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FDIC Enforcement Decisions and Orders



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   [12,026] In the Matter of Community Bank, Blountsville, Alabama, Docket No. 02-130b (3-12-03).

   A cease and desist order was issued, based on findings by the FDIC that it had reason to believe that respondent was engaged in unsafe and unsound practices. (This order was terminated by order of the FDIC dated 3-24-05; see ¶16,415.)

   [.1] Board of Directors—Written Plan Required

   [.2] Loans—Extensions of Credit—To Former Executive Director or Officer Prohibited

   [.3] Reports of Condition and Income—Amendment Required

   [.4] Shareholders—Disclosure of Cease and Desist Order Required
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In the Matter of
COMMUNITY BANK
BLOUNTSVILLE, ALABAMA
(Insured State Nonmember Bank)
ORDER TO CEASE AND DESIST

FDIC-02-130b

   Community Bank, Blountsville, Alabama ("Bank"), having been advised of its right to a Notice of Charges and of Hearing detailing the unsafe or unsound banking practices alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1818(b)(1), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST ("CONSENT AGREEMENT") with counsel for the Federal Deposit Insurance Corporation ("FDIC"), dated March 4, 2003 whereby solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST ("ORDER") by the FDIC.

   The FDIC considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices. The FDIC, therefore, accepted the CONSENT AGREEMENT and issued the following:

ORDER TO CEASE AND DESIST

   IT IS HEREBY ORDERED that the Bank, its directors, officers, employees, agents, and other institution-affiliated parties (as that term is defined in Section 3(u) of the Act, 12 U.S.C. §1813(u), and its successors and assigns cease and desist from the following unsafe or unsound banking practices:

       a) operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank;

       b) operating with a board of directors and management which has failed to adequately supervise and control lending to insiders of the Bank;

       c) failing to accurately reflect the Bank's financial condition on its books and records.

   IT IS FURTHER ORDERED that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

   [.1] 1) Within thirty (30) days of the effective date of this ORDER, the Bank's board of directors shall develop a written plan specifying the duties, responsibilities, levels of authority, and reporting lines of the Bank's executive officers to ensure proper supervision of the Bank's operations. The term "executive officer" shall have the same meaning as specified in section 215.2(e)(1) of Regulation O of the Board of Governors of the Federal Reserve System, 12 C.F.R. §215.2(e)(1). The plan shall outline the types of internal controls and reporting mechanisms that will be put in place to ensure that executive officers are complying with Bank policies and procedures; performing duties and carrying out responsibilities as set forth in the plan; and operating within the levels of authority set forth in the plan. Upon its completion, the plan shall be submitted to the Regional Director of the FDIC's Atlanta Regional Office ("Regional Director") and the Superintendent of Banks, Alabama Banking Department ("Superintendent") for review and comment. Within 15 days from the receipt of any comments from the Regional Director and Superintendent, the Bank's board of directors shall review and consider any recommended changes, revise the plan, and record its approval in the minutes of the board of directors' meeting. Thereafter the Bank, its directors, officers, and employees shall implement and follow the plan and/or any subsequent modification.

   [.2] 2) During the life of this ORDER, the Bank shall not make or renew any loan to any current or former executive officer or director, or alter any of the terms of any loan to any current or former executive officer or director including, but not limited to, releasing any collateral securing those loans, without the prior written consent of the Regional Director and the Superintendent. The terms "former executive officer or director" in this paragraph shall refer to any executive officer, as defined in Paragraph 1 above, or director who served in such capacities at any time between January 1, 1998 and the present.

   [.3]3) Within ninety (90) days of the effective date of this ORDER, the Bank shall amend its books and records, including all year-end financial statements and year-end Consolidated Reports of Condition and Income for the years 2000 through the present
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   to reflect the actual value of the Bank's premises and fixed assets.

   [.4]4) Simultaneously with the execution of the CONSENT AGREEMENT by the board of directors, the Bank shall provide to its sole shareholder, Community Bancshares, Inc. ("CBI"), a copy of this ORDER and a summary fully describing this ORDER in all material respects for inclusion by CBI in its next communication with its shareholders and in order for CBI to meet its disclosure obligations under the federal securities laws and the rules and regulations thereunder, including, without limitation, disclosure in CBI's Statement on Schedule 14A, and its annual and quarterly reports on Forms 10K and 10-Q, respectively. The Bank shall simultaneously provide a copy of such summary to the FDIC Registration and Disclosure Section, 550 17th Street, N.W., Washington, D.C. 20429 for its review and comment prior to the effective date of this ORDER. The Bank shall promptly forward to CBI any changes in the summary required by the FDIC.

   This ORDER shall become effective 10 calendar days from the date of its issuance.

   Pursuant to delegated authority.

   Dated at Atlanta, Georgia, this 12th day of March, 2003.



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