State Banking Department (the "Department"). The
agreement provides that the Board of Directors will take certain actions
regarding (i) an investigation into payments made in connection with several
construction projects of the Bank, (ii) approval and management of payments and
loans involving directors, officers and employees and (iii) expense controls and
review of financial statements.
With respect to the investigation of construction payments, the Audit Committee,
with the assistance of independent accountants and counsel, will determine
whether any directors, officers or employees improperly benefited from payments
made by the Bank for construction projects. If improper benefits were received,
the Audit Committee will determine the amount of such benefits, fix an
appropriate rate of interest due to the Bank on the principal amount of any
benefit, require restitution of the amount of the benefit, plus accrued interest
and investigate any apparent negligence on the part of Bank employees with
regard to improper payments. Subject to certain extension provisions, the Bank
will report the Audit Committee's findings to the Department for its review and
concurrence in January, 2003.
The Board has agreed, among other things, to require Board approval of all
extensions of credit to insiders, as defined in Regulation O of the Board of
Governors of the Federal Reserve System. The Board has also agreed to implement
certain procedures for managing existing loans to insiders, including
limitations on renewals, methods of collection of certain loans to insiders and
obtaining current appraisals on collateral securing such loans. In addition, the
Board has agreed to limit future extensions of credit and any payments other
than ordinary compensation to any director, officer or employee who, after
investigation, is deemed to owe restitution to the Bank or whose loans have been
made subject to limitations discused above, to consult with the Department
regarding settlement of litigation and to obtain prior approval for sales or
transfers of Banks assets benefiting any director, officer or employee deemed to
owe restitution.
As a part of an effort to control the Bank's expenses, the Board will direct the
Audit Committee to review for adequacy and appropriateness bills paid by the
Bank for professional services from 1998 to the present, to recover fees
improperly paid, if any, for the benefit of third parties and to establish
additional procedures for the payment of future bills. The Audit Committee will
require quarterly and annual reports from its auditors regarding the adequacy of
the Bank's loan loss reserve.
SIGNATURE
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.
By: /s/ Kerri Newton
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Kerri Newton
Chief Financial Officer
Date: December 16, 2002
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